0:00

All right, everybody. Welcome to

0:02

the 54th annual World Economic

0:04

Forum here in Davos. You

0:06

guys didn't know this, but as

0:08

elites ourselves, we were invited to

0:10

kick off the festivities. Surplus elites. Yeah.

0:13

You know, they're all in podcasts. Very

0:15

popular. And so they wanted us to

0:17

come and represent the pod and our

0:19

audience there. And it's

0:21

been amazing if you haven't seen some

0:23

of the great musical performances this year.

0:25

I mean, they're so notable. Let's

0:28

just start off here. I mean, guys, we were here

0:30

for this live. Soak

0:34

it in. I mean, I don't know. There's

0:37

the air flute. Wait,

0:42

wait, there's a great moment where she really starts vibing. Wait

0:46

for the head shake. The

0:49

eyebrows are great, but the head shake comes

0:52

in at about there. There it is.

0:54

I like your Moo Moo. I like your Moo Moo. Have you

0:56

ever played the air flute or just

0:58

the skin flute? Just the skin flute. But

1:04

guys, guys, this isn't it. There were other

1:06

there was a witch doctor or something. I'm

1:08

not sure exactly what's going on here. I'm

1:10

going to just apologize in advance for mocking

1:12

this. Or

1:15

for Sax mocking it, I should say. This

1:20

was incredible. I don't know exactly what's

1:22

going on here with the blowing of the hair. It's

1:25

coming a long way from Covid, that's for sure. So

1:28

they're blowing the Covid on each person's

1:30

forehead here to spread the Covid. They've

1:33

all taken the mRNA vaccine. But you

1:35

know, we each have a speaking gig.

1:37

Each of us is speaking. And so

1:40

I thought to kick this off here,

1:43

gentlemen, instead of us

1:45

just telling everybody our schedule, I

1:48

would sing our schedule. And

1:50

so let me just grab. Let me see if I got my guitar

1:52

here. Hold on. Let

1:54

me just grab it here. Oh, here it is. OK. Hold

1:57

on. It's happened to have the guitar. Is that your guitar or a

1:59

real guitar? Oh. No, it's actually a real guitar

2:01

here. So, but I thought, you know, everybody is

2:03

really excited about each of our speaking gigs. So

2:05

I thought we would just kick it off here.

2:08

Let me just see if it's in tune. Don't

2:11

you hear that? Oh,

2:13

okay. All

2:16

right. What's that? I think we got it. Kumbaya,

2:18

my lord,

2:21

Kumbaya. Sax

2:24

is interviewing Putin, my

2:26

lord, Kumbaya. In

2:30

the dictator lounge at

2:32

noon, Kumbaya. Conquering

2:36

Europe, Kumbaya. And

2:40

now I'm going to, there's a little audience participation

2:42

in here, besties. I need

2:44

you each to sing with me. Okay. It's,

2:47

uh, we're going to start here. It's going to be just listen one time

2:49

and then you're going to repeat. Okay. Here we go. Oh,

2:54

Davos Kumbaya. Just

3:00

Oh Davos Kumbaya. Ready? Three, two. Oh,

3:04

Davos Kumbaya.

3:08

Okay. Very good. Very good. Okay. Now go to

3:10

the next verse here. Chamath

3:12

in Laura, Piana

3:15

Kumbaya. Hosting

3:19

Steve Bannon at

3:21

1pm Kumbaya. Three

3:25

birds at 2pm

3:27

Kumbaya. Billionaire

3:30

bunker panel Kumbaya.

3:35

Teal just bought one Kumbaya.

3:40

Hunter Biden after party at

3:43

a 1am. Eight

3:47

balls and escorts for everyone brought

3:49

to you by barista. And

3:54

now you all sing. Kumbaya!

4:04

Wow. Fabulous.

4:06

You really are the world's greatest moderator.

4:09

Let your winner ride. Brain

4:13

Man Divin' Science. And

4:17

it's there. We have a resource that's

4:19

available to them. And they just create a

4:21

copy of it. All

4:25

right everybody, yes. The World Economic Forum

4:28

is wrapping up in Davos. If you

4:30

don't know what the WEF is, I'll

4:32

just give you the brief overview. 3,000

4:35

people, 5 days, tons

4:37

of parties, happens in Davos, Switzerland. It's

4:39

run by a foundation. They call

4:42

these non-government organizations, NGOs. You

4:45

can think of it kind of like the TED conference.

4:47

The topic this year was Rebuilding Trust. It's politicians,

4:50

business leaders, economists, journalists, all the elites.

4:53

The mission statement of the WEF, improving

4:55

the state of the world by engaging

4:57

business, political, academic, and other leaders of

5:00

society has shaped global, regional, and

5:02

industry agendas. I'll

5:05

give you a funny big story later if you care to know. But

5:09

they try to shake it down for about $40,000 a year to go to this thing.

5:11

Tons of notable moments that

5:14

we can get to on the docket

5:16

here. Free Break, any highlights for you

5:18

watching this, you know, get

5:20

mocked on social media this year? It's

5:22

been a slow unraveling from this being

5:25

something that people used to

5:27

flex about going to Davos. Now

5:30

people are literally apologizing on social

5:33

media, ex, Twitter, etc. explaining

5:35

why they're going because they're kind of feeling

5:38

shame in going to this event. So what

5:40

are your thoughts on the sort

5:42

of whole flipping of this from

5:44

being a flex to

5:47

requiring an apology in advance? You

5:49

guys know Andrew Ross Sorkin, the journalist

5:51

for CNBC. I think he

5:54

posted on Twitter, you know, I know, I know,

5:56

forgive me, I gotta go to Davos. It's almost

5:58

like embarrassing. now that

6:00

you are associating yourself with

6:03

the elite cabal in the

6:05

Swiss Alps during a time

6:07

of rising global populism and all the criticism

6:09

that's been rained down on Davos in the

6:11

last couple of years. And Davos is trying

6:14

to adapt by trying to be more cool

6:16

and appeal to the

6:19

populist notions that have criticized

6:22

them, thus the flute playing,

6:24

thus the shamanism.

6:27

And thus, I think a lot of what

6:30

Javier Millet has called general

6:32

economic support for what he defines as collectivism,

6:34

which I'd love to talk about, but why

6:36

don't we just say that? So I think

6:38

there's generally been a response from

6:40

the community that attends Davos, but there's

6:43

a lot of conflict here with the fact that folks

6:45

are flying in on private jets and telling everyone to

6:47

stop producing carbon, the fact

6:49

that they're all dining and spending lots of money

6:52

and telling everyone that we should move towards socialist

6:54

conditions and higher taxation. It's all a lot of

6:56

irony wound up in this whole thing. It's

6:59

almost like a like a like a Simpsons show. And

7:02

the theme rebuilding trust is kind of

7:06

insulting at its face, at least to me, like,

7:10

we don't trust you. You don't need to rebuild

7:12

trust with us. We're not going to trust you. There's no way

7:14

for you to do that, especially after what happened with COVID. Sax,

7:17

did you have any sort of reaction

7:20

to this year's Davos and

7:22

just how people are reacting

7:24

to it? You heard Freiburg sort

7:26

of thoughts on it. Well, Davos has become

7:28

a parody of itself. And that's why you

7:31

saw these clips go viral of these ridiculous

7:35

antics of the priestess doing

7:37

I don't know what she was

7:39

doing. But the only two sets

7:41

of remarks that actually were taken

7:43

seriously on their own terms was

7:45

the speech by Malay from Argentina,

7:47

and then also comments by Jamie Dimon. And

7:50

the reason why they went viral

7:53

is because they were actually saying

7:55

sensible things that contradicted the sort

7:59

of establishment. wisdom or consensus at Davos. I

8:01

mean they were effectively sub-tweeting

8:05

the other elites at Davos. I

8:07

mean Mille gets up there and

8:09

I think he was introduced by Klaus Schwab and

8:12

he immediately starts denouncing collectivist

8:14

experiments and says

8:16

that the West is in danger

8:18

because its elites have been

8:20

co-opted by a vision of the world which

8:22

leads inexorably to socialism and

8:24

thereby to poverty. So Mille basically

8:26

says this right in front of Klaus Schwab.

8:29

I mean he's describing the

8:31

people at Davos. That's why that took off

8:33

and went viral. It was

8:35

incredible. Yeah. In a

8:37

similar way. Any food or commercial? I

8:41

didn't know that. Yeah, kudos to him. Jamie

8:45

Dimon gave this interview, I think

8:47

it was on CNBC, where

8:49

he basically went full chamath. He basically

8:51

admitted that Trump had been right and

8:54

that a lot of the criticism

8:56

of Trump and all the derogatory comments

8:59

for years were basically just lazy. And

9:01

he said that Trump was

9:05

largely right on NATO, on immigration,

9:07

on tax reform. He grew the

9:09

economy. Immigration? Immigration.

9:12

He was mostly right on China, he said.

9:15

Diamond said he didn't always like how Trump said

9:18

things or talked about people, but he said

9:20

his policies were largely sound but

9:22

only look better in time since

9:25

we've abandoned them. And he's basically saying that

9:27

look at where we are right now. And

9:30

he questioned the kind of everything is hunky dory

9:32

narrative that the Biden campaign is pushing out. So

9:35

he really went off script there. And like I

9:37

said, I think Chamas said it first here on

9:39

this pod three months ago. And

9:41

now Jamie Dimon is accepting that. So

9:44

that was a huge sub tweet, you could

9:46

say, of all the elites at

9:48

Davos and the accepted wisdom and the

9:51

narrative that they're all pushing

9:53

out. So that

9:56

was the other big Interview

9:58

that went viral. And

10:00

I think that's really saying something. That.

10:02

You know, That. The Elites now. Have.

10:06

Parodied. Themselves to the point where

10:08

Davos has become a joke and the only.

10:11

Talks. Are remarks out a davos

10:13

that people pay attention to? Are

10:15

the ones. Talking sense.

10:18

To the people at Davos because they're Not listening. To.

10:22

Mop your? that's. Look,

10:24

everything has a season and I

10:26

think that when. There

10:29

is a much more singular

10:31

hierarchy of status. Davos

10:34

played a very important role. To.

10:36

Signal to other people that you had made it. But

10:39

you know these things come and go and.

10:42

I think that this is sort of in the. The

10:44

back half of it's. Usefulness.

10:47

In half? Like? What? Is. It

10:49

probably more than anything else

10:51

now. A glorified Enterprise Software

10:53

Sales Conference. Where. The reason

10:55

to go to these conferences for a lot

10:58

of these companies I suspect is that it

11:00

allows you. To. Close. Very big

11:02

deals. Multi. Million dollar licenses of

11:04

this. that and the other thing. Where.

11:07

You can get the leaders of that counterparty across the

11:09

table from you and hammer out a deal. And

11:11

I think you pay forty grand a ticket for

11:14

the rights to get everybody together to do that.

11:16

So I think they want to pretend that it's a

11:19

lot more than what it is and I think what

11:21

it is is that. and I think whenever you have.

11:24

The ability to convene people to close

11:26

business? That's valuable. Beyond. That

11:29

I think it's sort of in the eye of

11:31

the beholder. And it used to be that

11:33

the behold there thought that this was important. And.

11:35

Now I think we realize it's much of nothing.

11:38

It's. Say. Man and air

11:40

flutes and. All. Kinds of stupidity

11:42

which is why people have the courage to go

11:44

and market. And I think that. Malays,

11:46

Comments And Jamie damn his comments. Exemplify

11:49

that. The. Only other

11:51

thing I would say that I had heard although I haven't

11:53

seen it so don't know. Who's

11:56

Alex? Carp apparently did a very. Thoughtful.

11:58

speech about anti semitism And

12:02

which is also very counter-cultural to the

12:05

established logic that the

12:07

surplus elites at Davos want to believe,

12:09

which is the anti-Israel, pro-Palestine line. I

12:12

haven't heard of those, so I don't know how impactful

12:15

that was. But those are the three things

12:17

that I've just seen on Twitter, just kind

12:20

of... The LA speech, I think, is

12:22

the one that everybody is keying on,

12:24

and correctly so. Obviously, he's

12:26

the new president of Argentina. And

12:29

this speech was amazing. People

12:33

might not also know that

12:35

he was an economics teacher.

12:37

And so this talk about

12:39

collectivism leading to suffering and regulatory capture

12:41

and bloat, which we'll talk a little

12:43

bit about when we talk

12:45

about Boeing today, was

12:47

incredibly powerful. And it's super basic. Listen, free

12:50

market's work. There are people opting into either

12:52

side of it. He went over, essentially, without

12:54

saying it, the rule of 72, and

12:57

like 200 years of GDP growth

12:59

and how GDP growth under capitalism rises

13:02

everybody up. And then collectivism,

13:04

aka socialism, is

13:06

a bit of a disaster. But

13:08

it's well worth watching it. It's a really

13:10

cool thing that a

13:12

company called Heigen did, H-E-Y-G-E-N,

13:15

with their AI tool. They just immediately took

13:17

his speech, put it in his own words,

13:20

and published it

13:22

and translated it as if he was speaking English

13:25

because he was speaking in his native tongue. So

13:27

really worth checking it out. And yeah,

13:30

it was super notable. It's very basic,

13:33

but I think if everybody wants

13:35

to hear this right now, which is if

13:38

you're picking collectivism and socialism and redistribution of

13:40

wealth, Argentina has

13:42

a really good history of watching

13:44

this fall. And now they're in

13:46

the process of dismantling it. And

13:48

don't say something else before Weber

13:52

says something here, which I think is going to be very thoughtful. Jason,

13:55

the other reason why Argentina is a really good example

13:57

to use is that... What?

14:00

Does Davos. Represent.

