All-In PodcastAI Sovereignty Wars, Palantir-Nvidia Deal, SCOTUS Birthright Ruling, Newsom’s CA Budget Lie
EVERY SPOKEN WORD
100 min read · 20,372 words- 0:00 – 0:21
Bestie intros: Happy Fourth of July!
- JCJason Calacanis
All right, everybody, welcome back to the number one podcast in the world. It's your favorite podcast. It's your podcaster's favorite podcast. It's The All-In Podcast, episode 279, with me, Friedberg, Sacks, Chamath, you know the, the squad. You know the squad. We're here. It's the summer, and we're ready to rock and roll. We got a power docket. We got a rocket
- 0:21 – 33:52
Palantir-Nvidia open source deal, Alex Karp's CNBC "Crashout"
- JCJason Calacanis
docket. Palantir and Nvidia have announced a sovereign AI partnership. Where have we heard that term before? Palantir is gonna use Nvidia's Nemotron, Nemotron, like the Pixar film, open models to build a custom frontier quality model to serve the US government. Palantir is calling this new platform Sovereign AI Operating System. The US government agencies will own the hardware, the data, and the model weights. Palantir also shared a viral tweet manifesto laying out the concept, "Data retention is your treasure. Transfer it at your own peril. Transferring that data hands over access to your preexisting winning plays and yields the means of production for new ones." CEO Alex Karp went on CNBC to announce the partnership in a classic Karp Robin Williams-style monologue. Here's a clip from his 20-minute interview where he af- wh- where he basically went after the frontier models like Anthropic. Play the clip.
- SPSpeaker
Our clients are just, to say they're unhappy with the frontier labs is to say I'm welcome at the Berkeley faculty. It's like there's just a level of discomfort and loss of trust. Sam and, and, and Dario, D- you-- There's nothing more fun than debating Dario in private, so this is, I'm not throwing shade at them.
- JCJason Calacanis
Okay.
- SPSpeaker
But something has gone completely wrong, and the basic view among enterprises-
- JCJason Calacanis
Right
- SPSpeaker
... in this country is I'm gonna chillax, uh, and waste my time with tokens. I'm gonna get no value, and they're gonna get my IP. When the D, uh, Department of War goes to you and says, "I need this application," do they get to control the weights to do it or do you get to control the weights? Are we really gonna outsource the battlefield of this country to the consensus view in Silicon Valley? That is effing insane.
- JCJason Calacanis
All right, and so some folks, uh, refer to this as a televised nervous breakdown. We here at All-In call that Alex Karp on a Tuesday. And we talked about this, Chamath, uh, Sacks, Friedberg. We talked about this a whole bunch back in February. I coined the term intelligence sovereignty here. Here's your victory fap. Do I wanna give all of the secrets in our organization, every piece of intellectual property, to Sam Altman, who's gotta make a billion dollars a year to keep up with his spend, right? He's going to build every application. I've been talking about AI sovereignty here for a bit-
- SPSpeaker
Hmm
- JCJason Calacanis
... just in terms of how much more cost-effective it is and how you're not training other people's AIs with your knowledge and your insights. This is why it's super important that open source, open source agents, and local hardware be able to run these models and that consumers and companies learn how to roll their own language models. The intelligence sovereignty is different than privacy. Privacy is, "Oh, you can't see my photos. You can't peek into my Notes app and what I wrote there in my journal." Intelligence sovereignty is you can't tell me what to think.
- SPSpeaker
Hmm.
- JCJason Calacanis
You can't use your AI to analyze my photos, to analyze my emails, to analyze my messages, and tell me how to interpret the world. That's actually gonna be the next key piece here. All right, and, uh, Sacks, you are in your long post era. Another long post this week from you on this very topic, and obviously as, uh, AI tsar there for the first half of the Trump administration, you, uh, have been very involved and very close to this. I would love to hear inside, I would love to hear your take on this and your long post, over 300 words. You can follow x.com/davidsacks. But also, like, the palace intrigue here a- and what this means in terms of the relationship with the government, which we're gonna get into in our second story.
- DSDavid Sacks
Well, look, J Cal, I gotta give you some credit there. The first part of your take was spot on. After that, it was kind of diminishing returns. I'm not sure why we had to listen to the next 30 seconds of it.
