Nick, these guys are low energy today. You notice that? You know what we need to do? We need to f***ing gamble.
Let's do it, Nick. Let's play a f***ing hand to blackjack.
Let's get these guys f***ing amped. Gentlemen, what an absolute pleasure to walk amongst some goddamn greats.
Let me see if I can put a bit of pip in your step with a one-time blackjack hand to kickstart one of the greatest podcasts on earth. It is.
I can't confirm this is not AI. You did this? We're going to rock and roll proper today.
Let's go. All right.
some action. Are you on right now? I'm actually breaking my own rules for you guys.
I filmed today's hand, day 14, but I'm going to film tomorrow's hand for you guys right now. It'll roll out.
Hold on. Hold on.
Wait a minute, Tim. You are a kiwi living in calgary is that right yes yeah correct yep kiwi living in calgary been here since september 2022 the missus and i'm oh my god this is awesome welcome welcome to my country i don't live in canada anymore but i don't know how i stumbled across you somewhere and i started watching all your videos on Instagram.
They were off the hook, man.

Congrats.

They're awesome.

Thank you.

So much fun.

Where in New Zealand are you from?

From Taranaki.

So West Coast, North Island, certainly not somewhere.

It's not a holiday destination for certain.

If you're going, it's like dairy farming country.

It's beautiful, but it's off the beaten path.

So yeah.

And how did you choose Calgary of all places in Canada?

Do you know what the missus?

We holidayed here,

my fiancé and I,

May 2022.

And we thought it was just going to be a holiday

then back to the farm.

But I guess we had that COVID cabin fever

like the rest of the world

and loved our time here so much

that we just decided,

before we even finished the holiday,

that we cracked on to getting our visas

and got back, sold up my livestock and leased the farm back to my parents and and made the move and uh we haven't looked back i don't think they'll be seeing me uh pulling tits on the dairy farm anytime soon i'll that's colloquial for by the way um yeah so lads uh what do we want to do here we want to put 10k and then give it to uh one of uh tim's mates who's who's stuck How do we do this? We Mr. Beast this.
We give 10K to the next time you get coffee if we win. And give it to the barista or something.
What should we do? Yeah, let's do it. Let's do it.
Let's do a 10K free roll for Tim and his fans. Okay, perfect.
So now do you want me to add that to my bit for this one? Yes, absolutely. We want to be in a 10K sweat with you.
One and done is absolutely the way to go about this. There we go.
First part we've got to do here is pick out a dealer. Are these real dealers or are these AI dealers? No, these definitely are real dealers.
Certainly Eastern European, as far as I know, I don't know what their quality of life is like. I imagine they're warehoused somewhere and put on the tools.
Now, I went with a young lassie today, and she roll-balled an arse for me. So I'm going back to the blokes because they've been good to me.
Yeah, pick a bloke. Pick a bloke.
Somebody who feels blue-collar who wants to work for us. We need somebody who's a worker.
And you have over a million followers now watching this craziness. Yeah, it's gone from 15,000 to 1.3 million in this entire journey.
So, yeah, a little bit nonsensical. Okay, this looks like a good – he looks like a worker.
What do you think of this guy? He's going to work for us. You're going to cop the insult live as I do it.
All righty. It is day 15.
Going to Blackjack and betting $173. We have a $14,000 bet going on the lawn for me personally, but I actually have some absolute legends with me today.
I'm betting for the besties from the All In podcast as well. They're going to bring the luck, having been rolled, bowled, and arsed by our young lassie yesterday.
So $34,000 goes on the line. Oh, no, no, you guys want $10,000, right? Not $20,000? Jeez, I better not take it.
Yeah, put a start for $10,000. Put a start for $10 for 10 put it down 24 000 is going on the line our

dealer looks like the kind of bloke who stops at red lights playing gta we won't hold that again

if you will i need to see good guys jack 21!

21!

Yeah!

That's how we doing!

Oh, my God. That's a worker bee.
That's a worker bee. I knew he would do it for us.
I can't believe we've just pulled that off. Oh, my God.
Did that really happen? Gentlemen, that has really just happened. You've just turned 10 into 25.
Holy cow. Oh, my God.
Look at Sax. He's like, we can do this for the whole taping.
That's amazing. Sax is ready for another round.
We turned 10 into 25. All right.
So are we going to have a separate all-in balance? We just keep rolling it every week? Yeah, can you come back next week? This is keep rolling. We just keep rolling it every week.
We might have to. I cannot believe we've just blackjacked.
That is unbelievable. Well, Tim, have a good day.
All right, Tim, you are a legend.

Everybody follow Tim on Instagram. Let's get him to 10 million.

Let's get, I mean, you have a future in broadcasting.

You are going to make millions.

You went from the farmhouse to them.

Literally.

And here we go.

Now you're going to be running a casino.

I think you should have Tim's blackjack.

You should have your own brand.

We could build a whole brand on this. Tim.naki on Inst i would have to run anything if i can just play one hand of blackjack with you guys and i'd land jack ace every week that is unbelievable and like we said that 15k we won yep that's yours for you and the missus go on vacation no no no no we said it we said it we want you to do something go with it we're already cashed up you take that 15k you take the missus out you get some first class tickets you meet in italy and then let's go that's it come to the summit how about i go first class to the all in summit now that now we could play some oh we could have a whole session we may or may not have a have a fun casino night there so this will be fun yeah you gotta come home and summit for sure all right yeah get the missus take the 15k two first class tickets get yourself set up in a nice hotel and we will see you there all right everybody let's get to the docket well done tim thank you tim see you later i guys.
That was awesome. I can't believe they have live

dealers standing in a warehouse in front of a webcam. That is such a, like, imagine walking

into that facility. You're surprised that that facility only has what, dealers? That's like

only fans or gamblers. I think you can choose at the door what you want to do.
Deal blackjack or

whatever else you want to do. Whatever else you want

to be on a webcam for.

You'll be doing

the deal.

You're probably

making a porno

in the next room.

Above the table

and below the table.

There's two different

tapings occurring.

Oh my God.

Oh man.

Oh, it's rough.

It's rough, folks.

That was so awesome.

So what happened?

You DM'd him?

That was so good. Yeah, we were.
You know what? No, what happened was somebody emailed me and they're like hey that's my mate you talked about he's a big fan of the show it turns out yeah you know this is the thing about influencers now this is the thing about this micro celebrity stuff we all we all know each other by default right so he was just slid into the dm's there's definitely camaraderie yeah was awesome that's awesome i'm so glad he won and uh you know he he basically got smashed in his dms like a thousand people dm'd him oh you're on all in they're bugging out to you on all in and uh so yeah i just said hey would you do a hand would you do your live hand with us and then i didn't i didn't i wanted to clear with you guys before i put our money on it or whatever but i couldn couldn't do that because I wanted to surprise you. Yeah, that's great.
Here we are. I did not think that was real when he popped up.
I thought it was like a recorded thing. Yeah.
All I could think of was, do I look like an ass by saying more? So that I just stay quiet. I thought we did more than 10K.
I was like, well, you know, start with 50K. Let's just see what happens.
I know. You ever feel like when you like tipe into the bet with a small amount, but you want to do more, and then you win, and you feel like you actually lost money? Because if you had made a bigger bet, you would have made more.
I feel like I lost 60K. I should have put 50.
This is true to Jeff. I would have put 50.
I would have won 75. Instead, we put 10.
We won 15. I lost 60.
We made a Jake Nelson's back. Yeah.
Yeah. It's a field of back.
We'll let your winners ride. Rain Man David Sack.
And instead, we open source it to the fans, and they've just gone crazy with it. Love you, Ben.
Nice queen of kin of life. I'm going all in.
I don't know what's going on. Anything going on in your life? Anybody been busy having some adventure sacks? Seems like you were busy last week.
Anything to report from your side of the world? Well, should we take you guys behind the scenes of a presidential fundraiser?