14:03

Had a different level well what it

14:05

is his. Old Europe

14:08

getting together. In. A way

14:10

that allows him to continue to coalesce power.

14:12

And. What's interesting is if you are presented the

14:14

case of any other country. Trying.

14:17

Collectivism and failing. He.

14:19

Wouldn't get nearly the same attention as

14:21

Argentine. and the reason is that Argentina

14:24

has so many ethnic Europeans. And.

14:26

I think that's another reason which is like when

14:28

you present people that are telling you didn't work

14:30

but. Frankly, Look like you speak the

14:32

same language as you. I. Think it

14:35

actually goes further and making the point? Then.

14:37

If. You found somebody in South Asia or Africa

14:40

that said the same thing to these folks,

14:42

which they have, which they've not listen to.

14:44

And. So this is why the Malays so

14:46

interesting and important because. He. Looks

14:48

the part. Of a Western leader

14:50

and I think that that. Unfortunately

14:52

is what it's gonna take for some of these

14:55

folks to listen. And everyone's acutely

14:57

aware I'm an Aussie. Three things on this one is just

14:59

talking to your points him off about the history of Argentina,

15:01

how it relates to this. Position

15:03

that Malloy holds and been able to speak

15:05

credibly to this. Second, Is what he

15:08

said which I think is really important and third is

15:10

how it relates to United States. but it's with clearly

15:12

to my for my view one of the most important

15:14

media events of the year. I do think that anyone

15:16

it's listening to us right now should go watch it.

15:18

And go listen to the entirety of

15:20

the speech. It is so important I

15:22

hope everyone really takes and what he

15:24

said just briefly on Argentina In the

15:26

mid nineteenth century Argentina it was a

15:28

colonial. Nation: Very.

15:31

Agricultural but a lot of. Free.

15:33

Market. Pioneer. As I'm going on.

15:36

Businesses. Were built and an

15:38

economy flourished in Argentina. On.

15:41

This photo I put up here is from

15:43

nineteen thirteen. That. When I saw race

15:45

which up a time with called. Paris.

15:47

Of the west As much as it looks

15:49

like parasite the architecture underlings beard and earning.

15:52

But. Here's here's some statistics Lot of people

15:54

don't know. Argentina at this time was

15:56

wealthier than France or Germany. Twice.

15:58

as wealthy as spain and had

16:01

one of the top 10 highest GDP per

16:03

capita of any nation on Earth in 1913.

16:06

And so it was this flourishing, vibrant

16:09

economy with

16:11

a lot of innovation, a lot of arts,

16:13

a lot of building, a lot of employment,

16:16

a lot of immigration. And

16:18

then as the series of

16:20

military coups began, I don't know

16:22

if you guys are aware, but there was a military coup in 1930, 1943, 1955, 1962, 1966, 1976. And

16:31

in every one of these cases, the essence of

16:33

the coup was one of relativism, which is some

16:36

people have benefited more than others. As

16:38

a result, we need to change the way that

16:40

the government and the social structure is functioning, and

16:42

it has to be taken by force. And

16:45

I think this is the big story of

16:47

Argentina that says so much more than any

16:49

other nation of the past century, century and

16:51

a half, which is that

16:54

these cycles happen based

16:56

on not absolutism, but on relativism.

16:59

And I'll just give you what I mean by that.

17:01

Millet made this point, which is so important. From

17:04

the year 1800 to the year 2020, in the year 1800, we saw

17:06

95% of the world's population in

17:10

extreme poverty. By 2020, it was less than 5%. And

17:15

this was driven by free market

17:17

capitalism democracies that allowed people,

17:19

individuals to pursue their own

17:22

self-interest and as a result,

17:24

deliver products into a marketplace that people wanted

17:26

and were willing to pay for. And

17:29

that incentive, that market-based system allowed

17:32

the entire world to move forward. The

17:34

relativism problem is that some people move

17:36

forward faster than others. And that

17:38

causes this great cycle of what some people might call

17:40

envy or jealousy. And Millet said it

17:43

best, the West is in jeopardy, which is the

17:45

key statement he was trying to make in

17:47

his point that countries are no longer defending

17:49

free markets. This is a quote, private

17:52

property and other institutions

17:54

of libertarianism due to errors

17:57

in their theoretical framework and ambition for

17:59

power. Opening doors to

18:01

socialism and condemning us to poverty, misery, and

18:03

stagnation, socialism has failed in all countries where

18:05

it was attempted. And then he started to

18:08

harp on about neoclassical economic theory and the

18:10

issues of that. But I want to show

18:12

you one last image, which

18:14

speaks so clearly to the point that he's making,

18:16

which is as these governments that are well-intentioned, and

18:19

the people that elect the governments and put

18:21

them in power are well-intentioned, then try to

18:24

redistribute wealth by getting the governments to step

18:26

in and play a market role, the

18:29

market role that they play

18:31

causes inflation, causes degradation in

18:33

economic opportunity, economic mobility, and

18:35

prosperity for most people. And you can

18:37

see this in this chart, which we've looked

18:40

at many times. But everything on

18:42

the top of this chart, this is a chart that

18:44

shows that 20 years of price changes of various goods

18:46

and services in the United States, everything

18:49

that's gone up in price is

18:51

something that the US government has a

18:53

role in buying or paying for. Yeah,

18:56

controlling. Yeah. And

18:58

everything that's gone down in price is where

19:00

there is a free market that has allowed

19:02

people to access goods and services at a

19:04

lower price over time as opposed to a

19:06

higher price over time. And while the intention

19:08

is that the government is doing good for

19:10

people by making education, health

19:13

care, and other goods and services

19:15

available to them, the government stepping

19:17

in and intervening in the free

19:19

market causes the price to go up.

19:21

And ultimately, you end up in a really negative

19:23

cycle that results in this collectivism approach that he's

19:25

talking about. And that's why I just wanted to

19:27

tie back what he said to what's going on

19:30

in the US today. And I've harped on this

19:32

a lot, but the growing role that the federal

19:34

government is playing and the intention

19:36

is good, but the impact is bad over time.

19:39

And that's really, I think, why it was such

19:41

an important speech. He was so clear. It was

19:43

so important for me to hear it. I'm sorry

19:45

I harped on, but I just really thought that

19:47

was the highlight. The key of his speech is,

19:49

hey, good intentions can lead to a

19:51

bad outcome here. Yeah, you want everybody to have health

19:53

care, you want everybody to have education. The

19:55

government is providing it, and there's no

19:57

customer, and there's no market, there's no competition.

20:00

And the products and services that you are

20:02

referring to, they include medicine, they include

20:04

college, they include tutoring, they don't

20:06

just include, and they include air

20:08

conditioning, they include refrigerators and televisions,

20:10

smartphones, all of that. And

20:13

picking which system and which set of problems you want

20:15

to have, I guess, is what societies

20:17

need to do in free markets.

20:20

It's a weird reflexive loop, though, for governments,

20:22

because these people, what he also said was

20:24

these aren't just well-intentioned people. They're

20:26

also a small class of elites that wanted

20:28

to feel like they were better

20:30

than everybody else by implementing things that worked. And so

20:33

there is a dark part of this as well, which

20:35

is their desire for power. And I

20:37

think it's important to not gloss that over. So

20:39

this wasn't just a bunch of bumbling

20:41

do-gooders that screwed things up. This was also a

20:44

bunch of folks that, that,

20:46

irrespective of the data, had

20:48

an opportunity to gain influence and

20:50

power. And I think that that's an important

20:52

thing to acknowledge, because it created

20:54

a very negative reflexive loop

20:57

that governments used, meaning if you

20:59

look at Freiburg's church, why

21:02

did that happen? Well, part of

21:05

what happened was the administrative state became

21:08

more and more powerful. They were able to

21:10

pass laws. They were there to decide who

21:12

the winners and losers were. That

21:15

is a drug, and that drug is very

21:17

addictive. And so what happened as this happened

21:20

was the laws went and reinforced those

21:22

dynamics of those people being able to

21:24

decide winners and losers. The

21:27

thing that it has, that has not happened

21:29

yet, though, and maybe we're beginning to see

21:31

it in some of these markets that the

21:33

government is too involved in, is

21:35

that it has bred a level of

21:37

incompetence and incapability that

21:40

we now have to unwind because

21:42

the average everyday citizen's lives are

21:45

either at risk or these services

21:47

are just so expensive that it's just

21:49

untenable. And I think that's

21:52

where we are now. It's a great segue, I think,

21:54

into this Boeing issue that we've

21:56

seen, because here's an issue of regulation and

21:58

safety where you want to... government and

22:00

you want safe planes and you want some

22:02

level of regulation but then you get regulatory

22:05

capture. But the government has not been the

22:07

supporter of the safety agenda

22:09

that citizens think. Yes. Meaning,

22:12

when you look at what has happened in

22:14

the U.S. airline industry, there

22:16

are a handful of end

22:18

user providers, but those

22:20

are all using

22:22

OEM equipment from one of two

22:25

vendors, Boeing or Airbus. So it's

22:27

a duopoly, but in many ways it's

22:29

a monopoly, the way that these folks

22:31

fight with respect to tariffs and imports

22:34

and incentives. So the United

22:36

States airline industry is a monopoly of

22:38

one company. Now if you

22:40

look at what's happened, what they would say is, well,

22:42

planes have become safer and safer and safer. Yes,

22:45

but they've become safer

22:48

in some ways, in the most simple

22:51

and obvious ways, but they've become unsafe in

22:53

that you have these fleets of

22:55

planes that are now behaving very unpredictably. And

22:57

if you look under the hood, what

23:00

happens is Boeing as

23:02

an example, in like the last

23:05

four years, how much money do you think they've

23:07

spent on lobbyists and PACs? I'll tell you, $65

23:09

million. How

23:11

much have they spent just in the last year? Almost

23:14

$11 million. They're like the 15th

23:16

most active spender in politics

23:19

in Washington. Now what

23:21

did they use that money for? Well that's also

23:23

documented. See, the crazy thing is this stuff happens

23:25

in plain sight. So

23:27

they were able to water down the safety

23:29

regulations. What does that allow you

23:31

to do? It allows you to have a situation like this

23:33

unfold. And then on the other side,

23:37

the pilots unions can lobby those same politicians

23:39

who are taking money from Boeing and

23:42

prevent systems that

23:45

would actually make these planes safer. You

23:48

can have more improvements in the

23:50

Guide by Wire technology. You can have

23:52

more improvements in GPS. You can have

23:54

more improvements in a computer's

23:57

ability to help improve and augment

23:59

the capability of the pilot. Unfortunately,

24:01

that will result either in fewer pilots

24:03

or less pay. And so that doesn't

24:05

happen nearly as fast and obviously as

24:07

it should. It's the same for air

24:10

traffic control. And all of these issues

24:12

build up because we've allowed monopolies to build

24:14

up. So as much as

24:16

we think we are a capitalist society,

24:18

we have veered into this

24:20

collectivism in certain markets. And where it's

24:23

measurable and obvious, we need to

24:25

point at it and say, let's go fix it. And this

24:27

would be a, let me just tee up a little bit

24:29

of what you're referring to in case people don't know. But

24:32

everybody probably saw the news that on January 5th, the

24:34

door blew off of one of these Boeing 737 MAX

24:37

jets. If you've heard that name before,

24:40

it's because this isn't the first time that

24:42

the MAX jets have had problems. This plane

24:44

safely landed, thank God. And there was nobody

24:46

sitting in the row where the door blew

24:49

off. And this has to do

24:51

with some bolts on the doors.

24:53

But this is just the start of problems with the

24:56

737 MAX. There's an incredible documentary, if you

24:58

haven't seen it, we'll put it in the

25:00

show notes, Boeing's Fatal Flaw. And

25:02

the version before this, the 737 MAX 9 is the one

25:04

that had the bolts come

25:06

off. The MAX 8,

25:08

if you remember, there were two really

25:10

harrowing instances where tragically

25:12

346 people died in these two

25:15

instances because the plane, literally

25:18

the software on the plane, which is

25:20

called MAX, Maneuvering Characteristics Augmentation System, which

25:22

was designed because they were trying

25:24

to get more fuel

25:27

efficiency and they had positioned the engines

25:29

in a weird way on the wings.

25:31

So they had to kind of help

25:33

pilots level this stuff into your

25:36

point about regulatory capture. There was all this

25:38

behind the scenes manipulation

25:40

of the market to try to

25:43

get these planes built to try to get them out the door

25:45

because there was so much money at stake. Well, on

25:47

these two terrible accidents, the

25:49

plane, the nose literally dove and the pilots

25:52

were fighting it in both cases. They

25:55

just crashed and everybody on board died.

25:57

And for 20 months, the 737 MAX

25:59

9 is the one the max models were grounded

26:02

and that cost the company over $21 billion.

26:05

So there is no competition to your point

26:07

and then in a free market if there were 10

26:09

providers would this be much different from off? And

26:12

absolutely. Yeah. So I think

26:14

that's what you have to realize here is that these duopolies

26:16

you'd think there's competition and a duopoly there is in competition.