- JCJason Calacanis
[laughs]
- DSDavid Sacks
But anyway, uh, it started off-
- JCJason Calacanis
Friends like these
- DSDavid Sacks
... it started off really strong, but let's go back to the supposed crash-out by Karp on CNBC. It was nothing of the sort. It was all these legacy media types making that claim, and that's the first clue that he's actually saying something insightful and maybe kind of brilliant. And I think the thing that he said that I hadn't really thought about in quite those terms is he started talking about AI safety in the enterprise and what that really looks like. And what he said is that what technical customers want is control over their compute, their models, their data stack, and their alpha, meaning their proprietary knowledge. They wanna know they own the means of production, he said, and it's not being transferred to someone else. And what he's referring to there is that these enterprises are at risk of transferring their knowledge, their know-how, their trade secrets, their customer data to these model providers who might eventually decide to compete with them, like you said, J Cal. And you can see that enterprises are waking up to this threat, and they're not happy about it, and I think Karp is exactly right about that. Now, I think this is a really interesting take on AI safety, because what safety means for an enterprise is, again, that they get to control their own data, their model weights, their compute, so a frontier lab can't hoover up their proprietary knowledge, their alpha, and turn it into their next product. And if you don't think that can happen, just look at what happened to Figma. So according to the information, Anthropic, quote-unquote, "blindsided" its then business partner with the launch of Claude Design. So this was a new vertical app that Anthropic launched to compete in the design category. And Figma's founder said that Anthropic had not been completely honest with them. Anthropic's chief product officer had actually even served on Figma's board and didn't resign until three days before the launch of Claude Design. So obviously, Figma again felt blindsided by this, and you can see the resulting impact on their stock price. Figma's stock has fallen something like fifty percent this year, while Anthropic's valuation has surged. This is not an isolated example. Anthropic has also launched Claude Science, Claude Security, Claude Legal, Claude Financial, and of course, Claude Code. And every single one of these vertical apps expanded into categories that was previously served by companies building on top of Anthropic's own models. And really, if you wanna go back to when Anthropic's revenue explosion began, it was with the launch of Claude Code. And how did they know to launch that product? 'Cause they saw that Cursor was doing extremely well. Cursor was one of their biggest customers. They created the coding assistant first. They created that category, and Anthropic said, "Oh, like, why don't we vertically integrate?" So in other words, they're watching where the value is being created on top of their models, then they're moving in directly. And this is a formula that I think is very Microsoft-like. You could say it's very Google-like. They wanna dominate the model layer, you could call that the operating system, and then use that position, that monopolistic position, to capture the most lucrative verticals. So if you wanna think about, like, the Microsoft example, they had the Windows monopoly, and then systematically they went and dominated every lucrative category of business software. It started with spreadsheets and word processing, and then eventually it went to the browser, so forth and so on. If you wanna look at Google, they basically had a monopoly or dominant position in search, and if you go back to the early days of Google, the search results kicked you off-site. And in fact, they really prided themselves on how quickly they could send you off-site. But gradually over time, they used that traffic to tell themselves where to build properties, and today, fewer than half of searches kick you off-site. You stay on Google properties. And I think something similar is happening with Anthropic here. The pattern is clear. They are gonna use their dominant position in the model to then grab more and more territory in any interesting and lucrative vertical. So again, back to Alex Karp's point, if you're an enterprise customer or a developer, why in the world would you ever wanna share any proprietary data with them? You are mortgaging your future, you're sealing your fate. You are gonna lead to disaster for your company. Just one last point and then I'll turn it over to J Cal, is that Dario, at the same time that they pursue this business strategy, has been arguing that open source models are dangerous and need to be restricted. Well, dangerous to whom? Not to enterprises that want to retain control over their data. It's dangerous to his business model because-
- JCJason Calacanis
And his shareholders, yeah
- DSDavid Sacks
... his business model requires that customers don't have a lot of choice at the model layer. And, and what Karp is pointing out here is that if you wanna have true AI safety as an enterprise, you have to retain the ability to choose at the model layer who gets to see and use your alpha.
- JCJason Calacanis
Yeah, this is, uh, well said. I think you, you, you picked that carcass to the bone a bit. But Chamath, you're actually doing specific examples of this, uh, at eighty ninety. You've been testing, uh, some of the open source models. I saw you share that on Twitter/X. So maybe you could give us a little feedback on what you've learned as, uh, the CEO of eighty ninety and, you know, your firsthand experience now with using open source for the first time in the last couple weeks for this specific use case in enterprises.
- CPChamath Palihapitiya
When you start a company, I mean, you guys all know this, you're not starting it for the moment that exists today. You're almost s- sort of trying to forecast if such and such a set of things happen, then here is the scene that, that gets created because it takes time to build something and it takes time to get enough reps to know what you're doing and your go to market. This, for me, was the moment that I thought would arrive, which is the point where everybody wakes up and realizes, "Wait, hold on a second. Two things are true. The first is that my business is complicated. I want AI to be able to accelerate it, but I want to be able to protect myself in doing so. And then the second is I want the flexibility where there's an independent third-party control plane that I use to get all these benefits so that I don't leak and cede my advantages away." And I think Alex is an incredible, smart, brilliant guy, and he completely nailed it, and I think he called out on its face the huge risk of this. So let me just give you this narrative in three tweets. The first one is, I read this really interesting study from BCG, and what they looked at was the return on capital employed, or ROCE, of various businesses. And this is what's incredible. The cost of capital has now, with long-term rates, moved back to what its long run average is, which is around eight to eleven percent. What that means is, like, that is the actual cost that you would borrow money at effectively. The problem is that half of large US companies now cannot deliver returns that exceed that. That is a really big problem. And then second, there's a further problem, which is that persistently low returns, so in the, you know, one, two, three, four, five percent, is about one in seven companies all around the world. Okay, so why is this important to note? It means that being in business is complicated. It's hard. Not everything works all the time. There's a bunch of underperforming businesses. There's a bunch of underperforming segments. So in that lens, when you, you know, think about what Sac said, which is you have this company that comes to you and says, "I have a magic box, and all you have to do is tell me everything you're doing, and this magic box will make everything better." But then all of a sudden, from the shadows, the magic box says, "You know what? I've decided to compete with you." That is a huge risk. And now that you've seen enough examples of it, I think you have to figure out a different way to do it. So then you go to the next tweet that I saw, which I thought was interesting, and this is a woman who's an ex Meta PM. And what she essentially says is like, "Hey, hold on a second. There is this assumption that you can't use an open source model because it's all Chinese." And what she says was, "Well, even if it's a hundred X cheaper?" And their response is, "No, 'cause we care about safety and security." And her perspective is, "Don't you understand that you can actually host open source models with your own GPUs in US data centers that doesn't share any data back to anybody? And instead, what you're accidentally or purposefully doing is giving away all your data to a couple of frontier labs rather than owning it privately yourself." And a hundred X, it turns out, is a really big number to pay to do all of that by accident. And that's what Alex Karp is saying. He's like, "Why would anybody do this when there are alternatives?" And so the third post that I'll talk about is something that we did. So we took our software factory, which is an agnostic third party control plane, and we just wanted to see, and we ran it on a very typical enterprise task, which is you have an old piece of code, you wanna migrate it, and you wanna maintain it in a new framework so that it's easier and more flexible. Pretty straightforward task. And so we ran it, and we ran an experiment where we did Claude by itself, then we did us plus Claude, and then we ran it on the best frontier open source model, and then us plus that model, and the data's crazy. So when you use our harness with Claude, it was simultaneously one point four x cheaper and one point five x faster than just using Anthropic Opus four eight alone. But if you wrap the open source model with our software factory, it was sixteen point four x cheaper. Now, it was three times slower, but, you know, you're talking about a couple of extra hours to save sixteen point four x. So-
- JCJason Calacanis
On that one, the slowness, Chamath, is that slowness because of the hardware being served up by Claude, or is it the software layer?
