0:00

let's go, jason, start, let's go do have an any interest? of

0:02

go, let's go let's go let's go go all right if want interest

0:05

we're not going to pay for him, so don't even even there

0:09

is , all right elbow

0:11

star you want to do your job,

0:13

you'll do the intros and if you want to, if

0:16

you want to slow, roll your effort because you

0:18

think you're negotiating with us

0:21

we don't give a shit about

0:24

your interest to a bad job we don't

0:26

care i'm

0:28

still waiting in the we

0:31

we refused to recycle

0:33

in row oh my god it's going to

0:35

do do couple bad job so there'll be complete

0:37

are so here

0:40

we go

0:44

rain

0:57

oh and some it aipac rejoin

0:59

with sacks will give me an extra point

1:02

scripto holdings, they can't find a floor

1:04

could i have him flying commercial for

1:06

the first time since 2004 from

1:08

david sacks? back to the program the rain man

1:10

should be here see

1:14

him go, but you got to show up for work you

1:16

can't do every show the salted

1:18

science he certainly not fad that

1:20

again to see those ratings with brad

1:23

welcome back the sort of i'm afraid

1:25

of of both are still be brad's

1:27

rating so thank you very much to tell

1:30

okay well full of drama always builds

1:32

drama little audience okay here we go to model

1:34

healthy competition motor mathies in italy

1:36

live in life so grand his next back

1:39

a luxury wine and sweater brand

1:41

the market is leaving him in daze so

1:43

he's been since in the mediterranean for the past

1:45

ten days welcome back the dictator the

1:49

yeah i just i put them on son

1:51

i didn't wanna do any kill shots there

1:53

has to estimates as everybody so little sisters

1:55

on edge including the audience the audience

1:58

had lot to say about whether recover

2:00

the lot the controversial

2:02

topics ruby way

2:04

january six in ukraine

2:06

all i did bunch of surveys fifty

2:08

percent people want to talk about fifty percent done

2:11

though i wish he would want my guess

2:13

is as yeah do you think we should be

2:15

surveying the audience ask him what they want

2:17

us to talk about because when we started to so we just

2:19

talk about stuff that we saw with and for think some

2:21

people happen to look like didn't listen

2:23

and tune in for it

2:25

you end up asking the audience what they want don't you

2:27

end up becoming like fox news or

2:29

like any other media company where you

2:31

just ultimately use the feedback loop

2:33

to drive

2:35

i wouldn't every week of the show

2:37

i will tweet like a editing you want the docket

2:39

this up as people have good ideas

2:42

but yes certainly shouldn't face it on

2:44

like a survey now i think we we supposed waiting

2:46

at some point that the weirdest would

2:48

yeah that's how we started with are just kind of being intellectually

2:51

honest with each other and carried out of we're interested

2:53

and and it's and it worked of people to like it

2:55

in order for mean i mean we should admit the

2:57

because some or something like of like vote

2:59

for your topic the matter we follow deftly

3:01

not we can either programmer think

3:04

there is an ongoing debate amongst the audience of what

3:06

percentage of this show should be politics

3:08

and winter we talk about politics and are

3:10

the too much politics and so familiar

3:12

with market sees me as you want requests d

3:14

they gonna active should be to grow the audience or said

3:16

our objective to be talking about things we ought talk

3:18

about it would isn't mean what you think sex

3:21

the i always good idea to pull the on his spot

3:23

we wanna talk about any notice is he

3:25

was really odious yeah it

3:28

is good to have an audience of was what

3:30

we doing but yeah like

3:32

what the audience showed is that half and ones talk

3:35

about those topics roughly half said it i

3:37

suspect that most topics

3:39

going be like that you know unless

3:41

they're not markets and then people won't like

3:43

i think eighty ninety percent of your one here is talking about markets

3:45

and startups yeah like are course

3:48

the right

3:49

the thing your objective function is to maximize

3:51

your audience are going on up making tic tac video

3:53

of people torching something you know it's not

3:55

like third so did you just volunteered

3:58

to work on this i'm not going to do that

4:00

not smiling

4:02

sides of research from awful i have

4:04

the video has free bird torquing at

4:07

all some it anyway oh hey who

4:09

by let's get started with them

4:12

think what's going on in crypto because people

4:14

do want to hear about that and it's been quite stunning

4:16

british virgin islands court ordered

4:18

the liquidation of three arrows capital the

4:21

a c after creditor sued crypto hedge

4:23

fund for failing to repay it's death they

4:25

had three billion in assets under management

4:28

they had huge position in the now defunct

4:31

stable coin terror and its token luna

4:34

they were trading on some massive amount

4:36

of margin how much and

4:39

what deposits they were using to do this

4:42

ah we will find out now

4:44

they're been forced liquidated to be liquidated

4:47

three as he owed voyager digital

4:49

six hundred fifty million that

4:51

pay it was sent voyager spock down

4:53

sixty percent and cause them to need a ballot

4:55

from sam bank been free

4:58

which has led to a spf

5:00

as he's known in the industry bailing out couple

5:02

of other major folks in crypto

5:05

you've already two hundred million dollar credit line voyager

5:08

aged always the canadian crypto lender

5:11

though lend you money against your crypto

5:13

and fcx provided

5:16

a two hundred fifty million dollar credit wanted to

5:18

block fi fcx is obviously

5:20

spf company and

5:22

according to raleigh block fi lessors

5:24

yes t x credit why would wipe out all

5:26

existing shareholders so resorting

5:29

to see the really the onerous

5:31

term sheet keep these things alive this is

5:33

of course in the face of entire crypto

5:35

collapse many

5:38

crypto coin seeing what we saw in for that

5:43

is this the end of crypto is

5:45

going rebound again what your thoughts

5:48

smart sacks friburgo assert on crypto

5:50

did you guys see the turnstile

5:52

posted into the groups on

5:55

that showed bitcoins activity

5:57

as function of the year and value

6:00

apparently so that we can look at that to get the

6:02

crazy thing about this chart when you look at

6:04

it as it and it's pretty obvious that we

6:06

are collectively in one way

6:09

shape form basically trading up

6:12

ever since twenty a team really with all

6:14

the stimulus because if you look at you know the

6:16

mean price of bitcoin when

6:19

he is universal nothing burke you know what

6:21

we were talking about was no

6:23

the price that was sort of between few thousand

6:25

dollars to three thousand then

6:28

three thousand you know then all of

6:30

sudden when all of the stimulus money

6:32

hit the market look what happened

6:34

but i think something unique also

6:36

happens which is that people really understood

6:39

how to run these very complicated

6:42

off chain bitcoin arts then

6:44

i think we should explain what those are biggest

6:46

loser what's behind three arrows

6:48

capital it's behind you know

6:51

i think sam had this kind of oblique

6:53

tweet that said you know some of these exchanges

6:56

are actually already insolvent they're

6:58

already they're walking dead the first

7:00

thing to keep in mind is that you know this is completely

7:03

unregulated market right there

7:05

are no middle maker of market

7:07

makers for say that actually have reporting

7:09

requirements for any regulatory authority there

7:11

aren't any clearinghouses there

7:13

isn't way for us to understand systemic

7:15

risk the bills the crypto mark

7:18

so what happened starting a twenty eight he denied

7:20

seen as people realize the following things

7:22

for true sort of what we talked about

7:25

last go and do

7:27

some crazy round you

7:30

are you know markup some phantom equity

7:32

in a company that company

7:34

then issues tokens you

7:36

done with the tokens not on

7:39

you know a block seen for say the

7:41

heat but ah in a place

7:43

where trades can happen often

7:46

right into the bunch of exchanges where these things

7:48

happen often because it's one

7:50

you know a company and they have

7:52

bunch of segregated sub accounts then

7:55

what happens is when these things initially get

7:57

listed retail goes crazy the price the

8:00

folks basically dump on retail the

8:04

and you know you spin that loop as

8:06

fast as you can and you can extract an

8:08

enormous amount of money along

8:10

the way all these things like the file sudden

8:12

pops out of nowhere and it's like a you

8:14

can earn fifteen sixteen seventeen eighteen

8:16

percent just deposit the bitcoin and

8:18

so folks with deposit because then

8:21

what would happen is like the places where those

8:23

deposits for help with their need the odyssey

8:25

find place estimates that eleven

8:28

twelve thirteen percent the incident be

8:30

would go off chain to some other random

8:32

person who is offering to pay them even more than

8:34

that and they would try to aren't the difference what

8:37

at all catches up with you because

8:39

when something like camera goes to zero

8:42

all the bitcoin that was used

8:44

basically you know ah runs

8:46

i defy process around

8:48

tariff vanishes you

8:51

know and then all of sudden you the lender like

8:53

he can have my or bitcoin back and

8:56

the brokers like while ashley while don't have

8:58

an island to island to else let me to

9:00

assets someone else and they're like ansari

9:03

and had it but i have these terror coins hill

9:05

because i was running some arms and now what

9:08

does your and that's essentially what

9:10

we're seeing right now so we have to

9:12

be problem and then i did we have third

9:14

that kind of funny that the first a problem is like

9:16

it's obvious in the absence of any regulatory

9:18

oversight the stuff gonna happen systemic

9:21

risks are going build up that's what we're facing right

9:23

now there's an enormous amount

9:25

of systemic risk marjorie around

9:27

bitcoin a bunch of this money

9:29

i think has been essentially just the

9:32

price so

9:35

all these people that try to find their

9:37

deposits especially in custodial

9:39

accounts in off chain brokers

9:43

may be as well at some point and

9:45

think that is gonna be a huge shit show us

9:47

that actually happens and to be clear i'm jamal

9:50

they don't have the keys to the on backline

9:52

they gave money to a custodial

9:54

accounts

9:55

they then did this landing

9:57

went out to get them to fifteen percent and

10:00

they don't have any recourse

10:02

here they can't get their a look

10:04

at the sword imo make my own are simply

10:06

them in while it and on the keys does anybody

10:08

have recourse this three years capital

10:10

and all this other interrelated parties

10:12

are now you know gone completely

10:15

bankrupt because of this camp the answers absolutely

10:17

not

10:18

i'm so that that's the first problem

10:20

you have absolutely zero oversight

10:22

which means systemic risk has been built up

10:24

in the

10:27

second thing is that exactly what

10:29

you just a decent is that people don't

10:31

even understand the company here would

10:33

you that you thought that you on this bitcoin turns

10:36

out you actually may not actually on the but all he

10:38

thought that you properly lending them out you

10:40

actually do there is no enforceable

10:43

contracted true and so

10:45

i think that's gonna be an entire that

10:47

of different legal issues that are

10:49

now going come to the surface because people who actually

10:51

legitimately length about the

10:53

present like if you shortest stock and you go on borrow

10:56

start from any one of us really

10:58

tight guardrail you know, if you you wanted to to go and and

11:00

put credit derivatives swap off against that,

11:02

there's a central clearinghouse that make sure

11:04

you're not over leverage, you know

11:06

you have have to to go and and get audited by banks even get

11:08

an into the kind of account allows you you to put

11:10

these driven none of that

11:13

was possible and in the last

11:15

thing don't think kind of funny is that

11:17

we've had to listen to every millennial

11:20

engines the market observer of crypto

11:23

how how this is not like boomers and

11:25

they turn out to be the same seems

11:27

the fact that the cabal

11:30

it's like of all of the first time you've had

11:32

to hear how it's so different it turns out

11:34

it is entirely this entirely

11:38

in

11:38

fact worse because thirty an issue is safely

11:40

major one sacks what do you think is

11:42

happening in crypto right now for

11:45

subsequent i'm lot don't

11:47

really ever new

11:49

point of view on

11:51

i'm really pissed off that spf is to raise my

11:53

taxes in california it's

11:55

my in that same bayfront fried he

11:58

runs ft acts and his

12:00

companies he lives in bahamas the

12:02

guy and they're probably reasons why related

12:04

to liability or taxes me like that

12:07

k tell us what that would have to access their like

12:09

grievous competitor by they obviously think

12:11

it's beneficial to be offshore not under

12:13

us jurisdiction they're very profitable

12:15

right serbia supposedly they're super

12:17

brothel these were like

12:19

turned fifteen billion dollars my

12:22

understanding though he's

12:24

been very successful this don't know either in

12:26

the bomb as i think either there and therefore

12:29

security's regulation reasons or for tax reasons

12:31

but one of those two and a

12:33

that he doesn't live california and yet

12:35

the is sponsoring about initiative

12:38

year

12:38

that would add a zero point

12:41

seven five percent tax on

12:43

incomes over five million to finance a

12:45

pandemic presents and institute

12:48