26:18

No, I mean like for example like if you look at

26:20

the car market how many instances I

26:23

think the last big incidents that I remember was

26:25

I think Ford had an issue

26:27

with the fuel tanks of some cars that

26:29

were exploding, right? Yeah. But

26:31

the reality is when that happens there

26:33

are alternatives. One

26:36

is that there's legal requirements for Ford to just

26:38

fix these things quickly. There

26:40

are lawsuits that happened. There was class

26:42

actions. There was settlements. But there's also the ability

26:45

for folks that can afford it is just to

26:47

switch vendor and of which there are 50 other

26:49

vendors to choose from. That

26:51

is a healthy dynamic. So today when you look at

26:53

the auto market what do you see? A plethora of

26:56

choice. And when you

26:58

see fatalities or safety issues

27:00

they are overwhelmingly driver

27:02

error. And we assume that

27:04

and we get insurance to deal with that. When

27:07

you look at airplanes you have these three

27:10

sections of risk that each are

27:12

compounding because there is no competition. Number

27:15

one is that the monopoly vendor

27:17

has zero pressure to actually

27:19

test these things adequately because

27:22

on the other side of building something

27:24

well is shareholder pressure to

27:26

deliver something sooner and faster so that

27:28

they can reap more profits. Then

27:31

second is you have a regulatory infrastructure that

27:33

puts rules on top of rules but then

27:35

will bend the rules if you donate to

27:38

them, right? And that's measured and known.

27:40

And then the third are the folks that actually operate the

27:43

planes who have this actual

27:45

incentive to not see technical improvements

27:47

because it defends their job for longer. And

27:51

in all of these cases there isn't enough

27:53

competition to shine the light on this to

27:55

say how does society actually want this market

27:57

to operate? This is

27:59

collateral. It's not working. Freiburg,

28:02

you have thoughts on this Boeing regulatory capture

28:04

and the issue of only having two vendors

28:06

there and

28:08

the complexity of these machines

28:10

now in relation to that. Nick,

28:13

you can pull this up. This is an audit

28:16

of the business model for a company called

28:18

TransDyn Group. TransDyn Group is

28:20

a aircraft,

28:23

aerospace parts manufacturer. They

28:25

sell certified, regulated

28:29

aircraft parts to

28:31

aviation companies as well as to

28:34

airlines, private pilots, and also

28:36

the government. They

28:39

do about $7 billion in revenue, $3.5 billion in EBITDA. So,

28:43

Tim, off to your point a couple weeks

28:45

ago about what's the appropriate competitive

28:48

EBITDA margin that a company can ultimately

28:50

achieve. Their EBITDA margin is 53% this

28:52

company. Other

28:54

than Facebook. Insane. On $7 billion

28:57

of revenue and growing. Nick, if you want to pull

28:59

up their stock chart, you guys can see how

29:01

the business has performed over the years. Their

29:03

business model has been relatively simple. They've

29:06

acquired aerospace companies that have certified

29:09

parts. They drop the cost and raise

29:11

the price. They do that over and over

29:13

again. Here's the business over the last 10 years. This

29:16

thing is roughly $10, $8 to $10 in the

29:19

last 10 years. The

29:23

market cap is $60 billion today. No

29:25

end in sight. There

29:28

was a government audit done of the business by

29:30

using uncertified cost data, which is one of

29:32

the most reliable sources of information to perform

29:34

cost analysis. We found that TransDyn earned excess

29:36

profit of at least $21 million on 105

29:38

spare parts, on

29:43

150 contracts. They're selling spare

29:45

parts into the government. The government auditor

29:47

came in, audited them, and

29:49

identified because there's no real

29:51

audit, there's no real accountability in government as

29:53

purchasers, but there is regulatory authority on deciding

29:56

who are the winners and who are the

29:58

losers in the market. TransTime

30:00

has been elected a winner because they have

30:02

regulatory approval to make and sell these parts.

30:05

The cost to get approval to make and sell

30:07

these parts is so high that

30:09

it makes it prohibitive for startups to come

30:11

in and compete in this marketplace. And

30:14

now that they're a preferred supplier and they

30:16

get these single contracts where there's

30:18

no competition to be a supplier, they can raise

30:20

the price every year. Multiple audit

30:22

reports over the last 23 years have

30:24

highlighted the problem of the Department of

30:26

Defense paying excess profits on sole source

30:28

contracts where cost analysis was not

30:31

used to determine fair and reasonable prices and

30:33

this problem continues to occur. Now, I'm not

30:35

necessarily saying that this is a negative on

30:37

TransTime. It's a fantastic business. It's well run.

30:39

It's one of the best run public companies

30:41

with a multi $10 billion market cap in

30:44

the world. But the condition

30:46

is that the US government comes in and picks

30:48

and chooses through its regulatory authority which

30:50

companies can make products. The cost

30:52

to enter and compete becomes prohibitively

30:54

high. And then the company has complete

30:56

pricing power and there's very little accountability in the overall

30:59

system. And I think that this

31:01

plays out not just with this company, but obviously

31:03

also with Boeing and the fact that we've narrowed

31:05

down the competitive market space to just

31:07

a few sole source providers that have

31:10

very little accountability and eventually these sorts

31:12

of conditions arise. Either prices get too

31:14

high, quality degrades, all the other things

31:16

that natural market forces would keep a

31:19

check on. Yeah. And in terms of

31:21

competition, Chamath, I guess the

31:23

only thing you could say is consumers

31:25

could potentially maybe try to avoid the

31:28

737 MAX. I know I did. When

31:30

all these accidents happen, I

31:32

just told my person who books the flights,

31:34

hey, do not put me on a 737 MAX,

31:37

period, full stop. And you

31:39

know what? You're going to wind up paying a lot more. You're

31:41

going to have a hard time getting certain routes. You're going to

31:43

reduce it because most airlines,

31:45

I think, have these

31:47

737 MAXs in there. So when you

31:49

have such a few number of providers, to your point

31:51

about it's not like cars, it's not fragmented like that.

31:54

You can't avoid a certain car type, a

31:56

plane type, the way you can avoid a car type. So

31:58

just wrapping up here, Chamath. What changes

32:01

should we see in terms of late-stage

32:05

capitalism, something in the example like

32:07

air travel and manufacturers? Is there

32:09

any way to unwind this reasonably,

32:12

or is it too late because we're

32:14

at this too often? Well, I

32:17

go back to some of

32:19

the examples that we've made fun of before. You

32:22

have to rely on the

32:24

government to actually be competent in

32:26

key moments in time. I think this is one of

32:28

them. The organization that could

32:31

do something about it, for example, take

32:33

the FTC or even take the

32:35

DOJ, we

32:37

are investigating Amazon's

32:41

purchase of the portable vacuum

32:44

cleaner, Roomba. Critically

32:47

important issue. That is apparently

32:50

for the American people higher

32:53

than the sclerosis that the

32:55

government has enabled in

32:58

the airline industry, which affects everybody. So

33:02

could the right government agencies

33:04

choose to actually focus on something important

33:06

here and actually figure out why

33:10

is this happening? Because

33:13

I think the door plugs issue is endemic

33:15

of a much bigger problem. This is a

33:17

company that's rotting because there is no accountability.

33:20

And the reason there's no accountability is there's

33:22

no real functional competition. And

33:24

I have not seen any good answer to

33:28

accountability other than competition. Yeah,

33:31

I mean, the good news is the

33:33

FAA really took quick

33:36

action to ground these 171 Boeing 737-9

33:39

MAX era plans. But

33:41

they do not understand the scope of the problem

33:43

if they let them back in the fleet and

33:45

this is happening. The bigger picture problem

33:48

of lack of competition. Yeah. No,

33:50

no, no. My point is like, you have to

33:52

adjudicate. The

33:56

interaction of very complicated hardware and

33:58

software in that first goal. Here

34:01

is just a pure systemic

34:04

hardware failure. So

34:06

the point is that whether it's them

34:09

or their suppliers, there

34:11

is just some complacency that sets

34:13

in when you know you will always have the

34:16

business to Friedberg's point. It is

34:18

a very corrosive thing in

34:21

running a business, trying

34:23

to have motivated employees when

34:27

they know on the back end

34:30

of it that they could make anything in the world and

34:33

they'll just be able to sell it to somebody

34:35

and they'll have to take it. That's that example

34:37

that Friedberg just cited. Twenty

34:39

odd million dollars for just random stuff

34:41

for, what is it, fifteen pieces. That's

34:43

crazy. That's just straight

34:46

up theft. And so when you

34:48

have that, how do you expect the employees of

34:50

that organization to give a sh**? I

34:53

don't see how you could expect that.

34:56

And so my point is the FAA has

34:58

a much bigger problem. So for example, like

35:00

the DOE has a loan program to try

35:02

to create a diverse energy infrastructure in the

35:05

United States, maybe we need to look

35:07

at some of these sectors and instead of building

35:09

the administrative state, take some of

35:11

that money instead and just create programs

35:13

to get more competition. All right, in

35:15

other news, Adam Neumann, you

35:17

remember from WeWork infamy

35:19

slash fame, has a new

35:21

startup. You may have heard of it, Flow. They've raised a ton

35:24

of money. He started buying a bunch

35:26

of apartment buildings, the idea people

35:28

can rent nice apartments in cool cities. That

35:31

focused more on social interaction and

35:33

hacking out common spaces, all that

35:36

great stuff. And there's also allegedly

35:38

or reportedly some sort of rent to own

35:40

where renters can receive equity in the company

35:43

over time. And I don't think this has

35:45

ever been released, but the

35:47

idea would be maybe you own shares in Flow. Flow manages

35:50

around 3,000 units, most

35:52

of which were purchased by Neumann after he left

35:54

WeWork. He took down a windfall

35:56

as an exit package. And so

35:59

according to the real deal, the real estate publication, Newman

36:01

had a 60 million variable rate

36:03

mortgage on one of these properties in

36:05

June. In fact, maybe you could explain

36:07

to us what's going on here since you have

36:09

a lot of experience in real estate. Well,

36:12

it's pretty simple. He can't make his interest payments. Okay.

36:15

The reason is because he had

36:17

floating rate debt. So

36:19

if he had locked in his debt over, say,

36:21

10 years back when he bought this building in

36:23

2021 or whenever it was, when interest rates

36:27

were extremely low, that was

36:30

during the ZURP period, probably

36:32

could have locked in long-term

36:34

debt at maybe even 3% or

36:37

3% or 4%. And instead, he got floating

36:39

rate debt. And if you look at where commercial

36:41

debt is now, I mean, it's 7, 8, 9%, if you can get it,

36:45

which is pretty hard. So he

36:47

maxed out on debt when he bought these buildings. He

36:49

bought them top of market, it sounds

36:52

like, in 2021 because

36:54

real estate, like a lot of things,

36:56

moves inversely to interest rates. So when

36:58

interest rates spiked over

37:01

the last year or so, then

37:03

real estate valuations went down. So he bought

37:05

a bunch of buildings top of market using a

37:08

lot of debt that was floating rate. Interest

37:11

rates spiked, perfect storm. Now he can't make

37:13

his interest payments. The

37:15

crazy part about this when I was watching it happen,

37:17

Chamath, and we talked about it, I think, on the

37:19

program at the time was Andreessen Horowitz put in

37:21

like over $300 million at a

37:23

billion dollar valuation, but they didn't do that in PXURP. They

37:25

did that in 2022 when the

37:28

writing was on the wall. What are your thoughts on

37:30

why they would make a bet like that? And

37:34

yeah, just tech VCs betting

37:36

on real estate for a second time. How

37:38

does that occur? Well,

37:41

I don't think it occurs because they cared about

37:43

real estate. I think it allows them to take

37:47

$300 million of committed capital

37:50

and put it out there so that they're $300 million

37:53

less available, which means that

37:55

they're $300 million closer to raising a new

37:57

fund, which means that they can raise, they

37:59

can charge 2% or more money. That's

38:02

why they did it. Got it. Yeah. So

38:04

just keep the money train deploying capital. It's

38:06

a place where you can put a big

38:08

huge check. And you can raise

38:10

your next fund and yeah, why

38:13

not? Okay, well, they have. Let

38:15

me let me offer I mean, I don't disagree.

38:17

I think that candidly, what you've said is exactly

38:19

how mega funds are thinking about it, we have

38:21

to deploy capital to raise our next fund. And

38:23

if we still have capital in our last fund,

38:25

then we can't deploy. Freiburg, well,

38:27

if you're gonna have to deploy large

38:29

amounts of capital, wouldn't

38:32

you feel better deploying that capital with an

38:34

entrepreneur who's actually run a big business before

38:36

even though the business failed? No, no, no,

38:38

if you're if you if you were not

38:40

optimized for fees, you would do what Peter

38:42

Thiel did and just have the fund and

38:44

return the money. Right.

38:46

And for for that, because he's already

38:49

won, but probably else that's trying to

38:51

win the only way to win in

38:53

a world where your your exits are

38:56

not that great is to actually generate money

38:59

via fees, even though that fees are taxed

39:01

at current income, that's the way to win

39:03

in venture is not carry, it's by fees.

39:05

And so it's

39:07

and I don't blame Andreessen, I think

39:09

like that's, that's smart for them to do. And if

39:11

they have folks that are willing to enable that by

39:14

giving them money, they should do it. But are they

39:16

going to generate huge rates

39:18

of return? Probably not,

39:20

because that's not what real estate is known

39:22

for. Real estate is known for long steady

39:25

tax orbs. That's slowly compound

39:27

for the for the owner of the company over 20

39:29

or the owner of the business over 25 to

39:31

35 years. That's not what a venture

39:34

fund is supposed to be doing for a

39:36

10 year 12 year return cycle. So obviously,

39:38

they're doing it for fees. That's okay. I

39:40

think that's capitalism. What

39:42

are the LPs then think, Sacks, if we look at

39:44

this, you know, you're an LP in a technology firm,

39:46

I'll take Andreessen out of it for a second. But

39:48

let's just say some giant LP gives giant amounts of

39:51

money to a venture

39:53

capital firm, and then they're

39:55

deployed in real estate. What

39:57

happens, you know, in their minds, and is there

39:59

any of tension that would occur,

40:02

just handicapping the situation. You

40:04

can never judge a VC based on one investment.

40:07

If we were to do that, every VC would

40:09

have a lot of egg on their face because we're

40:11

supposed to take big swings and swing for the fences

40:13

and try and hit home runs and grand slams

40:15

and a lot of them are going to make you look foolish.