- CPChamath Palihapitiya
This is all using Open Rudder. No, this was all using Open Rudder-
- JCJason Calacanis
Okay
- CPChamath Palihapitiya
... on a very traditional hardware stack. So look, I think the reality is could that be optimized even further? Absolutely. But my, my point is, if you take Sacks' points, and then if you take Alex Karp's point and just this actual data, there is a very legitimate question, which is, If you are a reasonable company, why are you not finding an independent way to access this intelligence in a way that doesn't leak your edge away? To do so at this point now is kind of becoming derelict and irresponsible. Back then, you could be experimenting 'cause you didn't know any better. But now, when you know all of these data points, to continue to make the same decision, I think is really insanely dumb.
- JCJason Calacanis
All right, Dave Friedberg, you are also a CEO of the surging Ohalo, and you have a lot of proprietary data. Let me ask you point-blank, do you trust your data to the frontier model companies, or are you doing what there seems to be consensus here, protecting your data, protecting the crown jewels, so to speak, and using open source? Are you experimenting with it? And just yes or no, do you trust the frontier models with Ohalo's data?
- DFDavid Friedberg
So I'll tell you, there's been an effort by Anthropic to go around and sign up life sciences companies to contributing to a new life sciences-focused model. That effort has been they're approaching these large companies with large proprietary datasets and saying, "Hey, if you share your data, we will give you early access, some sort of proprietary value, sign this NDA, and you can participate with us." And I think nearly everyone I've spoken with has woken up to the fact that they are basically trying to commoditize everyone's business. 'Cause fundamentally, if all of the tens of billions of dollars you as a life sciences company have invested in experiments and product development, and you've generated all of this proprietary data along the way, that data is a true asset of your organization. It's an asset that you've spent billions of dollars developing. And by handing it over to a model company to then combine with other people's data, you are effectively commoditizing the asset that you have, the one kind of core differentiation that you have. And so everyone is largely saying no. The way I see this evolving is very much in line with what Alex Karp suggested on CNBC. If you go back a couple of years, I think we all assumed there was going to be this large hub, large spoke model for AI model development and deployment, meaning there would be these very large clusters. These large clusters would be ultimately capital advantaged, so those who had the most capital, which is why everyone's raised tens and hundreds of billions of dollars, would be able to train models. And then there would be these large spokes, these large clusters for deploying those models with inference. So everyone's using the Neoclouds and the hyperscalers and whatnot to run models. And then maybe they've got their own proprietary data layer that sits in front of that. But I think what everyone's realizing is they're better off developing their own weights and their own models using either an open source basis, or there might be some intermediary business model that evolves, meaning there will end up being several large hubs that do all of the core foundational model development. Then smaller hubs, meaning like clusters for training, that enterprises will use to train and develop their own proprietary advantaged models using their own data. And then there will be these much more distributed spokes, because I think everyone's also realizing the value of on-prem. By putting a set of servers and building a cluster in your own data center or even in your own enterprise, you know, IT closet, you can run a lot of the workflows that you're using AI for for your enterprise locally. And so I think the model is shifting where we're going from large hubs, large spokes, to large hubs, medium hubs, and then a distributed spoke model where there will still be, you know, neo clouds and hyperscalers that are being used for inference, but people will also have their own inference instances that they're gonna run for their own enterprise setting. And everyone I think is walking this path, and they're gonna walk this path over the next couple of months because they're realizing quite quickly that in order to compete in a world of commoditizing knowledge and commoditizing capabilities, you have to leverage the core differentiating assets that you have, which means you have to build your own models, and you will likely end up having to run your own inference with your own proprietary models.