I admit I've never done one before. So, it was a new experience for me.
When you host a president, it's just a whole different level of preparation. The Secret Service was out like a week before.
The president has an amazing advance team. They work out every detail.
They make a map of your house. They really have to think through everything.
The police shut down the street. it's really a very involved process by the way i went to dinner in the city that night and you know i was right by your house so i drove up the street and they had everything blocked off on like three blocks on both streets like on both sides of your house but there were all these protesters like all throughout san francisco like pro-trump people had driven in from all over norcal must have been because these were not san francisco natives supporters yeah and they came in with these like cars and the streets were blocked it was a total zoo in the city for hours before and after your i actually stayed in the city that night and i heard the people going nuts for hours afterwards but it definitely like took over it took over the city yeah it was really interesting is that all week the san francisco publications had been trying to gin up protesters by writing about that you know the president's coming to town and protesters are going to show up and in fact there was almost no anti-trump protesters and then a huge number of pro-trump demonstrators came out and they were waving flags and cheering along his motorcade as he was coming to the house.

So the whole protest thing backfired.

Why do you think anti-Trump protesters did not show up?

What happened?

I think there's just a big enthusiasm gap.

I mean, I think that the pro-Trump people are very enthusiastic and the, let's call pro-biden or anti-trump people are just not very motivated right now so it's exhausting to be against trump for eight years like this has been exhausting people i think they've exhausted folks uh-huh so anyway so owen mccabe who's the founder of intercom he was there and i i think this was actually a good summary because he said that he spoke with a bunch of people and none of them identify as Republican. All voted or donated Democrat in the past.
That's true for me too. Now they're backing this guy for his policies on war, immigration, crypto, and more.
This election is referendum on those issues. So Owen came out, appreciate his support.
But it's true. The campaign told us that they had more first-time donors at this event than they've seen before.

And that's because a lot of these people hadn't supported Republicans or hadn't supported Trump.

And they came out.

So, we have a few photos and videos here to take you behind the scenes.

Here we go.

Behind the scenes.

I think that might be interesting for people.

So, the first thing to say is that President Trump is extremely charming.

He connects with people in like five seconds. I mean, he meets you and finds something interesting or funny to say.
And he's hilarious. I mean, when he spoke in the living room and he talked extemporaneously for an hour, he's speaking off the cuff.
Every speech he gives is different. This is him coming into the living room.
He had made just a few notes about topics he wanted to talk about on a piece of paper, but that was it. It was all completely extemporaneous.
No teleprompter, obviously. And he's hilarious.
I mean, people don't realize how entertaining he is. What were some of the greatest hits? What did he hit on? Did he hit on low pressure from showers did he what did he what because i know he's got like some things he hits on that are relatable was it all like specific crypto topics tech topics or did he go well he did you know he did talk crypto and it was really interesting at one point in his speech he called on the winklevoss brothers who were there

and i'm only mentioning this because it was already reported that they were there so i don't want to speak out of school but he said to them he says i know you guys created facebook you know he was giving them credit for creating facebook i know he actually created it yeah but he said but but it's okay i mean you guys look like models you were dealt a lot of cards you know a lot of parts.

I mean, they're very good looking.

Huge IQ.

And... he says, but it's okay.
I mean, you guys look like models. You were dealt a lot of cards, you know, a lot of cards.
I mean, they're very good looking, huge IQ. And I mean, look at him, great hair.
And so I thought, okay, wow, like he must know the Winkervoss brothers. He must have met them previously.
And I found out this is the first time that he had ever met them. So think about the awareness that he has to know that they're in the audience, to see them, point them out, and then have this kind of hilarious routine with them.
So he's someone who's very sharp, very on the ball, very funny. And then his energy level is incredible.
So he had started his day at Mar-a-Lago at 3.30 a.m. Pacific time, 6.30 a.m.
his time. Then he flew to Arizona, did a Trump rally in Arizona.
Then he flew to San Francisco for our event. He spent four hours at our event.
He could have left an hour earlier if he wanted to. Then he flew to LA for more events the next day there.
So think about his day. And his energy level was just amazing the whole time.
Chamath, your thoughts before this goes on for an hour? Yeah, I'll give you two observations. The first is that I think that there is a huge gap between how the media tries to portray Donald Trump and what he's like when you meet him in person.
And that gap is really wide. And so I would say specifically to Democrats and independents, you really do need to sit in the room and feel what it's like.
David is right. He is charismatic.
He's intellectually sharp, and he's funny. And when you put that together, he can engage an audience for a long time and be totally extemporaneous.
The other thing I would say is that he is very polite, and he's kind in a way that was disarming and was not what I expected. And so I felt that I had misjudged him many years in the past.
And so I was very glad that I had an opportunity to sit beside him and to actually interact with him one on one. It was really, really engaging.
And so that's that's more about the style. And then about the substance, what I would say is it was not just a pro-America agenda, but it's very clear that he was pro-innovation.
So he was really supportive of AI in the details that he talked about. He was very supportive of crypto in those details.
And he's very much low regulation, low taxation. and so when you put that together, it does stand very much in contrast with what the alternative is.
And so I think that both of those things are a reason why, even if you aren't willing to vote for him, I would encourage everybody to experience what it's like to hear him. Freeberg, your thoughts on all this? I didn't go to this.
I didn't go to the event. I don't know.
Big picture. I want to know why Chamath didn't wear a tie.
Everyone else is wearing a tie. You didn't want the tie? Chamath doesn't need a tie.
He's a baller. Do you want to say what Trump said to you when he met Natalie? So it's us talking and he says, you guys are a really beautiful couple.
Uh-oh. And I said, well, thank you.
And then he turns to me and he goes, well, you must be really rich. He says this thing.
And I started laughing out loud. Nat thought he was hilarious.
So because of the disparity in the looks between you and Nat is sort of implying. You guys sat next to him at dinner.
Yeah. And was that like an hour, just private conversation between the three of you? This is the other thing that he does.
He actually sits there and he says, you know, folks, I'm happy to continue to talk about whatever you want me to you feel free to ask me questions, or feel free to just go around the room and just tell me what you think. And what would happen is people would say different things.
And then he would start asking questions of other people. And the thing becomes almost like this roundtable discussion of topics from we talked about Iran, we talked about foreign policy, we talked about deficit.
Crypto, regulation, everything. What did he say about deficit?

What did he say about deficit and debt well he's very much he's very much on your side of we have to really figure out how to get spending in order and get the deficit under control well congrats on it sounds like a successful event for guys. It sounds like you guys are in the halls of power now and Trump has flipped his positions on EVs, abortion and taking away a woman's right to choose.
He's flipped his position on TikTok and flipped his position on crypto. I give him a ton of credit.
Four flips in a month and he just sweeps all those votes. It's pretty smart.
And the democrats who are listening he's also pro losers and you're not listening to people so you're going to lose the election and he's biden's going to get demolished nobody wants to vote for somebody who they think jake out you think biden's getting demolished right that's your thought i mean did you see the video that came out this week where he was at some event and he looks it looked like a mitch mcconnell moment right where he was kind of frozen he was like so i don't want to make it like elder abuse and i know like people elder abuse to to sit to say to to be honest about what you're observing especially when it comes to no no i'm just saying most powerful role in america yeah he's gotta he's gotta bow out 538 just put out their election forecast showing 51 chance of biden winning 48 chance of trump winning as of two minutes ago yeah who knows i think it's all going to be determined by the debates sacks you were going to say well i just think what other job in america could biden even be qualified for like what what would you hire him to do is there any is there any mental job you would hire him to do is there any physical job you would hire him to do would you hire him to be your babysitter i mean i don't think there's any job in america that anybody would hire him to do except for maybe president it's kind of kind of crazy and this is where like the democratic party is in shamb. We should have the highest standards for the mental acuity, sharpness, and energy level of our president.
It's the most demanding job in the world. We need a cognitive test.
But the Democrats need to just look deeply in the mirror and say, hey, you're fielding a candidate that nobody's going to vote for. That's the problem here.
And there's not enough anti-Trump sentiment. And Trump's a genius at flipping his position to get huge swats of voters.
And so you're going to get demolished if you don't hot swap them. I guarantee you hot swap is coming.
I predicted the Trump TV flip, and I predict it now. I think you're right about maybe some of the issues where folks will get much more precise on these issues.
But I actually think what's happening is that this is really going to be about Trump versus Kamala Harris. I don't think Biden is going to step down at all.
But I do think there's a chance, a non trivial chance that Biden wins. And if he does, I don't think he's going to make it four years.
And so then the real question is, do folks want Kamala? And have they had a chance to really figure out whether they want to vote for her or not? I think that's really where it's going to come down to. It's really Trump versus Kamala Harris.
And if you if you frame it as that, Chamath, then it's even a bigger trouncing, right? Like if you put Biden, if you put Kamala against Trump, then what would the it would be a even bigger shellacking? Yeah.