the is design the doing

12:50

this with dustin moskovitz another billionaire

12:52

does know what do as as money us may remember

12:54

that doesn't was the guy funding to somebody

12:57

that any amount this would be this pandemic

12:59

lessons to be governed by an unaccountable

13:01

board as

13:04

opposed something like oversee california this

13:07

is like is am using the balances

13:09

system to fund their pet for

13:11

profit projects was really no need

13:13

for this to me for saw this is suzie

13:15

some should be done federally exactly

13:18

it's offers was looking the rearview mirror in

13:20

terms of like up a budgetary priority

13:22

but even if you believe this was priority i

13:25

don't why be the responsibility of california

13:27

taxpayers exclusively and even

13:29

if it was you'd wanna do and under

13:31

say the you see sustained some sort accountable

13:34

board as opposed to having a reporter

13:37

you know sam and dawson though

13:39

it makes no sense and this is really and are hurt

13:42

the california tax base because if

13:44

you start raising the access

13:46

on you know california

13:48

millionaires more than murder always

13:50

the state then that tax revenue

13:52

leave the states and sort of actually hurts

13:55

the general budget that's

13:57

why you know california teachers association

13:59

for example post this is because

14:01

they know that this is gonna have the negative

14:03

impact on core services what

14:05

is it but was offensive to me is

14:07

that we suffer saw this is just a stupid

14:09

idea and like every possible

14:11

way but what is guy was in a bomb

14:14

as doing funding down and issues in california

14:16

to raise our taxes thereby

14:18

worsening the california fiscal situation

14:21

the fun is powerful drop projects if

14:23

worth a billion just fund on your own

14:26

you know read your family foundation

14:28

i don't know why you need to raise the taxes all those

14:32

yeah

14:32

it is very bizarre are you i see why

14:34

is he giving up on simple answer is

14:36

because i think it helps curry favor with politicians

14:39

that he needs for

14:41

that's why you would do it that's why i

14:43

would do the terrain negative

14:46

favor because first all

14:47

every millionaire california it should be up in

14:49

arms over this but even i'd

14:52

say more the looming on gameplay

14:54

the army belies the even liberal

14:56

politicians an interest groups in

14:59

california like

15:01

it the like a teacher association don't want

15:03

this because the money's are going

15:05

to cause they support the and

15:07

it will probably will almost certainly

15:10

right down the states tax base

15:13

right because people on the margins

15:15

organ leafs we already have the highest taxes

15:17

in the nation where was like thirteen point

15:20

three percent for the top and we have

15:22

a hundred billion dollar surplus for a reason all these

15:24

ip i was all of these venture capital

15:26

as ceos and rank and file tech

15:28

workers are just paying massive amounts of

15:30

tax here and there are leaving right

15:32

but that's highly lever to capital gains

15:34

right answer last year we had boo market

15:37

we now know in hindsight that it was inflated

15:40

that with all german by this liquidity bubble

15:42

though at producing us can the case this

15:44

your idea was you for a huge budget

15:47

shortfalls next year because they're scared

15:49

me know capital gains a better hold onto that hundred

15:51

billion for sure the cowboys tax base

15:53

is highly leveraged to this boom bust

15:55

cycles they're driving

15:57

the top earners out of state

15:59

is oriental man embark so

16:02

you know but again but again why is guy the bar

16:04

is anyone saying if it was just

16:06

dawson during i guess but i'd also

16:08

i see i mean believe what he's not even

16:10

a california taxpayer because i think

16:12

he's a very sophisticated the

16:16

player the

16:17

in not just crypto but frankly

16:21

regulated and unregulated finance

16:23

and much he i think he spends lot of

16:25

money the easy as well and

16:27

i think that she has a theory the

16:29

to gameplay and then you know when you look at whose

16:31

parents are his parents are really

16:33

really smart sought to people's wealth

16:35

to law professors at stanford so

16:38

i suspect not knowing

16:40

it having spoken to him and

16:42

think that there's a really the

16:45

critic strategy that these guys have around

16:47

who they need to influence

16:50

and what be terrible and then

16:52

willing to the past

16:55

through fun those things in order to curry the

16:58

you know influenza he needs with into teachers

17:00

and i decided that kind of worst rated which is

17:02

i think it's pretty typical in us

17:04

politics and spent the

17:06

question though is what will happen

17:09

that yeah the have

17:11

really talk about know

17:13

everything that actually happening in crypto crypto

17:15

in i'm sure that fts could do a lot to help understand

17:18

lot of the arcane the activity

17:21

some of the you know especially the sub

17:23

that's really in the gray especially the such as

17:25

gonna come to light of the next few years as i

17:27

mean you tube the it's understand guys like in

17:30

week torch two trillion dollars in spite

17:32

of institutional capital you know this

17:34

know this results

17:36

all right is going to inspire

17:38

a lot of district attorneys

17:41

and d o j activity the discoveries

17:43

gonna be bonkers and it's all gonna be regulated

17:46

to the point of in which he tells a

17:48

lot of the opportunity i think

17:50

this is going become the most regulated

17:52

space well i don't have a lie is is

17:54

the goal here was to curry favor then

17:57

i think sam must think there's nothing

17:59

we are red

18:00

in november because i don't think

18:02

republican politicians are go look very favorably

18:05

guy who's using there's

18:07

money to raise taxes

18:09

or stay here seem unaware i let my boss

18:11

move back to the crypto pizza black to previously

18:13

on as many the out of nowhere near as important

18:15

as the difference is not few million dollars have a

18:17

floppy

18:19

at this point with this many retail investors

18:21

were actually me let say this freeborn

18:24

there

18:24

a real technology here and how

18:26

much of what we just witnessed with the

18:28

script collapse in crypto boom bust cycle

18:30

how much is is based on what you

18:32

would perceive as real technology that

18:34

is going to advance the human species

18:37

forward and how much of this was high if

18:39

were to put a percentage on trillions

18:41

of dollars in assets you know read

18:44

it and then whiteout the how much

18:46

you this was actually real technology how

18:48

much of was complete utter waste a fucking time

18:51

then

18:51

grabbed i'm no crypto expert

18:54

and i've not been an investor and crypto

18:56

currencies the already

18:58

original bitcoin white paper

19:02

make sense for communities

19:04

to me makes sense the

19:06

pencil

19:07

initially was on of interesting as potential

19:10

alternative currency but the transaction fees

19:12

very eyes and said never really

19:14

seen to make sense as replacement for traditional

19:16

financial networks until those transactions

19:19

he drops below those of the traditional

19:21

financial network this

19:24

not the biggest concern i've always had which i've mentioned

19:26

multiple times on the south that

19:29

whenever anyone how

19:31

about a crippled crypto currency

19:34

they talk about the price of it and dollars

19:37

if it really is meant to be an alternative the

19:40

us dollar

19:42

why you talking about it in the price of us

19:44

dollars and it's up and it's down relative

19:47

to dollars that implies

19:49

ultimately that the intention would be to transact

19:51

back to us dollars

19:53

which implies that the intent is not to

19:56

be a replacement for the us dollar

19:58

which was a lot of

20:00

early prognostication of bitcoins

20:03

was it was gonna be a replacement for the u

20:05

s dollars to be alternative to traditional monetary

20:07

systems that ultimately if

20:09

you're just measuring that and dollars and it's often

20:11

it's down everyone freaked out everyday about crit those

20:13

up the touchdown that means

20:15

it really is more like security except

20:18

security definition of we're supposed to have

20:20

security interest in some underlying set

20:22

of assets and there's no underlying asset

20:24

it's not actually security because doesn't provide

20:27

your secured interest anything though it

20:29

is effectively a bet on some

20:31

system as as computers that

20:33

are meant to facilitate sunset of activities

20:35

that you know ultimately people really

20:37

only seem to value in us dollars

20:40

though though i

20:42

don't know i mean like where does it all go it seems

20:45

like mentioned in our predictions episode

20:47

last year

20:48

that all these smaller things going get blown

20:50

out this quote unquote crypto currencies

20:53

even though many of them really acts like currency

20:56

can you know maybe bitcoin itself for

20:58

system and seems to me like that's always going

21:00

to have been staying power that observer

21:02

i'm not participant

21:04

and you know any time someone

21:07

telling you something in dollars it's going up and it's

21:09

going down and you're betting on weather's gonna go up or go down

21:11

and your intention is to transact back to dollars

21:14

you know and and there's no on this is lisa

21:16

been securities the has been in only the problem

21:18

lies the problem i have with it this

21:20

has been shadow security

21:23

that that was created in parallel

21:26

to the existing one with lot of

21:28

you know oversight and what

21:30

did we think would happen if you read

21:32

it all casino

21:34

with casino rules other for thirty seven

21:36

underlying interest or something this as underlying

21:38

sure interest some line

21:41

on the block said that particular

21:43

network that i'm not exactly

21:45

what

21:46

yeah i figured interest in a line of code

21:48

in on a distributor noses it's it's

21:50

it's either this is your eight a bitcoin

21:53

size the legitimate

21:55

in

21:56

non fungible entry in block chain that

21:58

says it and only get represent that

22:00

be and think the dot

22:02

know it is i guess that the the

22:04

lake erie on at some may call it tenuous

22:07

but mean i kinda think at

22:09

this point bitcoin probably

22:12

has to be regulated like a security

22:14

even even it is not

22:16

and it's more of commodity only because of

22:18

the the volume and the sheer

22:20

size of both the market and

22:22

the the first century ball out is

22:24

the way you're saying about the potential fallout when

22:26

things go off the rails is so great it's

22:29

i need have some well yeah

22:31

i mean i mean like like again as i

22:33

said like what if you're a market participate

22:35

trying to trade you know very

22:37

sophisticated we know derivatives

22:39

of any kind for example the credit markets

22:42

we have to go we create

22:44

these things called i as the as the called this does

22:46

know and is basically a kind an account

22:48

that allows us to go and know

22:51

take risk in some of these very as a type of

22:53

derek markets but the the underlying principle

22:55

of around that in a

22:57

common set parameters a clearinghouse

23:00

the ability to monitor risk don't

23:02

think it just you and think that's really what

23:04

folks have to software now secondarily

23:07

years

23:08

what we're all these kind of like shadow

23:10

activities you know it just

23:12

it's are you know if it seems too good to

23:14

be true when you would hear wow this

23:16

d five protocol will be yields you twenty four

23:19

percent in junior high who was paying the twenty four

23:21

how many it never made sense

23:23

really but than none of us really question did

23:25

in our in our i had people on swiss alps

23:27

questioned it all the time and it could never explain

23:29

it to me and then now the isolation was

23:31

what we were giving you have we were giving short

23:33

term loans to other people who basically

23:36

wanted a march among other want sit at

23:38

what they want to hotel their backline that

23:40

would only four five percent would were also

23:42

doing was giving you tokens in

23:44

some other crypto currencies

23:46

that they were basically originating so

23:48

the base were like will give you four percent on your

23:51

bitcoin loan somebody else will pay that

23:53

you'll pay that but then the other

23:55

eleven percent is coming from some

23:57

tokens were giving you that actually

24:00

you are airline miles we're thrilled when

24:02

you airline miles with answer really

24:04

important question if you

24:06

we've we can look for the

24:08

market said incinerator

24:12

then trillions of dollars i just saw like for example

24:14

there was one point seven trillion know

24:16

that was just horse in each

24:18

the of salaam just the be since the beginning

24:20

of this year round we've

24:23

done that more in

24:25

the crypto side we

24:27

don't matter more on public equities

24:29

right we're probably didn't do that more another markets

24:31

but every other market is regulated

24:33

and there's full accounting the

24:36

piano hundred dollars that are one

24:38

and dollars that are loss the here

24:41

some folks have just you know basically

24:43

escaped with billions and billions

24:45

and billions of dollars the

24:47

bag holder is just you know or

24:50

original that's are so the real question is regulators

24:53

going to actually care to try to do

24:55

something because oh yeah i love the level

24:57

of griff that's happened this market is extreme

25:01

especially when especially when everybody

25:04

was telling you know design

25:06

is different this market is completely different

25:08

is transparent it's on chain

25:10