- JCJason Calacanis
Yeah. And to just give a, a little bit of, uh, texture to how that's gonna look, if you follow the Microsoft example, which we've talked about here before, Lotus 1-2-3, Word Perfect were their partners. They were replaced with Excel. They were replaced [chuckles] obviously with Microsoft Word. You don't even know those other two, Word Perfect, Word Star, Lotus 1-2-3, VisiCalc. That's exactly what they have to do, and they have no choice but to do that now because they have a trillion-dollar market cap. They must win the application layer. And Sam Altman went to Y Combinator, and he said, "We'll give you two million dollars worth of free tokens." And I came out and I said, "Listen, this is n- nothing personal against Sam." Uh, you know, Sam's a very aggressive deal maker, and he wants to get access to those startups 'cause he knows having run Y Combinator, that if he can get their innovations, those founders' latest thoughts about what's around the corner, he can incorporate them into the platform. There is no free pizza. There's no free beer. When somebody like Sam Altman comes to you and says, "Here are some free tokens," your alarm should go up. Zuckerberg did the same thing. He said, "Hey, I'm gonna give people a bunch of access, gonna give them money. Come to the Facebook platform." Nobody who went to bed with Microsoft in the '80s, Facebook in the 2000s, or Sam Altman now in, in the 2020s did not wake up with their throat slit. This is a message to founders. If you partner with any of these people, they will slit your throat and take your business wholesale. There is nothing to discuss here. Don't trust them. Use your own models. Period. Full stop.
- CPChamath Palihapitiya
I don't think, I, I think, I think it's less Sam and OpenAI, to be honest. I think that the diversity of OpenAI in terms of its revenue streams and specifically its consumer business may actually be its savior. In a relative value basis right now, OpenAI equity, I think, is more reasonably priced than Anthropic equity, and the reason is not because of the quality of the models or the teams, because they're both excellent teams, but the reason is that OpenAI can fall back on a really healthy consumer business.
- JCJason Calacanis
Sure.
- CPChamath Palihapitiya
The difficulty that Anthropic is gonna face is that I think what Sac said is true, that they have lost this fundamental trust about being able to stay within their sandbox, and if you consistently demonstrate this tendency to learn and then to try to disrupt your host organism, eventually you get sort of pigeonholed and you get cornered, and people find ways to work around it. And so look, I sent that text that I had about the, or that post that I had about, uh, our testing of, of our harness on these Chinese models to somebody well-known in the industry, and he says, "Look, if you also add some post-training with all of the telemetry that you're gonna get from the harness itself," he's like, "I suspect you'll find that it gets as good as Mythos." And, and I thought, "Well, if that's true, then why don't I just take GLN, control it entirely soup to nuts on my own hardware inside of the United States with only US citizens that can touch it?" It just seems like the brain-dead obvious thing to do, and it's much, much cheaper.
- 33:52 – 50:24
Update on the AI jobs debate
- DFDavid Friedberg
this reveals quite clearly is that there is no buttered, slippery slide to job loss. I think everyone is realizing-
- CPChamath Palihapitiya
[laughs]
- DFDavid Friedberg
... that, you know, you're not just-
- JCJason Calacanis
I was wondering where you were going with that buttering it up.
- DFDavid Friedberg
Yeah.
- JCJason Calacanis
So is Chamath.
- DFDavid Friedberg
But I think, you know, the idea that everyone had in their head two years ago, the narrative that was formed and everyone clutched onto, and by the way, you will not see the media reverse on this narrative. I've realized the-
- CPChamath Palihapitiya
Oh, the media
- DFDavid Friedberg
... importance [laughs] when the, when-
- CPChamath Palihapitiya
The media
- DFDavid Friedberg
... if you're a reporter or you're a journalist and you come up with some story that says something that's happening or is going to happen or has happened or is about the future, you destroy your own credibility if the narrative shifts. You cannot ever let go of the narrative. And I think this is one of the things that, that we can kind of acknowledge is going on with this job loss narrative problem, is that even as all the data comes out, as all of the reconfiguring of how enterprises are using AI, as it's revealing to all of them that they're actually not just gonna cut costs, but they're gonna grow revenue, and it's gonna be a kind of clunky way of getting there, and it's not gonna happen overnight. It's not this slippery slope to job loss, to nihilism. Everyone's gonna kind of wake up and be like, "Wait, this reality that we all thought we were living in is not really the reality that we are living in." We're living in a reality where AI is clunky. It takes some putting together. It's a little more complicated than we thought. It's definitely gonna deliver value, but it's not about just turning off all the jobs and letting the genius AI solve all my enterprise problems and scale me into infinity without humans. And I think that that's a big kind of narrative shift, and you will not see the media accept that their narrative is wrong. Because as soon as they have to acknowledge that they were wrong in what they were saying about job loss, and all the other senators and people that are proclaiming job loss, job loss, job loss... By the way, the reason they're making that proclamation is so that they can step in and control AI, and they can drive their systems of socialism-
- CPChamath Palihapitiya
Totally
- DFDavid Friedberg
... which is what they're all looking to deploy.
- JCJason Calacanis
Yeah, 100%.
- CPChamath Palihapitiya
Totally.
- DFDavid Friedberg
But if they had to come in and say, "Look, the data doesn't map to the narrative," their credibility is destroyed. So they'll double down on it, and they'll double down on it, and I'm telling everyone that's listening, look at the [beep] data. There is no job loss with AI. It is an absolute scam to tell the world that AI is taking away jobs and destroying jobs and the world is shifting. It is clunky. It is valuable. It is going to take some time, and it is gonna create far more jobs than it is destroying.
- CPChamath Palihapitiya
Totally agree.
- JCJason Calacanis
We're a bunch of monkeys. We've been given this new tool. We're gonna solve more problems with the new tool. There will be job displacement, and the problem is people do not understand the nuance between these two terms. Certain jobs will be retired, and they're gonna be retired at a faster rate than you can imagine. But other jobs will happen, and you pointed this out, Chamath. Hey, it's the, it's the most, I don't know if you did it here or on your personal channel on YouTube, but, you know, it's the most empowering tool ever. If you get caught coding-
- DFDavid Friedberg
Jason, what jobs are getting replaced?