In your mind? I just think that without saying anything bad about Kamala, because I don't know much about her is really what I would say is I don't know much about her. And so you can't have somebody who gets into that role accidentally.
I think there, we have to give both President Trump and President Biden a lot of credit, which is they stood in the eye of the hurricane and withstood all the pressure and won. And he who wins that way deserves to be the president of the United States.
She hasn't withstood that. And so I think that it's pretty unfair for a lot of voters if there is a bait and switch and so i think that you have to look at both of these two candidates and assign a reasonable probability that both of them make it to the finish line and from at least what i saw up close i think it's a much higher probability that donald trump does than president biden and listen biden hasn't made it to the finish line of his first term it's obvious to everybody he's in cognitive decline you put up a candidate who's in cognitive decline you're going to lose even against you know trump who people really don't like these are the two most unpopular candidates of our lifetime i'm not sure about that i don't think it's true that people don't like trump i think that oh he's got a core but yeah no people the republicans including your republicans including yourself were looking for a different candidate just months ago you said trump was not your preferred candidate and you were all in on desantis so let's not pretend like he was your preferred candidate.
He's the remaining candidate.

So you flipped your position. I think it's wrong to say that there's not enthusiasm and love for Trump.

We saw it on the streets.

We saw it in that room.

There's some, yeah.

Do you see Logan Paul meeting with Trump four years ago?

He was for Biden.

Now he's for Trump.

Have you ever seen Trump walk into a UFC event?

They go nuts for him.

I'm just saying there's a lot of enthusiasm and a lot of love out there for Trump, a lot

of excitement.

I don't see any of that for Biden.

There are people who don't like trump and that drives some support for biden but if you look at enthusiasm and excitement it's all on the trump side in this we are in total agreement yes there is no enthusiasm to put somebody in cognitive decline in the white house all right listen we got to get got to get to the docket. We could talk for hours about Biden, Biden, Biden, Trump, Trump, Trump, and we will.
It's going to be a continuing topic, but let's get to a very full docket here. Breaking news last night, Tesla shareholders have backed their guy.
yes there was uh two important votes measures that tesla just had taken with their shareholders the first was approving elon's pay package the 56 billion dollar pay package that was voided by a delaware judge we talked about that on episode 164 back in february and then moving tesla's incorporation from delaware to texas this is also major remember we talked last week about the Texas stock exchange here's the two charts massive overwhelming support there were some notable people who dissented I think Norway's sovereign wealth fund and CalPERS were two of the ones who were voting against it Tesla share price popped six percent on the news. You don't want to lose Elon or Tesla.
That would be really bad. So your thoughts, Chamath, on this vote and maybe the move and what that represents.
It's kind of odd that we're in this crazy place. Say more.
When that original package was unveiled, there was a lot of people, including me, who thought, there's no way he's going to hit this. It's just way too aggressive, and it requires so many things to go right.
And so I think in part, that's why three quarters of the Tesla shareholders approved it then. 73% is not squeaking over the line.
It's not 50% plus a vote. It's a super majority.
And that excluded Kimball and Elon shares. Exactly.
And then I think you have this very dangerous form of judicial activism, which essentially ignored the will of the shareholders and tried to create some administrative ruling that threw up this big question mark. So then in typical Elon style, he's like, great, we're just going to get them to vote it again.
And then yet again, it passes and it looks like it's going to pass by around 73%. But the problem now is that it's still not clear what happens.
I think that there's still some question marks where this may not nullify the judge's decision, it may actually create more question marks. hopefully this gets sorted out he should get

this stock he never should have or these options he never should have had them taken away and so i just hope this thing yeah it becomes a nothing burger sacks you have thoughts on this outcome is it surprising to you not surprising and then i i think the jurisdiction thing is bigger than maybe people are thinking because Delaware has been the standard for incorporating companies, but Elon is putting his companies in Nevada and Texas. We saw the stock exchange last week getting back to move to Texas.
This does seem like there's something about jurisdiction in the water. What are your thoughts, Sachs? Well, I think it's ironic that the winning margin, 73%, is the same margin by which shareholders approved his comp package back in 2018.
So again, they got 73% voted for this 2018. Now they voted to reapprove it by the same margin.
And the reason why they had to do it is because this activist judge in Delaware avoided it on the grounds that somehow the original shareholder vote wasn't valid. And I think this is interesting that the margin didn't change because it shows that shareholders aren't ingrates.
Elon delivered what he promised, and now shareholders are upholding their end of the bargain. And certainly, they didn't have to take that position.
There were different groups like CalSTRS who basically took the position, what have you done for me lately? Yeah, you delivered, but we don't have to pay you because of the judge, so we're not going to pay you. And I think shareholders wisely approved the package because I think there was some chance that if they reneged, that Elon could leave the company.
And I still think he's absolutely vital to all the innovation that's going to come in the future from Tesla. And you see this, the stock is ripping on the news.
It's up about 3% today in a down market. So clearly the market thinks that securing Elon's future at the company was the right decision and shareholders did the right thing.
In terms of the downstream effect on this, like you said, it raises the specter of Delaware being an activist state. That's not why anyone incorporates in Delaware.
The reason why you incorporate in Delaware is because you think it makes you subject to an extremely predictable body of corporate law that's been tested and become bulletproof over many, many decades. And now all of a sudden, you have to worry that maybe a judge will set aside a shareholder vote for reasons that seem incredibly specious, especially in light of the fact that the shareholders just re-approved it.
So obviously, the shareholders didn think they needed your protection and they voted to reverse you. And moreover, Tesla could still be subject to paying the legal fees of these trial lawyers who've asked for literally billions of dollars in legal fees that the judge still has to rule on.
So imagine this, imagine that the shareholder vote gets set aside by the judge,

it then gets re-approved by shareholders, but the trial lawyers who brought this nuisance suit can now get billions of dollars. If that happens, I mean, Delaware can kind of kiss its status as the premier corporate law state away.
Freedberg, is this a John Galt moment? Is this where capitalism, socialism, and the state collide and people now start thinking, hmm, maybe we need to create a new jurisdiction, a new framework? That's a good question. I think it's a good example for capitalism.
And I think it should shine the light on how other CEOs are getting compensated at public companies where there's

typically a multi million dollar or multi deca million dollar pay package that has no dependency on the performance of the business. You can make 10s of millions of dollars a year and not drive shareholder value.
And I think that the way that this deal was structured, where Elon effectively got 10% of the company for 10xing the stock

should be an example that other boards should actively consider when considering both candidates

and their appetite for this sort of a package and their compensation packages themselves.