40:17

You have to look at an investment

40:20

portfolio and track returns over time. So

40:22

I wouldn't judge any

40:24

particular investor based on one investment. So

40:26

I don't think that's fair. Now,

40:30

in the case of this investment, if you want me

40:32

to explain what I think went wrong, I

40:35

think Adam Newman had a compelling vision. His

40:38

vision was to create a

40:40

new experience in, I guess you'd

40:42

call it apartment living and

40:44

that people would be willing to pay more for that

40:46

because he would create this national brand

40:49

in apartments. And right now apartments are super local

40:52

and there is no brand

40:54

in apartment living. So I

40:56

think as an entrepreneur, as an operator, he

40:58

had a great vision and I think

41:01

he actually achieved his vision. If you read these

41:03

articles carefully, what they say is that

41:06

his occupancy was high and people were

41:08

willing to pay at least

41:10

a little bit more for the experience

41:12

of being in a flow apartment. The

41:14

problem for Adam Newman is that at

41:16

the end of the day, his plan

41:19

to raise rents by creating

41:21

experience, even though it worked, it just

41:23

didn't raise rents that much. And

41:26

what ended up being much more important were

41:28

the moves in interest rates and

41:30

how he capitalized these acquisitions and

41:32

the price he paid on the

41:34

acquisitions. So there's an old

41:37

saying in real estate that you make money based

41:39

on the buy, not on the sell, meaning that

41:42

when you go and sell your

41:45

apartment building, office building, or whatever, you're

41:47

monetizing an acquisition that you did

41:49

correctly. And if you don't buy at the right

41:52

price, you're never going to be able to make money on the sale.

41:54

And this is a really good example of this, where he

41:57

bought at top of market his...

42:00

Capital Stack was over-reliant

42:02

on debt, and he

42:04

had floating rate debt. I mean, those

42:06

are just financial mistakes and timing mistakes

42:08

that you can't make up for no matter

42:11

how good an operator you are in real

42:13

estate. And in a way, I mean, this

42:15

is the same thing that happened with WeWork, which

42:17

is he delivered an excellent

42:19

product. I mean, people love WeWork

42:21

offices. Absolutely. Yeah. They

42:23

pick them over other offices because of

42:26

the vibes, because of the culture, because

42:28

of the community. And

42:30

he has some mastery of that, but to

42:33

your point, entry price matters, and the economics

42:35

matter. If you look at WeWork,

42:37

it didn't fail because the product wasn't good. It

42:39

was because he didn't pay enough attention to the

42:41

financial aspects of the business. With

42:44

WeWork, he leased a bunch of offices at the

42:46

absolute top of the market, and then

42:48

over-invested in TI's, tenant improvements. With

42:51

Flow, he bought a bunch of real estate at the top

42:53

of the market and sort of did it with the wrong

42:55

capital stack. So this is the

42:57

problem, is that when you get into a real estate

42:59

business, it doesn't really

43:01

matter how great you are as an

43:04

entrepreneur or operator if you're not good at sort

43:07

of the legacy,

43:09

old-school, real estate part

43:12

of it. And the old-school real estate

43:14

guys were saying during WeWork, this

43:16

is not going to work, because this is

43:18

egregious, but with a bad

43:20

capital structure. And the old-school real estate

43:23

guys were saying something similar about this.

43:26

It just goes to show that if you are

43:28

going to try and disrupt a legacy industry, you

43:31

do have to kind of understand the ins

43:33

and outs of that legacy industry. And the

43:35

great paradox of this, Sacks, was when he

43:38

did Green Desk, which was the precursor to

43:40

WeWork, when he did the first WeWork in

43:42

San Francisco and other places, his playbook was

43:44

find a building that's empty that cannot be

43:47

leased. So he got 25 Taylor Street, like

43:50

6th and Market, the worst area by the Tenderloin. And we had

43:52

an office there for a little bit, and I had my podcasting

43:54

stood there for a little bit. This

43:56

was a terrible area, but he made it

43:58

hip and cool. And it was

44:00

really cheap. And man, it sold out

44:03

and it was packed and the vibes were great. But

44:06

then, as you're saying, then he moved all of a

44:08

sudden to Soma and he started opening up these glass-filled

44:10

ones and, you know, he was

44:12

renting them for less with

44:15

all their giveaways and six months' rate and all this

44:17

stuff then they could ever afford. So he

44:19

kind of had mission drift, right? The playbook,

44:21

they just, they changed the playbook and

44:24

it economically was not viable. Well,

44:26

the timing got really bad and again, they

44:28

didn't pay attention to the financial aspects as

44:30

much as they should. In

44:32

this case, I think that if

44:35

he was trying to execute this play today

44:37

and doing his acquisitions today, he could

44:39

actually make it where you would need a lot

44:41

more equity because you wouldn't be able to get

44:43

as much debt financing. But if he

44:45

had the equity and could do more of an acquisition based

44:47

on equity, the prices he had paid right now would be

44:50

much lower. And then as interest rates

44:52

come down, he could ride that wave,

44:54

he could refi, pull his equity out and

44:57

put debt on it that is

44:59

cheaper as the price goes down. So

45:02

there was a way to maybe make this

45:04

work, but, you know, with real estate, the

45:06

timing is just so important. Again, your cost

45:08

basis of when you get in the investment

45:11

is probably the most important thing in

45:14

terms of whether you make money or not. Did you

45:16

see this by chance, the real estate piece in 60

45:18

Minutes, the package they did last week, Saks? It

45:21

was basically what we were talking about here a year ago.

45:23

Super compelling if you haven't seen it. It's basically the

45:25

only podcast from 12 or 18 months ago. Has

45:28

anything changed on the field in terms of commercial

45:31

real estate or is it just continuing to

45:33

collapse? No, I mean, nothing's changed. I think

45:35

that all the commercial real estate guys,

45:38

the sponsors and the dealmakers

45:41

and so forth, they're all kind of hanging on by

45:43

their fingernails waiting for interest rates

45:45

to come down. And all the leases

45:47

are still coming off, right? Like people are

45:49

still who had six, seven, eight year leases

45:51

that were signed pre-COVID before one month. It

45:53

depends on the market. I mean, some of

45:56

the markets are coming back, but again, what

45:59

this flow... News showed

46:01

this Adam Newman news shows is

46:03

that you could be fully occupied

46:06

And you could still default and

46:08

the reason is because your capital structure the interest

46:10

rates spiked up You're now paying you know,

46:13

all of your Operating

46:15

income is being eaten up By

46:18

your death service The only way to make it

46:20

through that is you you go to your bank

46:22

is one of these regional banks And

46:25

you work out a deal to extend, you know, they

46:27

call it pretend and extend and They

46:30

let you hang on there. You'll

46:32

like, you know extend the term of your kick the

46:34

can down the road Yeah Yeah they'll lower your debt

46:36

payments in exchange for more term and you just try

46:38

to get to the other side of These

46:41

high interest rates and then once

46:43

you get to the other side you again you're hanging

46:45

on you're not defaulting That's what everyone's

46:47

doing. So if rates don't come

46:49

down as expected this year, you know, I think

46:51

the market's expecting 150 basis

46:54

points of rate cuts if that

46:56

doesn't actually happen There's a lot

46:58

of real estate sponsors who are in trouble and

47:01

In turn, there's a lot of regional banks who are in

47:03

trouble because they're the ones who made all

47:05

these loans to these sponsors So everyone's

47:07

trying to like you said kick the can down the road Yeah,

47:10

and the 60 minutes piece also

47:13

talked about how there's some emergency rezoning going

47:15

on in New York specifically where they take

47:17

the floor plate in the middle Which

47:20

I think you talked about SACS You have to have windows

47:22

if you want to convert to residential and

47:24

they just make an empty space the void They

47:26

call it in the middle of the building that

47:28

you know, they'll deal with in the future But

47:30

they just have this empty space in the middle

47:32

of the building That's not going

47:35

to get used and then the rest that has

47:37

windows gets used to be converted into loss, etc

47:39

in New York So people are starting to think

47:41

creatively if people don't come back to office. Okay,

47:44

let me ask you a question Just based on

47:46

that comp the set of comments given

47:48

Adam Newman's experience as an investor In

47:51

this space and this general opportunity wouldn't

47:53

you rather back and known? Someone

47:55

who knows and has been through the market

47:57

and has experience versus some founder who

48:00

shows up and has never run a business in this space.

48:02

I mean, this guy has more experience than anyone else. It's

48:04

such a great point. Well, here's the

48:06

thing, Freiburg. The great point about that is you

48:09

don't see a lot of founders who explicitly come out and

48:11

say, I want to build a hundred billion dollar business. I

48:13

want to build a giant business.

48:15

They're so rare that VCs

48:17

who have a lot of chips, they would like to back

48:19

those, you know, swing for the fences

48:22

folks. And so I do understand

48:24

why people would back him again. And they've run at

48:26

it before they've done it to some degree. They

48:28

learned from mistakes and this time around, he learned

48:30

from those mistakes. Yeah, man, this is the exact

48:32

same mistake. So therefore they

48:34

made the bad bet. I'm not advocating, by

48:37

the way, I'm just asking. No, I understand, but

48:39

to your point, Freiburg, I can understand people want

48:41

to bet on somebody who is crazy and swings

48:43

for the fences. This entrepreneur clearly

48:45

does not learn from their mistakes. I think both

48:47

of those things could be true. Right, Trima? What

48:50

I would say is that I think that where

48:52

I've made the biggest mistakes in my investing

48:54

career is when I confused

48:57

what I was investing in, for

48:59

one thing when it was the other. And

49:01

so when I look back and I had

49:04

a small dolly ounce in

49:06

biotech, because I thought, oh, this is

49:09

gonna be more computational biology and I

49:11

understand computation. So this gives

49:13

me an edge. Turned out I was wrong. There

49:16

was another time where I've invested in certain

49:18

sectors of the economy, because I thought they

49:20

were technology businesses. And at best they were

49:22

tech enabled versions of an existing industry. When

49:26

I look at those investments, the thing that

49:28

I got wrong was not listening

49:30

to the very

49:33

experienced investors in those sectors

49:36

and why they passed. And

49:38

that has caused me no shortage

49:40

of headache and grief. And

49:43

so if I had to learn anything from all

49:45

of this, it would be that if

49:47

it looks like a duck and it quacks like a duck,

49:49

it's a duck. It's not a tech company. And

49:52

so if that duck means it's a

49:54

real estate business, I would talk to

49:57

a real estate investor and wonder to myself why they

49:59

wouldn't have done that. this deal. Similarly,

50:02

you know, when it's a biotech business, I

50:04

have to ask myself, why wouldn't

50:06

they have done it? They know more than I ever

50:08

will in this space. And so similarly, I kind of

50:11

look at this as an example of that, which is, could

50:14

be a very talented person in an industry. I

50:17

think just think it's important for us to be very

50:19

clear and lucid and

50:21

intellectually honest about what industry that is. That

50:24

is a great point. I mean, look, I think whenever

50:26

you're dealing with a tech enabled business, which

50:29

I would define as a more

50:31

traditional business model with

50:33

some sort of software layer, you

50:35

know, on top of it, you

50:38

have to kind of assess like, how much

50:40

of a difference does that software really make

50:42

at the end of the day? In

50:45

this case, this is a real estate business

50:47

with a very thin kind of

50:50

software slash operator. Technology

50:53

of Yeah, the experience layer

50:56

is a very small part of the overall,

50:59

let's call it P&L of

51:01

this business. Such a great point. Saks, I

51:03

mean, a perfect analogy would be like if

51:05

you have if you're taking a flight on

51:07

United, the United app is delightful. Now it's a

51:09

really good app. I don't you this is a commercial

51:11

airline. It's called United Airlines Saks, you pay for one

51:13

ticket instead of the whole plane. But have you been

51:16

to McDonald's recently? I actually went to McDonald's. Yeah, you

51:18

order through an app now. And there's a big screen.

51:20

The point is you walk in there and it's probably

51:22

not the McDonald's you knew 15 or 20 years

51:24

ago, it's not about waiting

51:26

in line and ordering

51:28

and that's not how it works anymore. There's so

51:30

the point is, is that a tech enabled business?

51:32

Or is that still a restaurant? Well,

51:34

if you spend a lot of your

51:36

time intellectually contorting yourself to

51:39

try to justify why the next version of McDonald's is

51:41

a tech enabled business, you're just going to lose a

51:43

lot of money. It's a restaurant. Now,

51:46

all restaurants need technology. And what you

51:48

see by McDonald's is even the oldest

51:50

and most established are running

51:52

forward very quickly to implement

51:54

technology because they know that it creates efficiency,

51:57

which then flows to the bottom line for

51:59

them. So the reality is

52:01

that we have lived in this

52:03

wonderland where we've looked at

52:05

these software businesses that have 80 and 90%

52:07

gross margins and imposed that expectation on other

52:10

markets and then made investment

52:12

decisions by trying to justify how

52:14

that it's a tech-enabled real estate

52:16

business, a tech-enabled healthcare business, a

52:19

tech-enabled energy business without being honest

52:21

with ourselves that those businesses have

52:24

over decades because of lots of competition

52:27

found a consistent

52:29

and reliable resting

52:31

place in terms of gross margins far

52:33

below 80 and 90%. And

52:36

so instead of willing tech-enabled businesses

52:39

to be at 80 and 90 and tricking

52:41

oneself, I think it's more realistic to ask

52:43

yourself, why aren't 80 and 90% gross margin

52:45

businesses decaying to 30

52:48

and 40% gross margins like every other part of

52:50

the economy, when everything will be

52:52

technology enabled? I think that that's a very

52:54

reasonable question. And I think the answer is,

52:56

there is no safe place. I don't think that you can

52:58

justify 80 and 90% gross margin software

53:01

when you can use a model and whip

53:03

up a competitor. I just think that we

53:05

are all going to a place where everything

53:08

is a tech-enabled version of something. Yeah,

53:10

marketplaces would be a notable exception

53:12

there with network effects. So DoorDash

53:14

versus the tech-enabled restaurant, Asset

53:16

Light Marketplaces, UNI and SACS have been involved

53:18

in a bunch of different marketplaces together. Sometimes

53:21

they're asset heavy, sometimes they're asset light. When they're

53:24

asset heavy, man, it's really hard to

53:26

make those businesses run our cossacks. Yeah,

53:29

I mean, I think we should

53:31

differentiate between gross margin and then

53:33

the net operating margin

53:35

or profit, right? And so, you

53:37

know, gross margin is what is

53:40

the cost on the margin

53:42

of providing one incremental unit?

