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Why OpenAI needed a federal backstop, not a bailout

Sarah Friar cited a federal backstop in the Wall Street Journal; the actual plan is a buildout, not a bailout, spread across six years and multiple partners.

Jason CalacanishostDavid FriedberghostBrad GerstnerguestChamath PalihapitiyahostSam AltmanguestHosthost
Nov 7, 20251h 27mWatch on YouTube ↗

EVERY SPOKEN WORD

  1. 0:00 – 0:38

    Brad Gerstner joins the show!

    1. JC

      Brad Gerstner's here joining us, hot after crashing the stock market and popping the AI bubble. Well done, Brad. We're gonna get into it. (laughs)

    2. DS

      (laughs)

    3. BG

      (laughs)

    4. JC

      All of our portfolios, thank you, (laughs) were all down 15% this week.

    5. DS

      Can we ask OpenAI to just put a moratorium on any more public (laughs) statements or appearances-

    6. JC

      Yeah, right.

    7. DS

      ... for another couple months?

    8. JC

      Good jo- good job, Brad. You, you decided you'd be a podcaster, you're like, "Hey, let me ask-"

    9. BG

      Hmm.

    10. DS

      Hmm.

    11. JC

      ... "a couple of hard questions here," and you popped an AI bubble. (laughs)

    12. DS

      (laughs)

    13. BG

      (laughs) Yeah, something like that.

    14. JC

      Do as I say, not as I do.

    15. CP

      Are we getting into it? 'Cause I think it is interesting, actually.

    16. DS

      Oh, it's super interesting.

    17. CP

      Yeah.

    18. DS

      Super interesting. Let's get into it.

    19. JC

      So Sam, uh,

  2. 0:38 – 18:16

    OpenAI's rough week: Altman's controversial comments on BG2, CFO's "federal backstop" faux pas, clarifications

    1. JC

      um, um, of course, if you're not in the industry, Sam Altman appeared on the fabulous BG2 podcast last Friday and, um, it got a little frisky when our fifth bestie here asked what I thought was a completely-

    2. DS

      Totally reasonable question.

    3. JC

      ... legitimate, you know, totally mundane question, "Hey, you're making 13 billion."

    4. DS

      Mundane. It's actually a, a, a softball question, to be honest.

    5. JC

      It was an underhanded pitch.

    6. DS

      The way that it was asked, I think you did a very reasonable job of asking a good question in a very fair way.

    7. JC

      So let's just show this, uh, clip here and then I, I wanna go behind the pod with you, Brad.

    8. BG

      (laughs) So I think the single biggest question I've heard all week and, and hanging over the market is how, you know, how can a company with 13 billion in revenues make 1.4 trillion of spend commitments? You know, and, and, and you've heard the criticism, Sam.

    9. SA

      First of all, we're doing well more revenue than that.

    10. BG

      Yeah.

    11. SA

      Second of all, Brad, if you wanna sell your shares, I'll find you a buyer

    12. HO

      (laughs)

    13. SA

      I, I just-

    14. BG

      Ooh.

    15. SA

      ... enough. Like, you know, people are-

    16. BG

      Enough?

    17. SA

      I, I think there's a lot of people who would love to buy OpenAI shares. I don't, I don't think you want to sell, but-

    18. BG

      Including myself.

    19. DS

      (laughs)

    20. BG

      Including myself.

    21. SA

      ... people who talk with a lot of, like, breathless concern about our compute stuff or whatever that would be thrilled to buy shares. Uh, so I think we, we could sell, you know, your shares or anybody else's to some of the people who are making the most noise on Twitter, whatever, about this very quickly. We do plan for revenue to grow steeply. Revenue is growing steeply. We are taking a forward bet that it's gonna continue to go- grow. There are not many times that I want to be a public company, but one of the rare, uh, times it's appealing is when those people that are writing these ridiculous OpenAI is about to go out of business and, you know, whatever, I would love to tell them they could just short the stock and I would love to see them get burned on that.

    22. JC

      So Brad, um, you asked, I think, like, you know, Chamath and I were just saying, a, a pretty mundane question.