The way executive comp typically works at the board level at public companies

is you hire these comp consultants. And the comp consultants come in and they use comparables, which basically means let's do what everyone else does.
And so you have this self reinforcing system of compensation and benefits for CEOs that bumps up a little bit every year, that ultimately has not has some degree of ownership in the stock, but fundamentally has very little downside and Elon had no guarantees in his pay package when he got this comp package originally in 2018. And he got 10% of the company if he 10x the stock, which is what he did.
I really think that it is worth having this become the kind of beacon for all boards to consider. And it seems like shareholders in aggregate are applauding the concept.
And look, Elon is a special guy, and he gets special treatment. But I think that it moves the needle and should move the needle a little bit for other CEOs and other boards to stand up and say, we should think about something that looks a lot more like this than what we typically do.
And I think you would find a very different cast of people showing up to become CEOs and to drive performance out of these businesses and a lot more risky and aggressive behavior than what I think you typically see in big companies that are in maintenance mode. What do you guys think of the organizations that initially voted yes and now voted no,

they basically are saying, look, I mean, if you think about it,

you're a big public company, I don't know what ISS

recommended this is institutional shareholder

services, they recommended no both times, right? And so ISS

basically what a lot of big public fund managers will

follow when they make their votes. And so if I'm a

shareholder, that's not what I'm saying. But like, let's say let's say that I'm Black black rock or i'm a shareholder i'm not going to put black rock as some big shareholder tesla stock why would i vote to give away 10 of the company when i don't have to yeah very simple because he would leave he would morals and ethics matter and you want to do the right thing and you want to incentivize capitalism to operate properly and want to incentivize the people who take on the burden of running these companies and the people who voted against it i think people should just make a list of those individuals and they should not do business with them because if somebody is going to double cross you they've shown you who they are these are people who double cross them they got the benefit and then they stabbed them in the back make a list exactly what they did that's exactly what they did it's worse if they voted yes the first time and then they voted no no i'm saying and then maybe you're just against the deal but if you're yes no then that's a renege then you're a true scumbag you're a scumbag is that public anywhere who did that yeah there are a bunch of folks that said that they you know, I think it was Calper that voted yes.
And then when they were on trying to explain they were like, tap that dancing in like corporal jargon. But really what they are scumbags, Jason, you're right, they are morally and ethically void and they're reneging.
And this is the one rule in business you're not allowed to do. And the people that do that are these penny pinching scumbags.
I'm not saying a blacklist, but I would say making a list of people who maybe you want to consider not doing business with is how I would frame it. These are people who- They're public market investors, they're not private investors.
They buy the stock on the open market, so they don't have to worry. I mean, I think the question is, what are the chances that Elon leaves the company if he didn't get the pay package? The chances are that was a risk and i think that was a non-zero possibility think about it yeah non-zero possibility you made an agreement with somebody and you shook their hand yeah why does he care whether he would have left or not left this is like i have to do the right thing yeah you have to do the right thing you promised the guy x amount of money for doing y amount of things he did the things.
And then you had a judge come over the top because of somebody who owned 10 shares. And all I'm saying is if you don't have the intellectual intelligence to look past that and say, wait a minute, we just paid the guy to do this work.
And now we're going to renege. They're gaming the system.
I just think that like, how can anyone who is capable of doing a job, sign up for a pay package?

How could anyone and the people that will sign up are these like, middling corpo people who will accomplish nothing and will run these companies in ways that then speaks to organizations that have just proven themselves to be totally unreliable. the irony of the thing is that these folks thought that they were getting a 10% free roll when they voted no.
And the reality is that by him getting the pay package, the certainty of him sticking around at the company caused the stock to go up by 10%. So they actually had the calculus wrong, that if they had gotten their way, the stock would have declined by more than the 10% free roll they thought they were getting.
This is I think that the main point 10% being the ownership of the company that he gets. Yeah.
The pay package was laughed at on CNBC by all the experts. There's no way for him to hit this stuff.
If he does hit it, he's getting a fraction of the value of it. And this is why stock is such a valuable device.
If employees get stock, and the CEO gets stock and everybody in between and retail investors get it and endowments get it and your retirement account gets it, everybody rose in the right direction. Is it perfect? No, people can buy back their stock, they can do a little gaming on the margins.
But it is the most pure system we have, everybody has a share of the company. So if you're a socialist, you know, like you should actually kind of appreciate how stock works that everybody has a chance to buy everybody has a chance to participate.
This is the model we should be using for all CEOs, they should all get a massive package if the stock goes up into the right. It's so obvious.
And this was so unfair. Let's see this flipper.
I want to see their explanation. The compensation is commensurate with the performance of the company.
Did you vote for it in 2018? I believe we did vote for it in 2018. But this is about long-term valuation.
But hold on. But do you believe you were duped in 2018? No.
I believe we used the information we had available and made the best choice. Okay.
So here's what I find so interesting about this particular choice. 73%, I believe, of shareholders voted in favor of in 2018.
A judge has said that shareholders were not informed properly. If you talk to most shareholders, by the way, especially big shareholders, they say, we were not dupe.
We understood completely what we're doing, and we were on board with this. Now that this opportunity, almost opportunity has arrived on your doorstep to say, to actually rethink this, if you will, there's a view that, oh, maybe we're not getting the value we thought we should.
You thought you should get it, but he's worked, by the way, under the assumption that he was hitting the numbers right and and dealing with the contract if i told you that you were being paid a certain amount of money in 2018 and then i called you and said actually you know what we're not going to give you that money anymore what would you do that's a great question i i would um i would go to my board you know i would talk with my with my board. This woman is so smart.
What is her name? Karen Frost? I don't think she's smug. Sorry, Marshy Frost.
Oh, sorry, that was Karen Frost. I think like this is emblematic of the kind of person who is incapable of actually doing the right thing.
And there's a lot of these people that run a lot of these organizations that I mean, what what kind of an answer is that? I mean, it was a non answer. That's why I said it was smug.
Let me just ask each of you. You've all started companies.
Some of you are still running companies. Would you take money from her and CalPERS after that statement? Hard no for me.
But remember, she's not investing in private companies. She's buying stock on the open market.
I don't know.

Calper's announced that they're an LP and they're starting to do directs.

Oh, okay.

I didn't know that.

Yeah, they're trying to catch up.

They've been behind on venture.

Let's call this whole thing what it is.

It was a heist.

You had these trial lawyers.

They find a name plaintiff who's got nine shares.

And on a contingency fee basis, they go after Elon's pay package. What are they looking for? $5.6 billion.
How does a lawyer make $5 billion? How does that possibly? This whole thing. They don't care about Tesla.
They don't care about the company. They don't care about shareholders.
They're looking for a giant multi-billion dollar contingency fee payment. And they took their shot.
And they found a Delaware judge to basically agree with them, even though shareholders approved it. And then shareholders re-approved it.
So my question is, how much are these trial lawyers going to get? Is a judge going to award them billions of dollars for what was clearly now a mistake to avoid a pay package that shareholders wanted to stick with if they award these lawyers billions of dollars which is what they're seeking no one's going to want to do business in delaware anymore because it subjects you to these stick-up heists by trial lawyers so i think that's going to be the next big shoe to drop is what do these trial lawyers get awarded? Well, what are they going to get paid? Because they also wanted to get paid in Tesla shares. No, I'm serious.
Here's an idea. Buy the shares yourself.
Yeah, they said, we don't like your management of the company, but we want to pay your shares. Yeah, by the way, they got their shares and then they voted to give Elon the next pay package.
So it's just a full-on grift they secure the bag but delaware is supposed to protect corporations against this grift that's why people incorporate there when people ask why does delaware have this special place that everybody decided delaware would be where we incorporate it was because it was predictable lawyers felt this was the most predictable jurisdiction that would be the most shareholder friendly most shareholder thoughtful whatever word you want to use they would defend the the shareholders and

here we are the last company i started 80 90 we incorporated in nevada and i just redomisiled a

couple of other companies that i own into nevada as well it's becoming a trend we're having very

big discussions about this in the startup community of where to domicile your company and more to come on this one. Okay, let's keep moving.
Apple had a huge announcement this week. Apple has entered the chat.
They announced Apple Intelligence, get it, AI, and they have included a chat GPT, integration from OpenAI. This was really, really i think impressive in many ways because people thought apple was far behind it was a banger of a demo a lot of un apple like future looking demos so none of these demos that we're going to show are coming to your phone this week they were really i think playing catch up with microsoft and it worked stock is up 10%.
They added about $300 billion in market cap. Now the top three market cap companies are all driven specifically by the perception that AI is going to be the next technological wave.
Microsoft, Apple, and NVIDIA all cruising around about $3.2 trillion. And this top three keeps flipping back and forth.
Apple had passed Microsoft in market cap. Here's the features.
I'll just give you a quick overview of what we're seeing. It's added a Grammarly like features, great product Grammarly.
I'm not an investor, but they added the ability to proof get grammar help AI will transcribe and summarize phone calls with permission, obviously double opt in, it will prioritize notifications and iMessage and email that are super important. You can do smart replies, a company where an investor in superhuman already does this kind of stuff.
And they're bringing AI to Siri. And this is going to be the big win, in my mind, you're going to be able to say things like you want to order something in DoorDash or Uber Eats or Instacart, and the AI Siri will be able to dip down into apps, they're building a whole app AI interface, much like the rabbit device CEO talked about doing.
And I think this means that Apple is going to win the AI consumer, there is a deal with chat GPT that I'll get your feedback on gentlemen in a moment. According to sources, Apple is not paying open AI.
It's a non exclusive deal chat GPT can be swapped out. Apple is also talking to Google about a similar deal.
Obviously, it doesn't take a genius to predict that Apple is going to auction off the LLM integration, I think to the highest bidder, they did that with the search deal. Google pays Apple $20 billion to be the default search engine.
That's about 5% of Apple's annual revenue, if you didn't know. And it's all profit, right? So this is a huge profit moment.
I'm going to pause there for a second before I get into more of this and just get your general reaction, Shamath. I think you nailed it right at the beginning.
The thing that I was struck by the most in this is we went from a phase where in the Steve Jobs era, these events were because you're about to unveil a product that was done and shipping as of that day.

