Big Fed rate cuts, AI killing call centers, $50B govt boondoggle, VC's rough years, Trump/Kamala

Jason Calacanis 0:00 All right, everybody. Welcome back to the All In podcast. The channel's been active.

Chamath Palihapitiya 0:06 We're in the afterglow. We're in the All In summit afterglow.

David Sacks 0:10 (laughs)

Jason Calacanis 0:10 It's so glowing that Friedberg couldn't make it. He has been riding a high. I've never seen him happier.

Chamath Palihapitiya 0:18 Nick told me that in the last week we just, we, uh, we've only put out a half the clips and they've already gotten 20 million views.

David Sacks 0:23 Oh my Lord. I, you know, I, I, I, uh-

Chamath Palihapitiya 0:26 So we'll be, we'll be around 50 million I think when all the clips are released and you let it bake for couple of months.

Jason Calacanis 0:32 That is an astoundingly large amount of reach.

David Sacks 0:35 Crazy. Yeah, and that's just YouTube. We're not doing it on the podcast feed right now.

Chamath Palihapitiya 0:39 YouTube and X.

Jason Calacanis 0:40 Well, hopefully we get it on the podcast feed, we get another 50 million (laughs) . Uh, but, uh, Friedberg's in his afterglow, couldn't make it, but he's very busy right now. Look how happy he is. The summit went well.

Chamath Palihapitiya 0:51 Is that marijuana?

Jason Calacanis 0:53 Think he's making potatoes. I think that's his farm. But I mean, the smile is incredible.

Chamath Palihapitiya 1:00 That's mari- It's marijuana. It's Friedberg's version of founder mode.

Jason Calacanis 1:03 He's in fantastic-

Chamath Palihapitiya 1:04 It's Friedberg's founder mode, he's hitting the bong.

Jason Calacanis 1:07 His founder mode gives him the munchies.

David Sacks 1:10 (upbeat music) Let your winners ride.

Jason Calacanis 1:14 Rain Man David Sachs.

David Sacks 1:17 I'm going all in. And I said- We open sourced it to the fans and they've just gone crazy with it.

Jason Calacanis 1:22 Love you, West Side.

David Sacks 1:23 Queen of quinoa. I'm going all in.

Jason Calacanis 1:26 He is, uh, he's in the afterglow, um, and he won't be with us this week. Um, but we, uh-

David Friedberg 1:33 He, uh, he organized such a great conference, don't you think, J-Cal?

Jason Calacanis 1:36 He did. He did great. Uh-

David Friedberg 1:37 I mean, he really took charge of that and-

Jason Calacanis 1:40 He crushed it.

David Friedberg 1:41 ... just did an amazing job.

Jason Calacanis 1:41 He crushed it. Yeah. I would like to give him his flowers. Absolutely.

David Friedberg 1:44 The level-

David Sacks 1:45 It is like at least a trillion times better than the first, and at least 50% better than the second.

Jason Calacanis 1:50 I mean, that's how it should go. You know, when you create something in the world, Chamath, what you want to do is you want to hi- you want to hand it off to professional management to then scale it, right? Not everybody can do the creative act of actually forming something. You need to have these operators to go and then execute your vision. And, uh, I just want to give Friedberg his flowers for executing incredibly well. We all play a role, Chamath. Sachs launched a tequila company. I want to say thanks to, uh, Friedberg. He did all of these great speakers. Big thank you to our CEO John, who put together all the operations. Nick did incredible, Nick did incredible, incredible job with those, uh, opening graphics. They went viral. Uh, Zach helped with the graphics. You had young Spielberg chipping in. You had, Laura did an amazing job with stage management. And of course, you know, I focused on the moderation. I got a lot of great things. So everybody plays a role. You got Sachs with the tequila, Friedberg, Laura, Zach, Spielberg, Nick, John. Everybody brought something to the table.

David Friedberg 2:53 Are you finally-

Jason Calacanis 2:53 So congratulations to everybody.

David Friedberg 2:57 ... learning to delegate?

David Sacks 2:57 You scale through people.

Jason Calacanis 2:58 That's it. Scale through people. That's it. Did anybody (laughs) , nobody got the joke? We, Chamath, everybody contributed. You understand? Sachs, new tequila company, John, operations, you have Friedberg, content, me with the, I mean the world's greatest moderator up there.

David Friedberg 3:16 Oh, what's Chamath's contribution?

Jason Calacanis 3:17 Oh yeah, (laughs) Chamath showed up (laughs) .

David Friedberg 3:20 (laughs)

Jason Calacanis 3:21 Chamath, Chamath looked great.

David Sacks 3:23 I showed up.

Jason Calacanis 3:23 That's just-

David Sacks 3:24 I showed up.

Jason Calacanis 3:24 He showed up and looked great. I, I-

David Sacks 3:26 I brought my two votes and I brought my vision.

Jason Calacanis 3:28 Absolutely. I would also say-

David Friedberg 3:30 Fan favorite.

Jason Calacanis 3:31 You, y- what you really did that was amazing was you took a lot of selfies. I was very proud of both of you with the fan service. The fans were very pleased that you guys took so many selfies. You know, we got a lot of feedback too, coming in. So it was, uh, pretty, pretty great feedback.

David Friedberg 3:51 Do you think that you did better as moderator because you finally let go of just the conference organization?

Jason Calacanis 3:59 What do you think?

David Friedberg 4:01 Yeah, I think that you were able to focus on your unique value add instead of immersing yourself in a bunch of-

Jason Calacanis 4:07 My YouTube.

David Friedberg 4:07 ... details that could be-

Jason Calacanis 4:08 Yeah.

David Friedberg 4:08 ... handled by the team.

Jason Calacanis 4:10 I agree. Um, it was absolutely fantastic.

David Friedberg 4:13 But I think it was a process to get you to let go.

Jason Calacanis 4:15 Well, you know, you ha- you have, uh, it's a, it's a fair point. I, I did, people did say my moderation was dialed in, and I appreciate that positive feedback from everybody. And, um, yeah, there is something to having people you can trust-

David Sacks 4:27 Yeah, I thought-

Jason Calacanis 4:27 ... with the content.

David Sacks 4:28 ... I thought your, your moderation-

Jason Calacanis 4:29 You know?

David Sacks 4:29 ... was excellent this time. It was better than before because I think that you're actually exceptional as a moderator, and I think you're mostly average as a conference producer.

David Friedberg 4:39 (laughs)

Jason Calacanis 4:40 (laughs)

David Sacks 4:41 But I will leave-

David Friedberg 4:41 Don't go that far.

David Sacks 4:42 I do think as a moderator-

David Friedberg 4:43 I know.

David Sacks 4:43 ... you're excellent.

Jason Calacanis 4:44 (laughs)

David Sacks 4:44 I mean, like some of the most memorable moments were you basically drawing out contrasting opinions.

Jason Calacanis 4:53 Mm-hmm.

David Sacks 4:53 And the way that the people engaged with them was so healthy and good. That was the, I think the recurring theme. So I give you an enormous amount of credit. I think you did an exceptional job, but I also think it's because you were able to focus on what you're great at.

Jason Calacanis 5:06 Yes. I, I do agree with that. I was talking to Jade about it, and she said, and, and Nick also pointed out, "You were really dialed in, J-Cal. What, what's up?" And I said, "I'm not worrying about the party and the vendors and the front desk and the sponsors."

David Sacks 5:18 Right.

Jason Calacanis 5:18 And it is actually, you're able to, to focus. Did you have some favorite moments yourself there, Sachs? Any favorite moments for you or panels or things maybe that exceeded expectation for you?

David Friedberg 5:28 Well, I thought the Mearsheimer, Jeffrey Sachs panel was great. I thought it would be, which is why I helped organize it. But I was just glad that the audience, so many people in the audience reacted and said that was the surprise hit of the conference.

Jason Calacanis 5:40 I would say that was my favorite of the event. One of the best panels I've ever been part of.

David Sacks 5:43 I think it's the, it's the most viewed. It's like slightly above Elon's one.

Jason Calacanis 5:47 Really?

David Sacks 5:48 Oh, just behind you.

David Friedberg 5:49 Elon's slightly ahead. But yeah, it's still like growing. It's like finding an audience.

Jason Calacanis 5:54 Yeah.

David Sacks 5:54 Well, I think that, I think that if you, if you look at the one from last year, Graham Allison, where he got a standing ovation. The thing is, there are these village elders where they are at a point in their life where they're willing to just be a truth teller. But-Oftentimes, they're de-platformed and we have the ability to actually bring some of the smartest of them on and give them a voice. And it's incredible how much they resonate 'cause what they say is so logical and sensible. So that's a really important thing that we have now at our disposal and I think that people really appreciate it, you know. So we're like a... I think we're doing a really important job in doing that. And now the question is, which village elders do we get next year to keep, you know, being truth tellers?

Jason Calacanis 6:41 Well, give us your thoughts. You know, there's an all-in, um, Twitter handle and he's Chamath, David Sacks, and I'm at Jason and Freeburg's at Freeburg. Just tell us who you think

Jason Calacanis 6:50 would be great. But Sacks, I know you're super excited and want to give Biden his flowers. The Fed just cut rates 50 bps and the stock market is, uh, tearing, uh, it up right now. On Wednesday, Fed cut interest rates by a half a percentage point, taking them down off of a 23-year high. We've been talking about this, God, for two years here on this podcast. First rate cut since March of 2020, which is about when we started this podcast. J Powell basically said the Fed thinks inflation is coming down to around 2% nicely, and they don't want the job market to soften any further than it already has. He also mentioned, uh, immigration has helped soften the market, uh, the labor market as well, obviously with all those new people looking for jobs. So in the last two months, July and August, CPI has been at a two handle. We talked about that. 2.9% in July, 2.5% in August. Here's the CPI over the last decade. Obviously, massive boom, uh, in interest that you see there from 2021 to 2023. Many obviously think we're going to have more rate cuts, probably 25 every meeting for a little bit. And, um, Dow's already at an all-time high, surged 300 points on the news. Here's a, here's, uh, some interesting data about the 50 basis point kickoff cuts. So, uh, this is where it gets interesting, Chamath. Fed only started publicizing their interest rate changes in 1994. Since '94, Fed has initiated a cutting cycle six times. Here's the chart. Take a good look at that. '95, '98, 2019, they started with 25 bps, '01 and '07, after the great financial crisis, they started with a 50 bp cut. So obviously there was an emergency 50 bp cut in March of 2020 when COVID hit. '01, '07, 2020, very severe situations. And the... What happened in the markets is what I want to discuss, uh, with both of you today. In twenty- 2001 market fell 31% in the two years after that rate cut. In 2007 market fell 26% after two years. So... And 2020, despite all the fears, market ripped 44% over two years. What's the more likely scenario, Chamath? Is this similar to the dotcom and Great Financial Crisis or similar to 2020?