53:45

And the thing about pure software businesses is that

53:47

on the margin, you can provision another instance of

53:49

the product almost for free. I mean, there's a

53:51

little bit of hosting cost of AWS

53:54

or whatever. So on the margins,

53:56

it's, you know, it's like the perfect gross

53:58

margin business. As opposed to a hair. As

54:00

opposed to a restaurant

54:02

that's going to have very large

54:05

costs of goods sold, or cogs. The

54:08

simple heuristic that I use is

54:10

just does this company have

54:13

large cogs, costs of goods sold,

54:15

and are they physical world cogs?

54:18

If they are, it's not a

54:21

software business. It's at best

54:23

a tech-enabled business. So just look

54:25

for that. Does

54:27

this business have large physical

54:30

world cogs? Now what I would say is if the

54:32

cogs are virtual, like

54:35

it could be hosting costs, or it could be paying

54:37

Twilio for telephony

54:40

or something like that, then at least it's

54:42

still not as good a business because the

54:45

margins aren't as good, but it's

54:47

very scalable. Because you don't

54:49

have that huge friction of needing to scale

54:52

up physical world infrastructure, physical

54:54

world supply chains, that kind of

54:56

stuff. So I like virtual cogs

54:58

a lot better. There

55:00

are digital cogs a lot better than physical cogs.

55:03

I love it when marketplaces, though. I mean, we could speak to

55:05

that, too. I had Dar on

55:07

the pod the other week, and when he launches

55:09

an adjacency, hey, we're going to sell alcohol, hey,

55:11

we're going to sell groceries, hey, we're going to

55:13

add this thing that's right next

55:16

to the already portfolio of Uber

55:18

offerings, doesn't cost them much. They

55:20

just have to get the supply side up and running, but they already

55:22

have the demand side. They're like these

55:24

super apps are doing really well, or Airbnb

55:26

adding some inventory in

55:28

a new city that they unlock, right?

55:31

Well, true marketplaces are perfect gross margin

55:33

businesses as well because they don't have

55:35

physical inventory that they themselves own. What

55:38

you'll see is with a lot of marketplaces, they'll

55:40

cheat by buying

55:42

the inventory themselves, at

55:45

least to jumpstart the market and then selling it. And

55:48

so when you see that line item on

55:50

the P&L, that they have real cost of

55:52

goods sold, you know, oh, wait a second,

55:54

this isn't a true marketplace.

55:57

They're providing the service. And

56:00

so again, it's just a way to like catch whether

56:02

the business is truly one

56:04

of these great high

56:07

gross margin businesses or whether it's more of

56:09

a tech enabled business that's pretending to

56:11

be a pure software business. Yeah, direct consumer

56:13

got people in a lot of trouble during

56:16

the last cycle in venture capital. If

56:18

you look at a

56:20

lot of these companies, even

56:24

the best SaaS businesses have seen their

56:27

gross margins erode by about 15 to 20%. It

56:31

used to be that best in class software

56:33

business can generate 90, 90, 1% high 80s to

56:37

low 90s gross margins. Now that's not true. You

56:40

see a lot of these best in class companies that are in the

56:42

high 60s to low 70s. So it

56:44

already just shows you that that pressure has come

56:46

upon the market. And so is

56:48

it that the software enabled business goes towards 85 or is

56:50

that the 85% gross margin business

56:53

goes towards 30? It looks like it's the latter.

56:55

That's just what the data says. Well,

56:57

maybe I'm just categorizing certain costs differently than you are,

56:59

but I don't know why a software business would go

57:01

all the way to 30, right? Because

57:03

again, sales and marketing don't count in the gross

57:05

margin. G&A doesn't count. Even

57:07

R&D doesn't count in the gross margin.

57:09

It has to be

57:12

a unit cost that you can attribute

57:14

on the margin to that incremental instance

57:17

of the product. So things like, again,

57:19

paying Twilio for meter to

57:22

left knee or paying OpenAI for like

57:24

meter to API access, all of that

57:26

is definitely in COGS. And

57:29

I think some customer support costs that

57:31

can be attributed on kind of

57:33

a per instance basis that goes in there. But

57:36

if sales and marketing and R&D and G&A

57:38

aren't going in there, I mean, I don't

57:41

know why you go all the way to 30. I guess I'm just saying

57:43

that I still think software businesses

57:46

and marketplaces for that matter are still the

57:48

best kinds of businesses on

57:51

a margin profile basis. The problem

57:53

is that there's a lot of fake software

57:56

businesses or fake marketplaces out there that are

57:58

pretending to be. be pure tech

58:01

businesses when actually they're more

58:03

like old-school businesses that have the

58:05

veneer of technology. And I think

58:08

to your point, the trick of saying

58:11

I'm an 80% gross margin business but having

58:13

no profitability is then who

58:15

cares? So

58:18

when you look at the profitability of these businesses, again,

58:20

you'll be in the 20 to And

58:23

when you see companies that are in the high

58:26

30s to low 50s, they're

58:29

A, very unique, and

58:31

B, you should expect that

58:34

there is something fundamentally monopolistic

58:36

about them. And

58:39

that is the simplest way to filter out these

58:41

companies because in a highly competitive market, you

58:43

cannot extract those kinds of profit dollars.

58:46

Capitalism says you can't do that. So you can only do it

58:50

when you have an N of 1 or N of 2 kind

58:53

of competitive dynamic where there's essentially a mutual

58:55

detente with your biggest competitor. Yeah,

58:58

it is a good point that just because you

59:00

have good unique economics or good

59:02

gross margins doesn't mean that the business is profitable at

59:04

the end of the day. Yeah, it could be totally

59:06

bad. I mean, you can have 80% gross margins and

59:08

still be losing a ton of money because you've got

59:11

too much overhead, you've got too much sales and marketing,

59:13

you've got too much R&D. Yes.

59:15

So you're selling to customers who don't really need it

59:17

and then they eventually cancel them, right? Like

59:19

we see that a lot. Look at the streamers. Look at

59:22

the streamers. That's just a big recycling exercise.

59:24

It's just like people come to the top of the

59:26

funnel, they use the product, and then they

59:28

leave and then you have to reacquire them over and

59:30

over again. And it could be the case that SAS

59:32

actually looks a little bit like that too at the

59:34

bottom line level. But when you hit your natural audience,

59:37

it does get challenging. Yeah. Well,

59:39

this is why in SAS, there's a heuristic called

59:41

the Rule of 40, which is

59:43

for public market SAS companies, you

59:46

want to see that their operating margin

59:48

plus their growth rate equals

59:50

40 or is greater than 40 ideally.

59:52

So in other words, you could have a

59:55

SAS business with a 20% operating margin and

59:57

a 20% growth growth

1:00:00

rate and that would hit rule of 40 and that would

1:00:02

be a very attractive business. Or you

1:00:04

could have, I don't know, it could be growing

1:00:06

50% year over year and

1:00:09

this operating margin could be negative 10%. And

1:00:11

that would be okay too because they're losing

1:00:13

money but at least the investment

1:00:16

is leading to well

1:00:18

above average growth. Or

1:00:20

you could be growing slower, you could have a

1:00:22

10% growth rate and have a 30% operating margin

1:00:26

and that would also be hitting the rule of 40. So

1:00:30

it's just a simple way of tracking whether this

1:00:32

is a good business at scale.

1:00:35

I don't think starps have to worry about this until they get

1:00:37

to kind of the later growth stage. Yeah,

1:00:39

when you're in your BC round, you're making 50, 100

1:00:42

million, yeah, you got to be really thoughtful about this. In the

1:00:44

beginning, you're trying to get product market fit and triangulate on something.

1:00:47

So Jamak just mentioned, streaming, NBC

1:00:49

Universal, if you didn't know

1:00:51

it, paid the NFL $100 million for

1:00:54

the exclusive streaming rights to one. That's

1:00:57

right, one for some playoff game for

1:00:59

the NFL. That happened last weekend between the Chiefs

1:01:01

and the Dolphins. That was on

1:01:04

their service, Pika, NBC's app

1:01:06

basically, their version of Netflix or Disney Plus.

1:01:09

It garnered 23 million viewers which makes

1:01:11

it the most streamed live event in

1:01:13

US history. Even so, that's

1:01:16

almost half of what the

1:01:20

Packers and Cowboys had, about 40 million

1:01:23

Lions versus Rams, same weekend, 36

1:01:25

million. And so

1:01:27

this has brought into question what's going on with

1:01:29

streaming, have these businesses gotten ahead of their skis,

1:01:31

just to give you a couple of charts. Disney

1:01:34

Plus took off like a massive rocket, peaked in

1:01:36

Q4 of 2022 at 164 million subscribers. They're

1:01:41

now at 150 million. Here's a chart. I

1:01:44

mean, just amazing how quickly

1:01:46

they got to Netflix-ish numbers.

1:01:48

Here's Netflix's chart. Again,

1:01:50

this is quarterly. They're up to

1:01:52

now an all-time high, 247 million

1:01:56

subscribers and the annual growth rate

1:01:58

all the way back to 2001. pretty

1:02:00

spectacular and their revenue also

1:02:02

very respectable for Netflix.

1:02:05

However, they overspent massively during the

1:02:07

peak streaming era, 2019 to 2022.

1:02:11

And that's when subscriber growth started to

1:02:14

slow. Obviously they were spending

1:02:16

way too much and other entrants came in

1:02:18

like Apple Plus and Amazon Prime, where they

1:02:20

really didn't even think that they had to

1:02:22

make a profit. They were using streaming

1:02:25

maybe to sell more iPhones or to

1:02:27

get more Amazon Prime subscribers.

1:02:29

So here is the major

1:02:31

problem. Here's the churn

1:02:33

chart. Basically churn means people cancel,

1:02:35

right? And so as these services

1:02:37

have cut what they're offering,

1:02:40

the number of Marvel shows or Disney,

1:02:43

you know, having Star Wars shows, the

1:02:45

churn goes way up. People are

1:02:47

also having subscription overload. I don't know how

1:02:49

many of these I subscribe to, but I

1:02:51

think it's all of them. Or

1:02:53

maybe out of these one, two, three, four, five,

1:02:55

six, seven, eight, nine on the

1:02:57

chart. I think I have seven of these. So there

1:03:00

is definitely some unbelievable

1:03:02

subscription burnout. And the

1:03:05

streamers in order to get these businesses above water

1:03:07

have raised their prices. We all know that. You've

1:03:09

probably seen your streaming bills, you know, have three,

1:03:11

four, five bucks added to them every month. And

1:03:14

at the same time, they're cutting how much they're

1:03:16

spending. So you're paying more for last month. Your

1:03:18

thoughts on this dynamic? If

1:03:20

you bring the chart back up, here's

1:03:22

the most important thing that's worth noting.

1:03:25

Let's take stars as an example. It turns 12

1:03:27

percent of their users every month, which means that

1:03:29

over a year, they've turned 144 percent of their

1:03:31

user base. That

1:03:34

means that they have to basically turn

1:03:36

their entire membership

1:03:39

base one and a half times in

1:03:41

order just to tread water. Right. So

1:03:43

if you start with 100. It's

1:03:46

a lot of money that you have to spend to make sure

1:03:48

you end the year at 100. Forget

1:03:50

about growing. If you

1:03:53

look at Peacock. They're going

1:03:55

to lose 100 percent of their subscribers in a year. If

1:03:57

you look at Discovery, they're going

1:03:59

to lose. lose 75%. If

1:04:02

you look at Macs, they're

1:04:04

going to lose 50 odd percent.

1:04:06

Apple TV, same. Hulu and Disney Plus

1:04:08

will lose 60%. Netflix will lose almost

1:04:10

40%. So the only winner in all of

1:04:17

this is Facebook and Google. The

1:04:19

only winners are Facebook and Google because that's

1:04:22

where the ads will appear to

1:04:24

try to reacquire these folks, right? So I

1:04:26

guess that's a positive indication. But

1:04:29

the reality is that money isn't infinite. And so

1:04:31

what happens in a dynamic where you have a

1:04:34

category where there's just a lot of

1:04:36

consumer churn? I think what happens

1:04:38

is it evolves in phases and in phase one, which

1:04:40

is sort of where we are now where there's a

1:04:43

bunch of relatively well established

1:04:45

folks, is that they are going

1:04:47

to initially overspend on content

1:04:49

because they are going to try to

1:04:51

differentiate the cost of acquisition based on

1:04:54

content, right? Which makes sense. I

1:04:56

have a tent pole. Come and watch it here. You can't watch

1:04:58

it anywhere else. And I think

1:05:00

that was the peacock example where they

1:05:02

had this football game and all these people showed up

1:05:05

and they thought this is exactly why

1:05:07

we're paying so much money for these

1:05:10

rights because people will show up. I

1:05:12

think the problem is that when everybody is doing it,

1:05:15

everybody's doing it. And

1:05:17

so you don't know how to differentiate. Even in

1:05:19

our group chat, look at the number

1:05:21

of times when somebody randomly says, is there something

1:05:24

to watch and everybody's got 50 recommendations? Guess what

1:05:26

I do? I tune it all out because I'm

1:05:28

like 50 across six

1:05:30

different services. I have no

1:05:32

way to track it. And then I lose interest

1:05:34

and I'm like, you know, I'll just stick to

1:05:36

YouTube. So I think what happens

1:05:38

is in phase one, folks spend

1:05:41

a lot of content. In phase two, they

1:05:44

realize that actually what

1:05:46

you need to do is spend on a long

1:05:48

tail of content in a much more disciplined way.