And then at some point we transitioned to,

they are talking about products

that they intend to release within a year.

Now we've shifted to the part

where they're talking about software integrations

from a third party that will happen in a year.

So if you just look at it sequentially,

it's a little disappointing in that sense because for a company this big it's really not much of anything you can't really touch it and feel it and it's going to take a year before we really know what the totality of all of this is meanwhile the economics of the chat gpt deal were leaked and there's no money on either side so i don't know it's a little bit of like it's really not much of anything to be honest because there's nothing we can actually play with and experience freeberg your thoughts on the vision here at least and to chamat's, Apple used to release dope stuff, fully baked, ready to go. And now we are increasingly see them talking about what's coming next year or at some point.
Do you think Apple's going to win the consumer? Do you think Apple's falling behind? Should they have built their own LLM by this point? I'm not sure. I think what they have shown is more of a glimpse into the future of hardware,

where for the last two decades or so, hardware has mostly been a portal to access the internet

and use the internet through apps or through the browser. And hardware has done a good job of

enabling that. But I think we're now going to see a much more tighter coupling, where the hardware

becomes more valuable, and it's less of this kind of funnel for apps to flow through and data to flow through, but the hardware actually becomes the value greater. And you see a much more tighter integration in the hardware OS, and the AI or the software that enables you to do lots of things, you're no longer just going to use the hardware to access an app to do something.
So a lot of the companies that are app developers are likely going to end up becoming services developers that enable that hardware AI to do something for you. And this coupling between hardware and software because of the way AI works, is I think becoming more apparent, not just in consumer devices, but we see it in the data center and in the enterprise stack as well.
You know, we've seen that, obviously, there's this tight integration between the chip and the software stack that Grok built. There's a tight integration between Google's TPU stack, and then the ML instances and the tools that you can use in Google Cloud that are optimized for use on that TPU hardware.
NVIDIA has got a big effort, obviously, in continuing to build out their software stack that sits on top of their hardware and works in a more coupled way. And then Google has this ability to kind of realize, I think, a similar outcome with pixel phones, which is a pretty sizable opportunity for them.
And then all of the hardware manufacturers can probably grab more value now, as they build their own AI into their OS, and you start to see more of this value realized by the hardware companies. So I think that there's this really interesting shift, where we've all thought about hardware as being this like commodity, where there's some degree of like, improvement or innovation made over time.
But now it seems like a lot of value might actually get captured by hardware companies in all points in the value stack. So it's an interesting moment.
And I think that this just shines a light on that trend that I think is going to play out over the next couple of years. It's clear, Sachs, that right now, to enable these features, you're going to have to have a pretty solid device.
They announced here at the keynote at WWDC that you need to have an M1 chip or better iPhone 15 or better. So, and having all this local data is a huge advantage for apple they've got your messages your phone your calendar your photos your app behavior the data inside of your wallet all of this gives them a huge huge advantage so i guess the question is do you think this renews the apple franchise and people start upgrading their phones again to get all these new features, David Sachs? Well, the market definitely thinks so because Apple was up big on this news.
And even if it was largely vaporware at this point, the market definitely liked where they were going. And frankly, Apple did exactly what I said they should do last week, which was to reinvent Siri as an LLM with the ability, with the capability to reach into apps as an agent and take actions on the user's behalf.
That's what they effectively announced. However, Apple took a shortcut to get here.
They partnered with OpenAI. And this is something that I don't think they've ever really done before at the operating system level.
Apple is famous for being vertically integrated, for being a walled garden, for being end-to-end. They control everything from the chips to the hardware to the operating system, and they don't let anybody else in until you're at the App Store layer.
This is allowing somebody in beneath the level of the App Store. This is allowing someone, open AI, to get access to your data and to control your apps at the operating

system level. And I think Elon pointed out, wait a second, what are the privacy implications here? And I think there are major privacy implications.
There's simply no way that you're going to allow an AI on your phone to take all these actions on your behalf without giving that model substantial amounts of user data. And that is a huge change for Apple.
Remember, Apple in the past has been the advocate for consumer privacy. There's a whole issue of the San Bernardino terrorist, where the FBI went to Apple and said, we want you to give us backdoor access to their phone.
And Apple refused to do it and went to court to defend user privacy. And furthermore, one of Apple's defenses to the arguments, the antitrust arguments for allowing sideloading and allowing other apps to get access to parts of the operating system is they've always said, we can't do this because it would jeopardize user privacy and user security.
Well, here they are opening themselves up to open AI in a very deep and fundamental way in order to accelerate the development of these features. In other words, they took the shortcut.
They could have developed the LLM themselves. They could have developed the AI themselves, but they chose not to do that.
And I think this is going to open Pandora's box for Apple, because again, they've proven that they can open up the operating system to a third party now. And who knows what the privacy implications of this are going to be.
It turns out Apple has addressed this head on. They hear the concerns and much like when you share a photo or you share your location, it's going to ask you over and over again, do you want to let this app do this? So they're aware that this is an issue they brought up privacy every single time but people

don't trust open ai and they do trust apple so this is strange bedfellows to be sure chamath your thoughts i think that apple really cares about privacy when they're trying to hurt a company they don't like i.e meta and they're willing to figure out a way to work around it when it's a company that they clearly

support, OpenAI.

Yeah, well, you're behind, you know, you behave differently than when you're ahead and you have your monopoly. Freeberg, you wanted to add anything here before we move on to the next story? Okay.
In related news, OpenAI has hit a run rate, and this is kind of stunning, of $3..4 billion dollars that means they've roughly doubled their monthly revenue in the past six months or so these are not official numbers opening eyes denying them but here's a chart that somebody put together based on all the different leaks and approximations of what opening eye is making the reason this makes no sense to chart and it shows a year and then it shows a month a month a month a month is because there's been different leaks at different points in time but just to normalize this in 2022 for all of 2022 before they really had a lot of customers 28 million and now on a 3.4 billion dollar run rate again it's pretty stunning number if it's true you can do apples to apples here because like 2023 jan is 200 million that means that june is 300 million if they're on a 3.6 billion dollar run rate yeah and so if we were to even look at you know the number of people who work there 770 if you put that at 500 000 a person some engineers getting a couple of some people may be getting less, they're probably only got a half billion dollars in salaries a year, who knows what they're spending on the infrastructure for this. If you were to do evaluation on this, everybody knows they sold a bunch of shares in secondary at around 80 billion, which means they're trading at if these numbers are true 25 times for revenue, which is close to what Nvidia is