David Sacks 9:19 Well, I think 2020 you have to put in a big asterisk because the question is what would have happened had there not been COVID and had there not been an entire global shutdown? So if you go back to that chart, you could probably just extrapolate and cut out that part that's flat because the part that's flat from 2020 to 2022 was largely artificially created because on top of that we injected so much money into the economy. The reality is we probably would have raised at some rate of change that you could have predicted from 2016. So what do you, what do you take away from that? I think that you have to, like, realize we are at a point in the economy where you cut rates because there's tension, and there's tension between employment and unemployment. There's tension between earnings growth and contraction. And so it's a stimulatory move. So if you look through that stimulatory move, why is the Fed doing this and why will they cut probably all the way down to 2 or 3% by the end of '26? It's because we now need to stimulate the economy again. So the reason why markets tend to fall once the rate cut cycle starts is because the next couple of quarters sort of demonstrate what I think the Fed is expecting, which is that there's pressure in the economy. We have not seen that flow through (air whooshing) in earnings or in how companies describe markets on the field, by and large, except for a few. So I think this part of the cycle now will be about all of these companies telling us whether there's nothing to see here or whether there is actual real pressure. And if there is real pressure, it'll probably look like the several times before where you're just gonna have to contract the value of financial assets because they're just not worth as much when they're earning less.

Jason Calacanis 11:19 Okay. Sacks, any thoughts here or just balls and stripes?

David Friedberg 11:23 Well, I think a lot of people are commenting on the fact that the only other two times where we've had a 50 basis point rate cut in modern history, it has been just before a recession. So I think this happened in 2001, 2007, right before, uh, the recession and the Fed had to do a dramatic rate cut because they could see in the data that things were weakening. So a lot of people are asking the question, "Well, is that what's going on here?" Now Powell's comments, though, are indicating that the economy is in good shape. He said the economy is in very good shape that, um, basically indicating that they had tamed inflation and that they would look to cut another 50 basis points this year. So Powell's rhetoric is, uh, in a way at odds with the magnitude of this cut. The qu- you know, so why didn't they just cut 25 basis points? I think people are trying to figure that out.

Jason Calacanis 12:17 Read the tea leaves-

David Friedberg 12:19 Yeah.

Jason Calacanis 12:19 ... into-

David Friedberg 12:19 Reading the tea leaves.

Jason Calacanis 12:19 ... why 50, because they could just do 25 a month-

David Friedberg 12:23 Sure.

Jason Calacanis 12:23 ... for five months as opposed to 50 and-

David Friedberg 12:25 And if the eco- And if the economy is hot... Yeah, if the economy is hot, why wouldn't you tiptoe into rate cuts, uh, and just do 25 now?

David Sacks 12:31 That's the key thing. If you look at the, the dot plot, and if you look at where the smart financial actors are betting where rates end, so it's hard to sort of like look at any point in time, 50 now, 25 later, what does it all mean? It's very hard to know. But what is much clearer is where do we think terminal rates will be in, even in the next 18 months, and it is dramatically lower from where they are now. And I think that supports, Sax, your, that argument that you just made, which is if you're going to basically cut this aggressively over the next year to year and a half, by the estimates of very smart financial actors whose job it is to spend every day observing the Fed, then they must see something. Because otherwise, as you said, you could take a much more gradual approach. And so I think that the smart financial actors are guessing recession or guessing contraction. I think what they're also guessing is similar to non-farm payrolls, we're going to go through a couple of difficult GDP revisions, probably downward, and I think that will have an impact to people's sense of how the economy is doing even more than what their sense is today, which is already teetering on it's, m- at best okay. And I think all of that has to play itself out. So it's gonna be a very complicated and dynamic fall in that respect.

Jason Calacanis 13:53 Yeah. And, and I think so much of this has to do with unemployment. Uh, we had that period where so many jobs were available. Remember we talked about it here, 11, 12 million (laughs) jobs available at the peak? We can debate the numbers, of course, but we all saw it where you just couldn't hire talent in America. There was so few people available to, to take positions. And man, has that changed. And y- you get to see it on the ground in early stage startups where this whole narrative, I don't know if you saw it in your board meetings, but, "Hey, we can't find a person. Hey, we're looking. Hey, that search is still going. We're still looking for a director of sales. We're still looking for salespeople. We're still looking for developers. We're still looking (laughs) for operations people." Now it's the opposite. It's like, I, I just... I'm hiring producers here in Austin because I'm building it, my in-person studio. We had like, I don't know, a dozen viable candidates for this position, and I had a hard time picking between, you know, the top three. Now, that's distinctly different than my experience for the last five to 10 years where (laughs) you were like, "H- how do we, how do we fill this role?" So I think that employment has been broken, and that's the thing that has me concerned because with all these people who came in through the southern border, and then you have people outsourcing to other countries, I wonder if Americans are gonna lose so many of these mid-paying jobs. And this will dovetail into our next story about A- Amazon making cuts. I'm very worried about the, the hollowing out of the upper middle class, that elite group of $150,000 jobs that, that employ nannies and spend money in the economy. I wonder, I don't know if you're seeing that in your company, Sax.

David Friedberg 15:30 I'm not worried about the hollowing out of that, that class.

Jason Calacanis 15:32 (laughs) You, you (laughs) , you have disdain for them.

David Friedberg 15:35 (laughs)

Jason Calacanis 15:35 But, but I mean, just in terms of the labor market, what do you see, you know, in companies right now, you know, hiring, the talent pool, et cetera?

David Friedberg 15:45 Well, I mean, in tech, things are, are pretty good. I mean, they, they're not as absurdly frothy as they were during the bubble of 2020 and 2021, but things are good. You have this huge AI tailwind now, and there's just a ton of investment going into AI. There's a little bit of A Tale of Two Cities going on. If you're in AI, things are really bubbly. And if you're outside AI, they're, they've returned to much more normal levels in terms of valuation and company operations, all of that kind of stuff. Just to go back to the state of the economy for a second, the, the reason why a lot of people were predicting a recession, including me for a while, is that the yield curve inverting has been an almost perfect gauge of whether a recession is coming. It's when basically the Fed raises short-term interest rates above long-term interest rates. Normally, long rates are the ones that should be higher because investors demand a higher rate of return to tie up their money for longer. So if something's really off and kind of broken, when short rates go above long rates, the yield curve inverts. And it's always been the prelude to a recession, but the recession doesn't come when the yield curve inverts. It usually comes when the yield curve de-inverts.

Jason Calacanis 16:59 Right.

David Friedberg 16:59 And the reason for that is because the Fed now sees weakness and dramatically cuts the short rates. So in other words, it jacks up the short rates to control inflation. That works. It trickles through the economy, the economy cools down, and then the Fed says, "Oh (beep) , maybe we've over-corrected." They slam on the brakes, and then they cut rates to basically make up for the effect on the economy. So the yield curve has finally de-inverted, and the question is just do we now get that recession, or did the Fed manage this to a soft landing? I don't think we know. I'm not, I'm not like calling a recession, but this is the, the thing that people are concerned about.

Jason Calacanis 17:34 Yeah. Well,

Jason Calacanis 17:35 Sax, we were talking about AI in the group chat, right?

David Friedberg 17:37 Yeah. I think it's now becoming really clear that call centers are gonna be the first really big disruption caused by AI.

Jason Calacanis 17:45 Yeah.

David Friedberg 17:45 I mean, all the level one customer support is gonna get replaced by AI.

David Sacks 17:50 Mm-hmm.

David Friedberg 17:50 I mean, LLMs plus voice because, uh, you know, OpenAI just released their audio API. You saw that at the ALAN Summit, we released a Mearsheimer AI-

Jason Calacanis 18:03 Yeah.

David Friedberg 18:03 ... where we trained it on all of his work. And you can go to Mearsheimer.AI and ask it questions, and it will tell you the answers in his voice because we cloned his voice using Resemble AI. Anyway, so AI can do voice now, and it can be trained extremely well on large data sets to give you answers to questions, which is pretty much what customer support is.So I think it's now becoming clear that I, I think within the next two to three years, you're going to see a massive disruption in that industry.

Jason Calacanis 18:31 I agree with that massively, and I think there's another under-reported story which is people don't like to call and talk to a customer service agent, like an actual human, if they can avoid it. They would much rather go on YouTube and say, "How do I fix this?" Or, you know, ask ChatGPT, "How do I fix this?" It's like, I don't want to waste another person's time. Just give me the answer as quick as possible, and AI will give you the answer quicker. YouTube will give you the answer quicker. I've had so many times where I have people who work for me who are like, "I don't know how to do that," and I literally would walk up to their computer and load YouTube and type in, "How do I blank?" And there's a video there. Watch it on two-speed, you can do it. That's what's, you know, gonna also kill this. Like, I, I don't want to talk to a human. Just change my flight. Just, you know-

David Friedberg 19:19 But you talk about disrup-

Jason Calacanis 19:19 Answer my question.

David Friedberg 19:20 Yeah, I mean, you talk about disruption, call centers are a very big part of the economy in certain geographies.

Jason Calacanis 19:26 Oh.

David Friedberg 19:26 Denver, Salt Lake, I mean, parts of Florida. I mean, there's-

Jason Calacanis 19:29 Arizona, yeah.

David Friedberg 19:30 Yeah, exactly. It's a really big deal. If, like, half the cost gets ripped out of those call centers?

Jason Calacanis 19:35 Where would you move those people if you, if you had your choice? Could they move to sales?

David Friedberg 19:40 Well, I think sales will be the one that's disrupted after customer support.