you could see every any transact actually most of

25:12

the was not entre nous asked him

25:15

n really were using they were using

25:17

this hey half on being poor a dislike

25:19

psi ops to get you to participate

25:21

okay boomer you don't get it

25:24

gansler i was starting to kramer cmb

25:26

say here's the quote some like bitcoin

25:28

and that's the only one german going to say because i'm

25:30

not going to talk about any of those

25:33

bees tokens that my predecessors

25:35

and others have said are commodity

25:38

the and then said many

25:40

of these crypto financial assets had the key

25:42

attributes of security sites and bitcoin

25:45

he believes the are the key things

25:47

are securities and that makes sense because ninety nine percent

25:49

of people buying them sacks were buying

25:51

them because

25:52

wanted to do them appreciate were never using these a

25:54

utility tokens they were buying them to

25:57

you know i see them appreciate into flip them

25:59

so what do you in fact that there is there

26:01

it when we look back on this whole mess in ten years

26:03

it going b like the dot com era were like yeah

26:05

got overheated but amazon and google came out

26:07

of it or we going to look at it and go well that

26:09

was to up season well

26:12

i think there is a

26:14

future technology platform here with crypto

26:16

farm but mean i've been saying this

26:19

the last year that just because

26:21

there's a future technology platform

26:23

doesn't tell you what the pricing should be and

26:25

the price action got the couples the

26:27

on the level of progress in space yeah

26:30

you should always be looking out what is the real

26:33

usage use cases

26:36

customers revenue things like that

26:38

and people stop doing

26:40

that and i think part the reason why the narrative

26:42

was so powerful if you go back

26:44

to last year in

26:47

the chart that small said about that the

26:49

increase the price of bitcoin which

26:51

is really that the route everything right because

26:53

the first bitcoin appreciates then

26:56

if you think about it like ophelia i'm is

26:59

there is more the top like

27:01

a derivative most of the bitcoin market cap

27:03

it's been roughly forty percent the

27:06

all points sort get the

27:08

the market cap the all kinds of swords roman of off

27:10

it's areas market cap soaps the whole thing

27:12

kind moved up in in sync

27:14

and the reason why bitcoin moved so much

27:16

is that as the third printing more

27:19

more money you have fans bitcoin

27:21

saying look the side is debasing

27:23

the us dollar were get indeed an alternative

27:26

courtesy that was a powerful narrative

27:29

that the said simply vindicating and

27:31

there was a positive feedback loop which is the more

27:34

the said debase the currency the

27:36

more that the price of bitcoin went

27:38

up now the reason the price went up was

27:41

not because they were

27:43

debating the currency was because they were creating

27:45

so much liquidity that

27:47

a cradle liquidity of fact that

27:49

then drove up the price that than so so

27:51

consumers had money that they could

27:53

buy bitcoin because they were there was more money in the

27:55

system yeah you are more buyers

27:57

have become exactly what happened the mean

28:00

oh did idiotic use your and of sorry

28:02

go sucks yeah you is on increasing specular

28:04

investments across the board including

28:06

but i will mrs crypto soaps again

28:09

era when the fed prince much money great asset

28:11

bubbles but there is powerful

28:13

reinforcement because as the said

28:15

was printing bitcoin is boards

28:17

bitcoin out really great explanation

28:20

for why but when i was growing up which is they're destroying

28:22

the u s dollars organ mean alternative

28:24

suits now i think in a very very

28:26

long term could be point

28:28

be a non see our currency

28:30

yes i mean i actually think the technology works

28:33

you could create the a

28:35

new kind of currency that's backed by

28:38

mass and by photography as

28:40

opposed to see our government but

28:42

that to take a really long time i mean that could

28:44

be decades in the future yeah

28:47

but what happened is the market started thinking well

28:49

as gonna happen soon and operators

28:51

got out of itself that was the to a part of

28:54

the i think that think that they

28:57

found all of these words you know

28:59

written in these economic textbooks that

29:01

allowed them frankly to justify one lot

29:03

of people were doing a lot of other markets which is

29:05

just straight up speculation because

29:07

the money printer was going and

29:10

he know if there if look at this ninety two

29:12

percent correlation to the equity markets i suspect

29:15

in bitcoin and crypto is probably

29:17

closer to the to even hundred percent them

29:20

because it really was the further south on

29:22

the wrist for have any just made the most sense when you

29:24

thought when was here effectively infinitely

29:27

going to be available to just buy the riskiest

29:30

risk assets think about the friction

29:32

taken out the summer

29:33

you could buy these you know crypto

29:36

currency so easily you could

29:38

trade them so easily you could create and

29:40

so easily people were popping up forks

29:42

of these things so in a way what

29:44

technology has done over the last thirty or four

29:46

years from cloud computing to

29:48

software to open source has

29:50

made it very easy to pop up start up lead

29:52

to pop up a currency and then you

29:54

could get an incredible reward

29:57

the it is incredible reward before nancy

30:00

made a product for consumers

30:02

and the

30:03

and absolutely zero rules and

30:05

oversight no oversight yeah

30:07

the feature that

30:09

was touted was

30:11

actually the first one to get thrown away which was transparency

30:15

yeah when all of this activity was

30:17

actually happening off chain this is why

30:19

you have the systemic risk issue now when

30:21

santa same some these exchanges

30:23

are actually and salzman the

30:26

he thing is while that exchange

30:28

has one master wallet

30:31

address every time

30:33

you open an account and transact on such

30:35

exchange you're actually just

30:37

transferring between a database

30:39

and three inside of that company though

30:42

it may look like it it's fine it

30:45

it actually not fun that's what he's cleaning

30:48

the problem with all of his so all of this activity

30:51

you know built on these principles of openness

30:54

and you know defense ability

30:56

ends you know you can't the fleet

30:58

is it and evaluated debasing

31:01

turned out to not even matter because the fundamental

31:03

principle that would allow us to verify all of

31:05

that was violated right from the get go

31:07

which was transparency all of it is happening

31:09

in dark most of his that is happening

31:12

off chain and if you

31:14

see that you know it's okay to torture

31:16

trillion dollars of equities while at least

31:18

there's rules on the equity so the

31:21

torch two a half trillion dollars and crypto

31:23

where there are no rules it'll be really

31:26

you know it'll be very telling sign see if these

31:28

folks get their act together and by meaning

31:30

regulators and politicians and do something

31:33

then we made this crazy hybrid where we had

31:35

the venture community and i'm not going to talk about

31:37

any specific from here and be clear

31:39

reason nobody knows exactly what's happening but

31:42

you had coins you can't

31:44

know by the way you can't know because

31:46

it was happening off chain exactly

31:48

so somebody would originate a coin and i

31:50

was you know offer these the else and you would

31:52

as adventure faculty buying some equity in company

31:55

then and some amount of tokens would created

31:57

before the total is alisa the public or

32:00

for anyone had insights into the sea tokens were swapping

32:02

around everybody has different right some people to

32:04

sell early some people could never south

32:06

and it was as if you

32:09

know you took the process

32:11

of going public and you gave

32:13

that to seed stage where series a

32:15

company before they wants their problem

32:17

so you're taking company public essentially

32:20

before they got if you if you subpoena with

32:22

a been wanting their product if you subpoena

32:24

the exchanges all of it gets

32:26

turned over good the exchanges

32:29

are the honey pot about

32:31

united

32:32

so that the and that's what's gonna happen think and all

32:34

this and it's going to really funky this

32:36

is and was terrible about this is this

32:39

is why the accreditation laws exist

32:41

is like only sophisticated people top six

32:43

percent of americans are allowed to participate in private

32:45

companies

32:46

what do we do we allowed a

32:48

one hundred percent people the blow to participate

32:51

that done by primer mass fact

32:53

that less than thousand people in world as we

32:55

understand that more could go wrong

32:58

walking around but you cannot buy stocks

33:01

but you can buffet this cryptographic

33:03

with citigroup for not allowed to buy a share

33:05

of linked in our ober or air ober b even

33:07

though you say these in air bnb we're it air

33:09

bnb a b hosts you're too stupid to by

33:11

air b air shares my private what

33:13

you can buy this crypto currency

33:15

that doesn't even have product in marco

33:17

and and uses white paper said

33:19

has you know university level pure math

33:21

as the explanation of why it's nothing

33:24

can go wrong and it's and it

33:26

turns out again because nobody actually understood

33:28

the first place this going

33:30

be a decade of disease i'm worried

33:32

about if you look at that price chart what it really means

33:34

is like against the you know we talked about this the

33:37

equity markets have to rebate get

33:39

all the qtr a kiwi yeah

33:42

right and then you have to rebates for earnings

33:44

if believe you're in recession and then you to rebate

33:47

the margins if believe that there's rampant

33:49

inflation those three things have to happen

33:51

in the equity markets were in midst of but

33:54

that also has the happen on the crypto markets in

33:56

crypto markets and if you look at that time

33:59

the really tells you the be fine price of

34:01

bitcoin for things seemed you

34:03

know where rational supply and demand were beating each

34:05

other before all these you know five

34:07

ten thousand thirty five

34:09

hundred to five the i say about

34:11

five thousand seventy five percent that's

34:14

right out and now so yeah we get we get we get could be

34:16

of ways to got one thing that thought was an interesting

34:18

sign of potentially bouncing

34:21

along the bottom send us has

34:23

agreed to be acquired by investor group investor all

34:25

cash transaction that basically going privateer

34:28

around ten point two billion or if you

34:30

don't knows and as the help

34:32

their software companies the sas offer company it

34:36

turned out a similar acquisition seventeen billion

34:38

earlier this year they're market cap is nine point

34:40

one billion the public markets it's it's gone

34:42

up of assistance as announced the

34:44

was announced but they

34:46

have

34:47

a billion three and revenue direct thirty percent

34:50

year over year so this is strong company

34:52

the acquisition prices seven

34:54

point seven times their twenty

34:56

twenty one multiple sorry did

34:58

you see their up thirty percent of

35:00

robbery the revenues up thirty revenues of

35:02

the thirty percent over year they

35:04

have one point five billion dollars in cash and securities

35:06

that are in market scary so that their cash

35:08

rich small loss

35:11

to to twenty three million for year and twenty twenty

35:13

one so they have six years of runway

35:15

if nothing were to change yeah what do make

35:17

of the sachs is why would they do

35:19

this they don't have

35:22

do so and is the see you

35:24

like the sign of a bottom if we start seeing

35:26

bunch of these companies that went public that

35:28

are seemingly strong start to go private indigo

35:32

may be clean up their balancing the public again in

35:34

three years what's going on here in

35:37

the saloon arbeloa com about way i'm

35:39

your number we shared a

35:41

when i was doing emmer decade ago we shared

35:43

ago floor in our our an

35:45

office building for ten townsend with

35:48

was and us related

35:50

to techcrunch fifty yeah exactly so

35:52

we had i think five thousand square feet and their the

35:54

size of scruffy that we're in standoff with us for

35:56

expanding and we needed the

35:58

other half of the or and was

36:00

like good move for space liam and that

36:03

they were they ended up moving and we took over there

36:05

space so i'm lot as a company

36:07

that you know was worse one

36:09

hundred million bucks ten years ago there whenever

36:11

was i mean they were still here they were very

36:13

early stage so this is

36:16

still a great outcome should they have taken the seventeen

36:18

billion sure with twenty twenty hindsight that would have better

36:21

butler to you're seeing evaluations here

36:23

being roughly reflected this

36:26

as index is now down to about

36:28

five and half times revenue

36:30

for the next twelve months revenue for

36:32

them for the medium sized company and

36:35

the medium sized companies going about twenty percent

36:37

if you're high growth company

36:39

was starts forty percent you're trading

36:42

and about eight times last twelve months revenue the

36:44

done one of the sorta in their i'm in dot is

36:46

what they're trading for it's

36:48

i found my god why we the founders

36:50

the board until you want to

36:52

go private is the question on people's

36:54

minds is not that they wanted to go private

36:57

i think that they wanted to stay public

36:59

and they wanted to build large business but

37:01

this is where the law of large numbers

37:04