    23. BG

      Yeah.

    24. JC

      You, you said it very nicely. I, I guess we could give Sam a little bit of grace. I, I don't know if he was being a little cheeky or maybe he's tired of answering the question-

    25. BG

      For sure.

    26. JC

      ... but the internet took this and ran with it in a very viral way that he was angry and he was hostile. Uh, how did you take it? And, and, yeah.

    27. BG

      That's the interesting thing, right? I mean, I mean, listen, we bust each other's chops all the time. We get feisty with one another. Sometimes it runs amok, like we don't know if somebody's being serious or not serious. And, and, you know, Sam and I had a good laugh after. You know, I think Sam was, he was feisty, but I think he also intended it as a joke. He knows that I don't wanna sell my shares. He knows that I would like to buy more shares in the company, et cetera. But I think the reason that it went so viral is because it is a super important question. People are really nervous. They're wondering, "Are we walking into an AI bubble?" Like, how can these huge numbers, how can you be talking about 1.4 trillion in spending when you, you know, have kinda gap revenue that's been reported at 13 billion this year? So I was ki- I was a little disappointed, and I tweeted about this afterwards, that kinda the feistiness got in the way of the answer. But if you listen to his words during the rest of the segment, he basically said, "Listen, we think we're gonna have 100 billion in revenues over the course of the next couple years." And, you know, uh, Jay Calley sent the team a chart that, that basically just shows the information's forecast for what OpenAI and Anthropic's revenues are going to be over the course of the next several years. And, like, The Information is reporting that their internal numbers are both over 100, you know, billion dollars.

    28. JC

      The- this is The Information reporting on leaked internal numbers or The Information is taking a guess? What, w- you know?

    29. BG

      No, I think this is, I think they report, this is on leaked internal numbers-

    30. JC

      Got it.

  3. 18:16 – 30:22

    Why Jensen Huang said “China is going to win the AI race.”; the need for a federal framework on AI

    1. BG

      for all of us.

    2. JC

      Great segue, Brad. Thank you.Jensen told the FT straight up, quote, "China is going to win the AI race." His argument, uh, is that US state-by-state regulations and power constraints are making it harder for US AI companies, as we've discussed here countless times, whereas the CCP is obviously just making it super affordable to run all those GPUs. NVIDIA put out the following statement from him. "As I have long said, China is nanoseconds behind America in AI. It's vital that America wins by racing ahead and winning developers worldwide." Obviously he has-

    3. DS

      He's 100% right. He's 100% right. I don't know if you guys saw but Cursor 2.0 launched this week. My team at 80/90 use it. It's an incredible product. Guess what they did? They swapped out Anthropic for an open source Chinese model.

    4. JC

      Yep.

    5. CP

      Do you know what they're using? Is it like KIMI or what is it?

    6. DS

      I think it's Qwen.

    7. CP

      Qwen.

    8. DS

      I think they're using a spin of Qwen, yeah.

    9. BG

      To be clear, they're cleansing these Chinese open source models but they are... I don't know about Cursor, but there are a lot of companies-

    10. JC

      They're forking them-

    11. BG

      Yes.

    12. JC

      ... and then running them, uh, setting them up themselves, obviously.

    13. DS

      My point is we are right now running with one hand tied behind our back. We are gonna have to deal with 50 different sets of legislation from state legislators who think they know what AI is. They don't. Saks knows. So there should be a federal framework and that should be it. And then meanwhile, the Chinese open source models get better and better and better and better. And so we're making technology decisions that tie our wagons to that steel thread. And so Jensen is right, we need to clean this up quickly.