Jason Calacanis 19:43 Okay. (laughs)

David Friedberg 19:43 But, um, but I don't know. I think it's going to be very disruptive. One of the reasons I think this is, you know, in the early days of LLMs, people were saying that legal services would be disrupted, and you saw some very highly valued startups rocketing up based on that. I think the problem with that is the error rate. So, when you think about AI applications, you have to think about what is the tolerable error rate that the industry will allow?

Jason Calacanis 20:13 Mm.

David Friedberg 20:13 Because we know that AIs get things wrong, they can hallucinate, and you're never gonna be able to make it perfect. I mean, you can improve the quality, but it's still gonna have some errors. And when you're dealing with, like, legal services, for example, you just can't have mistakes.

Jason Calacanis 20:26 Yes.

David Friedberg 20:26 It's just not tolerated. However, customer support is different. Customer support is already organized into levels, level one, level two, level three, based on difficulty, and there's already, in a sense, a mechanism for failover. If, like, the level one customer support person can't answer the question, they kick it up to level two. So, there's a place for LLMs to start in customer support, which is replacing all the level one and then working their way up the chain to level two as they get better and better. And so what I'm saying is that the level of accuracy now, especially with the new PhD-level reasoning models, is good enough.

Jason Calacanis 21:05 Yeah.

David Friedberg 21:05 And we don't need to wait for, like, some perfect LLM model. And I think this is why this is gonna be a big, big disruption.

Jason Calacanis 21:12 Let me pull you into this.

David Friedberg 21:12 Millions of people, potentially, are gonna have their, their jobs disrupted or at least transformed.

Jason Calacanis 21:17 Well, it could be the end of the entire career as well. Chamath, if you were to look at this four-by-four sort of quadrant chart that Sax is describing, which is the cost of an error, you know, and, um, the actual complexity of the job perhaps, uh, or the cost of the job, how do, how do you look at this? I know you're working on software that kind of does this with your startup as well.

David Sacks 21:44 I mean, I'll preview one use case from 80/90, which is pretty stunning. You know, we work with a, a very large regulated, highly regulated company, public company. And they have a very complicated set of people and processes because of the, the field in which they're in. And David, your point is exactly right. It took us a fairly long time, but we're at a point now where we've been running AI-powered software versus the old legacy deterministic solution, and we've been running it at 100% accuracy now for about 10 days. So this is still very new, and since... it's an incredible thing because, to your point, our first version was like at, in the mid-80s. Then we were in the mid-90s, then we were, you know, 97, 98%, but there were still errors, and it just took a lot of engineering to figure out how to get to 100. But now it's at 100, and it's been consistently at 100. And so we're all kind of like scratching our head because now the next step is, well, what do we do? To your point, what, what do we do? Do we... so we're, we're figuring that out right now. But the art of the possible is that I think well-crafted AI software is as good as deterministic software in the sense that the error rates will be equivalent-

Jason Calacanis 23:23 Mm.

David Sacks 23:24 ... in production and at the level of a very highly regulated public company, and I think that's the gold standard because, in those sectors, those companies have zero tolerance. It's not a toy. It's not even, you know, level one customer support. It's system of record type work.

Jason Calacanis 23:44 Yeah.

David Sacks 23:45 But it shows what's possible, and to your point, Sax, we're doing that today. Even though they're the best models, imagine how good those under-... the underlying models will get in a year from now.

David Friedberg 23:55 Yeah.

David Sacks 23:55 Right?

Jason Calacanis 23:56 I-

David Sacks 23:56 And we'll be able-

Jason Calacanis 23:56 Well-

David Sacks 23:56 ... to take on more and more work. It's, it's very stunning actually. It's really...

Jason Calacanis 24:00 Have you guys worked with the o1 preview yet? I, I just literally have been using this new reasoning engine that OpenAI released, and it is extraordinary, and it's kind of thinking about the next three or four prompts you would do, and I literally just got this while we were on the show.

David Sacks 24:16 Well, so the thing with-

Jason Calacanis 24:17 Like, I've hit the, I've hit the limit for my paid account because this thing is so intense on compute, I guess.

David Sacks 24:23 Well, the thing with o1 is that I think it's starting to add reasoning, but the way that you do reasoning...... is sort of this idea that you have this chain of thought. And I think that that's a very powerful but early concept. And as we refine those ways in which these models get to better answers, the wonderful thing is that OpenAI will preview 001, and then they'll have the actual 001 production build probably in the next couple of months, which will be probably pretty spectacular. But then you'll see something from Claude, you'll see something from LLaMA.

Jason Calacanis 24:57 Mm-hmm.

David Sacks 24:58 And the real art, I think, and this is where I do think it's a little bit of alchemy still, which I think is good because it, it keeps humans involved, all of us involved, right?

Jason Calacanis 25:07 Yes.

David Sacks 25:09 Is how do you stitch all of those things together to get to a 0% error rate? What, what Sax said. You know, how do you minimize the blast radius and how do you make sure these things are super high quality?

David Friedberg 25:20 Right.

Jason Calacanis 25:21 Well, and people don't...

David Sacks 25:22 It's still a very hard technical problem.

Jason Calacanis 25:24 Go ahead, Sax-

David Friedberg 25:24 Yeah.

David Sacks 25:24 ... and then I'll, I'll show you what-

David Friedberg 25:25 Well-

Jason Calacanis 25:25 ... ChatGPT is doing.

David Friedberg 25:26 So yeah, one of the reasons why I'm bullish on this customer support use case is because there's a very large dataset to train on. You've got all of the product documentation that companies have already created. You've got all of the previous email support, you know, so-

Jason Calacanis 25:40 And calls.

David Friedberg 25:41 A- and calls, yeah. The calls have been recorded, so you can now train the AI on that. So you, there's a very large body of data to train the AI model on, and it's not necessarily the most proprietary. It's not like dealing with people's medical records or s- or even confidential legal documents, something like that. So the data is r- readily available and then the foundation models are getting really good. I think there's a big question here about value capture, which is, there's a number of startups now that are becoming very highly valued, that are chasing this disruption, this sort of-

Jason Calacanis 26:12 Hmm.

David Friedberg 26:12 ... customer support agent disruption. And they're getting into very high valuations, uh, even unicorn valuations already. And the question is, well, wait, if, if the foundation models are advancing at such a rate-

David Sacks 26:25 Exactly.

David Friedberg 26:26 Like, a year from now-

David Sacks 26:27 This i-

David Friedberg 26:27 ... why couldn't a de- uh, like a developer-

David Sacks 26:29 Totally.

David Friedberg 26:29 ... just a startup of a few guys take next year's model-

David Sacks 26:32 It's such a good point.

David Friedberg 26:33 ... and train it and then commoditize-

David Sacks 26:36 Yep.

David Friedberg 26:36 ... the ...

David Sacks 26:36 Oh, you're, you're making such a good point. This, so when we were trying to figure out, like, what applications we would build and, like, which sectors of the economy we would go after, I was like, "Guys, we gotta go after the hardest, most regulated places, because those are the things and places and people that have absolutely zero tolerance for error and where you're going to need to do some amount of customization and, and specialization to actually solve these problems." And Sax, to your point, like, when you see, and I said, you cannot, we cannot touch customer service. We cannot touch it because it's going to get commoditized and run over by these foundational models within a year.

David Friedberg 27:18 Right. I mean, it's just too easy.

David Sacks 27:19 You'll, you'll be able to deploy these. It's just too easy.

Jason Calacanis 27:22 You'll be able to do it on a local computer. I mean, you'll just download the entire database-

David Sacks 27:25 It's just too easy.

Jason Calacanis 27:26 ... of every call on a MacBook with an M3 and just run it.

David Sacks 27:28 And by the way, just to build on that, the, the other thing that's now possible, and you saw this with Klarna, because Klarna put out this, like, cryptic tweet/press release where, oh, I think maybe it was in their earnings. Nick, maybe you can find this, but they're like, "We've deprecated Salesforce and Workday." And it's like-

Jason Calacanis 27:44 That was strange, yeah.

David Sacks 27:45 ... how, how can a company that big deprecate those two systems of record? How is that even ... uh, it's, how is it possible? So I'll tell you-

Jason Calacanis 27:52 I think it means they're writing their own, right?

David Sacks 27:54 Well, I'll tell, I'll tell you how it's possible. And so this is, like, this next crazy thing that's been happening. We've been doing a version of this to go after some other sources of software. We haven't had the balls, to be honest, to go after Salesforce (laughs) or, or Workday, but here's how they do it. They write these agents, and these agents can spawn other agents, right? So it's very classic kind of machine that builds a machine. And you start to observe the inputs and outputs of a system, right? I'm, I'm hyper simplifying, but I'll, I'm just, it'll make the point. And over time, what the agents start to do is by observing the inputs and the outputs, they start to guess on what the intervening code is, and the code paths must be in the middle to generate the outputs based on these inputs. And so over time, what happens is you develop a digital twin, and then you run that against that counterfactual, against Workday or Salesforce, and then at some point you're like, "It's the same." (laughs) And then you just say, turn it off, and you're saving yourself tens or hundreds of millions of dollars. So that's, uh, uh, it's a version of what Klarna did. It takes an enormous amount of technical strength to do it. It also takes tremendous, I think, executive courage and leadership, because I think that's a very difficult decision to embark on. But if you're an engineer, that must be an unbelievably exciting technical challenge to be a part of. But, but that's the basic premise of what they were able to do. Hopefully they share more and maybe they even open source what they did, because I think it would just be an amazing thing for all of us to look at.

Jason Calacanis 29:30 Yeah, I mean, to, to restate it, watch people use a piece of software and then based on what they do, you could write the code-

David Sacks 29:37 Yes.

Jason Calacanis 29:37 ... which you could take-

David Sacks 29:38 Yeah.

Jason Calacanis 29:38 ... a video-

David Sacks 29:39 Yeah.

Jason Calacanis 29:39 ... of a video game today, like Angry Birds, and somebody did this, you give the Angry Birds iPad, you know, game from 15 years ago to AI, it's gonna back into the code just by watching it. So why not just watch people use Salesforce or Workday? And those are very expensive products.

David Sacks 29:57 The, I mean-

Jason Calacanis 29:57 Thousands of dollars per user, right?