trading at right now. Obviously, they're two very different

businesses. So your thoughts on this as a SaaS company, obviously,

the majority of this revenue is consumption based, some portion

of it is SaaS space reoccurring like subscriptions we pay for

at launch my venture fund, we pay for 6000 a year to have all 20 25 people on chat gpt as a corporate account maybe it's 250 300 a year per person so what do you think of this business sax and how fast it's growing obviously some of its api consumption based not reoccurring some of it is reoccurring first of all let me say that you know we've talked about ai general hospital and all the soap opera issues around OpenAI. Yeah.
And, you know, Judge Sacks had opinions on that. Yes.
But putting that aside, I mean, everyone acknowledges that their products are awesome. I mean, OpenAI makes really great products with the ChatGPT 4.0 being at the top of the list.
And I talked about how when we moved from ChatGPT 4.0 4.0 at Glue, the speed and quality went up at least 2x and it felt like 10x. So they have the best language model as of this point in time.
And they also have other products that are really great, like the Whisper API, which does transcription. I mean, there's a whole bunch of tools they have that are great for developers.
So nobody's taking anything away from them on the product side. And I think you're seeing that in this revenue number.
Now, if I was to try and take apart this business as an investor, I would separate the B2C business from the B2B business. The B2C is a consumer subscription plan, people paying $20 a month.
I'm one of them, I pay the 20 bucks a month. It's probably the only LLM that I would pay 20 bucks a month for.
How often do you use it? Daily, weekly, monthly? I'd say a handful of times. To be honest, it's not like a daily use for me, but I probably use it every week, I would say, at least once.
So I still use it. I have to say, though, that the other LLMs are catching up.
And if Gemini ever gets good enough, or when Grok gets to the next level, am I going to stick with that $20 a month plan? I'm not sure. It depends whether OpenAI can really maintain the leadership it has or the perception of leadership.
Okay, so that's half the business. And then the other part of the business is the B2B, which is the API products that effectively they're selling to developers.
And that's where I would place the future value of this company. I mean, as somebody who invests in SaaS, when we see a business that has B2C subscriptions and B2B, we place all the value on B2B.
And the reason is because historically, the churn rates in B2C are too high. 5% to 10% churn rates are common, 50% a year per month, 50% churn a year, very common.
OpenAI may not be experiencing that yet, but it's very hard to avoid the downdraft of consumer churn. And on the other hand, on the B2B side, a good B2B business has expansion, 120%, 150% expansion year over year from same customers.
In other words, they're ordering more. So you would compare this business to Amazon Web Services, Google Cloud, Azure, that's really the business here.
Yeah. The first thing I'd want to know is how much of the 3.4 billion is consumer and how much of it is developers? We'll find out eventually.
Chamath, your thoughts on OpenAI's surging revenue? I'm kind of in David's camp, which is I think to the extent that the business has a large terminal value, it's going to be because of the enterprise cash flows. The thing to keep in mind is that I still haven't seen enterprises building production level products using AI.
It's all experimentational, right? It's all experiments now. That's nothing against open AI.
It's just a commentary on the fact that we are at a very, very early part of the cycle where when you use this term blast radius, right, what are you referring to? You're referring to this idea that you're stringing together elements of a model or multiple models that each have some non-trivial error rate. By multiplying all these error rates together, you get your final product.
But the unfortunate reality, in most AI workloads, is that you end up with something that's not very good. And that's not the fault of open AI, nor is it the fault of llama, it's just the nature of how these bottles work.
And the fact that you know, you've gone from something very, you know, deterministic to something that's very probabilistic. And we have not found a way to create extremely high quality experiences, we as an industry that make this cost justifiable.
So right now, as you said, Jason, most of that is toy apps and a lot of experimentation. Will we get there? I absolutely think so.
But we're not there yet. So I suspect that most of the revenue then is on the consumer side right now, actually.
And so I just looked at Google Trends. And I first looked at the United States.
And I just wanted to understand how is the traction. And what's interesting is, is that the traffic in the United States is down about 25 26% since the end of the school year, which I think reinforces this belief that ChatGPT has definitely over-indexed in that young people's cohort where they rely on it to write essays or what have you.
But then I looked outside the United States and worldwide, and what's interesting about that is that's actually still growing up into the right. So I think you have then an ARPU problem, which is the same thing that we had to deal with at Facebook, which is we have these extremely valuable users in America, they asymptote at some point, and then we have to grow in other markets, but those markets aren't nearly as lucrative.
Right. They just don't generate as much revenue.
The average revenue per user ARPU per year is year is single digits maybe it hits double digits as opposed to the states where it could be triple digits right so then i don't know i would just wrap up by saying that i think that it's just if this number is right it's just an incredible testament to what they've been able to uncover and create in a short amount of time that is legendary legendary stuff. Yep.
But what I can tell you, in working with enterprises around these AI experiences through 8090, we have not yet seen production quality models being deployed in the wild that are dealing with very, very important business processes, which means that most of the revenue right now is probably consumer oriented. Okay, Freberg, you I don't know if you got to see Sonny's talk at liquidity last week, but he talked about how many of the CIOs, CEOs are looking for open source solutions here.
80% of them want to go open source, they don't want a proprietary model to invest in. But the best model right now is a proprietary model.
So what do you think about opening eyes revenue surge? Is it sustainable? Or are there 20 better open source projects that are going to be death by 20 open source project cuts? And Shemot's general feeling here that hey, it's not ready for primetime yet. It will be but we're in the AI dial up era.
I to use an analogy here. Hey, you can see the promise but it kind of sucks in terms of reliability.
Maybe open AI is AOL. Right? Like, I think that there's going to be a Google that'll show up that'll maybe it's Google.
It'll grab a large part of the the value here. Or, you know, ultimately, the cost comes down so much with the open source tools, I do believe that these open source tools are incredible.
I mean, the open source llama instances are like they get you 85 to 90% of what you're looking for. So if you're an enterprise user, why would you pay 1000s of dollars for the open AI

platform when you can use llama, and you can tune it and you can build your own front end to it your own integration with your own data, etc, etc. It's just early days for enterprises figuring out how to do that.
But I do really believe that the future is enterprises, companies, building their own LLM driven tools for both internal and external

products that leverage smaller open source models. And that we're kind of in this, you know,

dearth of people's understanding and ability on how to actually execute against that,

which makes the default to be go to the chat GPT interface. I will also provide a counter.

I just did a big project at work this week, we had a like a big off site with 20 people involved. And everyone used chat GPT to get ready for it.
So there was a ton of analysis, a ton of data gathering, a ton of reporting needed for the offsite. And rather than hire a third party or have people go out and source data themselves.
A lot of us including myself, I prepared like maybe a quarter of the material. Just use chat GPT and pulled the sources to make sure it was all Did you pull sources and check facts, right? You do have to hold the sword and there was a lot of wrong stuff just to be clear.
But for our purposes, you're at a ballpark percent. I would say 25% of it was like wrong and then you have to clarify.
But the truth is for this particular application, it didn't matter.

We were making some approximations on markets and sizes and, and various facts that we were kind of using to do

some strategy stuff, but in some product development stuff. So I

would say like it wasn't useful. You found 100% and I would say

it's hundreds of hours, hundreds of hours.