    14. CP

      I was a little bit disappointed to see... I thought it was reasonable for certain politicians, especially Republican ones, to say, "Look, there's not gonna be a federal bailout for AI." Great, we all agree. No one's asking for it. But I was a little disappointed to see that some of them were associating a bailout with a single federal framework as opposed to the patchwork of 50 state regulatory regimes. Because if Republican governors think that they're the ones who are gonna be writing the rules, they're sorely mistaken about this. 25% of the bills going through state legislatures are in four states; California, New York, Colorado and Illinois. In other words, the biggest blue states. Those also happen to be the states where these big AI companies are all headquartered with the one exception of xAI which is in Texas. But these companies are in California. The blue states have the most market power and if they end up creating the regulations, I just think it's naive to think that the AI companies won't write their models to those regulations of the blue states. I don't think the red states are somehow gonna find themselves exempted from the blue state regulations that are being imposed. And I've talked about in a previous podcast how what the blue states are going for here is to reinsert DEI into AI models to achieve ideological capture. And the way they do this, they don't say, "We're requiring DEI," they say that, "We're prohibiting algorithmic discrimination," which means that the model says something bad about a protected group. You end up with the same end result which is, again, ideological capture. I think all Republicans should be opposed to this. There's only one way to stop it which is with federal preemption. Otherwise, the states will do what they want and the blue states will basically dominate. Now I think that part of what's going on here is that Republicans have muscle memory around what happened during the Biden years. And what happened during the Biden years is that the Biden administration pushed for censorship and shadow banning and deplatforming, all that kind of stuff. They were working very closely with the big tech companies to push this censorship agenda. The only pushback that Republicans were able to achieve was at the state level and so you had cases like Biden v. Missouri where we had Senator Eric Schmitt was on the pod talking about that when he was attorney general. And so he was able to make a state's rights argument to push back on the Biden censorship. So I think that Republicans remember that and they think, "Well, state's rights is our solution." But now we have a completely different situation. I mean, the board's been completely reversed where Republicans are in power in Washington and the states are making a bunch of bad decisions with respect to AI. And so I think that, to be honest, I think we need to kind of just realize that. And I think the arguments that make the most sense right now are the Commerce Clause arguments where, look, the Constitution wants to create a single national market for interstate commerce. AI clearly qualifies. And let's give President Trump, not Gavin Newsom or J.B. Pritzker or Kathy Hochul or Jared Polis, the ability to write the rules. Let's have a single federal framework that will prevent ideological capture of AI, keep it unbiased, which every conservative should want.

    15. DS

      I'll just reiterate again. If you want to see the impact of having a state set of regulations that basically munge the market up, just go and use your favorite AI tool and ask what happened when California passed CARB, which are the emission standards that forced the entire American US auto industry to have two sets of cars. One for California and one for the rest of the market. And what did it do? It completely flipped demand upside down on its head and it has made it very difficult for the auto industry to be sustainable. And I think if you apply that same idea across four states instead of just one, across the most important technological revolution we've had, I just don't think it's gonna be a good outcome.

    16. JC

      The steel man's-

    17. CP

      Right.

    18. JC

      ... version of that ... Chamath would be, we got rid of smog in California (laughs) and that it did an amazing job in terms of getting rid of pollution, which also matters. And I'm trying to think of the steel man.

    19. DS

      Are you sure that that's the steel man that you've come up with or do you think that the tax credits did that?

    20. JC

      Um, they have-

    21. DS

      Do you think making two sets-

    22. JC

      ... The top is-

    23. DS

      ... of everything was the way that solved smog or do you think...... the $7,500 federal tax credit solves smog.

    24. JC

      Well, no, but these smog regulations predated the, the EV ones. Those have been going on for decades. So it-

    25. DS

      Okay.

    26. JC

      ... did get rid of smog. So, you know, putting, uh, better, um... using cleaner gas and then having better exhaust on those cars. That would be the steel man of it. I'm not saying I, I'm for or against state regulations, but Sacks, have you heard any... Aside from the, the federalism argument and states' rights, have you heard any great defense of states having some say in how AI is deployed in their communities?