David Sacks 29:59 I wanna, I wanna get Sax's point of view. Like, the thing in enterprise software that we were always told is you cannot touch these systems of record. Don't ever start a systems of record company. Don't try to touch these systems of record companies. Don't, you know, try to disrupt them. It's an impossible task. But then the question is, if you have these things, why do you necessarily need a system of record in the way that you needed to before when you were writing all this clunky deterministic code?

Jason Calacanis 30:26 What do you think, Sax?

David Sacks 30:26 I don't know.

David Friedberg 30:27 Well, I saw the Klarna story where they said they were gonna rip out Salesforce and, and Workday because they were able to write their own bespoke code using AI. I mean, I have to say, I'm a little bit skeptical of that story for a couple of reasons. One is...If that's their goal, why wouldn't they have open-sourced this- these products they created? You might as well get the whole ecosystem working on it because they're not trying to sell this product that they've internally created, they're just trying to rip out the cost, so why not let the whole ecosystem see it? The other thing is, if it's so easy to do, why hasn't the market already been flooded with new startups that are effectively able to reverse engineer?

Jason Calacanis 31:06 I don't think... You're right, I don't think it's easy to do because I don't think there's a generalization here that's productizable. Do you know what I mean? Like, I do think that these are very custom-specific things. So m- maybe there's, like, some scaffolding, but I don't think-

David Friedberg 31:19 Yeah.

Jason Calacanis 31:19 ... that that scaffolding has a ton of economic value. I think it's really good open-source stuff.

David Friedberg 31:24 Yeah. I mean-

Jason Calacanis 31:24 I think it's what you build on top of it, and so y- that hasn't been figured out yet, for sure.

David Friedberg 31:29 Yeah, look, I- I think that if you're only using a few use cases of these big, complicated software packages then yeah, it's probably easier than ever to deprecate them. You know, eliminate them from your stack and just have your own internal engineers build specifically what you need in a more tightly integrated way. I think that is possible.

Jason Calacanis 31:50 Nick, show this tweet-

David Friedberg 31:50 But-

Jason Calacanis 31:50 ... to these guys. Here's the tweet. Th- this is... And, and I'm not making- Oh, this was a crazy one, yeah. So, so look at... But look at the code. Look at the actual product itself for a second.

David Friedberg 32:03 Yeah, but the product-

Jason Calacanis 32:04 Right?

David Friedberg 32:04 ... is garbage. I mean, look how ridiculous this is.

Jason Calacanis 32:06 But that was six-hun... S- it... Sorry, it was a billion dollars that NYC bought. Okay, so here's the tweet.

David Friedberg 32:11 Oh, well this is, this is just egregious-

Jason Calacanis 32:12 New York City's public college system paid Oracle $600 million to build our course management portal. It's built on top of Oracle's PeopleSoft suite, which they refuse to customize without an extra $400 million to hit $1 billion. New Yorkers got the image below and pay $5 million-plus a year for hosting.

David Friedberg 32:28 Look, this, this is egregious government waste. I mean, that site looks like... It's pathetic. I mean, honestly, this looks like it a- it could have been done with a SharePoint site and you pay some consultant to stand it up and... For 1% of the cost. And t- there are better plat- more modern platforms than that, so this is just incredibly wasteful and inefficient government spending.

Jason Calacanis 32:52 And then they're going for retro. And, and, and they were going for retro.

David Friedberg 32:55 And, and-

Jason Calacanis 32:55 They wanted to hearken back to the '90s and get people

Narrator 32:58 Yeah.

Jason Calacanis 32:58 ... on remembering the... But the reason I wanted to, I wanted to show this to you is- Yeah. ... I think that these kinds of things will not be possible in the future. I just- Hmm. ... don't see how one could spend a billion dollars, if one tried to, to enable that (laughs) feature.

David Friedberg 33:12 Yeah, but see-

Jason Calacanis 33:12 It'll be impossible.

David Friedberg 33:13 Right. But that, that, that 600 million that was wasted on that, um, crappy portal, that shouldn't have happened even without AI, right?

Jason Calacanis 33:21 Agreed.

David Friedberg 33:21 Because-

Jason Calacanis 33:22 I agree.

David Friedberg 33:22 ... there's, like, much better ways. There... You could-

Jason Calacanis 33:24 Yeah.

David Friedberg 33:24 You could buy a much better product for 1% of the cost, so... Or 0.1% of the cost. So-

Jason Calacanis 33:29 There must be some regulatory capture going on here, where somebody's got a record- No, I think it's relationships. ... like, a 10-year re- That's what I'm saying- Yeah, totally. ... like, a 10-year relationship with somebody in Albany that, you know-

David Friedberg 33:40 It's waste, fraud, and abuse.

Jason Calacanis 33:40 ... worked at Oracle

Jason Calacanis 33:41 previously. Yeah, something in...

David Friedberg 33:42 It's waste, fraud, and abuse. It's the same thing that's happening with, um, rural internet. Do you see that story?

Jason Calacanis 33:47 Yeah, which is our new- Horrible. Horrible. ... paradoxically, it's our next story. Horrible. So (laughs) - Horrible. ... let's go for it. In related news of our government burning our money, rural broadband, rural broadband (laughs) and EV charging, 42 billion and 7.5 billion, almost $50 billion combined. Let's just go over these two programs real quickly here. Both were part of the $1.2 trillion infrastructure bill in 2021, 42 billion carved out to provide high-speed internet to people living (laughs) on farms and rural locations, 7.5 billion carved out to build 500,000 EV chargers over 10 years. It's been a thousand days since the bill was passed, so let's check on the progress. Zero people have been connected, according to FCC Commissioner Brendan Carr, and eight, one, two, three, four, five, six, seven, eight EV (laughs) chargers have been built as of May, according to AutoWeek magazine. What's even crazier, private industry already solved these problems (laughs) . United Airlines just announced they're putting Starlink on a thousand of their planes, and they're gonna offer it for free. And Starlink now has 2,500 planes under contract with a bunch of other airlines. And, uh, in the second half of 2023 alone, the private sector built over a thousand charging stations in the US. These are two problems that's- have already been solved, Sax. Why are we burning $50 billion in the future with- So close. Uh, on things that have already been solved? We've solved for this. You, I own electric cars. I have Starlink. You know the answer. You know the answer. Say the answer, Jason. Corruption. No. Come on, Jason. Incompetence. R- R- Really? Graft. Keep going. (laughs) I mean, you tell me. W- w- corruption, graft, buying votes from your constituents? They haven't, they haven't delivered any of it. Incompetence, yes (laughs) .

David Friedberg 35:51 Well, there's, there's a couple things going on here. So one is typical government waste, fraud, and abuse-

Jason Calacanis 35:57 Mm-hmm.

David Friedberg 35:57 ... where they've allocated 42 billion for rural internet, haven't hooked anyone up, and we could spend a fraction of that giving people Starlink and allowing the private sector to do its job. So-

Jason Calacanis 36:09 And why even pay for it, Sax? Why are we paying for it if it's available-

David Friedberg 36:12 Sure, of course.

Jason Calacanis 36:13 ... for 100 bucks?

David Friedberg 36:14 So that, that's, that- that's the baseline, but it's-

Jason Calacanis 36:15 Yeah.

David Friedberg 36:15 ... worse than that because on top of the waste, fraud, and abuse, and the fact that the government is grossly incompetent and inefficient, you also have naked political retaliation going on here.

Jason Calacanis 36:26 Ah, that's-

David Friedberg 36:26 And-

Jason Calacanis 36:26 ... the answer.

David Friedberg 36:27 Yeah, exactly. And Brendan Carr, who's an FCC commissioner, pointed this out. He said that in 2023, the FCC canceled or revoked an $885 million contract with the company by claiming Starlink is not capable of providing high-speed internet.Then, the- a year later-

Jason Calacanis 36:45 I'm using it. (laughs)

David Friedberg 36:46 ...the... Yeah, of course, that was a lie.

Jason Calacanis 36:48 (laughs) It's a lie.

David Friedberg 36:48 And then a year later, the FCC is now claiming that Starlink provides so much high-speed internet that the word "monopoly" should be, uh, tossed out.

Jason Calacanis 36:56 Yeah.

David Friedberg 36:56 So look, this is just pure-

Jason Calacanis 36:58 Which is it? (laughs)

David Friedberg 36:59 ...it's pure, naked retaliation.

Jason Calacanis 37:01 Yeah.

David Friedberg 37:01 The, the Biden-Harris administration doesn't want to admit that Elon has the best solution for rural internet.

Jason Calacanis 37:08 Yes.

David Friedberg 37:08 Just like they couldn't admit he made the best electric cars. Remember when they did that EV summit and they didn't invite him?

Jason Calacanis 37:13 Yes. 100%.

David Friedberg 37:13 That was just nakedly political, um, because he's on their team.

Jason Calacanis 37:17 Because it's not union.

David Friedberg 37:18 Right.

Jason Calacanis 37:18 It's not union.

David Friedberg 37:18 So look, I mean the, the, the Biden-Harris administration, it... Look, it's blue no matter who. And Elon has drifted from being sort of independent and not aligned to-

Jason Calacanis 37:30 Yeah, he was blue.

David Friedberg 37:30 Exactly.

Jason Calacanis 37:30 He was blue. Let's call it what it is.

David Friedberg 37:31 So now, now he's no longer-

Jason Calacanis 37:32 I mean, he voted for Hillary and Obama he said.

David Friedberg 37:34 He's no longer team blue, and so they're punishing him for this.

Jason Calacanis 37:37 Yeah. Well-

David Friedberg 37:38 And it's costing taxpayers a huge amount of money. I, I think this is one of the worst decisions by the current administration. And if Trump gets in there, he should reverse it on day one.

Jason Calacanis 37:47 Well, and we need to investigate. I mean, I think how we got to the point of wasting $50 billion, that requires an investigation, I think. Chamath, your thoughts?

David Sacks 37:57 One comment is, and this is so sad, but I'm so desensitized by the amount of waste that I don't know whether $50 billion is a lot or a little anymore when it comes-

Jason Calacanis 38:07 Hmm.

David Sacks 38:07 ... to the United States government. Isn't that sad? Like, 'cause now everything I hear is-

Jason Calacanis 38:11 It's normalized.