- JCJason Calacanis
I'm just gonna challenge your narrative
- DFDavid Friedberg
I said displaced, displaced.
- JCJason Calacanis
Very s- very simple.
- DFDavid Friedberg
Yeah, displaced.
- JCJason Calacanis
Absolutely.
- DFDavid Friedberg
But you're saying some of them are gonna go away faster than you can see.
- JCJason Calacanis
Absolutely, I-
- DFDavid Friedberg
What, what are those jobs that are gonna go away faster than you can see?
- JCJason Calacanis
Yeah, I've said it here.
- DFDavid Friedberg
'Cause I'm just-
- JCJason Calacanis
Cu- customer-
- 50:24 – 59:06
Anthropic's Fable 5 available after export restrictions lifted
- JCJason Calacanis
In a related story, by Commandant Howard Lutnick's decree, subject Dario Amodei will be permitted to bring his powerful new model, Fable 5, to market for the glory of the realm and at the pleasure of His Majesty, Lord Trump. Remember two weeks ago, the US government put export restrictions on Fable and Mythos and the Iliad and the Odyssey and whatever else they're doing over there at Anthropic, and Anthropic expanded Mythos, uh, to 50 unauthorized entities according to sources. That included SK Telecom, which allegedly perhaps maybe has li- ties to China. On June 30th, Howie in the Commerce Department, that's my guy, Howard Lutnick, my favorite in the administration, no disrespect to you, Sacks, um, he lifted controls on Fable 5. Mythos 5 was restored to US customers this past week, June 26th. Many suspected this would happen because Anthropic replaced Dario as their lead negotiator. Here's the palace intrigue I was referencing earlier. Co-founder Tom Brown, whoever that is, took the spot, and appears to be getting along better with the Trump organization. For example, he proactively genuflected, showed the tweet to Lutnick's tweet announcing the export restricting, restrictions had been lifted. Tom Brown: "Thanks for your partnership on this, Secretary." Explanation point. Look at that smile. Tom Brown coming in to save the day. In a postmortem blog post, Anthropic said the jailbreak that triggered the shutdown was not unique to Claude. Remember Andy Jassy reported to the Commerce Department what was going on with this. Okay, Sacks, former AI tsar, what's going on? Give us the palace intrigue, please.
- DSDavid Sacks
Well, look, the export control letter was taken down after two weeks. I think that this was a highly unusual circumstance, and it was brought about by three things, three conditions, and you really needed all three in order for this to happen. Number one, you had Dario running around for months saying that he had created a cyber weapon. He almost boasted about it. It was Mythos, okay? So that was number one. Number two is you have a trusted partner of Anthropic, which is Amazon, which did its testing of Fable, which was Mythos with guardrails, and they reported that the guardrails failed, so therefore Fable was, according to Dario, a cyber weapon. So that was important fact number two. And then fact number three is that when confronted with this information, Dario basically refused to roll back Fable until the jailbreak could be fixed, or at least that's what he communicated to the administration, and that's what the administration heard. So I think if you change any one of those three facts, this would've ended up not causing the government to basically send that, that letter to Anthropic. I think if Dario hadn't primed officials to see Mythos as a cyber weapon, it wouldn't have happened. If their trusted partner Amazon hadn't reported the jailbreak, it wouldn't have happened. And if Dario hadn't refused to take action when he did, then this wouldn't have happened. I think this was sort of a unique circumstance. I guess what I'm trying to say is that a lot of people are reading a lot into this letter. I know that foreign companies or foreign actors or allies and partners of the US are wondering, "Does this mean that our ability to access US technologies can be limited?" I don't think it does. I think that the administration reacted with the tools at its disposal, and I think that what the president cares about is what he's always said, which is he wants to be pro-innovation, he wants to be pro-export, he wants to be pro-infrastructure. He wants to support American companies in the AI race, and I don't think people should over-extrapolate based on what just happened over the past few weeks. I think it was-
- JCJason Calacanis
Let me ask you a, a-
- DSDavid Sacks
... highly particular to this fact pattern
- JCJason Calacanis
... we, a lot of discussion of exports. Let's talk about imports for a reason. It seems to me that importing Chinese models when we in fact have open source models here from Nvidia and other players, why have you not, or in your, during your time, did you not advise or talk about here blocking access to import? We will not allow the importation of Huawei products into the United States or self-driving technology from China. Why are we allowing open source models? Why don't we put out an edict, and why didn't you suggest that when you were the tsar of AI? Why didn't we stop Kimi and DeepSeek from coming into this country in order to drive our open source technology and to keep the leakage from those models, Sacks?
- DSDavid Sacks
Well, a few things. Number one-
- JCJason Calacanis
And is that a concern of yours?