    27. CP

      Well, they can have some say. There, there's definitely areas where you don't preempt. I mean, you have to decide how wide the, the preemption is. But when it comes to things like notifications about model safety incidents, things like that, it doesn't make sense to have model companies needing to report to 50 different states, 50 different agencies within those states, each with a different definition of what needs to be reported, each with different reporting deadlines. Like, why would you have that? It doesn't make any sense. Why would you allow the big blue states to essentially insert DEI into the models, which will affect the red states too? You're not gonna be able to keep that out. I mean, if California pushes algorithmic discrimination, you know, Florida and Texas and Arkansas are gonna be affected as well. So I think we need to use the opportunity we have right now by the fact that we have a majority in Washington to set a sensible federal standard that preempts the excesses of the blue states. And look, the constitutional arguments you can make either way. I personally believe in the commerce clause, but I think when it comes to the merits of the policy argument, we should let Donald Trump write these rules. Let me just say one other thing. Part of what's going on here on the right is that there's so much anger towards the big tech companies for what happened during the Biden years with censorship and deplatforming that I think there's just this knee-jerk reaction where we don't wanna do anything to help the tech companies, we just wanna hurt them. And I think we just have to have a more nuanced approach than that, because the question is, what will the result be? Look, no one was more critical of the big tech companies engaging in censorship in Silicon Valley than me when Donald Trump-

    28. JC

      Yeah.

    29. CP

      ... was kicked off every big tech platform. I think I was literally the only person in Silicon Valley who was publicly objecting to that on this podcast. So, I'm perfectly willing to criticize the big tech companies when they make a mistake. But when they're engaging in healthy competition and innovation and we wanna prevent ideological capture, and that's what we're talking about, let's make sure it ends up in the right place, not disengage in this knee-jerk anti-tech reaction, which will play into the hands of the blue state governors.

    30. BG

      We're in this race to win, uh, uh, AI globally. And one of the major concerns I have is that AI is becoming deeply unpopular in America, right? Silicon Valley is losing the battle around AI. Doomers are now scaring people about jobs. They think all these job cuts that are going on in America are the result of AI. And number two, they're seeing their electric bills go up, and they think that's also the result of AI. I've talked with a lot of Republican senator and House members who say they are afraid to mention the words AI because their popularity ratings go down. We need to get on the other side of that, because that is a losing proposition for America. If what takes hold here is that, you know, it's politically popular, right, to push back against AI, then David, I think that's what you're seeing at these state levels-

  4. 30:22 – 36:30

    OpenAI's strengths and headwinds: breakout product, trust issues, competition, betting on the AI supercycle

    1. JC

      Brad, let's talk brass tacks, uh, before I move on to our next topic about ChatGPT and their revenue. If they're at 20 billion in revenue run rate, I think it's pretty well-known their majority of their revenue is consumer, 75% is the number I heard. You can tell me if that aligns with your estimates as well. And, uh, costs 20 bucks a month, 240 a year. That's about 60 million paid subscriptions a year. And then on the other side, you got Anthropic, which has kind of got the opposite, right? They're, they're mostly APIs. Uh, and do those roughly correlate with what you know, Brad?

    2. BG

      Well, I, I would just say they correlate with what the information is reported as leaked-

    3. JC

      Okay.

    4. BG

      ... you know, data from, from both companies. And, and that makes them both the fastest-growing hu- companies in the history of Silicon Valley. Let's just be clear about that.

    5. JC

      But specifically the 75% coming from consumer from OpenAI.

    6. BG

      Yeah, more I think-

    7. JC

      So-

    8. BG

      ... I think it's well-known more comes from consumer at OpenAI and-

    9. JC

      Yeah.

    10. BG

      ... and more comes from enterprise at, at Anthropic.

    11. JC

      So two challenging questions for you since you have a big bet here. Google, Apple make these products free. They have pretty robust ad networks. That's a massive headwind. And then on top of that, in the startup community, we just talked about Cursor, people are not trusting OpenAI and their API anymore because they know OpenAI is creating competing services. And so there is a big movement in the startup community to not use OpenAI's API products. How confident are you that with those two headwinds, free for consumers and better products, right? Gemini is a great product. Rock's a great product. Claude's a great product. There are a lot of great product out there and I don't think consumers can tell the difference. Why would they pay 240 if they can get it for free from Google? And then second, startups are realizing, hey, Sam has to make a lot of money, therefore he's going to do what Microsoft did. There was a company called Lotus 1-2-3, there's a company called WordPerfect that were on the Microsoft platform, Windows, and then Microsoft killed them. People right now are experiencing that from OpenAI. How concerned are you about the revenue growth?