David Sacks 38:12 ... in hundreds of, hundreds of billions and trillions, but $50 billion is an enormous amount of money, right?

David Friedberg 38:18 Well, that-

David Sacks 38:19 It's-

David Friedberg 38:19 ... that's such a good point. And I remember, you know, back in the day, 60 Minutes used to do these segments on waste, fraud, and abuse at the Pentagon, different parts of the government. $42 billion just spent on something that really taxpayers could have for free or without the government getting involved, and, you know, $42 billion that was lining someone's pocket when the service doesn't even work. That would've been a scandal, and the media-

Jason Calacanis 38:42 Yes.

David Friedberg 38:42 ... would've covered it. But the media doesn't even cover it these days. And again, it's because the media has become so tribal that it's better dead than red, and blue no matter who. And so, because the media would have to admit that Elon's already solved this problem, they just can't go there. They won't even cover this. And so we have no accountability. There's no accountability on the government.

David Sacks 39:03 If I had to just take a step back and just generalize going forward, do we wanna live in the kind of administrative state where they will pick people that they dislike based on totally random criteria, a tweet, a meme, a post, and then all of a sudden punish a bunch of the rest of us because of that? They're punishing all of America because they collect our taxes to waste on it, and then they punish the people that they actually say they're going to uplift by not delivering what they promised. And if you take Elon out of it for a second, the p- the problem was when we crossed the chasm and did it f- with the first guy, him. But the reality is, there's only one of him and then there's a lot of the rest of us. And what'll happen is people ju- just get added to this list of folks that certain nameless, faceless people in the administrative state dislike. And what happens is the country slows down.

Jason Calacanis 40:09 Hmm.

David Sacks 40:09 And the country wastes money and the country pilfers it away. And that has to stop. And so what really bothers me about these things is, A, I don't know how to un-desensitize myself to the fact that all of a sudden now, because of just all of this sloppy waste, I didn't react as much as I should have to just $50 billion being flushed down the toilet on these two projects. And then two, Jason, your point, it is a solved problem that you can give incredibly cheaply.

Jason Calacanis 40:39 Hmm.

David Sacks 40:40 And the fact that it's not left to private enterprise to solve this, and instead it's just brazen partisanship combined with retaliation, combined with incompetence, and to really-

Jason Calacanis 40:51 And buying votes by giving this money to other vendors who are giving them donations.

David Sacks 40:56 And just to give the Democrats their due, what happens if then Trump does the same thing for a solution that you support and you need and you think should be everywhere? The, the point is, we don't want any of this stuff-

Jason Calacanis 41:07 No.

David Sacks 41:07 ... under any administration. And-

Jason Calacanis 41:09 Separate.

David Sacks 41:09 ... it's... A- and the minute that one administration breaks the seal and makes it acceptable, it becomes part of the water table. And that's the real problem. We broke the seal on this crazy multi-multi-trillion dollar spending, and it has just never stopped since then.

Jason Calacanis 41:27 And, you know, the incentives really matter. Uh, if you look at a private company, if you were at Klarna and, to our previous story, and you go to the boss and say, "I know how to get rid of these, this wasteful spending we're doing here. We can get rid of all tier one calls with AI and save that money," you get a promotion. If you're in the government, y- you can't. If you're a politician and you cut this program, your constituents get upset, you don't have that stuff being built in your district, there is a perverse incentive that you can't buy the votes, which is why these folks are constantly trying to buy votes. And then second-

David Sacks 42:01 The good, the good news is, the good news is, I, I really applaud the people that have the courage to show this stuff on X, to tweet this stuff out-

Jason Calacanis 42:10 Yeah. Brendan, yeah.

David Sacks 42:10 ... so that the rest of us know about it, and the person that talked about the NYC thing. But then the next step has to happen, which is that we all need to decide that this stuff needs to stop.

Jason Calacanis 42:21 Exactly.

David Sacks 42:21 Otherwise it's gonna bankrupt our country.

Jason Calacanis 42:23 And we have to celebrate it. That's the key. If we can celebrate people saving money again, like Millais is getting a lot of credit. And that's up to us, i- leadership in podcasting or the media or influential people who have followings. If you point out, "Hey, this is a waste. Go save this money," and somebody does save the money, well, why don't we start celebrating people saving the money and doing the right thing here? Because this is our children's future.

David Sacks 42:47 Is it true that Kamala was the broadband czar?... that was responsible for this thing? (plate slides)

Jason Calacanis 42:51 I mean, it's who knows? It's just-

David Sacks 42:53 No, because I saw it... I, I saw that a bunch of senators wrote a letter to her.

Jason Calacanis 42:58 Huh.

David Sacks 42:58 And they claimed that she was the broadband czar, but I don't know if that's true or not true and whether she was responsible.

Jason Calacanis 43:04 I mean, we just-

David Friedberg 43:05 Well, remember, she was the AI czar. I mean, the administration did put her nominally in charge of various technology initiatives.

Jason Calacanis 43:12 Here's an idea-

David Sacks 43:14 That's just awesome. (laughs)

Jason Calacanis 43:14 Save money, get the, get the best solution at the lowest price, and then reevaluate that as you go. And I just wanna point out with the... it's a, this is a, a subtle point, but Elon also open sourced his patents for the superchargers and let anybody do them. And he opened up the superchargers to other vehicles, which he didn't have to do. And when they gave him a loan back in the Solyndra days and the Fisker days, remember they gave these incentives in the form of loans? He's the only guy who paid it back. Everybody else failed. So now you're punishing the guy who actually built the infrastructure for both of these projects. So the reward for actually doing the right thing, which Starlink did, SpaceX did, and Tesla did, is to be punished. And then you're giving a leg up to somebody else who's building these chargers. Who's more qualified to build these charges at scale? (laughs) Or a satellite network at scale? The person who's already done it. He's already done it.

David Sacks 44:07 I do worry that there's a growing version of the Elon derangement syndrome that's also kind of like festering.

Jason Calacanis 44:15 Yeah, for sure.

David Sacks 44:16 Which just, it just stops people from thinking rationally.

Jason Calacanis 44:20 Of course. I mean, we're talking about laying fiber lines, cable modems to people who are hundreds of miles into the countryside. That makes no sense when you can just beep put a satellite dish up today. What are we even talking about here?

David Friedberg 44:36 Yeah, look, I mean, government has never been particularly efficient, but there was a period of time where people would at least care about wanting to make it more efficient. And it would be a scandal if there was political corruption to try and bias the result in a way that actually deprived the intended recipients of the program from getting the services they were supposed to get and cost the government way more money than it needed to. We're so far beyond being that country anymore-

Jason Calacanis 45:02 Let's bring it back.

David Friedberg 45:03 ... where we actually debate the best policy. We're, now it's just like we're warring political tribes, and the objective of the party is to punish its political opponents, to engage in retaliation, and to basically loot the public coffers as much as possible on behalf of their constituents. And that's what's basically happening. You know, it's completely-

Jason Calacanis 45:26 Yeah.

David Friedberg 45:26 ... dysfunctional.

Jason Calacanis 45:27 Well, let's use this podcast. If you see government waste, tell us in one of our future appearances.

David Friedberg 45:30 No one really cares because the media doesn't really shine a light on it because they're, they're completely tribalized as well.

David Sacks 45:35 I agree with everything you're saying except the last part. I don't think it's on behalf of their constituents. I don't think any of us see any benefit from any of this spending.

David Friedberg 45:43 No, no, I meant their donors, the, the donor constituents.

David Sacks 45:46 Yeah.

David Friedberg 45:46 There's not, not the citizens of the country.

Jason Calacanis 45:49 Oh, I see. Yeah, yeah, right.

David Sacks 45:50 They're happy-

David Friedberg 45:50 Yeah.

David Sacks 45:50 But who, but who's winning in this? It's not like this 42... Is, is 42 billion lining the pockets of, I don't know, name needs of-

David Friedberg 45:56 For sure. How do you think these contracts get awarded?

Jason Calacanis 45:58 For sure all those fiber companies that are gonna lay that fiber are gonna get that money.

David Friedberg 46:01 And then, uh, and then they're gonna kick back 40,000 contributions.

David Sacks 46:03 40,000 a home. But it's been, it's been three or four years. They, they haven't done a single thing.

Jason Calacanis 46:07 (sighs) I mean, the... I still think they're cashing the checks.

David Sacks 46:10 I, it seems like we're at the stage of just pure incompetence and retaliation. We're not even at the stage of actually then giving it to anybody else.

David Friedberg 46:16 (laughs)

Jason Calacanis 46:17 I mean, that would be... So, so they're giving the money away and they're so incompetent-

David Friedberg 46:21 Somebody else is getting this money.

Jason Calacanis 46:21 ... they're not getting the political benefit from it. (laughs)

David Friedberg 46:24 No.

Jason Calacanis 46:24 No.

David Friedberg 46:24 They, they're so incompetent, they can't get it out of their own way, but somebody's getting that, call it 50 billion, that we don't need to spend. And the way that money is awarded is gonna be political.

David Sacks 46:34 We're gonna do our-

David Friedberg 46:34 You don't think that they're gonna turn around and give big political contributions?

Jason Calacanis 46:37 Yeah, of course they are.

David Sacks 46:38 Well, I think, I think the, I think the good news is that the more of these things we shine a light on, the harder it'll be to hide when these grants are actually given or what the execution is. And, and, and to your point-

Jason Calacanis 46:50 Let's start a running list. Let's start a running list.

David Sacks 46:52 No, to your point, Sacks, maybe like, you know, we, we need a revival of the 60 Minutes, you know-

Jason Calacanis 46:57 Right here.

David Sacks 46:57 ... Waste, Fraud, and Abuse.

Jason Calacanis 46:59 On this program. We'll do it at the end of the show every time. We'll, we'll have a running list at allin.com of just every, of one of these scandals and we'll feature it. So leak it to us first. Send it to us. My DMs are open.