- DSDavid Sacks
Well, number one is that once a model is open sourced, it stops being Chinese in a way, right? Because you can now take that model, you can fork it, you can create your own version. You run it in an American data center on your own hardware. There's no packets going back to China. There's no data leakage going back to China. In some sense, they've made a contribution to the open source community. And then people can take it from there. Now, should you still exercise caution? Absolutely, because you have to make sure that the model is safe, it doesn't contain back doors. I mean, this is a relatively new surface area for cybersecurity. So look, you should obviously be cautious, but the bottom line is that when an American company takes an open source model and converts it and runs it itself, it is now theirs. So-
- JCJason Calacanis
But it builds consensus around that model and makes that model stronger by more people participating in it, which was your argument for allowing people to get on the hardware stack. So-
- DSDavid Sacks
Well, the com-
- JCJason Calacanis
Yeah
- DSDavid Sacks
... well, but then that, I think that leads me to argument number two, which is if you were to do something like ban open source in the United States, you'll put the United States on an island. The rest of the world is not gonna follow suit. The rest of the world wants to use open models because of the advantages they offer. They're cheaper, they're more customizable, they offer more control, and again, they stop being Chinese models once you can take them and adapt them and run them on your own hardware. So the rest of the world's not gonna stop using these models just because we do, and what we will do then is subject American enterprises to a token tax. You're gonna end up paying for closed models in the US that charge more.
- JCJason Calacanis
No, no, but there's Nvidia. Th- we have open source models now. Nvidia has theirs, for example. There are others.
- DSDavid Sacks
Well-
- JCJason Calacanis
So if there are open source models here that are equally competitive, would you then support an import control so that more people in America put their effort into American open source models?
- DSDavid Sacks
Well, I've been, I've, one of the things I've been saying for over-
- JCJason Calacanis
And Google's open source models, obviously
- DSDavid Sacks
... one of the things I've been saying for over a year is that we need more strong offerings in open source from the United States. So I hope we win the open category of models, just like I do the closed. I mean, I hope America wins the AI race in both open and closed models. I don't really want anyone being forced to use models they don't want. But look, if American models, open models, are better than Chinese open models, they will win, and people will want to adopt them. So if what you're saying is true, that our open models are better or getting better or are gonna surpass the Chinese ones, leave that to the market to decide. And just one last point on this is, you know, I'm not against limiting the import of certain Chinese products in the US. For example, I don't think we allow Chinese connected cars.
- JCJason Calacanis
We don't.
- DSDavid Sacks
I think we should think twice about whether we allow, you know, Chinese robots into the US. I mean, we wouldn't wanna-
- JCJason Calacanis
We blocked drones. Yeah.
- DSDavid Sacks
Yeah, we wouldn't wanna have-
- JCJason Calacanis
That's an example
- DSDavid Sacks
... like a f- like a fifth column of, you know, of backdoored Chinese robots or something in the US potentially. I'm just brainstorming here, okay? So I'm not against limiting certain things, but we should understand that when we do that, we are inviting retaliation by them as well, and we are in a trade relationship with them. We still need things from them. We still need rare earths, things like that. One day we won't, hopefully. I do think we should try to be as independent and autonomous as possible, but while we do, we have to think very carefully about the larger trade relationship.
- JCJason Calacanis
Yeah, Trump banned the import of Chinese drones as a signature part of the legislation, so. Um, all right, so a little housekeeping here. All-In Summit is coming back September 13th, 14th, and 15th. Fifth year of the summit. Keep raising the bar. Man, if you knew the speakers that I knew that Friedberg's lined up, your brain would explode. This year, the nights are as good as the days because, let's face it, Friedberg likes to party. He's been known to have a cocktail or two. We're doing the biggest poker tournament we've ever done at the summit this year. Gaming will happen at the welcome party, and we're gonna have a full casino night at an exclusive mansion in LA. Ooh-la-la. Applications open now, allin.com. Don't miss our biggest event of the year. I think we have $12 trillion in market cap booked so far. It's probably gonna double. Okay, next topic, topic number three. It's a hot SCOTUS summer.
- 59:06 – 1:21:30
SCOTUS upholds birthright citizenship, striking Trump's EO
- JCJason Calacanis
The justices released 11 decisions in the final few days of the term. Let's discuss the top three right now. Birthright citizenship case was Trump versus Barbara. On the first day of his second term, Trump, as you know, signed an EO ending automatic citizenship for children born to illegal immigrants or those on temporary visas. Uh, this is codified, I guess, in the 14th Amendment. The court struck it down 6-3, maybe 5-4. There's some nuance here. 255,000 children are born every year to non-citizen parents. Chief Justice Roberts wrote the majority, joined by all three liberal members. The court is still a bit, uh, polarized. Citizenship then and now was the right to have rights. We keep that promise today according to Chief Justice's majority. Kavanaugh carved out a lane for Congress to tighten up on birthright citizenship that's still consistent with the 14th Amendment. Uh, as you know, the administration has been pointing out, and you watch Fox News, you've heard this a million times. If you watch CNN, but not All-In, uh, you're gonna maybe have heard of this once or twice, birth tourism. A Chinese national, Dong Juan Lee, pled guilty in 2019 to a scheme to help pregnant Chinese women enter the US under false pretenses so their babies would be granted US citizenship. She pled guilty to one count of conspiracy to commit immigration fraud and one count of visa fraud, so we, we handled that through the legal system. She served 10 months in prison. Trump's response to the loss, quote, "Congress should start today to work on ending birthright citizenship. They will have my complete and total support." For Trump, feels like a loss for Trump objectively, but he's gonna keep fighting this one. Close decision. Uh, if you ask Steven Miller, he doesn't like immigrants like you three dudes, but I would let all three of you in again.
- DSDavid Sacks
That's not his position.
- JCJason Calacanis
Okay. Well, you can explain it. [laughs] I know he doesn't like immigrants.
- DSDavid Sacks
Well, we're legal immigrants.