1:05:50

So there's a company that I know about, for

1:05:52

example, they just signed a pretty

1:05:55

big deal with Amazon.

1:06:00

millions of dollars.

1:06:02

I was trying to

1:06:04

figure out, is that a lot or a little? It

1:06:06

turns out that Amazon is trying to get three

1:06:09

or four or five versions of these going, which

1:06:12

means that before we probably could have gotten five or

1:06:14

six hundred million and instead you get two

1:06:16

or three hundred million. It's still an incredible thing, but

1:06:18

it just goes to show you that there's a lot

1:06:20

of competition. Instead of having a single

1:06:24

mode, if you were to graph something where

1:06:27

there's a few pieces that just get all the money, now

1:06:29

you're smearing this content across

1:06:32

all kinds of stuff. I

1:06:34

think that that makes it very difficult to

1:06:37

keep folks. I suspect that you're just going to

1:06:39

see a lot of churn. I don't like this

1:06:41

category at all as an investor. Clearly,

1:06:44

there's been an overspend here, but consolidation is

1:06:46

coming. Freiburg, any thoughts on the streaming space?

1:06:49

I just think this is the opposite

1:06:51

of what we were talking about earlier,

1:06:53

where there's a free market competing and

1:06:56

it's benefiting consumers. The point that you made

1:06:58

is a really good one that there's a lot of great content

1:07:00

to watch. Folks that raise prices,

1:07:02

people cancel. You got to drop

1:07:04

prices. You got to offer good content. I

1:07:07

actually think this is a really good and

1:07:09

healthy thing to see happen is

1:07:11

competition that benefits consumers. There'll be some set

1:07:13

of winners here and some set of losers,

1:07:15

but I think ultimately, it's just

1:07:17

really good to see how it all shakes out,

1:07:20

who's willing to put up the big bucks, who's got

1:07:22

the smarter algorithm that predicts how fresh

1:07:24

your content has to be and how unique it

1:07:26

has to be relative to other platforms to keep

1:07:29

the audience attention. I would argue if you look

1:07:31

at those numbers and you look at the performance

1:07:33

over time, Netflix absolutely rules

1:07:35

the roof in the sense they're an incredible operating

1:07:37

team. They have an incredible capability

1:07:39

of predicting what content will work, how

1:07:42

quickly they have to refresh content, how much they

1:07:44

should be investing in content per quarter, per month,

1:07:47

and they're clearly retaining users and making money. Users

1:07:50

that are newer to the game haven't figured that out yet, but

1:07:52

it's just very good to see the competition. I don't know how

1:07:55

to predict what's going to happen here, but it's good to see.

1:07:57

It's clearly going to be massive consolidation, also these folks.

1:08:00

are launching advertising-based versions. So you

1:08:02

probably saw Netflix has an advertising

1:08:04

tier. And so a lot of

1:08:06

these folks didn't have those. Disney Plus, I think,

1:08:08

is going to have one as well. You know

1:08:10

what no one's paying attention to is YouTube TV.

1:08:12

I don't know. Do you

1:08:14

guys subscribe to YouTube TV? I'm a Hulu

1:08:16

person. Yeah, I think it's fantastic. If you

1:08:19

look at some third-party data on YouTube TV,

1:08:21

the subscriptions are going through the friggin' roof.

1:08:23

And it's really interesting to see because with

1:08:25

YouTube TV, you're basically rebundling the

1:08:28

unbundling that happened in cable, except

1:08:30

you're doing it over the internet, and you can

1:08:32

access it anywhere. So they basically converted the pipe

1:08:34

as the value to the service itself as the

1:08:36

value, which you can access anywhere you want on

1:08:39

any TV, in any room, without boxes, while you're

1:08:41

on the road, on your phone, on your laptop.

1:08:44

And it seems to be kind of highlighting

1:08:46

that maybe it wasn't necessarily the bundling that

1:08:48

was the problem, but the way

1:08:50

that the service was being offered. So

1:08:53

who knows? Maybe bundling versus all of this

1:08:55

part and parcel, you got to pick five

1:08:57

different providers and buy content on the fly.

1:09:00

Maybe that's not what consumers want. Young

1:09:02

people don't care about the live channels.

1:09:04

Old people do. But yeah, Hulu and

1:09:06

YouTube TV are really wonderful products because

1:09:08

they work really well on Apple TV.

1:09:10

The apps work great, but they also

1:09:13

work great on your iPhone, your iPad.

1:09:15

So they're really spectacular in that

1:09:17

way. Saks? Well,

1:09:19

this conversation back to what we were talking

1:09:22

about with margins and SaaS

1:09:24

and tech enabled versus real software

1:09:26

businesses, I personally have

1:09:28

never seen a B2C subscription business that

1:09:30

works. The churn is just too high.

1:09:33

I mean, what I've seen is that

1:09:36

the monthly churn rates on a

1:09:38

software subscription for consumers is somewhere

1:09:40

in the 5 to 10 percent range. So

1:09:43

on a full year basis, you're attaining maybe

1:09:45

50% of your customer base. You're effectively rebuilding

1:09:47

your business from scratch every two years. It's

1:09:49

a very tough place to be. This is

1:09:52

why I basically skewed towards B2B SaaS is

1:09:54

because a good B2B

1:09:56

SaaS business will have net expansion

1:09:58

instead of 50 percent. churn, you'll

1:10:01

do 120% expansion. And

1:10:03

so you're actually building a subscriber base with

1:10:06

long-term value. Now how did

1:10:08

Netflix do it? I mean, Netflix avoided

1:10:10

that prohibitive level of churn by spending

1:10:13

literally billions of dollars on content and

1:10:15

original programming. And again, it goes

1:10:17

back to the point this is not a pure software,

1:10:20

a pure tech business. It

1:10:22

includes an old-school studio,

1:10:26

which is very capital intensive. And

1:10:29

they financed a lot

1:10:31

of the content acquisition with

1:10:33

billions and billions of dollars raised

1:10:36

during that zerp period from, I

1:10:38

think, both equity and debt. And

1:10:40

you have to wonder if that could

1:10:42

be done again in this post-zerp period

1:10:45

where capital is just a lot scarcer. I think this

1:10:47

is going to work really well, though, for Netflix and

1:10:49

Disney, man, these huge archives that they own, these libraries

1:10:51

are going to get them to 300, 400, 500

1:10:54

million global subs and

1:10:56

has become money printing machines that I don't think they're

1:10:58

going to need a ton of new

1:11:01

content. The question is whether you could recreate

1:11:03

an archive of that level today, given how

1:11:05

much more expensive capital is. My point

1:11:07

is that zerp helped Netflix catch up

1:11:10

to these studios and create this huge

1:11:12

library. But still, I think

1:11:14

that what the streaming services have

1:11:16

shown in their churn is that

1:11:18

if you don't provide original content and

1:11:20

original programming, then users

1:11:22

will churn off that. So

1:11:25

you have to kind of have both. You kind of

1:11:27

have the library as filler. But if you

1:11:29

don't have a hot show come along

1:11:31

every so often, the subscribers will

1:11:33

churn off that. Yeah, you need to

1:11:35

have some new content, depending on how deep the libraries. It feels

1:11:37

like Netflix and Disney Plus have done a great job with their

1:11:40

libraries, just to give you an idea. Revenue

1:11:43

for Netflix for 2023, $33.5 billion, 247 million

1:11:45

subs, that's our yearly revenue for

1:11:51

those folks, $136 bucks a year. The

1:11:55

reason you're seeing that number not

1:11:57

make sense if you're paying $15 bucks a month is because internet...

1:12:00

and Netflix is a lot, lot cheaper.

1:12:03

But I love those two businesses. I think

1:12:05

they're gonna be extraordinary over time. Netflix has

1:12:07

to acquire 100 million

1:12:09

people a year just to stay even.

1:12:12

What's their churn rate? 4% a month. I

1:12:15

think it's fine. Right, so they're churning half their customer

1:12:17

base every year. That's my point. 100

1:12:21

million people. They're rebuilding their customer base from

1:12:23

scratch every two years. How does that make

1:12:25

sense? It's totally fine because what happens is

1:12:28

you have people coming off their

1:12:30

parents' plan, getting their own. People go through

1:12:32

a bad beat, they don't like it, you

1:12:34

know, whatever, they unsubscribe. But they all come

1:12:36

back, back and forth, back and forth, and

1:12:38

then it just keeps growing

1:12:40

over time. I think you're describing something

1:12:42

that's true. I think David is describing

1:12:44

why it's a shit business. I

1:12:47

mean, if they make more money than they

1:12:49

spend, and I don't think they need to do a ton

1:12:51

of advertising. Eventually you churn through so

1:12:53

much of the market that actually you

1:12:55

can't maintain that growth rate. I

1:12:58

mean, if you reactivate, maybe you can do

1:13:00

it. But I don't think that's what's happening.

1:13:02

From a business perspective, the only logical thing

1:13:04

that I would do if I was running

1:13:06

one of these businesses is

1:13:09

attach it to another business where you

1:13:11

can think about it in terms of LTV. So

1:13:13

the only obvious example of that, I think, is

1:13:16

Amazon Video because you can stick it beside Prime

1:13:19

and a bunch of other things, and

1:13:21

now you have a very different way of justifying LTV

1:13:24

and minimizing churn. And that seems like

1:13:27

a, I buy that argument, Jason. I

1:13:29

don't buy a standalone business like this

1:13:31

trying to do it, this, yucky. Sorry,

1:13:34

real quick, have you guys dug into Netflix's business?

1:13:37

I mean, they're still growing top line.

1:13:39

The EBITDA margin continues to expand. I

1:13:41

mean, all those facts might be true,

1:13:44

but that churn engine and that recapture engine seems

1:13:46

to be working in a way that they're printing

1:13:48

cash and growing. It's pretty impressive.

1:13:51

I don't know if there's a limit there, but I mean, I

1:13:53

haven't looked at the analysts. I think that is the key. Yeah,

1:13:56

to the bundling point Apple Plus,

1:13:58

which is the TV component. it, not the

1:14:01

hardware product, is bundled as

1:14:03

part of this Apple One program, which is

1:14:05

kind of like Amazon Prime. And so I

1:14:07

think you're seeing a little bundling there. Netflix

1:14:09

also added video games to make it even

1:14:11

more sticky. So I think there's like a

1:14:13

subscription, super app coming, which the

1:14:15

New York Times is kind of done right with

1:14:17

Wordle, crosswords, the athletic wire cutter and the New

1:14:19

York Times. So I think you're going to start

1:14:22

to see on

1:14:24

a huge had a jumble of names that went in

1:14:26

one year and out the other. I don't remember a

1:14:28

single one you said this is my point for most

1:14:30

people, Jason, not a media patient. I don't like New

1:14:32

York Times is doing fantastic doing this bundling. Some people

1:14:34

come for the crosswords and Wordle and that's why they

1:14:36

subscribe and they like the news. Other people come for

1:14:38

the news, they discover crosswords and wire cutter and the

1:14:41

athletic and they stay for that. So I

1:14:43

do think there's going to be an incredible business here. I'll

1:14:45

take the other side of it. Yeah, they spent a

1:14:47

lot on content though during that period

1:14:50

where Disney Plus came in, I think everybody's

1:14:52

now has a little more discipline and the

1:14:54

budgets came way down. If you didn't know

1:14:56

the Hulk cost 250 million

1:14:58

or something the She-Hulk rather that cost 225

1:15:00

million for nine episodes. What? The first Avengers

1:15:02

225 million. Wait, sorry, 225 250 million for

1:15:04

nine episodes

1:15:07

of the She-Hulk. Oh my God. People

1:15:09

criticize it for having bad CGI. So

1:15:12

it's I think there's like new discipline coming to

1:15:14

Hollywood. Is this a Netflix show? A Disney Plus

1:15:16

show. A Disney Plus show. Yeah, I don't know

1:15:18

about you guys. I've been rewatching the Sopranos. I

1:15:21

find some of the content on HBO Max to

1:15:23

be the best content out there. Oh my God.

1:15:25

I watched it. So much rewatchability on it. Disney

1:15:27

doesn't have that much rewatchability. I don't know. The

1:15:29

only reason I keep my Max description is because

1:15:31

I'm waiting for House of the Dragon season two.

1:15:33

I mean, they didn't have that one show. I'd

1:15:36

be like, yeah, cut it. You know, yeah, I

1:15:38

do think this could help Netflix because a lot

1:15:40

of these streaming services came along. We had way

1:15:42

too many, right? We got saturated with streaming

1:15:45

services and most of them

1:15:47

you subscribe to you may not even remember subscribing.

1:15:49

You may just subscribe to a free trial to

1:15:51

get an NFL game. And then you get billed

1:15:54

because you forgot to cancel it. By the way,

1:15:56

yeah. Have you guys ever gone

1:15:58

into Apple? I

1:16:00

cloud settings and looked at your subscriptions.

1:16:02

Oh boy. Yeah.