Jason Calacanis 47:10 All right, listen, early stage investing has always been hard. There was a tweet storm this week that Y Combinator might be having a hard time replicating their early success. We'll discuss it now. A thread this week from X user Molson Heart caught a couple people's eyes. He made the case that it's been a rough decade for YC based on the accelerator's top companies page. YC lists top companies by 2023 revenue there. And, uh, you'll notice there's not a lot of companies from the recent cohorts. Out of the 50 companies featured only three are from the classes after 2020, most of them being from the early 2010, '10s. Obviously, that's because they've been around longer, but it sparked a big discussion that there were so many winners from the 2009 to 2016 era. And that, uh, maybe the class size at YC has expanded a whole bunch and maybe that's part of the problem, but there's a bigger problem in VC that we've talked about here. Here's a chart from Carta that just shows the percentage of VC funds that have made a distribution since 2017. Over 40% of 2018 vintage funds have not made a single distribution yet. Uh, and it's getting to the point year five, six, or seven, where you probably should have had some distributions occur. Obviously, a lot of this has to do with maybe M&A and those early wins being taken off the table. We've talked about that a whole bunch. But here's the chart that kind of gets really interesting. An explosion in fund managers occurred, as we all know, and this chart shows from PitchBook, the first-time, first-time VC managers that raised a second VC fund as a share of all first-time VC managers, and it's now down from above 50% to below...Gosh, 15%. So, what are your thoughts here, Chamath?

David Sacks 48:57 My gosh. Venture is a really, (laughs) really tough business. Every year for the last seven, six years, seven years, I have published my returns, which most VCs don't wanna do. I do it because I go back and I look at it, and I think having public accountability actually drives some good decisions. They s- they may seem suboptimal in the moment, but they, in the long run, turn out to be good decisions, and the biggest one has been generating liquidity. So Nick, you can throw up this thing, but I'm sure there are funds in each of these vintages that have done way better than me, so I'm not, I'm not saying, you know, it is what it is, but what I wanna point out is, if I go and look inside of these funds and tell you how hard it has been to generate this DPI-

Jason Calacanis 49:50 (laughs)

David Sacks 49:50 ... it is like, it's like dragging an entire just-

Jason Calacanis 49:58 Sack of potatoes-

David Sacks 49:59 Oh, my gosh.

Jason Calacanis 49:59 ... over the finish line. It's, it's-

David Sacks 50:01 It's like, like a truck of dead bodies over a finish line.

Jason Calacanis 50:04 (laughs)

David Sacks 50:04 It is super, super hard. And the things that we have fought are two. One is that the gestation of companies has totally blown out. We used to be in a world where, by year five, six or seven, you could return money. You just can't do that anymore, unless you get extraordinarily lucky, which by the way, I got when Sacks was running Yammer. It was an enormous win for all of us, but that is just exceptionally rare because there just-

Jason Calacanis 50:33 And that was M&A in year what? Five or six, Sacks?

David Sacks 50:36 Yeah, but there's just-

Jason Calacanis 50:36 When did it get sold?

David Sacks 50:36 ... there's so few, there's so few entrepreneurs capable of that. He's one of maybe five or 10. So, other than that, I've never really had a company that has generated liquidity in year five, six or seven. They've always generated, if they've de-generated it at all, in years 11, 12, and 13. And so the problem with that is that at some point you have these paper marks that say you're winning and things are working, but there's no path to liquidity.

Jason Calacanis 51:06 Mm-hmm.

David Sacks 51:06 So then I, what I did was I stepped in to the secondary markets and I would sell.

Jason Calacanis 51:12 Hmm.

David Sacks 51:12 And it would really upset certain founders, but I was very clear that when I was running outside capital, and I was running outside capital on behalf of really i- organizations that I believed in, the Broad Foundation, the Mayo Clinics, Memorial Sloan Kettering, my job was to get them money back. You know, these were their pension funds. These were the things that they used to build facilities, so-

Jason Calacanis 51:36 Cancer research.

David Sacks 51:38 Cancer research. I didn't have the, you know, ability to just sit on my hands and say, "Oh, you know what? You're 15, don't worry." So, it, it's just meant to say that the, the tactics of generating liquidity in venture are very misunderstood and very underappreciated, and even then, you sell some things that are just absolute winners that had you waited another five or six years would've turned another, you know, one or two turns, but that's not the job. The job is not to maximize absolute every single win. The job is to return capital in a reasonable time period so that your investors don't run outta money to give you.

Jason Calacanis 52:19 Yeah. It's, uh-

David Sacks 52:20 So it's a tough game, man. It is really, really, really tough.

Jason Calacanis 52:23 Yeah. And the, and the insight-

David Sacks 52:25 And, and sorry, by the way, and I feel this now because, you know, the last five or six years has been entirely my own capital, and my gosh, it's hard.

Jason Calacanis 52:32 Yeah.

David Sacks 52:33 Managing liquidity is imp- it's impossible, especially when you can't rely on anybody else. So, it's a tough game.

Jason Calacanis 52:39 Well, and thank God for the secondary markets even emerging, because at the same-

David Sacks 52:42 Oh, thank God.

Jason Calacanis 52:42 ... time that the secondary markets emerged and people were willing to buy venture assets, you know, going into their second decade or-

David Sacks 52:50 I would've been in real trouble without the, without reasonably liquid secondary market-

Jason Calacanis 52:53 Uh, myself included. I mean, uh, uh-

David Sacks 52:54 My numbers, my numbers would be a quarter of what they are.

Jason Calacanis 52:58 Yeah. And I, I took advantage of almost every time I had one of those opportunities to sell some shares, pair some positions, and that's how we got our DPI as well, because let's face it, moynihan and the anti-tech sentiment has led to these large companies not buying startups and instead they compete with them. They just say, "We'll build it in-house 'cause you're not letting us buy it," and it's broken the entire ecosystem now.

David Sacks 53:22 That's broken. The, the IPO process is broken. I tried to flip that on its head with SPACS.

Jason Calacanis 53:33 Yeah.

David Sacks 53:33 V- You know, some worked, some didn't. Many didn't in the end. Many of mine didn't work out at the end. There was a period where it looked like it was working, but these are all attempts at changing the liquidity cycle-

Jason Calacanis 53:44 Yeah.

David Sacks 53:45 ... of these companies, because the way that things stand today, we are not in a sustainable industry. It is if you raise funds and think about fee generation, but it is not if you think about returning money to founders, LPs, getting employees compensated for many years of hard, you know, toil that they put in. It's a very tough game right now for us.

Jason Calacanis 54:06 Well, Sacks, right now we're seeing people do things like selling, you know, their early SpaceX or their early Stripe, whatever it is, to other VCs, to later stage funds. A lot of ways to try to secure DPI. What's your thoughts on the state of venture today, given all this data that we're looking at today?

David Friedberg 54:25 Well, tw- two points. So first, I agree with Chamath that the amount of time it takes to generate an outcome for, I'd say most startups, is longer than the 10-year period of these funds. And these funds can be extended up to 12 years usually, but then what do you do after that? I, this takes a lot longer than that l- in a lot of cases to generate a meaningful outcome. I just had two companies that I invested in, in my second fund, so in 2019 and 2020, so four years ago and five years ago, just got marked up.

Guest 54:56 And it was a big markup, the company's doing well. I call them late bloomers. It took four to five years for them to accomplish what they wanted to in terms of, like, building out the tech. I mean, I invested at, like, the earliest stage. So that's how long it took, and now they just did growth rounds and they're kind of off to the races. But, you know, I could easily be 10 years from here to get to-

Jason Calacanis 55:15 Yeah.

Guest 55:16 ... a liquidity event. So you're talking about more like 15-year funds. So I agree with that point. The second thing, though, is that the big thing that's happened in our industry is we had a bubble in 2020 and especially 2021. And we just had a ton of capital come into the industry because the Fed and the f- the, um, federal government airdropped $10 trillion of liquidity onto the economy in reaction to COVID. And not all of that money went into VC. It went into a lot of places, but the VC industry was flooded with cash. And you see this in the deployments. I mean, in those bubble years there was something like 200 billion a year of capital deployment when normally it's 60 to 100 billion. So if twice the amount of money is going into the industry and is being deployed, and rounds are now twice as big and valuations are twice as big, that has a huge outcome, uh, a huge effect on returns. So for example, the average venture fund is like a 2X return. But if the entry prices were artificially double, then there goes your return right there. Your 2X becomes a 1X.

Jason Calacanis 56:20 This is such a key point, yeah.

Guest 56:21 So, look, I think we're just in the hangover of this massive liquidity bubble that didn't originate in the venture capital industry. It came from, frankly, the federal government, but we're just downstream of that. Now what I would say is, I, I do think we're at the tail end of working that out, and the good news is that we now have maybe the most exciting tech wave ever, which is AI. Definitely the most exciting tech wave since the internet came along in the mid to late '90s. So, the hope is we're finally gonna have, like, really exciting things to invest in again. But, but yeah, look, I think we're at the tail end of the last cycle and the beginning of a, of a new cycle.

Jason Calacanis 57:00 And vintage distortion is so real, you know? It's very hard to understand how each of these vintages with your late bloomers or overpriced things, companies getting $100 million rounds-

Guest 57:11 Totally. Totally.

Jason Calacanis 57:12 ... at a billion dollar valuation before they have product market fit, and those distortions were just so pronounced the last five to ten years that we're now sorting them out like a, like a house of mirrors where you don't know who's tall, who's fat, who's skinny, what the reality is here. And the other big thing is this peanut butter effect that, you know, I, I tweeted about today. You know, during peak ZIRP you had all these exceptional team members, you know, the number two, three, four, five person at a company that was doing great, they would leave to start their own company, so the talent got spread. Then you had so many of these founders rushing into the same vertical, so you'd have 20 startups because there was too much capital pursuing the same opportunity, who pursued the same opportunity, what happens to earnings? They get spread then. What happens to customers? They get spread across 20 different products competing for the same customer, and then what happens with, you know, ownership stakes for us as GPs and LPs, Chamath? The ownership stakes, because the valuations went up so much, they got spread like peanut butter-

Guest 58:14 Totally.

Jason Calacanis 58:14 ... and instead of a series A getting you 20% of a company, it got you 10, instead of a seed check getting you 5%, it got you one. There's no DPI possible.