catches up with every company

37:06

that's why it's so rare to have an apple

37:08

or google or microsoft her facebook

37:10

or netflix where you can grow for twenty years

37:12

at twenty five plus percent because at some point

37:15

twenty five percent growth over last

37:18

year just becomes too hard of mouth

37:20

a bit naive so what

37:22

members suffered from is what most

37:24

the south companies not

37:27

and i'm not ready to spare some just calling it out will

37:29

have to go through which is the follow the

37:32

easier kind of south company to start

37:34

the one that folks you know really talented

37:36

investors like sacks will find overwhelmingly

37:39

over others or one called bottoms

37:41

up sas right things that sells

37:44

to the low end of the market

37:46

things that someone to you know as individuals

37:49

can buy them in corporation as opposed to

37:51

the cia yeah the the unfortunate

37:53

part that growth curve that

37:55

is pretty terminal within seven

37:57

to ten years and after that

38:00

your first to go

38:02

the need market and then eventually you're forced

38:04

to go enterprise but when you go to the

38:06

mid market and your sewing to five hundred and in

38:08

a one thousand two thousand person companies and then

38:10

eventually been enterprise you're

38:12

talking about massive investments

38:14

of other people engineers

38:16

product manager sales people and

38:19

all that stuff costs money and it's not

38:21

clear that your product any good though

38:23

in the zen desks examples that is

38:25

it a products for bad when all

38:27

a sudden they were going up and selling a crm

38:29

tool sales force automation tool and

38:32

now you're going head to head against the companies like salesforce

38:34

who are going down and

38:36

all of sudden feels worse and microsoft

38:38

and all these companies can play very

38:41

aggressive pricing games with their products they

38:43

can bundle all kinds of other things in for

38:45

free they can give you discount very

38:48

hard to compete as single individual companies

38:50

your growth starts to stall so i

38:52

suspect what happened and sent us the

38:54

people we can make we

38:56

believe in ourselves they found

38:59

that it was hard then instead of organically

39:01

growing that's when they turn down the seventy

39:03

billion dollar offer tried to grow

39:06

inorganic and he looked a survey monkey

39:08

right which are friends and runs as if we're

39:10

going try to buy that for four point one billion dollars and

39:12

the markets as ah

39:14

and then the market basically

39:17

contrast and now they're like well if we

39:19

go and now works are

39:21

you but the goal until the market we're going to

39:23

go and spend all that billion

39:25

dollars we have to try go up against salesperson

39:27

microsoft the

39:28

product that don't know it's gonna work or

39:30

such gonna be an adult

39:32

though

39:33

i did that that's sort the the parade

39:35

terrible habit for them but it's

39:37

little bit of a warning sign for how

39:39

difficult it is to get big like what salesforce

39:42

pulled off right in what work

39:44

date is starting to pull off what service

39:46

now has pulled i

39:48

mean if you can't underestimate

39:50

the quality of i mean google apple

39:53

the face for i'm saying i'm saying sporadically enterprise

39:55

ass yeah those companies there

39:57

was no probably been last one that's really did

39:59

it in credible so

40:02

difficult palo alto networks probably

40:04

the next closest one now sell for today's your

40:06

our this amazing between red cell

40:08

force and are having a panic lean

40:10

organically doesn't matter the point is it's very

40:13

hard britain's most ios

40:15

field nobody so is this going but okay

40:17

so my original question is this the bouncing along

40:19

the bottom moment know cause we

40:21

have power time and fuzzy with so

40:23

me this company this this is warning sign

40:26

okay why

40:28

not yet the have some of this

40:31

this warning sign that says you

40:33

cannot go into massive

40:35

investments site all

40:37

companies

40:38

i unless you can prove that you can sustain

40:40

margins the theme growth

40:43

minimize our backs but isn't this

40:45

a very sophisticated buyer

40:48

taking private they must have a thesis

40:50

or how they're gonna get their money back it's

40:53

that my point is sexy you they

40:56

fit this is like if if

40:58

the companies already public

41:00

and somebody thinks he'd i take this private

41:03

i can do better than if it's public and i'll

41:05

reintroduced to public months to get could he later

41:07

is know what's gonna happen here in all likelihood you're making

41:09

us theme in the absence of understanding of reasons

41:11

or finance both got a billion five and

41:13

and it's breakeven almost so

41:16

what is what about the what about the the billions of dollars

41:18

adapter going tease out and slap on the company

41:21

what about the number people they need to talk about posts

41:23

going private at the end of the data private equity

41:25

firms are not fun to make

41:27

you know this ten billion dollars

41:29

go to twenty five you're

41:32

trying to make the two billion of equity they put in

41:34

go three

41:36

and there's lot of ways that you can go to free

41:38

for ten goes to twenty five they

41:41

want a modest return i'm

41:43

reminded fifty percent return it's

41:45

a lot of it's is making billion dollars it's

41:47

hard

41:48

but but compared to the management team in the

41:50

boards view of being a public

41:52

company and growing twenty percent year or

41:54

tax interface thirty with that the better

41:57

opportunity for those shareholder sat with as

41:59

is that up here so

42:00

when even if i to gas of you haven't talked

42:02

to mikel about why they're doing it i think

42:04

that they're operating at new stage

42:06

of the business i don't think it's as fun

42:08

to be growing company at

42:10

poet twenty to thirty percent a year and now

42:12

the some you have to generate cash flow and

42:14

you're being valued on that i mean they're

42:16

paso mandatory burn out her thesis

42:19

i don't i mean it's it seems our potential basis

42:21

i think that's basically why people sell

42:23

good businesses like i actually don't think there's a

42:25

problem in their business i think that

42:28

three percent year with one point three billion

42:30

in revenue play cast the bag

42:32

as a they have good product i don't think

42:34

there's anything wrong with the business

42:36

yeah i think that that i do think souders

42:38

get burned out and this is an exit

42:41

i do think that the phase their business or in

42:43

right now is not can be as fun as

42:45

a high growth phase look when you're growing one

42:47

hundred two hundred percent year and

42:49

investors are willing to fund their growth in really

42:51

care if you're possible that is just more

42:53

fun than growing

42:55

business players thirty percent a year

42:58

and investors are breathing down

43:00

neck saying when you can deliver cow swaps

43:02

and what the private equity guys do is they're

43:04

going go in there and they're going to restructure the business

43:07

to deliver cashflow the

43:11

ultimately these types of businesses

43:13

the great nice offer business okay this is our

43:15

biggest star gross margin the

43:17

and you know that they've got a

43:20

subscription based or just keeps going organically

43:22

if they've got pauses the dollar attention

43:25

so you've got a placeholder one where three

43:27

billion dollar subscription based that will grow

43:30

the two billion over the next whatever half

43:32

dozen years quite frankly

43:34

i do you the political you guys are dirty or hospital

43:36

structure

43:38

read or listen to me generally five hundred million a

43:40

year and free cash flow

43:42

mattingly between would be unwilling to

43:44

do that because it is not what

43:47

is your that every day to come in and fire half

43:49

the team that you hired and take that hard

43:51

madison it's just as as

43:53

for that as a personality type

43:55

as a as a different animal fruits salads

43:58

and yeah the on

44:00

a medal

44:01

this is my software companies the

44:03

justification them burning money

44:06

was what we're gonna we're gonna

44:08

spend every dollar in revenue

44:10

that we make as and some because we're

44:12

building a subscription revenue base that

44:15

the again as positive net dollar attention

44:17

so one day a one

44:19

day we won't have to keep investing

44:21

so much in sales and marketing we

44:23

won't have to keep investing so much an r

44:25

d will still keep investing

44:27

to some degree will make the product better spent

44:30

on the old of more made us but we will get to

44:32

maturity and officer

44:34

to the staff and of a sudden and then and also

44:36

the companies can super possible a or artifact

44:39

the matter is is that day never came because

44:41

the markets never demanded and now

44:43

that days here novel on that it never

44:45

came because the markets of demanding more growth

44:48

if you look at their long term operating margins

44:51

in when he first became when you first came up public

44:53

isn't it like had like a negative thirty percent

44:55

margin two years later that

44:57

negative fifty percent margin and

45:00

over the last seven years to that was twenty

45:02

sixteen up to now they

45:04

crawled their way back to negative thirteen

45:06

percent that's not what think

45:08

investors and oh my gosh this company's

45:10

never made money it needs to keep

45:12

investing more in order to grow then

45:15

i think david your point maybe the decisions

45:17

that he didn't wanna make was the

45:19

flip the to a cash cow

45:22

don't think that's true i looked at need

45:24

guys have been generating cast

45:27

the reported gap earnings are negative

45:29

because the stock this topic stance meaning

45:31

that are issuing was a reasonable time to discuss

45:33

here and i got it exactly worth highlighting

45:35

to get this is an important wanted people been talking about

45:37

this considerably lately

45:39

the company's been making money every

45:41

quarter they generate cash in

45:44

last quarter they issued

45:46

sixty million dollars and stock to

45:48

employees to compensate them for the work

45:50

they do so that's two hundred and fifty

45:52

million roughly of dollars

45:54

per year of stock based com which

45:56

is two and half percent of

45:58

the total shares standing in

46:01

the company are issued as employee

46:03

comp every year that number

46:05

results in a dilute of affect the shareholders

46:07

over time even though the business of generating

46:10

cash your relative ownership

46:12

of the shareholder in a business for generating cash

46:14

it going down by two and half percent every

46:16

year because of all new shares that being

46:19

issued to compensate employees

46:21

for the work that they're doing and think that's part

46:23

of the issue that a lotta folks kind of have taken for

46:25

granted this was well rooted in

46:28

m i would say probably google who became very

46:30

generous very early on with issuing are

46:32

accused and stock in their publicly

46:34

traded securities to employee to

46:36

part of their compensation package but

46:38

google has a thirty forty percent even to

46:40

a margin in terms of incremental contribution

46:43

of new new revenue and

46:45

they can afford to take a

46:47

pointer to of the loser google

46:50

by the way it's actually not dilute of they they

46:52

buy back shares with their extra cash so

46:54

a as a shareholder your you actually benefit

46:56

from this considerable cats generation a

46:59

lot of a software businesses and

47:01

tech companies in general have had to

47:03

rely on issuing shares the compensate employee

47:05

for the what did they do so even though the core

47:07

fundamental of the business is generating task

47:09

and cast is going up every year the

47:11

business doesn't know how to get out of the cycle

47:13

of how do you pay these engineered foreigner thousand

47:15

dollars year that the looting

47:17

shareholders by issuing all these new shares every

47:19

year you'd have to do that more

47:21

likely as a private company to figure out

47:23

how consolidate our names how to turn

47:26

heads out in another get the same degenerate because

47:28

he liked each other

47:29

if bring isn't that real like you're pretending

47:31

like of sunset park

47:33

it's not it's it's a real cause it's because

47:35

the general the present but why the why why

47:37

the ostrich well

47:39

not as specific reason because the business

47:41

itself operate any out cast is not burning

47:44

care of business is growing it's cast ballots

47:46

in order to compensate employee for that cast spells

47:49

their diluting you the shareholder

47:51

press i

47:53

when you own share of a company okay

47:55

let me say the waiters is another way of saying that the

47:57

company is effectively issuing to ask for

47:59

suddenly stopped

48:00

we're the fund it's operations mean

48:02

that's another way to think about

48:04

i'll give you the warren buffett scored you could tell me that

48:06

it's stupid that a kind of makes sense which is you

48:08

take number of shares you on divided

48:10

by the total number of shares outstanding you

48:13

look at the total profit then

48:15

you pay my looked through earnings equals

48:18

that percentage times a total profits yeah

48:20

you're percent isn't going down every or restock paper

48:23

the router and so the question is it

48:26

also going down because you're buying real estate you're hiring

48:28

people you're paying them more like it's going

48:30

down for whole host of reasons that ask for it's

48:32

is an irrelevant aspects and might like stepping

48:34

into the day you spend money to grow how

48:36

you spend the money is not that important to be clinics

48:38

a tissue quick things on the topic one his

48:40

arm yeah totally agree it's