1:16:05

Get in there. Guys, just go. If

1:16:08

you have like an extra five minutes,

1:16:10

you will save so much money by

1:16:12

going into subscriptions in your settings and

1:16:14

just turning them all off. I

1:16:16

was shocked. I was shocked. I mean, this is

1:16:19

part of your austerity measures. Absolutely. You know how

1:16:21

many subscriptions to Disney Plus I had? How

1:16:23

many? Well, this is what's so gross is why they even let me

1:16:25

do this. I had three. Three.

1:16:28

How many of them

1:16:30

possible? One for the plane. One

1:16:35

for the kids. I had three. I had three.

1:16:38

I had two HBOs. I had two Netflix.

1:16:42

Oh no, Netflix keeps sending you message saying, hey, you

1:16:44

need to update your payment information.

1:16:46

But then I'm watching Netflix on my Apple TV.

1:16:49

So I'm like, I'm clearly paying for

1:16:51

it somehow. It's

1:16:53

so confusing and sh**. I

1:16:56

have the perfect solution for you. There are credit

1:16:58

cards now where you can set a spending limit.

1:17:01

And so what I do is every year I just

1:17:03

turn off the limit on

1:17:05

that credit card. I just take it from unlimited or

1:17:07

uncapped down to zero and I do this for business

1:17:09

as well. And then all the subscriptions time out.

1:17:11

You know what I call that? What? Jeff.

1:17:14

Jeff does that for me. Jeff.

1:17:17

But I mean, having somebody go in there and they use... I

1:17:19

have a Jeff. I have a Jeff. You

1:17:21

know, but it's very simple. You only use one card for subscriptions

1:17:23

and then you turn it off every year to see which one

1:17:25

you want to keep going. It works really well. And

1:17:28

then you move the other ones to a new card. I

1:17:30

don't even want to say how many thousands of dollars I

1:17:32

was wasting on like Duolingo. I was like, I'm paying for

1:17:34

Duolingo and then I was paying for... And your Italian is

1:17:36

still terrible. Yeah, terrible. And then I

1:17:38

had like... I think you have a case against

1:17:40

that. No, then I had Duolingo and I had

1:17:42

Babbel and I had Rosetta Stone. So I'm like,

1:17:45

my Italian is not improving because of any of these

1:17:47

three apps, but I was paying them collectively like $400.

1:17:50

I had a Whoop subscription. I don't even have a

1:17:52

Whoop. When

1:17:54

Rick Thompson started Manscaped, I

1:17:57

signed up for Manscaped. I get all this

1:17:59

ball deodorant. I've never used it once! We

1:18:01

know! We know! We sit there in poker! We

1:18:03

know! It's not working, bro!

1:18:06

Just a message to Manscaped. I have tried

1:18:08

to cancel. I have called, I have emailed,

1:18:11

I took it upon myself to

1:18:13

try to- It's impossible to cancel. They won't even let

1:18:15

you reset your account so you can get a link

1:18:17

to cancel. It's so hard.

1:18:20

And still, your balls are terrible. Yeah.

1:18:23

My balls are phenomenal. I sat next to

1:18:26

you in poker, man. Okay, let's get into

1:18:28

plastics and get off Chamath balls. I

1:18:32

mean, how did we get here? Subscription

1:18:35

services. Subscription services, yes. Streaming

1:18:37

is at a crossroads, apparently.

1:18:41

They're really trying to make

1:18:43

that ball deodorant happen, aren't they? They're trying to

1:18:45

make it happen. Well, they're trying

1:18:47

to make fetch happen. Ball deodorant's not happening. I'm sorry. I

1:18:50

mean, what are you supposed to do? Squat and swipe? How does it

1:18:52

work? Is it a spray? Are

1:18:54

you listening and spraying? I

1:18:57

give them points for creativity, trying to create a

1:18:59

new thing, but yeah. I was

1:19:01

trying to support my friend in signing up

1:19:03

for a subscription service, and now I can't

1:19:05

cancel. That's my problem. That's

1:19:07

my predicament. Could you also take a shower

1:19:09

yourself? I don't know. Just

1:19:11

putting it out there. What's going on

1:19:13

down there, Chamath? I said I have to do

1:19:15

with the product. I signed up because Rick was

1:19:18

the venture investor that seeded it and

1:19:20

started. I supported my friend. Yes. And

1:19:23

now, I want out, and I cannot get out. You can't get

1:19:25

out. Every time I try to get

1:19:27

out, they pull me back in. I'm just going to

1:19:29

say, when it comes to Manscaped, no testimonials,

1:19:32

please. No testimonials. The worst

1:19:34

part is, like, you know, it comes to the

1:19:36

house, and... Oh, somebody opens your

1:19:38

ball deodorant and puts it on your desk. They

1:19:40

do. No, they put it right on the kitchen counter. That's

1:19:43

what's so funny. They put it right on the kitchen

1:19:45

counter. So as I walk

1:19:47

through the marbling room, and I walk away,

1:19:49

I grab it, and I'm like, Who's seen

1:19:51

this bottle? Ah, there it is! What is

1:19:53

it, guys? This bottle's got to lose! I'm

1:19:56

shaking balls, you're right. Oh

1:20:03

my god. How do you apply it? Is it

1:20:05

just a little dab will do ya? No,

1:20:08

I mean, you know, I just- Not a spray,

1:20:10

it's apparently an ointment, Sax. It's an ointment. This

1:20:14

is far too much information. Nah, I'll try it.

1:20:16

Don't you? I'll try it. I'll go- Good,

1:20:19

come on, can I- You know what,

1:20:22

I'm gonna give you my description. It's

1:20:25

gonna drop all faulty. Oh, why

1:20:28

not? Use

1:20:32

the promo code Chamath for 10% off your- Use

1:20:34

the promo code Dictator, you get 10%. You

1:20:39

can never cancel, but you get 10%. This B-I-C-K,

1:20:41

Tator. Dictator,

1:20:45

yeah, use the promo code

1:20:47

Dictator. You get 10% off

1:20:49

your ball deodorant at Manscave. Alright,

1:20:51

Praburg, it's your turn to shine. No,

1:20:53

not ball deodorant. We wanted to talk

1:20:56

about microplastics. A study came out,

1:20:58

it's terrifying. We've known plastics have been terrible for

1:21:00

years, obviously it's been turned into some sort of

1:21:03

political discourse with straws and everything,

1:21:05

but plastics are horrible. We

1:21:07

shouldn't be using them, but this study confirms

1:21:09

a bunch about drinking microplastics. Educate

1:21:11

us on this study that everybody's

1:21:14

talking about right now. Dr.

1:21:16

Fridberg. I wouldn't start with

1:21:18

the statement that plastics are awful. Plastics

1:21:22

are polymers, which are long

1:21:24

chains of what are called monomers. This

1:21:26

is hydrogen, carbon, and oxygen that comes

1:21:29

together to form these specific molecules. And

1:21:32

then we can kind of bake them into

1:21:34

crystal-like structures. And the reason the

1:21:37

plastic industry took off is because it ended up

1:21:39

being very cheap to create materials that we could

1:21:41

turn into chairs, that we could turn into bottles,

1:21:43

to move stuff around, a lot

1:21:45

of applications, everything from solar photovoltaics

1:21:48

to our computers, to our laptops,

1:21:50

to our phones. Everything has some form

1:21:53

of these polymers in it. And the

1:21:55

polymers that are commonly used for making

1:21:58

bottles that we consume beverages. out

1:22:00

of are PET plastics.

1:22:02

These PET plastics are made from a

1:22:05

combination of natural gas and crude oil. So

1:22:07

we kind of have a production process where

1:22:10

we get the carbon, hydrogen

1:22:12

and oxygen that's naturally found in

1:22:14

natural gas and crude oil, converted into these

1:22:16

molecules that we turn into long chains and

1:22:18

we turn them into bottles. And

1:22:20

fill those bottles and they end up being a lower

1:22:24

carbon footprint than using glass

1:22:26

about 5x the

1:22:29

carbon footprint to use glass instead

1:22:32

of plastic in making a

1:22:34

bottle to store stuff and move liquids around 40%

1:22:37

cheaper and a lot

1:22:39

of other kind of reasons why the industry

1:22:41

and the world adopted plastics not just for

1:22:43

bottle beverages but for other applications. So

1:22:46

in bottle beverages because these are polymers, there

1:22:48

are these long chains of little molecules that

1:22:50

are stuck together, some of

1:22:53

those chains break and then some

1:22:55

of those little chunks of those molecules end up floating

1:22:57

around in the liquid that we're consuming.

1:23:00

And what this study did that kind of highlighted

1:23:03

a set of data that hadn't really

1:23:05

been studied well before is they used

1:23:07

a form of spectroscopy, so

1:23:09

kind of a multi-spectral light system shining

1:23:11

light at different wavelengths on

1:23:14

the liquid in a bottle, in plastic bottle to

1:23:16

figure out how many of these little plastic particles

1:23:18

there were in the liquid. And

1:23:20

in doing that they found that there was on

1:23:23

the order of 10,000 little plastic particles

1:23:26

per liter of water or per liter of

1:23:29

soda or drink or Gatorade or whatever beverages

1:23:31

that you're drinking. The real question then

1:23:33

is well how risky is that? So if you look at a lot

1:23:35

of the the health agency

1:23:39

studies, the kind of

1:23:41

well-adopted and well-researched efforts

1:23:43

on is there toxicity associated with PET

1:23:45

plastics on its own, they find

1:23:48

that there's very little genotoxicity or no genotoxicity,

1:23:50

meaning each of us doesn't change your DNA,

1:23:53

there's no carcinogenicity that doesn't

1:23:55

cause cancer. But there

1:23:57

are other studies recently that

1:23:59

have shown different mechanisms by which these

1:24:01

little tiny microplastics might end up in

1:24:03

your cells because they absorb into

1:24:05

your body and they're small enough that they can

1:24:07

cross into barriers, they can get into your brain,

1:24:09

they can get into your cells when they're in

1:24:11

your cells. There are other mechanistic studies that are

1:24:13

done in a petri dish as opposed

1:24:16

to being studied in the body where they've

1:24:18

demonstrated that they could actually disrupt the function

1:24:20

of organelles like mitochondria, endoplasmic reticulum,

1:24:22

so all these little things that operate in

1:24:24

your cell, they can cause irritation, they can

1:24:27

trigger chemicals to be produced that might cause

1:24:29

allergies, that might cause inflammation and

1:24:31

so on and so forth. So while

1:24:34

the general molecule of PET itself isn't

1:24:36

known or shown in any way to cause

1:24:38

cancer or to cause changes in your DNA,

1:24:41

there are other mechanisms by which these little

1:24:43

tiny plastics might be disrupting cellular function, might

1:24:45

be causing other health issues and that's now

1:24:47

going to open up a big area

1:24:50

of research that's going to

1:24:52

be predicated I think on the fact that

1:24:54

this study now shows that there are thousands,

1:24:56

hundreds of thousands of little pieces of tiny

1:24:58

plastic in these plastic bottles that we're drinking

1:25:00

water and soda and juice from

1:25:03

that are getting into our body and

1:25:05

into our cells. Two hundred and forty

1:25:07

thousand little pieces in the average one

1:25:09

liter plastic bottle. It's a

1:25:11

pretty scary statistic when you hear that

1:25:13

number. Small enough to cross the blood-brain barrier. Right.

1:25:16

And in rats and mice,

1:25:19

they've shown that these little microplastics can actually accumulate

1:25:21

in the brain if they consume enough of them.

1:25:23

Now the reason this hasn't been well understood or

1:25:26

studied in the past is we kind of look

1:25:28

at the aggregate amount of plastic that's in a

1:25:30

liquid and it's like oh the amount is so

1:25:32

small it doesn't matter. But when you

1:25:34

start to look at how small these little pieces

1:25:36

of plastic are and add them

1:25:38

up, the cumulative effect over time that they can

1:25:40

actually cross into cells, cross the blood-brain barrier, maybe

1:25:43

you're not getting removed from the body, that's opening

1:25:45

up a whole lot of research because there's no

1:25:47

easy way to just scan a body and say

1:25:49

is there plastic in it? How much plastic is

1:25:52

there? Because there isn't a good chemical signature for

1:25:54

it and what these guys did is

1:25:56

they used white to look in the liquid to

1:25:58

find the plastics which we can't easily do in

1:26:00

the body today. So Freiburg, are you going to drink plastic

1:26:02

bottle water anymore? I'm not. Okay.

1:26:05

Chamath. I've already stopped. This

1:26:07

started for me about four months ago.

1:26:09

My wife basically said we're getting rid

1:26:11

of all plastic. And at first I really pushed back

1:26:13

and I'm like, this is crazy. And

1:26:16

she just kept talking to me about it and showing me

1:26:18

all this data. And yeah, about a

1:26:21

month ago, I would say I switched.

1:26:23

So now I use glass and a

1:26:25

carafe like this. Yeah, much better. We got rid

1:26:27

of all of the plastic in our house, in

1:26:30

the gym, no more bottles. It's wasteful anyway.

1:26:32

Like why not? If you have beautiful filtered water

1:26:34

at home, put it in a crack. Sure.

1:26:36

But the scary thing, I mean, it's a little bit

1:26:38

more inconvenient, I'll be honest

1:26:41

with you, but it is very scary. And

1:26:43

I think that it does alter the phenotype

1:26:47

of the human body over time. And I

1:26:49

think you'd have to be

1:26:51

insane to bet against that. And I

1:26:54

suspect when you look at the

1:26:56

rates of depression and autism and

1:26:58

Alzheimer's and dementia and autoimmune diseases,

1:27:00

Crohn's, rheumatoid arthritis, to

1:27:02

think that all of these environmental factors

1:27:05

have no impact, I think is

1:27:07

taking a very scary bet. Here's what I do. I

1:27:10

buy these glass bottles on Amazon, you

1:27:13

know, two or three cases of them. I have the best

1:27:15

water filter system at home. We fill them,

1:27:17

we put them in the refrigerator and

1:27:19

we haven't bought plastic in years.