    12. BG

      Yeah, I mean, listen, I'm betting in the supercycle. This is the biggest supercycle of all of our lives. I'm an investor in OpenAI and Anthropic and Google and, and Microsoft and NVIDIA, et cetera, and so I don't think you have to make the call right now one of these, uh, you know, companies winning. The fact of the matter is, as Sax said, we have one of the most vibrant and competitive ecosystems of, uh, uh, in AI in the world. I love the fact that Sundar is coming off the mat swinging. I think Gemini 3 is gonna be great at Google. They may, in fact, make it free. I think Apple, I love seeing Apple pay Google to, you know, make Siri better. I think that's gonna be a great consumer experience. And the only way that OpenAI wins is they gotta build a product that we all love. You've seen those cohort curves. The reality is, they are the verb at the moment. It's theirs to lose in consumer. The cohort curves are things of dreams, right? This is the retention rate and the engagement rate as people stay with a service longer. And then, by the way, Anthropic's numbers, despite Cursor doing some of their own thing, Anthropic's numbers are off the charts. I think that this market is as big or bigger than current estimates are out there, but it's not gonna be a straight line up and to the right. We're gonna have these moments, as Chamath said, of risk-off panic, just as we did with internet, just as we did with mobile, just as we did with cloud. The key here is, as an investor, is conviction. There is a massive conviction tax to be paid, right? If you lack conviction and sell when these things are down, I'm gonna bet on the supercycle, but I'm betting over a much longer period of time than most people.

    13. JC

      And the, the... Amongst the startups out there, they basically believe Claude is not trying to take their business and Claude has been very careful to say, "Hey, we're not gonna encroach into the application layer." So, all right, um, yeah. If I were to start-

    14. DS

      By the way, the most impressive revenue chart when you showed that leak from OpenAI was Anthropic. If that revenue chart is real, what's really impressive is Anthropic is not really in a J-curve at all. And they get to very similar points of free cash flow, but will not have burned through near as much capital to get there. That's my singularly interesting observation about this chart.

    15. BG

      Ca- can I say again, those numbers are, are-

    16. DS

      If it's real. If it's real.

    17. BG

      ... yeah, a- as reported by the information. But, but what I would say about that is this. I've been forecasting companies for 25 years. I know the numbers today. Sam just told us, $20 billion run rate end of the year for OpenAI. Everybody who is forecasting three years out on these companies is totally guessing, right? Like, that's why I said time is on your side if you're betting over a five to y- 10-year horizon, but if you think with precision that the company itself can forecast what's gonna be happening in three years, I think you're misleading yourself, right? So we'll see. I think it's gonna be a lot bigger. Could be even bigger than those numbers. But, you know, those forecasts are highly uncertain because the rate of growth has never been seen before.

    18. DS

      How do you think about expenses then? 'Cause you're gonna have to have some sense of whether the spend is accurate or reasonable.

    19. BG

      I think you have to build in an expense structure that has the flexibility, so if the numbers don't show up, that you have the ability to extend your y- you know, your obligation. So that's why I was saying I don't think this 1.4 trillion, I think it's kind of this, th- the red herring out there. I think it's kind of a fake, made-up number. It's all of the obligations of all of the deals that have been announced. And the, the truth of the matter is only a portion of that is borne by OpenAI and I'm certain there's flexibility in all of those deals to match the expenses with the revenue side. But listen, let's steel man the opposite case, Chamath. Let's just say that all of these revenues start flat-lining, uh, for Anthropic, for X, for, you know, for Google, people aren't willing to pay for these products, then our, uh, then our CapEx buildout for AI is gonna be a lot slower. Because at the end of the day, there's gotta be somebody, either in the enterprise or a consumer, willing to pay real money to pay back all of this infrastructure buildout or it doesn't happen.