- JCJason Calacanis
[laughs]
- DSDavid Sacks
We're legal immigrants.
- JCJason Calacanis
Yes. Well, but-
- DSDavid Sacks
You understand the difference, right?
- JCJason Calacanis
Well, birthright would also be legal according to the Constitution.
- DSDavid Sacks
Yeah, but that's the whole point is it doesn't really make sense that, let's say an illegal immigrant runs across the border ... is like nine months pregnant, plops out a baby, and all of a sudden they're an American citizen? How does that make sense?
- JCJason Calacanis
Uh, what about somebody who's been here for 20 years, Sacks, worked really hard, they're illegal, and they have a baby. Should the baby kicked out and that baby not be a citizen? You're... Let's say it's somebody's nanny, somebody's gardener. We have 20 million, 30 million illegal immigrants we've let into this country. We waved them in across many different Republican and Democratic terms over the last 30 years. What do you say to that person who has a baby? Should they be deported? Should they be given citizenship?
- DSDavid Sacks
Well, look, the question here is what the Constitution says, and my view is that the original purpose and understanding of the 14th Amendment was to make sure that the children of freed slaves would have citizenship rights. That was the purpose of it. That was obvious, and I don't think it speaks to the situations you're talking about, and Congress should just make the law about those situations. But now Congress cannot make the law because the Supreme Court has ruled that citizenship is determined by birthright. So in that case, anyone who's born here-
- JCJason Calacanis
Well, but my question was, somebody who's been here 20 years as an illegal immigrant-
- DSDavid Sacks
Yeah. I think Congress-
- JCJason Calacanis
... who was waved in under Reagan's-
- DSDavid Sacks
... should decide that. I'm saying Congress should decide that.
- JCJason Calacanis
But what do you think? I'm asking you your personal opinion. Should they get citizenship?
- DSDavid Sacks
I don't know. I mean, look, that's... You're talking about an edge case. It's complicated. But the point is that we all know why the 14th Amendment was ratified. It was to protect freed slaves, obviously. And now we're in territory that's, like, very different, but the Supreme Court has decided that if you're born here for any reason whatsoever, even if you're an illegal, even if you weren't supposed to be in the country, now your children are American citizens. By the way, I don't think any country in the world has this policy. It's kind of a crazy policy, so I agree with Stephen Miller about this. But in any event-
- JCJason Calacanis
I'm not sure it's an edge case. I think, I think the majority case is people who've been here illegally for, for decades, and I think the edge case-
- DSDavid Sacks
Then Congress could decide that
- JCJason Calacanis
... is the one, the one you proposed is the edge case, like a pregnant woman running across the border and-
- DSDavid Sacks
Then let Congress decide that.
- JCJason Calacanis
Okay.
- DSDavid Sacks
I don't think the Constitution ever spoke to this.
- JCJason Calacanis
What's your personal opinion on this, Chamath? Should the person who's been here for 10, 20 years, paid their taxes, but they're illegal and they have a child, should that child be a citizen or not? What's Chamath's personal opinion here?
- DFDavid Friedberg
I haven't thought about this.
- JCJason Calacanis
Great. Okay. It's, uh... I mean, that's the key to the, uh, I think what we're talking about here. Friedberg, do you have, um-
- DSDavid Sacks
No, no, no, no, no, no, 'cause there, J-Cal, there's a big-
- DFDavid Friedberg
Yeah
- DSDavid Sacks
... difference between making something constitutional and then doing it via a law of Congress.
- 1:21:30 – 1:42:07
Newsom's "balanced budget" and how California's dire fiscal situation could break apart the Union
- JCJason Calacanis
he just balanced the California budget? Newsom announced $351 billion in balance, zero deficit budget through 2028. Over to you, Friedberg, from your bunker, the last California stand in the Friedberg capitalist bunker
- DFDavid Friedberg
I'm gonna call it, I'm gonna call this, this, the State of California.
- JCJason Calacanis
The state-
- DFDavid Friedberg
The, the state-
- JCJason Calacanis
... of California. The lowercase state
- DFDavid Friedberg
The state of Cal... That's right.
- JCJason Calacanis
The state-
- DFDavid Friedberg
The state of California
- JCJason Calacanis
... of the state. The state of the state.
- DFDavid Friedberg
And it's, and there are five-
- DSDavid Sacks
The state of the state
- DFDavid Friedberg
... the state of the state, and there are five-
- JCJason Calacanis
State of the state. Got it
- DFDavid Friedberg
... chapters to this. The ballooning costs, the accounting tricks, the revenue dependency problem, and now the big exodus and spiraling that's happening, and the looming unaccounted liabilities. These are the problems that California is facing as Gavin puts his bow on his final budget, calls it balanced, and walks away while the house burns. California's state budget ballooned from 215 billion a year in 2019, six years ago, to 355 billion today, so a 65% jump in the state budget. And there were a number of these kind of accounting tricks that took place to try and make it look like it's a balanced budget this year, but there's revenue and there's spending. When they call it a balanced budget, that's not the way we all talk about it in the business world where you have, like, a P&L, you have revenue and expenses. They have revenue and expenses, and the expenses exceed the revenue. And that little difference, they do a bunch of borrowing against-
- JCJason Calacanis
[laughs]
- DFDavid Friedberg
... and then they, then they call it a balanced budget.
- JCJason Calacanis
[laughs]
- DFDavid Friedberg
So all, all that they've done-
- JCJason Calacanis
So they were able to raise enough debt to cover their hole?