1:27:22

Wow. In years? In years? Only because I

1:27:25

care about the environment because I'm a good

1:27:27

person. Jason,

1:27:30

I'll also say like that application is a

1:27:32

pretty small, like I think on the order,

1:27:34

if I'm right, 80% of bottle beverages are

1:27:37

drunk outside the home. So people

1:27:39

are buying stuff at convenience stores, at

1:27:42

gas stations, at markets, taking them with

1:27:44

them to work. And that's

1:27:46

how a lot of plastic bottles are consumed. I

1:27:48

carry a container with me. Remember, the US is

1:27:50

such a small percentage of the global population, you

1:27:52

go to Africa, you go to Brazil, you go

1:27:54

to China, there isn't a great like, people don't

1:27:57

have these amenities that we have in our upper

1:27:59

and middle class. America that

1:28:01

plastic bottles have provided access to products

1:28:03

that consumers around the world otherwise wouldn't

1:28:06

be able to afford. So there's a

1:28:08

reason they exist. But by the way,

1:28:10

I also want to just be really

1:28:12

clear. There isn't conclusive evidence or science

1:28:14

that shows these plastic microparticles or nanoparticles

1:28:16

are causing these health effects. There's

1:28:19

certainly a lot of questions that it brings on, well,

1:28:21

what is the cumulative effect of these little things getting

1:28:23

into cells? Did they get into cells? Why? Why

1:28:26

would anybody bet that it's zero? Right.

1:28:28

That's the real one. What is the other side?

1:28:30

Right. Well, the outside is that people get

1:28:32

to access cheap beverages on the street. But otherwise, people that are living on $13,000

1:28:34

a year that can buy a plastic soda for 25 cents,

1:28:40

you can also buy water and a can though. Yeah.

1:28:44

So that's definitely an alternative. They're a little more

1:28:46

expensive generally. Plastic just became the cheapest container. Facts.

1:28:49

Your thoughts. Sorry, guys. I

1:28:52

stepped out to get a drink here. Did I miss

1:28:54

anything? It

1:28:56

would be better if you had put a

1:28:58

straw in your water bottle than we're drinking

1:29:01

from a plastic bottle to a plastic bottle.

1:29:03

Now I understand your level of depression. I'm

1:29:06

glad to get sacked. I'm

1:29:08

just killing those arrow water bottles. Did I

1:29:10

miss something? I stepped out. Also,

1:29:14

I use these beautiful contigos. I

1:29:16

think some people use yetis or other kind

1:29:19

of things. And I actually

1:29:21

carry them with me only because I try

1:29:23

to like think about the environment. Just

1:29:25

the amount of plastics being created, I don't

1:29:27

know if you've seen this, but like you go to Whole Foods

1:29:29

now or you go to any supermarket

1:29:31

and you see this wall of salads,

1:29:34

Freiburg, like this is

1:29:36

unconscionable. We're literally

1:29:39

giving people salad in

1:29:41

a giant plastic box. Yeah. Let

1:29:44

me just say a couple of things about this because

1:29:47

there's this conception that this is just awful, awful, awful.

1:29:50

Plastics, there is a degradation of these

1:29:52

PETs when they're exposed to sunlight. There

1:29:55

is a recycling system that much of this material

1:29:57

ends up in. Much of it? Yeah,

1:30:00

I mean, not a lot. I don't think that's actually correct.

1:30:02

Not a lot. But what would the alternative be, right? So

1:30:04

the alternative is you put in a glass thing and you

1:30:06

charge people $15 for a couple pieces of

1:30:08

lettuce. The reason the

1:30:10

plastic industry emerged is because it provided

1:30:13

a low cost way to transport materials.

1:30:15

And that we're all very wealthy. So we have

1:30:17

to just step outside of our bubble for a

1:30:19

second and recognize that most people, you

1:30:22

know, the dollar difference is a huge difference for

1:30:24

most consumers. They're not going to make that dollar

1:30:26

leap. So the fact that plastics

1:30:28

emerged is to support a consumer market that's

1:30:30

grown up all over the world. Yeah,

1:30:33

but how does this make sense? Look at these bananas.

1:30:35

Just as an example, to give people an idea, bananas

1:30:37

already come with the case. It's called

1:30:39

the peel. And they're

1:30:41

literally wrapping bananas in plastic now.

1:30:45

And you know, I think this is where regulation

1:30:47

makes sense. There might be a gas in here

1:30:49

or something because they're trying to keep the bananas

1:30:51

from going bad. That's what I probably want to

1:30:53

put in there. Shout out, like this is where

1:30:55

I think regulations actually do

1:30:57

work. France, Spain, a lot of countries

1:30:59

now are just saying, you know what,

1:31:01

for fruits, vegetables, like, yeah, don't put

1:31:03

them in plastic, please. We're not going to allow you to do that.

1:31:06

And I think... I'm not pro-plastic, by the

1:31:08

way. I'm not drinking plastic from plastic bottles. But

1:31:10

we have to be cognizant of where this industry

1:31:12

emerged from, what the science says about it. Like,

1:31:15

I don't want to just be flipping about it and be like, all plastics are

1:31:17

bad. But then what is doing to... What is doing in the oceans, Freiburg?

1:31:20

It's unconscionable. This

1:31:22

is not like a do-gooder thing. It's just... It's

1:31:25

awful. There's no reason that we need to

1:31:27

have plastics as a family. It should be bad. I'll give you

1:31:29

some good optimism around

1:31:31

this. There's a lot of

1:31:33

efforts right now to develop microbes that

1:31:35

can actually biodegrade these PET plastics. So

1:31:39

we're engineering these microbes that will produce

1:31:42

enzymes, these are little bacteria that will

1:31:44

produce enzymes. Those enzymes can then be

1:31:47

made in the plastic itself. So

1:31:49

then the plastic will biodegrade within a year after

1:31:51

you use it. So there's a lot

1:31:53

of this kind of effort on how do

1:31:56

you make naturally biodegrading plastics using biosources and

1:31:58

biological molecules as part of the production. production

1:32:00

process, and a lot of big

1:32:02

plastic packaging companies and industrial biotech

1:32:04

companies are investing in this area. This

1:32:06

is where collectivism can do good. If

1:32:09

we actually, as a society, say

1:32:11

we want to do sustainable packaging because of

1:32:13

the tragedy of the commons,

1:32:16

like you're saying, Freiburg, because it's cheaper,

1:32:18

capitalism, there's no floor

1:32:20

here to stop people from doing this

1:32:23

and stop from using plastics unnecessarily, like

1:32:25

wrapping bananas, et cetera. All right, listen.

1:32:27

This is an amazing episode of

1:32:29

the All In podcast for

1:32:32

the dictator. Wish me luck today, boys. Wish me

1:32:34

luck. Use the promo code DICK. We'll be

1:32:36

following the live stream on the chat. We'll be following the

1:32:39

live stream. Use the promo code DICK to get 20% off

1:32:41

your ball deodorant. Hey, what do you guys

1:32:43

think about actually running some

1:32:46

poker tournaments through the year called All In? That

1:32:50

would be super fun, though. I

1:32:53

think we could replace the WSOP pretty quick.

1:32:55

I mean, it'd be pretty the lead.

1:32:58

I'm not kidding. We have still home youth on

1:33:00

our squad. I think Jason's right. Not just home

1:33:02

youth. I think you can get all the pros

1:33:04

because I think the problem is like those championships

1:33:07

have been so watered down, right? There's

1:33:09

52 of them just in

1:33:11

Vegas in June and July. And

1:33:13

then now you have like the circuit

1:33:15

rings so that there's bracelets and rings. And

1:33:18

then there's the European one. Then there's this

1:33:20

one. There's the all in. All of the

1:33:22

amazing. You can't have, I think,

1:33:24

in order to be a world champion. Can you

1:33:26

really have like 150 winners a year?

1:33:30

Sacks, are you bored with holding them? Well, I'll play

1:33:32

with you guys. But yeah, I'm kind of

1:33:34

bored with it. I played a tournament

1:33:36

yesterday, Big O. 37 players. I

1:33:39

came in first. I don't know if they played Big O. Where

1:33:41

did you play? I had a speaking gig yesterday

1:33:43

in LA. After the speaking gig, I was going to

1:33:45

the airport. I had a little time. And I

1:33:47

just stopped by Hollywood Park where, you know, I wanted to

1:33:50

see the new one. You're

1:33:54

the best. I don't know. There's nothing

1:33:56

more boring than playing in a tournament with

1:33:58

people you don't know. Oh, it was

1:34:00

great. It was great. There was like a fight to go

1:34:03

out forever. I mean, I did the W SOP a couple

1:34:05

of times and you know, I think I lasted like three

1:34:07

days. It's a long time to be

1:34:09

playing poker at a table for people. I got

1:34:11

to the final table and they

1:34:13

wanted to chop and I was the short stack. I was

1:34:16

like, well, you know, on my flights in for a couple

1:34:18

hours, I'd rather not chop and this woman, I got

1:34:21

in a fight at the casino almost. This

1:34:23

woman was wearing a mask and she goes, this

1:34:25

mother after won't top.

1:34:29

And I said, man, it's

1:34:33

my option to not shop.

1:34:35

Madam, madam, madam, whatever. Say

1:34:37

them. And she went crazy.

1:34:39

And the floor came over, said, ma'am, you have

1:34:41

to sit down. She called me a mother effort

1:34:44

twice to my face. You went on a way.

1:34:46

I was the short stack and I went on

1:34:48

to win the tournament. I kid you're not how

1:34:50

much did you win 1400 bucks. So what do

1:34:52

you really rate on that? You make like

1:34:54

$14 an hour. $100 buy. So yeah, it was 200

1:35:00

bucks an hour. But here's what happened. So I

1:35:02

had this guy massively for seven hours, six hours.

1:35:04

Maybe it was great. I had

1:35:06

the time of my life. It was the first time

1:35:09

I played in the tournament for like, since

1:35:11

we played the one drop that time, I haven't played

1:35:13

in the tournament since then. It

1:35:15

was so much fun. Jason goes from

1:35:17

playing the hundred K. I had a

1:35:19

time of my life because I've never

1:35:22

played big O before. It's where you

1:35:24

have five cards and it was high

1:35:26

low. It was so dynamic. I

1:35:30

had five whole cards and it's high low.

1:35:32

So I was like, I'll learn big O.

1:35:34

I've literally not played one orbit of big

1:35:36

O. I won the tournament. It

1:35:38

was awesome. And so then it's

1:35:40

me and this one guy. And you

1:35:43

know, I've got like, I've got him like three to

1:35:45

one or whatever. And he's like, Listen, I gotta go,

1:35:47

please. I got my kids. I was like, no problem.

1:35:49

I'll chop it with you. If we take 400 off

1:35:52

the top for the dealers, a dealer cries. She was

1:35:54

like, what? And I was like, yeah, just I'll chop

1:35:56

it with you evenly. And so

1:35:58

I won and I just try. and give

1:36:00

a big tip. What did you get, like a certificate?

1:36:03

I think they put you on the website or something

1:36:05

like that. Well get up. Yeah,

1:36:07

it's on the Poker Classic website that I, or I

1:36:09

don't know if it's called the Poker Classic, whatever it

1:36:11

is, but my point is we would have a great

1:36:13

tournament. We do each of the games. Each of us

1:36:15

gets a free roll into the game, and

1:36:17

then everybody else buys it, and I like it. Sax,

1:36:20

do you like PLO or are you just like Chestnut? No,

1:36:22

I like Hold'em, but I'm just saying I wouldn't play

1:36:24

with a bunch of strangers. Yeah, yeah. You

1:36:27

know, I like play with friends, you know, but... To

1:36:29

goof off and have fun. Yeah, yeah, yeah. No. Yeah,

1:36:32

yeah, yeah. Like sitting... The problem

1:36:34

with tournaments... You'll RSVP to my game to show up at 6,

1:36:36

to show up at 8.30, and then listen to yourself

1:36:40

on the pod and then leave. Yeah, he's editing the

1:36:42

pod at the table. There's a lot

1:36:44

of things you can do while at a poker game.

1:36:46

You can watch your podcast, you can edit

1:36:48

your podcast. For the

1:36:51

Sultan of Science, the king of beep, David

1:36:53

Freiburg, and yeah, definitely the rainman himself. We're

1:36:55

live from Davos. We'll see you next year.

1:36:58

Bye-bye. Wait, did you give me the shout

1:37:00

out? Am I... I did. No,

1:37:04

the chairman dictator. The

1:37:06

chairman dictator, use the promo

1:37:08

code JEREMEN or DICK to

1:37:11

get 10, 20, or 30% off. Can

1:37:13

somebody from Manscaped please let

1:37:15

me cancel, please? Please. It's

1:37:18

like 10 bucks a month. It's 10 bucks a month. I'll

1:37:20

give you the money. I just don't want to get... I

1:37:22

want to be able to cancel. I'll pay you 10 bucks

1:37:24

a month. I want to be able

1:37:26

to cancel. I

1:37:55

wish you a dry wish. I wish you a dry wish.

1:37:57

All right. All right. All right. We

1:38:01

need to get a room and have

1:38:03

one big huge or two-thirds. It's like

1:38:05

sexual tension that you just need to

1:38:07

release somehow. Let your feet be. Let

1:38:11

your feet be. Please, please,

1:38:13

please, please, please, please.

1:38:15

I'm going, going. I'm

1:38:19

going.