Guest 58:22 You nailed it and Sacks nailed it, but, but, and the thing to remember is both of those two things now work together to erode the return stream for the general partner, but really most importantly for the limited partner. So I, I do think that we are in a situation where the average returns are going to decay by 50% to 100% because of what Sacks said and because of what you said. On top of that, I don't think we know what the actual cap structure needs to be for a, a successful AI company. Is it 20 people that does the work of 2,000 now because they have all of these agents and systems that work on their behalf? If that's true, giving that company hundreds of millions of dollars is actually the opposite of what you want to do. You want to give that company 10 or-

Jason Calacanis 59:07 Yeah.

Guest 59:07 ... 15 and then let them cook. And so we have a, we have a rightsizing of capital problem that needs to happen. The data would tell you though that the industry understands that. So the fact that we've gone from 50% of people being able to raise a fund to 12% means that a lot of people will get washed out of the industry, less capital being raised, which probably is foreshadowing the fact that these companies will need a lot less capital. But, you know, that has a lot of implications as it ripples through our economy. It does... I think it's very good for the early stage. I think, you know, you guys are very good there. You've talked about how it's good for you. It's very complicated, I think for the expansion and growth stage capital, and then I think it's going to be, there's going to be another turn on what happens on the IPO markets because you can't have so many companies waiting with very, very few ways of accessing public market capital and exposure. I just think this is, that is, that is-

Jason Calacanis 1:00:04 Yeah.

Guest 1:00:04 ... fundamentally broken and we're gonna have to reinvent. We tried once with SPACS. We're gonna have to go back to the drawing board and try again. I don't-

Jason Calacanis 1:00:11 Direct listings, secondary markets that are more fluid. I don't know-

Guest 1:00:14 I don't know what it is-

Jason Calacanis 1:00:15 Yeah.

Guest 1:00:15 ... but we need to do something because the status quo doesn't work.

Jason Calacanis 1:00:18 I think there's a lot, so many good points that we're hitting here. I'll, I'll just say the, the other thing to build on your point about, hey, these take less capital, you have to look at what does your ownership, after you've been diluted half, by 50% as a seed or series A investor, you're gonna be down to half. So if you own 10%, you own five, if you owned seven like YC or we do in a company, you're gonna own three. You're gonna really have to model out, is the valuation you're looking at, what does it pencil out to for an outcome? And when I did this with our investments, I saw a leak in my game which was, hey, I'm putting 100K into a $25 million round or a $50 million round as a follow-on investment, you know, to support the founder.Okay. What does that do for my LPs? Well, that 100K would need to hit some extraordinary outcome, five, 10, 20, $40 billion in order for us to return the fund. So now my team understands, "Hey, take that 125K, that 250K, that 500K, do more four, do four more accelerator companies with it because those could return the fund." And that's, that fund math, people stopped doing. I think all these fund managers who are getting wiped out, they never penciled out, "What does this company I'm giving a million dollars need to hit in order for me to return my fund?" And now they're finding out that it's not-

David Sacks 1:01:36 Look at the thing that Sachs just tweeted.

Jason Calacanis 1:01:38 ... doesn't work.

David Friedberg 1:01:38 Oh, shit.

David Sacks 1:01:38 Look at that. I mean-

David Friedberg 1:01:39 Let me see, let me see.

David Sacks 1:01:40 You know, th- everybody's course correcting.

David Friedberg 1:01:42 I mean, it's basically the capital deployment's gone back to-

Jason Calacanis 1:01:45 Reality.

David Friedberg 1:01:45 ... where it was in 2019, let's call it. So again, we had this bubble, the foam started building in 2020, but you had COVID, people didn't know what to think, so there was some restraint, I guess. And then 2021, it just went wild.

Jason Calacanis 1:01:58 (scoffs) That was nuts, man. That was-

David Sacks 1:02:00 Well, I mean, the question is-

David Friedberg 1:02:01 ... those middle vintages are just gonna be garbanzo beans '21, (laughs) 2022.

Jason Calacanis 1:02:05 Well, you know, that's such an interesting point.

David Sacks 1:02:07 If you can, if you can return capital, you're gonna look like a euro.

Jason Calacanis 1:02:10 Also, Chamath, I remember, I don't know if it was Michael Moritz or, or Doug Leone, but I was talking to Sequoia about the time dispersion of your fund, like over what period of time are you deploying a fund. And man, people started deploying funds in 18 months, because they could raise the next fund so quick. So they're like, "Screw it, I'm gonna deploy this fund in 18 months, 24 months." And LPs were saying to me like, "H- what period are you gonna deploy this?" And I said, "Well, you know, I was taught by Fred Wilson and this person, 36 months, 48 months would be a good window to deploy capital because, you know, it, it smooths it out."

David Sacks 1:02:46 I think you're, I think you're saying the, the dirty little secret of the venture business, which is at some point people get to a fork in the road. If they hyper-optimize for returns, I'll put benchmark, I'll put Fred Wilson and USV, I'll put Sequoia's early stage fund. They have to introduce time diversity. They keep the funds small and they look to hit grand slams. But there are many other people, and I would say the most of the set outside of that take the road more traveled, which is then you optimize for size, which then becomes a fee game. And so you optimize for velocity, get the funds out as quick as possible, raise a new fund. They have no intention of generating returns because they have no ability to. When you have absolutely no time diversity in this business, in a pool of capital, you're giving away one of your best edges. David just talked about it as a smart practitioner, he was able to nurture these companies and (laughs) all of a sudden they start to win. If you've all of a sudden flushed all your money in fund one, then you go to fund two, fund three, by the time something in fund one hits, what are you gonna do? You're gonna cross the funds or you're gonna justify taking money from the left hand to pay the right hand, or you're just gonna let your ownership wane because you frittered all the money away. These are all the problems that most of these folks have encumbered themselves with. It's very difficult to get out of. It's gonna take more luck.

David Friedberg 1:04:07 Yeah.

David Sacks 1:04:07 In fairness to them, they probably, you know, got good while the getting's good, so they'll make a ton of money in fees, but they will not be able to raise funds.

Jason Calacanis 1:04:15 And those fees are not clawed back folks. (laughs) For those of you-

David Friedberg 1:04:17 Yeah.

Jason Calacanis 1:04:17 ... playing along at home.

David Friedberg 1:04:18 Well just, just by the way, I feel better about those late bloomers in my portfolio because I know the marks are real. Because if they're getting marked up now-

Jason Calacanis 1:04:26 Yeah.

David Friedberg 1:04:26 ... then it's very, very solid, uh, compared to frankly some of those marks that we got in the bubble year, like 2021. I call 'em tiger marks, whether it was Tiger or not. It's just less real, quite frankly. And a lot of those companies are retrenching and have issues. So a mark now it just means something different than a mark then.

Jason Calacanis 1:04:46 Yeah.

David Friedberg 1:04:46 But look, I wanna, I, you know, just so we're not like totally beating up on VC, there was... You, you remember that in this bubble period of September 2021, everybody thought that this party would just continue forever. And this is a good example from the Wall Street Journal where it's talking about how university endowments were minting billions in golden era of venture capital. So the bubble wasn't just in VC, it was in the public markets too, because we had ZIRP, right? Like interest rates were zero, liquidity was just flowing. And so it was very easy for companies to get liquid, they IPO'd, and then the valuations were stratospheric. So the distributions to LPs were massive in 2021. And then that led to, again, more funds being able to raise bigger funds. Everyone was just kind of paying it forward and thought the party would just keep going. So this is what happens in a bubble is everybody thinks that it's just gonna keep going like that.

Jason Calacanis 1:05:42 And this is why it's so important as a fund manager or an entrepreneur for you to get great advice (laughs) from people who've been at this for a long time and focus on the process. You cannot control all these outcomes. You cannot control all these meta events. What you can control is your relationship with your customers, building a team, making great bets, supporting late bloomers. That's the critical part of all this is the process. And you can make your process better. And so with my team internally, I'm constantly talking to them about our selection of companies, how we help companies get pulled through and get downstream funding. How we... Literally our big effort this year is how do we introduce our companies to the top VC firms. And we've been working on that as a internal project, right? Of just getting our great breakout companies to the best investors to increase our pull through. It is a process and you have to trust and focus-

David Sacks 1:06:41 It's a grind.

Jason Calacanis 1:06:41 ... on the process. Yeah.

David Friedberg 1:06:43 Well look-

Jason Calacanis 1:06:43 Love you boys.

David Friedberg 1:06:44 ... iro- ironically just, I mean, just to end on sort of a positive note, if these interest rate cuts are real, like if we, we just got 50, if we get another 50 this year, if inflation's really tamed, and interest rates-

Jason Calacanis 1:06:56 It's set up.

David Friedberg 1:06:56 ... are never gonna go to zero, but if they go down substantially...... and we have this new AI disruption, this new AI tailwind. We could be back in another golden era.

Jason Calacanis 1:07:07 I agree.

David Friedberg 1:07:07 It's not gonna be a bubble, but it's, could be another golden era, so we'll see.

Jason Calacanis 1:07:12 Start companies. From your lips to God's ears (laughter) love you guys, I gotta go.

Jason Calacanis 1:07:18 Love you. All right, Chamath had to go do work, apparently, starting this new concept at Sax where Chamath is actually going to work, and, uh, at a company. Uh, we never got to talk about the, uh, debate because we were busy doing this summit and we took the week off from a new episode. Uh, people wanted to hear your take. What did you think of Kamala and Trump? The one and only debate we're gonna hear, a- apparently. Any, any thoughts?

David Friedberg 1:07:43 I think that Kamala Harris performed better than expected. She did that, I think, mostly through having canned answers to topics, and she was able to kind of memorize those answers and, and say them, and she was never knocked out of her preparation.

Jason Calacanis 1:08:03 She was well-prepared, yeah.

David Friedberg 1:08:04 I think she was well-prepared. However, we now know that these were canned answers because, in subsequent press interviews, she gives the exact same thing. It's like a jukebox where you just push the button-

Jason Calacanis 1:08:13 Greatest hits.

David Friedberg 1:08:14 ... and you get the same answer. Exactly. So, she's, she's memorized a certain number of talking points, and that's all she's gonna give you, no matter what the question is. And if you saw that, it's become a meme now, where if you saw that question when she was asked about inflation, there's a pause when she's figuring out which Greatest Hits she's gonna play, and then, you know, she, I guess, pushes B26 in her head, and then it begins, "So I was born in the middle class."

Jason Calacanis 1:08:40 And it's working, apparently, right? It seems like it's, it's helping her, yeah?