    20. JC

      Well said. And, um-Hey,

  5. 36:30 – 39:03

    Holiday party announcement! allin.com/events for tickets

    1. JC

      just a quick plug here. We're gonna have an amazing holiday party. Come spend another Christmas with your besties at the All In Holiday Extravaganza.

    2. DS

      With Kill Tony?

    3. JC

      Yeah, thank you. (laughs) You got the announcement. We're burning it down this year. Joining us on stage, it's gonna be a (beep) show, the host of Kill Tony is going to mercilessly roast everyone in Silicon Valley and the Besties. Tony Hinchcliffe is coming to the Bay Area. We're gonna have the same great stuff we always do, casino nights, poker-

    4. DS

      Are we gonna-

    5. JC

      ... DJs, open bar-

    6. DS

      Are you guys, are you guys-

    7. JC

      ... food, cocktails.

    8. DS

      You guys have the courage to go up there and do a little set? I'm gonna do a set.

    9. JC

      That's what we're gonna do. It's gonna be the four of us. People are gonna come up and do a set. We're gonna roast each other. It's gonna be (laughs) absolutely brutal and fun. So, uh, you can-

    10. DS

      I'm gonna have to bring in some firepower. I'm gonna have to bring home my-

    11. JC

      Oh. Oh, I, I know exactly what you're doing. You're calling Kevin Hart, aren't you?

    12. DS

      (laughs)

    13. JC

      That's fine. I'm gonna get Chappelle. I got a, I got, I, I got a way to get to Chappelle. So, uh, I'm gonna-

    14. DS

      So-

    15. JC

      ... I'm gonna get my own writing team going.

    16. DS

      You guys were all there. I mean, Nat threw a birthday party for me, what was it, five years ago?

    17. JC

      Yeah.

    18. DS

      Three- four years ago. And Kevin and Sky and Diego, they all flew up from LA. Al Wrobel. We all did speeches. Sacks did a great roast. J-Cal did one. Friedberg did one. Nat did an incredible one. And then Kevin just ad libs and destroyed everyone.

    19. JC

      Mm.

    20. DS

      Singularly (laughs) destroyed everybody in the room, one by one-

    21. JC

      And Juarez was about to say, "You are a tiny-"

    22. DS

      He's like, like a s- like a sniper.

    23. JC

      "... ƒachamadill." She says that-

    24. DS

      Like a sniper.

    25. JC

      ... "I'm gonna do a quick, tight, uh, five minutes on your ƒachamadill, which is, uh, so small and, uh, pathetic."

    26. DS

      (laughs)

    27. JC

      And so go to allin.com/events, and you get to come. Make jokes about Chamath's tiny penis.

    28. DS

      (laughs)

    29. JC

      Join us for the All In spectacular. That's worth the price of admission alone. Uh, allin.com/events.

    30. DS

      Oh.

  6. 39:03 – 1:05:41

    State of the market, consumer is cracking, need for domestic/"main street" wins, is Trump losing the middle class?

    1. JC

      talk about markets. We got Brad here, our fifth Bestie. Stock market, uh, pulling back, as Chamath just said, eh, we're gonna be risk off. And we have been getting a lot of data, a lot of hand-wringing going on, Brad. Uh, GDP growth. Hey, maybe that's mostly due to AI, the unemployment rate's ticking up, inflation's ticking up. Lots of concerning signs. H- h- help us make sense of this, Brad.

    2. BG

      I think it, you know, Chamath teed this up perfectly, which is, you know, let, let, let's rewind the clock a little bit to April of this year. I think on an intraday basis, the NASDAQ was down 20% year to date in April. We're now up 20%, so a 40% move higher in a few months. Same with the S&P. I think it was down over 10%. Now it's up 14% on the year. So we've had some pretty massive moves. And I think you have to, you know, reflect on where we are, you know, and we used to do this on, on, on Market Checks when I was on, and you say, you know, "Where is Altimeter?" And so early in the year, when we were worried about tariffs, Alt- Altimeter was positioned small, right? By May, we thought they would land the plane with the Besant consensus, you know, uh, on trade. We'd get the big, beautiful bill passed, and we went to kinda extra large positioning, and we've been there most of the year. And so now, we're back to, kinda Chamath just nailed it. You know, we're back to kinda medium, medium-small positioning in the market. And I'll, I'll, I'll walk through a couple of slides as to the reasoning for that. Maybe we can kick it around a little bit. The first one is just, there's growing signs, um, you know, the consumer is pulling back. And, you know, you heard it out of, uh, Chipotle, you heard it out of Cava, you heard it out of NCL, you heard it out of JetBlue and, and, you know, the, the nature of it is we have this two-tier economy. The low end consumer is faltering. The higher end consumer is hanging in there, but the consumer thing's making people nervous. Now, uh, compounding that is US credit card delinquencies are now, uh, uh, back to two- you know, 2009 levels, right?