And were you paying them an enterprise license or a

consumer license? 20 bucks a month? What is that? It's the same thing for the enterprise to math, you can just sign up and for 20 bucks a month, you can have your whole organization on it. Yeah, no fever.
Like you're just paying it yourself? Or you pay for everybody at Guhalo? I think everyone has the right to pay for I think other people at the company pay for it too. I pay like I I have my I't have like a corporate thing set up.
So everyone basically time to set up the corporate it's really easy and then anybody with your domain can sign up and let you track it but it doesn't consolidate. That's what I'm looking for.
Chmop is the ability to consolidate all the searches in one place and everybody can share their searches. But like I said, the application is doing right in some way.
Yeah, collaborative AI. It's an today, meaning like, we go to the app, we ask questions, we get answers, and we use that.
And I actually had it pull tables down and I dropped those tables in like all sorts of great stuff it could do, you know, do some analysis, pull out the stuff what the analysis showed, understanding unit economics on various businesses, all this sort of stuff that it consolidated for us. It's great for that stuff.
It definitely makes everybody bionic. I agree.
But what it's what it doesn't do yet, is take all of our internal data and all of our internal tooling and kind of reconfigure how we use that. So we're still paying for a whole bunch of enterprise software and SAS licenses for things that we know we don't want to be paying for in the future.
And we're now starting to figure out how can we build our own AI based software to replace a lot of the dependency we have on third party software that uses our internal data for our internal consumption. So there's a lot of that still ahead of us.
And that's why I know and we're pretty progressive. So that's why I know it's early innings, because I see the way we're going to use it.
And I know that we're probably well ahead of a big enterprise companies that are more traditional. And so I can see like a couple years from now, all these big enterprises are going to figure the same thing out.
And then you're not necessarily going to need to pay for this chat GPT stuff. If there's an internal tool and an internal people are really getting dependent on this, and they use it constantly.
We're on our investment team meeting, we're evaluating a company for real estate brokers, we're evaluating a company for therapists, and like tools and SaaS products for those type of people. And when I asked them, well, how many what's the total addressable market? Boom, three or four researchers and analysts on my team are doing that search, finding sources and saying there are this many therapists, this many social workers, this many real estate brokers, as many bystand saying well did you source them like yeah of course i asked and like one of them was like well i asked claude i asked gemini i asked chat gpt i asked them all for sources i cross-referenced them so they're like you have three of these things open and so just everybody's knowledge level goes up but you do have to check it because one out of four facts is probably wrong or cited wrong and so it's going to be i think one out of four is about the right number yeah that's interesting so you use multiple lms to find the hallucinations yeah basically you cross-reference that's actually pretty interesting i jump on gemini too so i use gemini.google and i use chat gpt and i just make sure that stuff lines up just sanity check things because i'm But you're not going trying to process a lot of these right? How many would you be willing to pay for? I mean, I mean, for five, you'd pay for five different LL.
Well, think about it. If somebody salaries 100,000, and these cost $1,000 to have five of them, of course, I pay for five, because it's 1% of their size.
Okay, so as a work tool, you know, I guess, I guess there's three categories to their business now that you're raising this there's sort of the consumer subscriptions yeah then there's the business subscriptions which are basically the consumer product but a company's paying for it and then there's the developers paying for metered api usage yeah yeah this that that enterprise is really powerful yeah it's kind of like microsoft office or google docs where consumers use them for free or want to use them for free. And then companies will pay for it.
And that's where the real money is. Anyway, this is going to make people bionic.
I think all organizations will have the same number of people for the next couple of years. And then just individuals will get better and better at their jobs.
And so efficiency is going to go way up. Speaking of efficiency, the the market is ripping we're going to get a little macro here in three acts inflation has uh been broken i think it's safe to say we're down at 3.x 3.3 lower than expected and hiring wages are surging and stocks are surging so let's go through it here and get the besties take

on the vibe session i actually disagree with that framing jason yeah i agree i disagree as well disagree with it let me go through the numbers and then you can all disagree that's how that's how this works folks inflation print came in at 3.3 percent lower than expected here's your 10 year chart super easy to explain what's happening here rates were low for a long time inflation cruising at about two percent and then lunatic spending during covid and we added a trillion to the national debt and then biden added a bunch everybody getting those stimmy checks and ppp loans and so if you look at inflation here we were just cruising along at two percent massive spike up to nine percent year over year inflation and now coming back down to three point x the question is, can we get to a two handle and the rates went up faster than in ever in history. Here's the Fred chart, you can see there in and this goes from the ADC, you see that massive spike when they tried to break the back of inflation previously.
So this is the fastest ever gone up. And here we go.
The common sentiment here is that savings has been burned off and people are starting to have debt. And so now we are in act two, the lowest unemployment rate of our lifetime continues.
If you believe those numbers, some people do some people don't. Labor Department reported 272,000 new jobs in may smashing crushing the 190 000 estimate and then act three average hourly wages up a massive four percent from last year at 35 an hour that also topped estimates so if inflation is at three point x and hourly earnings are at four point x maybe consumers will start feeling better about the economy eventually they obviously have been pretty shocked by that nine percent inflation and only four percent growth here's your chart from fred of the hourly earnings of all employees and you can feel pretty good about that where everybody's wages keep going up the question is do they go up faster than inflation? Okay, so there's my

framing of the situation. Freeberg, tell me what I got right.
Tell me what I got wrong. I think there are three numbers that matter.
Okay, inflation rate, the growth in GDP, and the cost to borrow. The growth in GDP in the first quarter of 2024 was a lousy 1.3% on an annualized basis.
And even if the rate of inflation came down, we are still inflating the cost of everything by north of 3%. So the economy is only growing by 1.3% and it costs more than 3% more each year to buy stuff.
So that means everyone's spending power is reducing. And our ability

and our government's ability to tax is declining because the economy is only growing by 1.3%. And the most important fact is that the interest rates are still between four and 5% for 4.7%.
That means that to borrow money costs 4.7%. But the businesses the economy on average is only growing 1.3%.
So just think about that for a second. We have a tremendous amount of leverage on businesses, on the economy, on on the federal government, that leverage the cost to pay for that debt is more than four to five, four to 5%.
But you're only growing your revenue by 1.3%. So at some point you cannot make your payments and the rate and the goal and that is true was that is true for consumers that is true for enterprises and it is true for the federal government just to point out here what you're saying the goal was to in fact increase the interest rate just to cool the economy right which they got too late but that was the goal that was the explicit goal was to cool the economy.
Yeah, the whole purpose of raising rates is to slow the flow of money through the economy. And by slowing the flow of money through the economy, there is less spending, which means that there is you're reducing the demand relative to the supply.
So the cost of things should come down, you should reduce the rate of the increase in the cost of things. Now, if you click on this link, Nick, that I just sent you, in response to the condition in the economy today, Elizabeth Warren sent this note to Jerome Powell, three days ago, saying, Dear Mr.
Powell, or Dear Chair Powell, we write today to urge the Federal Reserve to cut the federal funds rate from its current two decade high of 5.5%. The sustained period of high

interest rates is already slowing the economy and is failing to address the remaining key drivers

of inflation. She goes on to point out the fact that consumers are suffering, businesses are

suffering. And the strain of these three numbers is really starting to show on individuals on