48:42

an expense

48:44

the on an enterprise software and six

48:46

years your the the the master the

48:48

art said you know

48:50

as an observer seems to me that many of these

48:52

companies once you have enterprise account

48:55

you benefit from being able to cross all new products

48:57

into that account and you can grow this net revenue

48:59

retention number over time and

49:01

ultimately generate cash many

49:03

of the big enterprise software company that we talked

49:05

about sunsail forza worked

49:07

and others have succeeded in doing that autodesk

49:10

is another good example in combat settings on the board

49:12

of send us they've done arm

49:14

they've done this successfully by bulking up their product

49:16

categories there there they've got acquisitions

49:19

are they don't build apps and so over time

49:22

your incremental costs to disturb

49:25

to sell our eyes and you products and generates

49:27

pass or incremental growth process goes down

49:30

and the business performs better with scale this

49:33

seems to be one those businesses were ultimately

49:35

they couldn't bulk up there acquisition and

49:37

he couldn't organic organic dry products and

49:39

he tried and so challenges

49:41

they're kind of up kind don't want to say once say pony

49:44

for the portfolio things that things that like

49:46

this and sell into and ultimately increment gross profit

49:48

is very limited and that this has become

49:50

challenging operate as public company did

49:52

you really you have to show that momentum as a as

49:54

a steel than a price offered as as you're

49:56

actually generating real cash overhaul well

50:00

courtesy of happens had an inside cat internet

50:02

access the tomato and and you got

50:04

hope you realize this but the standard

50:07

in silicon valley today the

50:09

when a company goes public an idea

50:12

to have what's called an evergreen stock grant

50:14

proposals and evergreen basically

50:16

means that every year the company's

50:19

authorize the board off automatically

50:22

authorizes the issuance of some percentage

50:24

of new shares burger typically

50:26

in range of four percent than

50:29

iss and other you know kind of institutional

50:31

shareholder advisory services actually

50:34

vote against these shareholder

50:36

proposals and push back against them

50:38

but most of the companies in silicon valley that

50:40

go public automatically include

50:42

evergreens as part of their you know

50:45

kind of ideal prospectus i mean can we agree

50:47

on control like it's yet we be i'm not a prisoner

50:49

they can pick and dilute shareholders my four percent

50:52

you know headed how the business operated

50:54

that year which is effectively same

50:56

as doing a four percent secondary

50:58

class offering every year because it's this

51:00

your your issuing their shares into the public notice

51:03

instead of getting cash you're paying employees

51:05

with them

51:06

though the boys you having to use your own cast

51:08

ballots to pay your employees see are effectively

51:11

raising money every year and you're allowed

51:13

to raise up to four percent the loot

51:15

of affect the several there's to do that every year

51:17

it become a real topic seems to me that a

51:19

lot the big portfolio manager is a

51:21

big institutional farm the start of pace

51:23

really close attention to this

51:26

quote unquote standard silicon valley

51:28

that sort this topic stance has become so

51:30

high and evergreens have become kind in standard

51:33

as almost like an ordinary course a business

51:35

and it's become

51:36

the a really competitive topic and

51:38

i don't think would be too surprising number

51:40

one to see cast salaries go up and

51:43

number two as result of as to see salaries

51:45

become rationalize insulting valley where

51:47

incentives may start to get silenced on the standard

51:49

foreigner taper year that everyone's

51:51

become his tail you know

51:53

terms of get high tier ties

51:55

in satellite remote work maybe

51:57

there is a a compromise that

51:59

can be

52:00

that eat this compensation for have remember

52:02

has been outrageous and some cases especially

52:05

for senior management and so it

52:07

makes the core business look broken

52:09

but way actually have is maybe people who

52:11

are on these boards

52:13

are also enormous compensation

52:15

and it's as bad hygiene and it's not related to the

52:17

performance of the company right bottoming out of the

52:19

board people are close in on it i think that it's

52:22

it's it's you have to pay as an engineer forte

52:24

year to compete effectively for valley today lot

52:27

more about the management's the management's

52:29

saw com or management saw comp is different

52:31

than the incentives you would agree free party my there

52:33

have been some enormous program for

52:35

job yeah certainly as you want run

52:37

the company as company high growth start

52:40

up with employing these high

52:42

paid engineers or executives including

52:44

saw conference saw sense does a certain kind

52:46

of away running the business but again if trying to

52:48

run the business for profitability as different way

52:50

running the business this add a layer

52:52

to what happens here that genders

52:55

was under intense pressure from

52:57

an activist investor or called janna was

52:59

basically try to replace the board

53:01

directors are running proxy battle against them

53:04

though jana has been pressuring

53:06

them replace the boards

53:08

to make all these changes that

53:10

to take a seventeen billion dollar offer

53:13

get back in march they didn't do it now

53:15

they did lower offer a ten billion why

53:18

i think because the market has clarified

53:20

we now it's it's clear that we're

53:22

in this regime change what

53:24

the market is valuing uscis fleet

53:26

ah slopes as opposed to profitless

53:29

gross my guess is

53:31

again was already talked to metal my guess

53:33

is they try to serve the arm said listen you know

53:36

it's not can be fun to run metropolis watch

53:38

but you also to the

53:41

about the question why are these i was so scared it's

53:43

private equity firms buyer for ten billion i think

53:45

they're going to make a lot money the way they're going

53:47

make a lot money more than billion

53:50

durga slash wow the call structure

53:53

they're gonna run it to be highly profitable

53:55

they'll probably bringing growth down from thirty percent

53:57

of your that twenty percent or fifteen

53:59

percent but the benefit

54:01

the also benefit to reducing the brothel bet

54:03

will be they could probably generate three

54:06

four five hundred million a free cash flow on

54:08

our business it was during one point three billion

54:11

they stop investing in r and d and they stopped

54:13

and bring down the sales and marketing that

54:15

could of that can be a cash cow like you said

54:18

so i think that's probably what's what's going

54:20

on here i'm is the i

54:22

just want you guys know not to versus bubble but

54:24

when people talk about free cash flow how

54:27

did lot of companies touted lot because

54:31

you're allowed to add back in stock

54:33

face palmed as if it doesn't exist

54:35

the problem is that stalkers pompous

54:37

non pass the when

54:39

when your only source so if you see the company

54:42

has negative he the dot negative the

54:44

everything all of sudden are like

54:46

quote unquote free cash flow positive because

54:49

we were able to add back in stock is top

54:51

of that money is not real so

54:53

when the only source free cash as dot based

54:55

com that free cash flow doesn't reflect

54:58

the companies to profitability this

55:00

is what mean by people play the shell games

55:02

of these numbers to allow know

55:04

both slut muslim you know

55:06

value something based on but i actually

55:08

know because you know or spotless copies off

55:10

the charts plus actually goes to something

55:12

else you know will do a non jackie but the measure

55:14

you know you know adjusted either

55:16

dogs and then i'll actually wait sorry

55:18

look at free cash flow because you can add back

55:21

in this gargantuan amount of stock based com

55:23

mean it's crazy how just as the

55:25

quote from you interested but are we were accept

55:28

that that that the quote from warren buffett summarizes

55:30

the if compensation

55:33

isn't an expense what is it the

55:36

on real and recurring expenses

55:39

don't belong in calculation earnings were

55:41

the world the they belong i think overeating

55:44

right

55:45

my point is is not that composer

55:47

and inexpensive as but rather

55:49

that is an extensive can control by

55:51

reducing the amount of staff know i guess who's the

55:54

i think these private equity guys are gonna basically

55:56

walked the construct for this business understand

55:58

can distort free cash flows

56:00

because you had back and start with top it's joke

56:02

it's little bit a shell game going on like

56:04

the dirty secrets let me ask you or

56:06

anything like that in important

56:08

investing accounting question

56:11

let's say that business like tom

56:13

zen desk is generating one hundred million dollars

56:15

have free tasser year what

56:17

it on me up whole lot so

56:20

every year there cast ballots goes up by

56:22

hundred million dollars have business it generates

56:24

one hundred million dollars of incremental casts every

56:26

year the cast ballots gotta see you

56:28

as a shareholder own shares in company

56:30

that is creating hundred million dollars of top

56:32

of incremental capital prayer however

56:35

your share is that you on

56:38

are going down because they're getting so

56:40

looted every year by roughly two

56:42

a half three percent m s a dispute

56:44

our present as and us tax or number however

56:46

year you're getting to looted to had half percent would

56:49

you rather have a business that you are getting

56:51

diluted by two and half percent increment

56:54

thing it's overall balance by hundred million dollars

56:56

or would you rather own shares a company that's burning

56:59

tas each year then i think that's where

57:01

this ended up from market perspective

57:03

getting rationalize it's shareholders

57:05

said i want have the safety and security staff general

57:07

sense and i'm willing to take on the solution

57:09

for it that's how to see games

57:11

that you know as standard as it is when i

57:13

think about finding a new start up

57:16

and i look at the competitive landscape

57:18

when i see that the competitors have

57:20

all been acquired by private equity companies

57:23

i generally think

57:25

okay there is room for innovation here because i know

57:27

that the first thing that p the

57:29

arms gonna do when a car company this

57:32

is why you're out already

57:34

order to the chronicle maintenance mode is

57:36

no innovation that happens the up with a

57:38

product once the beavers by that by arise

57:40

though the reality as i say

57:43

those are good targets for sides and acquisitions

57:45

right sacks i mean they'll find the us all on it'll

57:47

do roll ups right on toes of this

57:49

is that they will do financial innovation

57:51

they whoa innovator the structure

57:54

of them at all those a wasteful spending

57:56

and all the nonsense and lunches yeah

57:58

i saw some on a month

58:00

that all the guy lloris yeah the time

58:02

or those bricks was like

58:04

all is no sir giles thirty

58:06

six vegas trip mail the stock

58:08

based compensation based way to their to get rid all

58:10

high price engineers they're gonna get rid of that allow

58:12

the high price executives they're gonna

58:14

probably the don't have to keep customer support

58:17

thirty years as years cast salary probably

58:20

bonus people but as do bonuses for

58:22

hitting targets and sort of during people's

58:24

much equity in the business

58:26

no run it like a private equity

58:28

type type like the unisex

58:32

the upon his i interesting to me

58:35

yeah i mean when and will listen it's all your

58:37

other products i completed the other reason why

58:39

wouldn't be fun as i it's it's it's a level of financial

58:41

engineering which is highly sophisticated asking for

58:43

some people it is financing for us it's was

58:45

fun because you're not

58:47

reading and company per se non innovating

58:49

not be a product for seven years yeah but

58:51

would say that it is a highly sophisticated in the

58:53

folks that do at these places that these private

58:55

equity firms are incredibly they're very good

58:57

at it sadly it how they do it and

59:00

it's it's the twists and turns of how you know

59:02

lever this up and use that blah

59:04

and use a margin loan and three sons that

59:06

comes as means and it's not

59:08

the stuff that necessarily we want be thinking

59:10

about

59:12

i know that so you'd have to do as well as

59:14

leader is a lot i'm

59:16

i'm happy they exist in the ecosystem

59:18

because we need firms we need

59:20

more exits right and we

59:22

know that right now wash and

59:24

the the regulatory

59:27

regime is very difficult for ya get the also

59:31

though at least you have productive firms are providing

59:33

some exits and we need the

59:35

ecosystem needs and knows exit are saying

59:37

sacks don't trigger pump

59:39

pump the competitive concerns with mean

59:41

con and her group brat like as much as a

59:43

private only protect his private okay cells were

59:45

arrested by it so we don't need get through regular

59:47

is roger to see a lot will need

59:49

exits in order to justify the

59:51

risk capital that goes in

59:53

the earliest stages which in

59:55

most cases can be zero india

59:57

to give you some other numbers out there mans caped

1:00:00

we could become it's as races for guys ah

1:00:02

they had three hundred fifteen million

1:00:05

in net loss and twenty twenty one with

1:00:07

read your ten million stock based com by

1:00:09

the way that number can also be distorted has to be

1:00:11