David Friedberg 1:08:45 I think what you saw is that she got a bounce out of the debate, but now it's sort of, like, a lot of these, um, bounces, there's been kind of a effervescence to it, and then it kind of settles down back to the recurring pattern. And so, I think the election is extremely close, but I don't think-

Jason Calacanis 1:09:01 Oh, yeah.

David Friedberg 1:09:02 ... the-

Jason Calacanis 1:09:02 I mean, every day it's like a poll going one way or the other. I mean, this is the closest of our lifetime, maybe, or that I can remember.

David Friedberg 1:09:09 Yeah.

Jason Calacanis 1:09:09 I mean, it's nuts how this thing has flipped over and over again. What did you think of Trump's performance? Were you disappointed? Uh, there were some rumors, uh, people were a little upset that he doesn't prep as much as he should. What, what's your, what's your advice there, you know?

David Friedberg 1:09:23 Well, look, I mean, I, I think that, uh, he was in a very difficult situation. You basically had a three-on-one situation where he was up against not just Kamala Harris, but the two debate moderators. It turns out that Lindsay Davis is, uh, Kamala's sorority sister. David Muir was fact-checking him constantly.

Jason Calacanis 1:09:42 Yeah.

David Friedberg 1:09:42 And some of those fact checks weren't even correct. Um, for example, we now know that the Springfield city manager has acknowledged complaints about pets being eaten as far back as-

Jason Calacanis 1:09:52 Oh, here we go. (laughs)

David Friedberg 1:09:54 ... a whole second-

Jason Calacanis 1:09:54 I was wondering if we were gonna get through the episode. (laughs)

David Friedberg 1:09:55 Well, no, it's, it's as far as, as far back as March-

Jason Calacanis 1:09:58 Yeah.

David Friedberg 1:09:58 ... there are videos of him talking about the complaints at a city council meeting.

Jason Calacanis 1:10:02 Yes, I, I did see that today, yeah.

David Friedberg 1:10:03 Now, you can, you can say that you don't believe those stories or whatever, but those reports were real, but David Muir fact-checked in real time saying that Trump was wrong, and there was, like, this effort to kind of gaslight and make him sound crazy during the debate when there are, in fact, sources for what he was saying.

Jason Calacanis 1:10:23 And it might have thrown him off a little bit, I noticed. Like, it was like he... I, I agree, they... Going into it, I think they need to negotiate in the future, you know how they're negotiating the microphones on or off, audience on or off. I think they should negotiate, are we fact-checking in real time or are we not fact-checking, and who's doing that fact-checking?

David Friedberg 1:10:43 Well, totally, and they only fact-check one candidate. For example, when Kamala Harris repeated numerous hoaxes like the Very Fine People hoax, the bloodbath hoax, the suckers and losers hoax. I mean, these are things that f- were already addressed in the last debate, and, you know, even left-wing sites like Snopes have said the whole Very Fine People thing is, is totally made up.

Jason Calacanis 1:11:02 Yeah, for people who don't know that, they, there's been selective edits, and I mean, there's been selective edits forever, but that one is particularly egregious, and-

David Friedberg 1:11:09 It's really egregious. The bloodbath-

Jason Calacanis 1:11:10 Yeah.

David Friedberg 1:11:10 ... one was really egregious too because when Trump was-

Jason Calacanis 1:11:11 Yeah, 'cause he was talking about the bloodbath, the EVs-

David Friedberg 1:11:14 The auto industry.

Jason Calacanis 1:11:14 Yeah.

David Friedberg 1:11:14 Yeah, and the auto industry wasn't-

Jason Calacanis 1:11:15 And just make it into-

David Friedberg 1:11:17 Right.

Jason Calacanis 1:11:17 ... a January 6th extension, which it's not. Right. So we're-

David Friedberg 1:11:20 Right. And she was able to say these things and never got fact-checked once, which meant she never got knocked out-

Jason Calacanis 1:11:24 I mean-

David Friedberg 1:11:24 ... of her preparation.

Jason Calacanis 1:11:25 And let's also be honest, like, Trump is hyperbolic, so if you are going to say, you know, "Oh, we're gonna fact-check Trump," like, there's a lot of material there, and he just, he's a hyperbolic guy. That's kind of his shtick, right? I mean.

David Friedberg 1:11:39 But, but here's the thing, is that in the wake of that debate, look, I, I think a lot of people scoring the debate on, like, technical debater's points would award her the, the, the win for, for that night. I don't-

Jason Calacanis 1:11:50 Clearly, she won, yeah.

David Friedberg 1:11:51 ... certainly. I don't deny that. However, what I think has been surprising is that, in the wake of the debate, you're seeing her support sort of return more to its previous level, and so what I'm saying is the effect of that's wearing off. And I think one of the reasons why that's wearing off is because Trump still has the killer issues in this election. He's got the border, and he's got inflation and the economy. And Harris may have done well, again, on debater's points, but what substantive answer did she give in that debate, except to say, "I'm not Joe Biden," which is, I guess, true. However, what you're basically saying is you won't defend your own administration's record. You are the incumbent. You're not the change candidate. And you're saying that people should vote for you because you're not Joe Biden. Well, what is it about Joe Biden's record that, uh, wha- what is it about Joe Biden's policies that you don't agree with? I mean, after all, you cast the tie-breaking vote for the, uh, Inflation Reduction Act. You cast it for the two trillion American Rescue Plan that set off the inflation. So, the debate moderators never asked Harris, "Well, what is it about you that is different than Joe Biden on a policy level, other than the fact that you're, you're a different person."

Jason Calacanis 1:13:02 She's pro- currently, she's pro-gun. I thought that was, like, a great moment for her.Objectively, I think, you know, and I've said this forever here on this show, uh, putting our feelings aside about the candidates, I think whoever comes across as the most normal or the most moderate is gonna win, and I think she's done a great job of, like, pers- pers- convincing those moderates that she's not crazy and he is. What are- what are your thoughts on that? Because people looked at this very podcast and they've said to me, "My God, that's the Trump I wanna vote for, that Trump 2.0, the all-in Trump," and then people are like, "Ah, he's going back to the insult comic Trump, I- I don't want the chaos." What are your thoughts on moderates specifically in the swing states and- and this sort of strategy?

David Friedberg 1:13:45 Well, let's, well, let's talk about, let's talk about-

Jason Calacanis 1:13:46 Yeah.

David Friedberg 1:13:46 ... the Teamsters. So Biden, when he was still in the race, was plus eight among the Teamsters rank and file, and now that, uh, Harris is the- the candidate, Trump is up something like plus 26 with the Teamsters.

Jason Calacanis 1:14:00 Now why is that? 'Cause she's, isn't she pro-union as well? He was Union Joe, so I mean, it was like in the name. I understand why they loved him.

David Friedberg 1:14:08 There's something about her policies and I think her, the, the, the... Look, I think within the Democratic Party-

Jason Calacanis 1:14:15 Maybe it's her personality.

David Friedberg 1:14:17 I think, I think it's partly personality but I also think it's- it's policies and cultural issues. So within the Democratic Party, there've always been two tracks. There's the beer track and there's the wine track. And so, you know, Bill Clinton was classic beer track guy, right?

Jason Calacanis 1:14:31 Yeah. Beer summit-

David Friedberg 1:14:32 That kind of Bubba image.

Jason Calacanis 1:14:32 Beer summit with Obama.

David Friedberg 1:14:33 Right. And I think Joe Biden was- was beer track. Then there's kind of the wine track, which is the more, it's the part of the party that cares about these boutique cultural issues, starting with DEI and equity and, uh, trans and things like that. You can under-

Jason Calacanis 1:14:47 Limousine liberals is what they used to be called, but I like yours, wine liberals, or-

David Friedberg 1:14:51 Yeah.

Jason Calacanis 1:14:51 ... yeah, the woke wine contingent, yeah.

David Friedberg 1:14:53 Basically, the entire California Democratic Party is very wine track. I mean, Gavin is very wine track, Kamala Harris is very wine track.

Jason Calacanis 1:15:00 Quite literally, yeah.

David Friedberg 1:15:00 You can understand why a blue collar worker, it doesn't appeal to that. They want more of that lunch pail traditional Democrat. But that Democratic Party doesn't really exist anymore. I mean, the Democratic Party has evolved to be the party of the professional class, whereas the Republicans are more the party of the working class. And you're now starting to see it. I think Biden was the Democrats' last vestige of this working class party. He really worked at being appealing to those voters, you know, the- that whole Scran (ph) Joe image. And he-

Jason Calacanis 1:15:30 Yeah, Union Joe.

David Friedberg 1:15:31 Yeah, exactly. Whereas Kamala, when you get her talking in an unguarded moment, and it's not a canned answer, she's gonna talk about diversity, equity and inclusion, and that's not what your typical Teamster wants to hear.

Jason Calacanis 1:15:43 Let me ask you a challenging question, 'cause audience likes when I ask you a challenge a bit. If Trump loses, what do you think will be the cause of the loss? If he loses, like strategically when we look back on the last six months, what do you think you would change? What would cause it?

David Friedberg 1:16:02 Well, look, I mean the, the- the- the great asset that Kamala Harris has is not her likability, it's not her track record, it's not her policies, it's the fact that she's got the media behind her. And if you look at like, for example, ABC News, 100% of the coverage by ABC News is positive, whereas something like 93% of the, of their coverage on Trump is negative.

Jason Calacanis 1:16:27 Mm.

David Friedberg 1:16:27 And you saw this, that before Harris replaced Biden as the nominee, she had very low favorability ratings, and then the media basically reinvented her as this transformative candidate. So look, when you've got the media willing to operate as de facto members of your campaign, that's tremendously powerful. If we had a fair media, this election wouldn't be close. So look, that is the advantage the Democrats had. Now look, should Trump have done the debate with ABC News? No, I think he should've chosen more fair moderators. I mean, to their credit, I think CNN played the Biden-Trump debate pretty fair and down the middle. But ABC, I mean it was predictable that, like I said, I mean one of the hosts was her sorority sister, they're friends. So you know, I- I think that if Trump loses, you could say that his willingness to walk into the lion's den, take on all comers, do every interview, you could say maybe that wasn't as strategic as what she did. But at the end of the day, I think