businesses and obviously on the power of the dollar. But the dollar is a different story.
So yeah, the condition of the economy in the rest of the world. And we're in a very unique position.
But I think that things are not as rosy. Now, there's a certainly a shift in the market, because what this tells us is that the timeline at which the Fed will cut rates is coming in a little bit, relatively speaking.
And so the market is saying, okay, let's adjust to lower rates, the 10 year Treasury yield has come down a bit. But we are still in a difficult situation for people and for the for businesses.
And you have Elizabeth Warren, who I think is the voice of small businesses and consumers. She's, she's, she's trying to be the voice of those.
Yeah, I'm saying this is very hard on people. Chamath, what's your take on this? We have a slowing GDP growth.
We have inflation going from nine down to three. We have wages going up 4%.
How do you make sense of all this? Do you feel like... Sorry, Freiburg, are you saying we're going to have stagflation? We have stagflation right now, definitely.
But what I'm saying is that it's not a rosy picture just because labor rates are going up. If the labor rates aren't going up, you can see this ultimately, the best number for this is the sum of GDP growth.
So in aggregate, if the revenue of everything combined, which is GDP, isn't going up faster than the increase in the cost of everything, people, businesses and the government can't afford their stuff. And that's fundamentally what's going on right now, what we need to see is a normalization, where GDP growth is greater than inflation rate.
And as soon as that happens, then we have a more normalized and stable economy. So right now, things are not stable, there's a lot of difficulty and strain in the system.
I will put myself on the other side of that trade if there was one if I had to simplify the United States economy. Remember, GDP is 70% spending by individual people.
And so people can spend two things savings that they have or credit that they have. And what's interesting is that we have finally burned through, and this is what this picture shows, all of the money that folks had in their bank accounts.
And so what does that force people to do? It actually forces people to re-enter the workforce so that they can start to make money. But the problem is that companies have been shrinking and have been on a defensive posture.
And so as a result, which you started to see this past unemployment report, unemployment is now ticking up because when these people re enter the workforce, there are no jobs for them to have. People are filing incremental unemployment insurance claims.
States like California, in fact, the state of California was the worst off this past month. So I think what we're starting to see is that for the large portion of the economy, we've run out of cash to spend.
And as a result, I do think that we are going to see an economic slowing. And I think that that will create not just enormous empirical justification for Jerome Powell, it'll be exacerbated by what Friedberg just showed, which is the political pressure that he's going to be under to cut.
Will it cause him to cut more aggressively than he would have otherwise on the margins i actually think yes but my perspective is that i think that we've run out of money individual people so i think unemployment is going back up i think gdp is going to shrink yeah and so i kind of tend to be in this camp that we're going to see more than one rate cut so here is total job openings to your point shamath they're getting burned off we peaked at 12 million again if you believe the numbers are not there they obviously have some value and we've burned off a ton of those so sex what's your non-political non-partisan take first principles of what's going on with the economy well look we just had this inflation report cpi was 3.3 percent the market was expecting 3.4 percent so that's a teeny bit better than expected but it's still persistently sticky inflation is and furthermore powell's comments were very hawkish he basically said he could not commit to when rate cuts might begin. And we're already, remember, at the beginning of the year, we entered the year with expectations for seven rate cuts this year.
Now we're down to an expectation of one rate cut, and we can't say for sure when that's going to happen. So honestly, I think your introduction overstated how positive this news was.
And that's why I think if you look at the markets right now, it's very mixed. Most tech stocks that I'm seeing are actually in the red, and a few of them like Tesla and Apple and Nvidia are up, but the vast majority are in the red.
So I think the market is taking this in stride. I think the big picture here is just we don't know when red cuts are going to begin.
And I think that Vinnie Lingham had a really interesting take on this, actually, where he said, look, could Powell cut by a quarter point? Would that matter that much? No, it wouldn't matter that much. But the point is Powell doesn't want to say that the rate height cycle is over, right? If he were to cut by a quarter point, that by itself wouldn't do much, but it would be a huge statement that we're out of the woods on inflation, there's not going to be any more hikes coming, and we're beginning a new rate cut cycle.
And Powell is clearly unwilling to say that. We're still in this limbo where he is saying that we don't know when rate cuts are going to begin.
Betting markets had a 70% chance of two rate cuts before Powell spoke. Afterwards, now it's one rate cut.
Dow, record high again this past week. And NASDAQ record highs each of the last month for the last four months.
So the market, putting aside individual stocks, has broken records almost every month for the last three. Freeberg, your notes.
On the back of like two stocks. I mean, NVIDIA is holding holding up the whole market there's a lot of funny memes about this nvidia microsoft and ai stocks have are holding up the whole market correct yes record stock market what does jerome powell have to gain or lose by bowing to political pressure so a lot of folks mention and reference kind of, there's political pressure for him to do something.
But why would he bow? What does he care? What do you think the motivation is for Powell individually? And what is the political process that will ensue future job to political pressure? I think it's the legacy and the perception that he leaves behind. I think, he not over promised and under delivered at the end of last year, remember, he was promising as Saks said, six or seven rate cuts, and he's delivered bubkis, and the markets were none too pleased.
And so now I think he's just swung the pendulum to the other side, which is he's going to massively under promise, and then over deliver if he can. And so as a result, I think he's being much more measured and guarded, I don't think he wants to be wrong here.
So I think he's thinking about what most folks think about when they're at the tail end of their of a job like this, he's not going to get reappointed, he's going to go off into the sunset. It's roughly about how history will write how he handled the transition from that to the next phase, whatever that is.
So I think he's probably very interested in making sure he doesn't break the economy. And also that he doesn't seem like he's constantly waffling and unpredictable.
But isn't he just an autonomous agent that is meant to respond to the data? I guess I'm not quite understanding the degree of judgment and discretion that everyone seems to think he has. They have a mandate but if you're asking what his incentives

are i agree with jimoth i think his main incentive at this point is concern for his historical legacy and specifically he wants to be thought of like volcker not like martha burns in the 70s volcker basically crushed inflation even at the cost of a recession and he is worshiped today as best Fed chair ever, whereas Burns let inflation slip the leash in the 1970s, and he's not thought of very highly. So I think that Powell's main concern here is with his historical legacy at this point.
I don't think he's expecting to be reappointed. He's wrapping up his second term already.
Now, I think if you go back to 2021, the incentives were a little bit different. Powell wanted to be reappointed by Biden.
And remember that in the summer of 2021, that's when the inflation began. We had that surprise 5.1% inflation print.
Powell was up for renomination and confirmation in November of 2021. And I think what happened back in that year is the administration downplayed the inflation report.
They called it transitory. Yellen did.
Biden did. And so Powell had to get on board with that message if he wanted to get confirmed by the Democrats.
And he did get on board that message. He repeated the whole transitory point.
And for that reason, they didn't begin the rate hike cycle until March of the following year. And from that May inflation print to November, they kept doing QE, even though we had inflation back in the system.
So I think that Powell was actually intensely political in 2021. He knew who was going to reappoint him and who was going to have to confirm him.
And he got on board with that message. And that's why they were so slow to react to the inflation.
And I think it was disastrous. And that's one of the reasons why the rate tightening cycle was so steep is because he had to catch up with all this inflation that he had allowed for nine months longer than he should have.
But if you ask me, what's his incentive now? I think it's purely about legacy. And he does not want to let inflation come back after cutting rates a little too soon.
So his incentive, I think, at this point is to make sure that he's not wrong again about inflation. And to remind everybody, maximum employment, stable prices, moderate long-term interest rates is the mandate for the Federal Reserve.
They're supposed to be independent. Famously, Reagan pushed Volcker to get rate cuts cuts and there is a lot of politics involved in this and so legacy does seem like the organizing principle here i would agree with chamath and sax that it's legacy but there's always political pressure here as you can see elizabeth warren is trying to push him to make cuts for obvious reasons.
Well, no, there's politics when they're up for appointment or for reappointment, for confirmation, basically, because they want to get that vote. Yes.
But there's also subtle pressure. And then there's letter writing like Elizabeth Warren's doing here, right? So the pressure can be there.
The question is, do they bow to it? Right, sex? Yeah, they don't have to't have to i mean the fed's independent what do they stand to gain or lose by the pressure is my question and i'm not sure i really like this concept exactly and i think that's really where there's a important point to note here that you can identify the guy's motivation and how he's going to operate this year because there aren't there is no political pressure there was 2021, and I think that's why he was slow to react.

Yeah, right.

Listen, if Powell can stick the landing here, then his legacy comes out intact. But if he screws this up, and then he was slow to react to the inflation back in 2021 and 2022, his legacy is going to be mud.
So I think he's going to be more concerned about erring on the side of tamping down inflation than erring on the side of the economy not doing as well. I think those are the incentives.
My position is I think he might have already stuck the landing. I think the fact that we've burned off all that savings, to your point, Shamath, that people are going back to work and that these businesses are doing fantastic and efficient because of ai and other gains it feels like all people are trying i think he's a handful of tech stocks that are no no they're they're trying to go back to work but the jobs don't exist i think they're going to take jobs they just might get the job they want and that's what I think people have to recognize is they have to take a job and they may not

be the one that they want working from home.

We could have a negative recessionary print going into the election cycle.

I think that's very possible.

Yeah, exactly.

I don't know, Jason.

Look, I'm hearing a lot of happy talk right now.

And I agree with you.

You had 1.3% GDP growth rate with a six percent of gdp deficit by the government if the government wasn't printing so much money wasn't overspending that's right if you were to have a balanced budget it would be a recession yeah think about that just subtract it would be negative it would be negative gdp growth if not for the government's program stimulating the economy and a lot of the jobs you're talking about are government jobs. The government is creating jobs like crazy, not in the private sector, but in the public sector, because it is an election year.
So there's a lot of political forces propping things up. And I wonder what happens after the election.
We'll find out. All right, everybody.
This has been another amazing episode of the All In Podcast. Just one last thing, guys.
This is really important. So, friend of the pod, Peter Fenton, who's a famous VC in Silicon Valley, tweeted that his sister has been diagnosed with a rare sarcoma.
And they are searching for lookalike cases to do a study at Dana-Farber. And if this works, it will change the future of cancer.
But they are seeking, this researcher William Gibson, who he's retweeting, is seeking patients with myoxoid myosarcoma featuring a PLAG1 fusion. So if you are somebody out there who has a case like this, then please reach out and let us know or let Peter Fenton know this could save a life or many lives.
His sister is also the wife of a good friend of ours, Pete Brigger. So our thoughts are definitely with you.
and if there's anybody out there who has this type

of sarcoma please let us know and we can refer you to dana farber and this is a very important

study that may save some lives pete and peter are great guys and our thoughts with devin hope you

guys find a cure okay best wishes to peter and his sister help out if you can and you're in our

thoughts and our prayers

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