clear if you give a one time paid

1:00:13

gramps to i executive like a ceo

1:00:16

yet as the way that the accounting works on started

1:00:18

com it's not the kind thing you can

1:00:20

have a very simple decrypt

1:00:22

around but you have to have is very significant

1:00:25

short term costs associated with a big grants

1:00:27

that could best over long period time for

1:00:29

with that that has very high strike prices

1:00:31

i mean when you on got that massive

1:00:34

grants a tesla the thought this

1:00:36

topic stance with significant we

1:00:38

an interesting way into it he was that

1:00:40

was there were twenty targets something crazy

1:00:42

like that and all of them are base where lot

1:00:44

of them were based on the spot price and delivery

1:00:46

of cars so that's one the things i only be

1:00:48

broken top yes yeah so that this

1:00:50

is one these has broken in silicon valley is that

1:00:53

the comp in the stock is

1:00:55

hop is not tied to performance it's

1:00:57

like just giving people guaranteed salaries and

1:00:59

fact of cynicism for i could be wrong like

1:01:01

that that there is more sophisticated be clear

1:01:03

an executive com in public or

1:01:05

technology companies that to trickle down to the junior

1:01:07

people to everybody said rise

1:01:09

and fall of the company's performance at my process

1:01:12

on i mean this mean this problem with entitlements

1:01:14

you know and and people being a title to sorry be

1:01:16

like as a red peltier but we

1:01:19

should have like performance should

1:01:21

be lauded and compensated for not is

1:01:23

showing up and hanging out visit

1:01:25

be bunch of companies in this position so look

1:01:27

for this as a trend palatine

1:01:29

the to sixty four million last quarter revenue

1:01:31

last seven hundred fifty seven million quarter

1:01:34

david three point one billion dollar market cap

1:01:36

they've only got eight hundred and seventy nine million dollars with

1:01:38

cash i'm just looking at these numbers hopefully there the

1:01:41

tide never billion

1:01:43

for an inventory companies

1:01:45

gonna get taken out by ,

1:01:47

i don't know why that even went public their down eighty

1:01:49

four percent ninety one million

1:01:51

dot media company eighty one million dollar sixty

1:01:53

one revenue it was forty five million

1:01:55

their market cap is down to two hundred and ten

1:01:58

million they've only guy seventy

1:02:00

four million in cash so with some get with

1:02:02

one hundred millions and accounts receivable that is

1:02:04

a bunch of companies right now that our public

1:02:07

that are

1:02:08

bow to hit in couple of quarters running

1:02:11

out of cash going into a recession

1:02:13

are we going see

1:02:14

big flame out see think and year are you

1:02:16

watching specific companies because the private equity

1:02:18

folks must salivating watching this

1:02:21

reluctantly how you out what the take away

1:02:23

was or any of this and i think the take

1:02:25

away as there's been regime change in the

1:02:27

public markets the way that investors look these

1:02:30

companies is changing it's not the

1:02:32

about growth at all costs me more they're not

1:02:34

lucky a revenues is also about margins

1:02:36

and cash flow the and you

1:02:38

know we talked about allows pod out

1:02:41

the think a lot of sounders understand

1:02:43

intellectually that we're headed for downturn

1:02:46

if not a recession but they weren't taking

1:02:48

medicine beasley reducing

1:02:51

their burn while this is

1:02:53

an indication of what investors are

1:02:55

valuing if the only way for send

1:02:57

us to create value as a public

1:02:59

company this assault or private equity

1:03:01

firm whose get on how the sas zealots

1:03:03

are out there are some shoot him or staff

1:03:05

to run for free just loves does this indication

1:03:08

of the regime change so you

1:03:10

know we need founders to start internalizing

1:03:13

this information so they can run their

1:03:15

businesses more efficiently what

1:03:17

investors want right now they still want growth

1:03:20

but they want it was low bird high

1:03:22

burn operations are going to get punished

1:03:24

as transition most of my public

1:03:27

markets time to focus on that

1:03:31

and i've been looking as seventies because now because

1:03:33

there's a lot of these really interesting set companies

1:03:35

have a lot of ill because what david says i think

1:03:37

is hundred thousand percent right

1:03:39

but such as there isn't

1:03:41

a massive massive regime

1:03:43

change here the us and

1:03:45

wish i were you see don't take the medicine

1:03:48

and what what's funny is like so many

1:03:50

of these companies have been left for dead

1:03:52

what what is really juicy

1:03:55

in the few companies that

1:03:57

you think will survive specifically

1:04:00

making sure you're protected in capital structure

1:04:02

which means to own the death because

1:04:04

debt is always senior the athletic there's

1:04:07

some really really interesting companies

1:04:09

out there that are in that situation

1:04:12

and it's just like it's much better risk reward

1:04:15

the moment where again you know we talked about this why

1:04:18

would you give up your liquidity today i

1:04:20

don't know bs why

1:04:22

why are only moines yeah just as

1:04:24

term decent before like skipping along

1:04:26

the bottom you think it's a psychological

1:04:29

wishful thinking as opposed to sort of

1:04:31

like irrational summation of the actual

1:04:33

jerome powell just said i

1:04:35

will take the economy in

1:04:37

order to beat inflation he just sat in

1:04:39

in last winter

1:04:40

but people believe inflation might be turning over you

1:04:42

buy that are not

1:04:44

no as i said i think you're going see eight

1:04:46

and nine percent inflation prince for least

1:04:48

next three or four months minimum i

1:04:51

think that things could get

1:04:55

marginally better after that i

1:04:57

think the thing we don't know and again it

1:04:59

is such as and i don't care what the fuck an audience

1:05:01

things such as russia and ukraine the

1:05:04

sorry to bring politics but normally miller

1:05:06

you know that are ugly intertwined

1:05:09

the people want go and venture and gamble

1:05:11

and the stock market you might as well understand

1:05:13

this because i think you know

1:05:15

many of the scenarios will trade

1:05:18

because of what's gonna happen with couldn't let

1:05:20

let me ask the question here how many quarters

1:05:22

will this recession be if we had to pick range

1:05:25

pick to quarter range

1:05:27

they can play to five what what you think i'd

1:05:30

notice

1:05:31

friedberg you gotta wait a

1:05:33

second how many quarters

1:05:36

what's your minus two essay

1:05:38

is this recession going to be so five

1:05:40

plus or minus two for plus or minus two plus

1:05:42

or minus one what are you thinking

1:05:45

will be the bottom our point i don't like the

1:05:47

term i've told you guys don't like the terms

1:05:49

quote recession as if it's some absolute negative

1:05:52

thing i mean

1:05:53

negative gdp growth coming off of inflated

1:05:55

gdp doesn't seem to me as systemically

1:05:59

challenging to economy

1:06:03

you know but some other circumstance

1:06:05

where for example there was global financial crisis

1:06:08

or nine

1:06:10

eleven or or some other kind of sector that

1:06:12

that that throw things that

1:06:14

that really affected the core economy

1:06:18

certainly we hadn't we had something

1:06:20

that that affected the core economy kobe

1:06:22

than we had massive stimulus though

1:06:24

i don't i think this is unfortunate

1:06:26

general characterization of cog

1:06:29

recession in absolute

1:06:31

negative and i think that there is relative

1:06:33

growth and they were group

1:06:35

is your relative growth is negative

1:06:37

off of an inflated number over

1:06:40

at okay let give me a limit were you know me

1:06:42

to finish but over it as oryx two or three

1:06:44

year period you're still growing the economy considerably

1:06:47

to job time jobs are growing

1:06:49

and for production of growing it's

1:06:52

not as negative as it's be made out be so

1:06:54

i'm not gonna okay i get to get as

1:06:56

many other me as persuade them

1:06:57

how many more quarters will we have

1:06:59

of stocks and

1:07:01

real estate and assets declining

1:07:04

and value or being fun that's

1:07:06

financial markets question yes or that's

1:07:08

how met from one and one thing i've

1:07:10

realized is that financial markets in the short

1:07:12

term the

1:07:13

other the old warren buffett quote whomever is

1:07:16

that over the long term equities are weighing

1:07:18

machine and certain they're voting same

1:07:20

we've seen with crypto it was

1:07:22

voting machine and everyone voted on the the

1:07:25

hot thing this your and

1:07:27

now everyone's voting against as i i don't know

1:07:29

weighing and now yeah well

1:07:31

yeah i mean at some point not a marriott you

1:07:33

all the crypto currency long enough you'll find

1:07:35

out how much fundamental productive value is greater

1:07:38

the same true for owning businesses are other

1:07:41

real assets you'll find out over the

1:07:43

lager on how much productive value the creating

1:07:45

no no you don't include a question of when we hit

1:07:47

floor of a sacks money they go hit or

1:07:49

we are we hitting a floor now as we have

1:07:51

lot more to go down so you one point view i'd

1:07:53

say i'm looking at buying high quality sir

1:07:55

businesses by certain high quality businesses

1:07:58

right now i think that there

1:08:00

the things that bitter cheaply price it of my own them for

1:08:02

a long enough period time the underlying

1:08:04

productive value that business will return

1:08:06

my capital to me

1:08:08

yeah one that you might want to mention

1:08:10

here that you're looking at i don't

1:08:12

we utilize your car is at the summit with

1:08:14

our friends or sunny the his his

1:08:16

praise or off by like i told him the

1:08:19

there longer term for a sex when you think in terms of

1:08:21

animal gonna some the political sauce that

1:08:23

affects markets after this well me

1:08:25

i think it's all related so there's three

1:08:27

things going on here right now economically

1:08:29

or three underlying causes one it is

1:08:31

the raid expectations have

1:08:33

changed massively interest rates

1:08:36

have gone up and reputations

1:08:38

going up even more you'll by inflation

1:08:41

the toll not we see were out

1:08:43

on inflation whether that gets controls

1:08:45

that issue is not going away the second big

1:08:47

issue is economic slowdown the recession

1:08:50

so the first was wall street this mainstream

1:08:52

these two things are related because companies sammy

1:08:54

on the brakes because they're seeing

1:08:56

that the couple availability

1:08:59

is really getting reduced

1:09:01

by this rerating this regime change

1:09:04

in market so we're singing economic slowdown

1:09:06

that runs to turn into recession

1:09:09

the consumer confidence is part of our right when

1:09:11

you're wages don't buy you

1:09:13

as much because food or gas prices are through the roof

1:09:15

that reduces consumer confidence intervals

1:09:17

plays into that says the second biggest

1:09:19

your now that we're gonna know about

1:09:21

recession they've gotta get

1:09:24

out and sleep through rest the year before

1:09:26

we figure out what's happening there and

1:09:28

then the third part of this as the overhang of

1:09:30

this war in europe ukraine war

1:09:33

which is now threaten it's become a forever

1:09:35

war there was a pretty stunning

1:09:37

articles in the washington post

1:09:39

this week in which the

1:09:41

administration officials

1:09:44

were quoted as saying that they would

1:09:46

effectively prefer or

1:09:48

countenance was their word a global

1:09:50

recession in santa over letting

1:09:52

in russia the dawned ass

1:09:54

region so they are committed now

1:09:56

to basically prying rush

1:09:59

out of the dawn even if it means

1:10:01

global recession

1:10:02

the automatically specifically the donbass or

1:10:04

specifically standing up to poodle

1:10:07

the i never had minimizing when i were

1:10:09

talking about his is the doghouse region

1:10:11

what's happened is what the russians

1:10:13

last the first few weeks the war

1:10:15

in which they tried that's right they

1:10:17

eventually went for knockout blow to

1:10:19

take over chief topples on skates

1:10:22

i think we accomplish something in preventing

1:10:24

that but since then they

1:10:27

have achieved are objective of taking over

1:10:29

this eastern portion the country the donbass

1:10:31

region in which this is where most

1:10:33

of the ethnic russians lives and

1:10:35

these ukrainian separatists

1:10:38

who are ethnically russians

1:10:40

they've been fighting alongside the russian troops

1:10:42

and the russians are basically one that part of the

1:10:44

war the answer the question is what

1:10:46

do we do now and will you how does your administration

1:10:49

officials saying that they would not accept

1:10:51

the status quo that they willing to fight

1:10:53

on for years the are the same

1:10:55

geniuses you gave us the forever wars

1:10:57

as a middle eastern are giving us a forever works

1:11:00

in eastern europe they are

1:11:02

saying they are willing to be subject to do this

1:11:04

fight even if it means global

1:11:06

recession i don't think the american

1:11:08

people never voted for this

1:11:10

but this is what demonstrations

1:11:13

pursuing and you know you gotta

1:11:15

remember that there's always rest of this war

1:11:17

spins out of control that we go nuclear escalation

1:11:20

so i think that this is a huge

1:11:22

overhang all markets as as the sister big

1:11:24

problem that we have so i don't

1:11:26

see how we get out of this bear

1:11:28

market until you get clarity

1:11:30

and resolution of inflation

1:11:32

rates summer one sort out recession

1:11:35