- DFDavid Friedberg
Exactly.
- JCJason Calacanis
That's what's the-
- DFDavid Friedberg
So there's, uh-
- DSDavid Sacks
Oh, my God
- DFDavid Friedberg
... somewhere between, uh, 20 and 40 billion of debt that they have a legal ability to just pencil away, and that is now a liability that the state has, that the taxpayers are all gonna have to pay at some point, that allows them to, quote, "balance the budget" this year. And I'm not gonna get into all the details of what went into this budget, all the money that's being spent. It's crazy. But I think that's what's worth ta- taking note of, is the revenue dependency the state has. As you all know, the top tax rate in California is 14.4% today. Personal income tax is $142 billion of the state's revenue, okay? That is 211 billion of revenue the state generates. 142 of it comes from personal income tax. The top 1%, 150,000 people, pay 70 billion, pay half of that tax, of that income. So 70 billion of the state's 210 billion income comes from just the top 1% of payers, 150,000 people, who are already paying the highest tax rate in the country. The top thousand people in the state of California pay roughly 22 billion a year, so more than, you know, 11% of the state's income. The corporate tax is one of the highest in the country at 8.9%, $43 billion. So it's cheaper to move out of state. If you look at some of the other states, Florida 5.5%, Texas- Tennessee's six and a half, and Texas is zero. So now if you kind of look at what's happening, there's a massive exodus underway. The corporate exodus, because of the high tax rates, since 2019, at least 15 Fortune 500 companies have moved out of California, moved their headquarters out, not to mention all the local franchises and everything that have moved out. 2,100 companies that are mid or large size have moved out of California since 2019. At least 5% of California jobs have been lost as these companies have moved out of the state. And this is the more important and crazy statistic. No one pays attention to this. But we are seeing an average annual exodus of 1 to 1.5% of personal income, meaning the AGI, the adjusted gross income. So people that earn money, about 1 to 1.5% of that income is leaving the state every year right now. That might not sound like a lot, but after 10 years, you've seen 15% of the state's income leave. And obviously with the new billionaire tax that's being proposed, we're gonna see an acceleration as the numbers come out for 2025. There's a, as we all know, personal friends that have left the state in '25, and many more that'll leave in '26, including our friend David Sacks. So- There is a spiraling of a loss of revenue while there is a ballooning in costs. And this is fundamental to the spiraling problem that's occurring. So now in order to try and make more money, the state has to go further down. They can't just go to the corporates and the high net worth earners. They're now going to the average Californian. So they're increasing sales tax rates this year by creating a new sales tax on software. So if you buy Microsoft Word or you pay for your Gmail subscription or even your ChatGPT account, you have to pay an 8% sales tax on that this year. They're estimating that that sales tax is a brand new one. It'll generate about a billion dollars a year in incremental revenue for the state. They're also creating a new tax on healthcare insurance that corporates are gonna have to pay that's ultimately gonna pass down to the individual. That's gonna create another $2 billion a year in taxes on health insurance. The final thing that they did, which we all know about, is they made the temporary top income tax bracket permanent. So, you know, it was only meant to be a temporary to bridge a major budget deficit problem back in 2012, 13.3%, and that became permanent, and now it's increased to 14.4%. So this is the spiraling that takes place. The costs are ballooning, the revenue is leaving, and now there's a scrambling underway in the state of California to try and make up this difference, and they're still falling short. In the out years, 2028, '29, the projection is $40 billion a year in budget deficits every year. Now, looming over the state of California is the fact that there is this insane unaccounted debt problem. California already has $1.4 trillion in public debt. The state has $500 billion, and the local governments have another, call it $800 billion. The state has a reported $664 billion in unfunded pension liabilities. That number, by many estimates, is closer to $1.5 trillion. And then there's a retiree healthcare obligation deficit of $175 billion. You add this all up, there's somewhere around $1.5 to $2 trillion of incremental liabilities that the state has to come up with. And remember, all of those pension liabilities, that trillion dollar plus of pension liabilities, sits senior to the bonds of the state of California because of something that's known as the California Rule. So the state has this looming kind of cliff ahead of it, and there's already this spiraling problem where they're increasing costs because of the demands of the unions and the cost of living and so on, and there's an exodus of corporations and high net worth individuals that pay the taxes. So I would argue that Governor Newsom did not exactly put a bow tie on the budget and create a balanced budget and leave California in a great state as he is wrapping up his final term and his final budget here in the state. But in fact, I think that this state, which as I've said in the past threatens to bring down the Union, is on the brink of defaults that are going to be so significant that if the federal government was called in to bail them out, because a state cannot declare bankruptcy legally, that all of the red states and all of the other taxpayers in the United States will say, "Why the hell should I pay federal taxes to bail out California?"
- JCJason Calacanis
Hmm.
- DFDavid Friedberg
And I think that's what the story will be over the next decade with the state-
- JCJason Calacanis
So you predict-
- DFDavid Friedberg
Given the fiscal condition
- JCJason Calacanis
... AOC and Mondame, president and vice president, AOC. Mondame can't be VP. He wasn't born here.
- DFDavid Friedberg
I do predict-- Yeah, so I predict AOC will be president. I mean, obviously, there's a lot of dispersion in what could happen here. But I would say AOC would be my front-runner based on the, the, the movement for the extraordinary cost of living in the United States right now, uh, largely because of government spending.
Episode duration: 1:42:10
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