and were to and basically this

1:11:37

war in europe numbers leash and it's reflexes

1:11:40

because these next three months as

1:11:42

i as i

1:11:44

indicated last week i think we're gonna see inflation

1:11:47

the prince that a really high in part

1:11:49

because things like rents which have

1:11:51

a dinner which are on allies will get for

1:11:53

the backend server going to be printing eight nine

1:11:56

percent and then guess what jason it's

1:11:58

the fall it starts to holder

1:12:01

know russia depriving europe

1:12:03

of nat gas where's the

1:12:05

oil gonna come from the package

1:12:07

basically still stuff farming the united states

1:12:09

with respect expanded production capacity

1:12:12

why because they didn't like the way that we were strong

1:12:14

arming them a whole bunch of other topics in it's

1:12:16

in in so where where do we

1:12:18

stand you could have one hundred and eighty dollar

1:12:20

barrel oil by november december

1:12:22

when it's cold not just year been continental europe

1:12:25

old a sudden inflation gets kicked right

1:12:27

back up again it could be seventy nine percent

1:12:29

again so

1:12:31

i do think all of these things are now so inextricably

1:12:34

intertwined think david right we need to

1:12:37

what this war the bad

1:12:39

then the unfortunate consequence

1:12:42

is that right now if we

1:12:44

want fight proxy war there

1:12:46

is no elegant author

1:12:49

the right though

1:12:52

the

1:12:52

prediction markets to so people now are are

1:12:54

predicting point eight point nine percent

1:12:57

additional inflation in june

1:12:59

of our enemy that's over last month and last

1:13:02

month was a point six surrogate be

1:13:04

a nine and half decent could you imagine what the martha

1:13:06

stewart we printed double digit inflation prince

1:13:08

ten and half percent then point

1:13:10

one the psychology of

1:13:13

well consumer psychology is really

1:13:15

low right now known as consumer psychology

1:13:17

unthinking market cycle know marketeer

1:13:19

yeah so we put those two things together and then if this

1:13:21

war is never ending and famine

1:13:24

that and the impact on

1:13:26

forty million people or something like that

1:13:28

freiburg predicted is actually going to happen

1:13:30

in next six months the who

1:13:32

going to feel quite chaotic to people around

1:13:34

the world so we we do need to put this

1:13:36

weren't too bad for sure there's

1:13:38

no the on the table right now but the deal

1:13:40

that we've talked about our previous shows there was

1:13:42

always

1:13:43

the broad construct your even

1:13:46

before the war began was there are

1:13:48

three pieces to number one

1:13:50

was that that

1:13:53

ukraine out your main initial state

1:13:55

as opposed to being brought into nato

1:13:58

and having american troops left as as the on

1:14:00

russia's border that was always red line to them

1:14:03

and in exchange for neutrality ukraine

1:14:05

get security guarantees peace number

1:14:07

two was that in the eastern region would you out

1:14:09

these russians these russian speakers

1:14:12

that their rights will be respected and that they

1:14:14

would have some autonomy n

1:14:16

and again that was something that ukraine agree to under

1:14:18

the minsk accords but was never properly

1:14:20

implemented and the thirties was a russia

1:14:23

gotta keep for me out which

1:14:25

ago was a fait accompli that happened in two thousand

1:14:27

and fourteen smart as a result

1:14:29

conflict been outlining dot three

1:14:31

point plan for over

1:14:34

year and that is what

1:14:36

we're gonna end up with the only difference

1:14:38

is that can be implemented by force

1:14:41

the and ukraine will be the story in the process

1:14:43

that is really where we're at right now russia

1:14:46

has they've taken over

1:14:48

donbass to get over this eastern flank saw the

1:14:50

country they ask for me in

1:14:53

ukraine basically don't know dot

1:14:55

the rest of it will not part of nato

1:14:57

dot is basically what the russians have done is

1:15:00

implement by force the plan

1:15:02

that frankly we should have agreed to through

1:15:04

negotiation a year ago and

1:15:06

avoided all the stuff and destruction my

1:15:09

might as well as she made his maybe every

1:15:11

we don't know pollutants intent and that's that that's the wild

1:15:13

card here he is a bit of madman i mean

1:15:15

he's pretty much of wild card here is dictator who

1:15:17

invaded another country my

1:15:20

my countless slightly different think i

1:15:23

see two things two things to get us back to state

1:15:25

of relatively predictable growth

1:15:27

and price stability number one

1:15:29

is we need to

1:15:30

we that supply and demand by taking thirty

1:15:33

trillion dollars out of global

1:15:35

markets

1:15:37

the second is we need an off ramp to this ukraine

1:15:39

russia war so that there is

1:15:41

predictable energy and food supply

1:15:44

the world so that folks can just get back

1:15:46

to what they do best

1:15:48

and it those two things can happen in

1:15:50

the markets will have found the bottom the

1:15:53

the until those two things

1:15:56

happen in my opinion it by the way the first thing doesn't

1:15:58

actually have to happen entirely you

1:16:00

didn't flip path for it and you

1:16:02

not worthy only one that's doing quantitative

1:16:04

tightening right now the easy be hasn't even started

1:16:07

taking all this crazy money out

1:16:09

the know i don't know when the bank of england is gonna do

1:16:11

it when it's you know thanks to pander to do the

1:16:14

didn't to be global coordinated

1:16:16

effort before refine the bottom then

1:16:19

this war has this the

1:16:21

digital your back to this unfruitful

1:16:23

mad men narrative the reason

1:16:26

a lot his immunity to it or yes

1:16:29

if what you're trying to say here is that

1:16:31

putin bearers moral culpability

1:16:33

and moral responsibility the blood is on his hands for

1:16:35

this war i agree with you on that okay however

1:16:37

this does not mean he desires

1:16:40

who invaded yeah but yeah but like it

1:16:42

there but right but the idea that this war

1:16:44

was unpredictable or coronado been predicted

1:16:47

is simply false because many experts

1:16:49

did put a dead and they don't tell us exactly

1:16:52

was gonna happen the reason i knew was gonna

1:16:54

happen is because ross has been saying since

1:16:56

at least two thousand and eight when

1:16:58

there was his progress summit and nato declared

1:17:00

some tend to bring ukraine is in need

1:17:02

of the russians been saying that is a red line

1:17:05

in russia experts binds own cia

1:17:07

director guy named all birds he

1:17:09

was then our our emissary

1:17:12

to russia he wrote memo to them searchers

1:17:14

say condoleezza rice what he said

1:17:16

is that's the idea bringing

1:17:19

expanding nato to ukraine the

1:17:21

red line for the entire rationally

1:17:24

not just prudent so far

1:17:26

as you go back and look about what

1:17:28

other russian leaders said about

1:17:30

nato expansion gorbachev said

1:17:32

it was humiliation to russia yeltsin was

1:17:34

against it they've all been against it

1:17:36

and so go burns warned in two thousand and

1:17:38

eight this was red line and russians

1:17:40

and sameness as two thousand and eight yeah

1:17:42

they were saying at all of last year if

1:17:45

you go look at contemporaneous headlines

1:17:48

describing the tensions between

1:17:50

the us and russia this

1:17:52

is the headlines of articles i can provide to neck

1:17:54

with for on the screen they were saying this was

1:17:56

not see red lines for them to the idea

1:17:58

that this conflict was the verdict will because bring

1:18:01

a madman listen you can com a dictator

1:18:03

that can also we could all have predicted

1:18:05

remarkable he okay and know it's off

1:18:07

a highly predictable that china considers

1:18:10

you know taiwan renegade you know

1:18:14

province like yes dictators

1:18:17

you know i will tell us what they're going to do

1:18:19

the question is does the free world want to stand up to

1:18:21

dictators and so wow

1:18:23

you know it's messy to stand

1:18:25

up to a dictator the west you

1:18:27

know kind of doesn't have choice to stand

1:18:29

up to dictators or else they will roll into other countries

1:18:32

history has shown that so as messy as

1:18:34

the says and as terrible it is for the economy

1:18:36

they do things that we

1:18:38

have to stand up to dictator play editors

1:18:40

where we work with by invading

1:18:43

other countries they're not invading other countries

1:18:45

and that that's the difference here sacks year we

1:18:47

had a winning record a bit of pass

1:18:49

here he invaded country we must

1:18:51

stand up to dictators who invade other

1:18:53

countries while looks and will years and i

1:18:55

only just america i mean the free world

1:18:58

that

1:18:59

will look look where you've gotta say i'm with this policy

1:19:01

you and the people we we could have avoided yeah

1:19:03

because you are basically spouting this

1:19:06

this nonsense that

1:19:08

look even question is end up to dictatorship

1:19:10

invade other countries i think would agree that is good idea

1:19:13

he can't let him talk i let let us discuss

1:19:15

okay for uber okay listen to

1:19:17

the the there's no question that russia has

1:19:19

been the aggressor but the question is why did

1:19:21

they do this you don't really have a theory on

1:19:23

that jason accept that you believe

1:19:25

that on february twenty fourth putin woke

1:19:27

up and went nuts that's basically your

1:19:29

excellent know that's not happening the world

1:19:33

debated , know it's debate region we know

1:19:35

that they've had this conflict for one time i couldn't

1:19:38

be used to hear on the pod many times every

1:19:40

many times from bill clinton

1:19:43

to obama who has dealt with

1:19:45

putin has written largely the same

1:19:47

account of him in

1:19:48

their memoirs which is what they know

1:19:50

that he's a thought they know that he's a dictator however

1:19:52

murder i said they always said he is very

1:19:55

businesslike he's very direct he

1:19:57

told them what their issues were okay

1:20:00

putin was very direct he and

1:20:02

biden how to summer in june

1:20:04

of last year the russians been

1:20:06

very direct your attempt

1:20:08

bring ukraine into nato is a red light

1:20:10

thrusts why it's a violation the

1:20:13

our security interest the idea

1:20:15

of bringing a complete into nato

1:20:17

it has huge security externalities

1:20:19

for them by the way we understand us

1:20:21

another concerts weird assume it's in

1:20:23

concert the cuban missile crisis we don't say

1:20:26

that cuba had the right to join any military

1:20:28

alliance that it shows too because

1:20:31

we can be able to sleep as was at night

1:20:33

if cuba has nukes when

1:20:35

that us with a first likely to don't

1:20:37

we've had this conversation delia stanley know

1:20:39

hundred and rivalry in sweden and finland

1:20:41

be invited internet i

1:20:44

would table addition to the war is over i don't know

1:20:46

why when he said basically duel dot right now

1:20:48

but listen willingness go back to the cuban

1:20:50

missile crisis right now attacks

1:20:52

is country called the solomon islands about

1:20:54

three thousand miles off this really and coast

1:20:57

they entered into deal with china security

1:20:59

deal and the us mint up in arms about

1:21:01

that so you know and the reason

1:21:03

as we don't want china extending it's

1:21:06

footprints in asia

1:21:08

okay so we treat ideal having

1:21:11

security externality for us and

1:21:13

yet we refuse last year to recognize

1:21:16

that there be any security externality russia

1:21:19

if we brought you frame into nato the

1:21:21

russians were abundantly clear about what

1:21:23

they needed so much eyewitnesses or session

1:21:25

or session part yes my point is this that this

1:21:28

war was easily avoidable

1:21:30

through the use diplomacy demonstration

1:21:32

shows your me about you don't know that

1:21:34

you believe that you don't know that you do we don't have to

1:21:36

don't we never tried it just gets worse

1:21:38

than the don't know that she doesn't that

1:21:40

that's worse than that jason because here's what happened

1:21:43

after the june sixteenth summit in

1:21:45

geneva between britain and biden last

1:21:47

year of okay the wouldn't

1:21:49

held by into his face as the red line

1:21:51

as they've always said so what is most

1:21:53

recent do the only do they

1:21:55

not good negotiate with the russians they invited

1:21:57

was key to the white house on september first

1:22:00

of last year we we talk about honestly and then

1:22:02

on nov chance they publish a massive

1:22:04

tend your charter agreement this is

1:22:06

huge for your on the i to the russians it

1:22:09

on heels that number much and charter agreement

1:22:11

russian space delivered an ultimatum to the u

1:22:13

s demanding written guarantee that ukraine

1:22:15

or join nato and then in january blinken

1:22:18

was tasked with negotiating with lavrov and

1:22:20

blinking said there has been no

1:22:22

changes will be no change nato's door

1:22:24

is open will remain open this

1:22:26

administration was incredibly stubborn

1:22:28

they are obsolete refused to use diplomacy

1:22:30

to defuse the crisis are you say

1:22:32

well we can't know what would have done well

1:22:35

but the point is they never tried

1:22:38

the ukraine a sovereign country yeah

1:22:40

they are but didn't mean take what they do

1:22:42

in their face like this idea

1:22:44

that the really gotta pick their faith the

1:22:47

sovereign country and good agree yes well

1:22:50

here's the question is your what you're trying

1:22:52

to do and is is fried a

1:22:54

doctrine okay you're trying create

1:22:56

new doctrine that a

1:22:58

country get such joy and whatever

1:23:00

security alliance they want whatever military

1:23:02

alliance they want that is not adopt we

1:23:04

believe it when it comes to solve an island is

1:23:06

not doctor we believe in with respect to cuban

1:23:09

cuban missile crisis and fact the matter

1:23:11

is is that the nation's the world are engaged

1:23:13

the security competition the re en

1:23:16

if if a country like ukraine

1:23:18

joins a new military alliance that

1:23:20

has use externalities so

1:23:23

we do not believe in a doctor jason the

1:23:25

document does not exist until february

1:23:29

we don't believe more people should be able join nato

1:23:32

lol sweden island or really believe that but

1:23:35

this does doctrine that the countries that was

1:23:37

real to joy whatever military alliance they want

1:23:39

that is nodded that is not we

1:23:41

do not practice that doctrine that

1:23:43

monitoring the arena cuba you

1:23:46

buy the more recently the solomon islands okay

1:23:48

yeah i mean listen i i'm not

1:23:50

saying this more he does not a mess hall

1:23:52

worse tend to be a mess i'm not saying we should

1:23:54

try to resolve it with everything we have

1:23:56

i do think the people of the ukraine and youtube

1:23:58

get to pick their fate

1:24:00

and i am in supply what am i going to relay

1:24:02

i'm in support of the of nato

1:24:04

being stronger and stronger and i'm favor

1:24:06

of isolating poodle you

1:24:08

when using diplomacy as the primary tactic

1:24:10

the do that and make

1:24:13

sure it has one on one hundred as you would stop at

1:24:15

one i think that's the the big question

1:24:17

i think is really stop at one do think he'll stop

1:24:19

at one country wasn't it

1:24:21

has proven he won't is you know what my

1:24:23

new are you okay with stopping him

1:24:25

listen if you you just said that you

1:24:27

want use nick diplomacy is primary

1:24:29

tactic of are so we can we agree on that the

1:24:31

question is what you're going to give up because

1:24:33

ministration was not willing to engage

1:24:35

on the key russians insert which is the

1:24:37

admission money as yours refrain it's

1:24:39

native do you think russia will stop

1:24:41

with ukraine where or donbass didn't

1:24:44

got back to the southern boy for

1:24:46

listen i think as few ways to come out that question

1:24:48

one is to ask what is a motivation which is

1:24:50

very hard to notice the since i tunes had

1:24:52

a guy said the second is whether

1:24:54

interests and the third is one of their capabilities

1:24:57

the get all these questions pretty easy

1:24:59

answer mean they about a very

1:25:01

hard time winning this war they've

1:25:03

won this issue region of the donbass

1:25:06

because i think doing so why

1:25:08

did have hard time what

1:25:10

because the lord your capabilities are obviously not as

1:25:12

great as people thought and then nato's

1:25:14

ukraine got a lot of weapons from

1:25:17

the west from for nader exactly so this idea

1:25:19

listen there before the

1:25:21

years gdp is ten

1:25:24

times greater then

1:25:26

russia's an ear economic

1:25:28

strength is the foundation for motors strength moreover

1:25:30

we see that these nato weapons are incredible

1:25:33

the us is watery i mean

1:25:35

it's see or in support of provided weapons to ukraine

1:25:38

nato

1:25:39

you the european country i'm

1:25:41

not as evil as creating a forever war

1:25:44

in eastern europe dot is none none of us are

1:25:46

in heart knowing what the question is jason

1:25:49

you just said that we have to isolate prudence

1:25:51

we have to deprive him of any

1:25:53

the any positive outcome from this war none

1:25:56

an honor to stop them from reading countries

1:25:59

that what we offer

1:26:00

the baby more countries that the organ and i admit

1:26:02

his i going to a nato countries because he so our

1:26:04

map will not nato but mean there's lot of success

1:26:06

or not and you know so i mean think that's the thing

1:26:08

but mean that's we discuss this million times zero think

1:26:10

both agree want the word and

1:26:12

think we might get question is why are you

1:26:14

always due to end the war and

1:26:17

you know my point is this that the demand

1:26:19

is what is food and will hinted so in terms of

1:26:21

starting wars invading other countries and what does the

1:26:23

west have to do to react the i

1:26:25

think that's what we're talking about here

1:26:27

we didn't start this war you know but anyway let's

1:26:29

move on either get bored well as a when

1:26:31

i started this war but we felt for van it

1:26:33

through use diplomacy that's always have my point

1:26:36

yeah i think before should be an early draft

1:26:39

i think this war was easily preventable if

1:26:41

we had listened and against his ability to say

1:26:43

easily yes okay i got had

1:26:45

i'm not sure that's what

1:26:47

right now the deal that would endless war is

1:26:49

the same deal that was on table last

1:26:51

year the euro bloodshed which

1:26:54

is you problem is unusual state there's

1:26:56

autonomy for russian speakers in

1:26:58

the donbass and for me up they

1:27:01

sleep remains part of russia that was

1:27:03

the deal that is the deal that will be the deal

1:27:05

the only question is does

1:27:08

whole country free destroyed or right well we're

1:27:10

going to find out in the coming months

1:27:12

and the world have to go through a global

1:27:14

recession salmon is big questions

1:27:17

yeah it's not the not the it takes

1:27:19

to stand up to dictators is very significant

1:27:21

that's

1:27:22

what she wanted nuclear bombs that it will be even worse

1:27:25

which i want i mean if we think that this

1:27:27

is difficult can you imagine

1:27:29

this kind of escalation with a capable the

1:27:31

adversary if russia is not super capable

1:27:34

no weapons turned out to not be a strong my

1:27:36

god what would taiwan look like that's

1:27:38

read the story where the

1:27:40

was the deputy foreign minister got

1:27:43

demoted then he was

1:27:45

all this

1:27:47

speculation like why did he get demoted

1:27:49

and one of the things i

1:27:51

came out was that know

1:27:54

he would very very pro russia and

1:27:56

the he is not do

1:27:59

you not and it is much more hedged

1:28:01

and moderate and

1:28:03

you know wanted have more optionality insult

1:28:05

that he was corner because i think there was some some

1:28:07

of those the quote mean that you can pull that was something

1:28:09

about you know the

1:28:11

the strength between basically china

1:28:13

russia infinite that was a

1:28:15

dumb as a code that he said that was little bit off the

1:28:17

reservation seems and so understand

1:28:19

our defense them down

1:28:22

i didn't important story as well i'm in

1:28:24

a in is one of things that we can look

1:28:26

at what's happening these political situations i think we

1:28:28

probably have fifty sixty seventy percent of the

1:28:30

information not even know really

1:28:33

quick tell us what's going on in alpha fold

1:28:35

world sultan so there was paper published

1:28:37

about two weeks ago in journal science

1:28:39

has it's actually i'm an

1:28:41

important paper because it used

1:28:43

alpha fault

1:28:45

to do some really important work and the work

1:28:47

is to actually create read

1:28:51

these structure three model

1:28:53

the nuclear poor complex

1:28:55

and that nuclear for complex is

1:28:57

really the scaffolding

1:29:00

that makes up the nucleus of

1:29:02

a south so all you karaoke

1:29:04

all plants and animals have a nucleus

1:29:07

in ourselves and the nucleus holds

1:29:09

the dna

1:29:10

the big question for never learned it

1:29:12

action is getting bored specific

1:29:15

so got a

1:29:17

, six hours after celebrity

1:29:19

sunset is simply no you're

1:29:22

fine keep up the users would have your martell

1:29:24

and have your mix has was so boring was so godzilla

1:29:26

to go

1:29:28

the what it is mean in terms of what

1:29:30

pulled are so i'm so what

1:29:32

is t there and mrs of of the

1:29:34

the problem that's kind of been

1:29:36

around for decades

1:29:38

we've never really understood what's

1:29:40

the physical structure of the nucleus

1:29:42

in cell look fight and this is important

1:29:44

because the physical structure regulates

1:29:47

how molecules get into and out the

1:29:49

nucleus and how dna is expressed

1:29:52

how the irony that comes out the dna goes

1:29:54

into the rest the cell it's regulates

1:29:56

so much of human health in fact it's been shown

1:29:58

demonstrated that this function

1:30:01

in

1:30:02

a nuclear ports are out that the nuclear

1:30:04

for complex and cell

1:30:06

the can lead to things like viral infection

1:30:08

brain injuries cancers

1:30:11

cardiovascular disease many

1:30:13

diseases their their underlying driver

1:30:15

may result from dysfunction

1:30:18

in transmission of molecules into

1:30:20

and out of the nucleus of south authorities

1:30:23

have always had to figure out what is that transport

1:30:26

mechanism look like what that infrastructure

1:30:28

what life so

1:30:31

for the first time and scientists

1:30:33

have published series on earth and they've shown

1:30:35

using x rays image game

1:30:37

you know some theory around what these

1:30:39

complex as look like arm

1:30:42

and what this team at harvard there as

1:30:44

a public two weeks ago is really

1:30:46

groundbreaking extremely

1:30:48

detailed view of the entire

1:30:50

nuclear com a nuclear for complex

1:30:52

around nucleus of the sell by

1:30:54

combining both x ray

1:30:57

images and also fault as

1:30:59

what they did as they suck the predicted physical

1:31:02

structure of those proteins from

1:31:04

alcohol i knew that to

1:31:06

construct sample of

1:31:08

what the if you know the nuclear for complex was

1:31:10

how did know it's accurate the

1:31:12

using this x ray imaging they've been able to kind

1:31:14

of verify some of the assumption saw

1:31:16

alpha fold yields and now they've created

1:31:18

three the model and it's really models

1:31:21

now gives and by the way to think about this

1:31:23

physically what it means like for a second the

1:31:26

nuclear for complex think about is like

1:31:28

sense like a spiritual sense

1:31:30

that sits around nucleus some

1:31:32

parts of the fence open and closed some

1:31:34

parts static and away the

1:31:36

certain things often include and what can fit

1:31:38

through them and how they sit through and half of that stuff

1:31:41

is really important to understand as a way

1:31:43

to both the understand the underlying

1:31:46

causes diseases like cancer also

1:31:48

how we could create therapeutics and how we can

1:31:50

target specific things that we can six

1:31:53

and housing get molecules into the

1:31:55

nucleus of self to regulate

1:31:57

dna express in and edit the dna inside

1:31:59

awesome and

1:32:00

sweet if i would translate this hundred

1:32:02

basically household predicted

1:32:05

know i'm being sincere there's map

1:32:07

here that we were not able to

1:32:09

see through x rays and through you know

1:32:11

physics physics the

1:32:13

alphabet predicted some of that instilled in the

1:32:15

gaps so now we have the masses been

1:32:17

idea of that's great access a great way describe

1:32:19

it as so now we have this incredibly

1:32:21

detail three be image and and they consider

1:32:24

the images on are heated

1:32:26

three year of what nuclear for

1:32:28

complex looks like and how each of those poor

1:32:30

worth how do they open and close what's

1:32:32

the structure of them this isn't simply like

1:32:34

a circle this is like all these weird

1:32:36

tentacles and little things sitting out

1:32:39

and that can help us predict what molecules get

1:32:41

stuck and how one error

1:32:43

in one of those proteins can cause things get

1:32:45

i only like on cancer or something like that

1:32:48

our power to cause their dna to be over

1:32:50

express are under express causing things

1:32:52

like cancer we're gonna live forever

1:32:54

a whole new area of research in

1:32:56

medicine gene therapy

1:32:58

and new things that we can think about targeting

1:33:01

to fix a lot of the thunder like diseases and

1:33:03

so this was groundbreaking paper incredible

1:33:05

the name of the paper harvard can we just get the name of the papers

1:33:07

of people can google it will put it in show notes as well

1:33:10

that amazing as far as a yes

1:33:12

the team out of harvard will send link

1:33:14

them in so no structure of cytoplasmic

1:33:16

ring of nuclear put up like by integrate

1:33:18

of cryo he of alpha folds a

1:33:20

terrible naming north as general audience

1:33:23

not sitting in iraq right

1:33:25

now and he's going use it for his

1:33:27

tits his a new kitten from the but didn't want to highlight

1:33:29

you know could we talked about alpha full of i think last

1:33:31

year the year before know how was gonna

1:33:34

open up all these new areas of rain here we are

1:33:36

a year later credible example of how

1:33:38

possible

1:33:40

all but will admit understood of

1:33:42

never really well understood that

1:33:44

the biology that is that the root

1:33:46

causes so much of disease and create all this

1:33:48

opportunity for medicine therapeutic research

1:33:51

and discovery or august and then it's

1:33:53

great it's great see with breaker saarinen gets

1:33:55

into twenty six or

1:33:57

robbie way will get to that next episode and know

1:33:59

the know medicine as robbie wait i'm not

1:34:01

sure there's

1:34:02

mean much to do something about the reactions but we

1:34:04

did a pretty thorough episode folks really

1:34:06

want us to double click we double click with

1:34:08

to of the most of jonathan our constitutional

1:34:11

experts in space when it first

1:34:13

got leaked so please go and watch yeah we're

1:34:15

looking at it that are at the which episode

1:34:17

that number dunno which will put it the show

1:34:19

nuts it'll be the shown us for everybody and will see

1:34:21

you all next time bye bye bye

1:34:24

bye love you so

1:34:35

source

1:34:52

the one

1:34:55

if you join a

1:34:58

gym and yeah