    3. JC

      Uh-oh.

    4. BG

      And so you have, okay, consumer cracking a little bit, delinquencies, you know, and now we're seeing regional banks roll over, et cetera. We're seeing the credit markets beginning to crack a little bit, credit spreads blowing out a little bit. And then if you go to this next slide, you know, this goes with what Sacks is, has talked a lot about on this pod, that we're still in highly restrictive territory when you look at the 10-year TIPS. You know, uh, the Fed is still, you know, got the market tight because they're seeing, you know, the market at all-time highs. They're seeing AI stocks rip. But under the surface, I think there's a lot of concern and question about what's going on. The good news about this is we still have firepower. So what's gone on in this earnings season, you know, this next slide, basically, earnings have come in really strong, you know. So we have 70% of companies that are beating, they're beating by wide margins, you know, in earnings. But if you look at the forecasts, you know, basically earnings have come in about 11% higher than last year, and the stocks are up about 13% or 14%. But the real question is as we roll into next year, and so, you know, Scott Bessen, on the one hand, is saying, "Listen, in Q1, we're gonna have some big tax refunds because of no tax on TIPS, no tax on overtime," and he thinks that'll give it a boost. But clearly you hear them pounding the table that we need to get rates down. I tend to agree. The low-end consumer who pays a lot on their credit cards, on their car loan, et cetera, is clearly hurting.... we see these layoffs. These layoffs are h- are hurting some of these people as well. And so when you look at the multiples in the market, w- how do we look at it from an Altimata perspective? We still believe that owning all of compute like we have for three years and A- this AI trade has room to run, but there, obviously, multiples have come up a lot. I talked about a 40% move from the bottom this year. And so you can just take your position size and make it a little bit smaller. So in the world of lesser more, I think Chamath's exactly right. There's a pause as we head in over the course of the next couple months, reflected by the stuff that we're doing, but I do think the economy is set up as we head into next year.

    5. DS

      There's been a total decoupling.

    6. BG

      Yeah.

    7. DS

      It used to be the case that as goes Main Street, so goes Wall Street, or vice versa. The unfortunate reality is that there's a handful of companies that have bids that are, as you said, totally speculative and well into the future, but they are so well bid and they're so highly valued that they drag the entire indices forward, even though, underneath the waterline, you're leaving 493 companies behind. And the reality is that those companies that more accurately reflect what's happening to middle income America are not doing so well. And so we need to find some visible wins in the domestic policy arena. I think that that's what we need now. Because if you think of each year of a presidency as an act in three parts, I think act one was tariffs, I think act two has been foreign policy, and now it's an opportunity for act three to refocus on domestic earnings and the domestic wealth effect of middle income Americans. I think that's what has to happen. And there's a lot of clever ways, by the way, that we can do this. I- I've mentioned this before, but I think the really interesting opportunity for us is to use the money that's been committed by all of these countries as part of their trade negotiations. Like, if you add up the money that was committed from Japan to South Korea to the Middle Eastern countries, you're talking trillions of dollars. I think it's, like, 3.2 trillion is the number. So it's an enormous amount of capital that can improve the state of earnings of the middle class, and I think we need to figure out a way to more aggressively put that money to work now. I think that that's- that's what needs to happen, I think. If you look at some of these other markets, it's really incredible. Bitcoin is about to break through 100,000 to the downside, which I think is a psychological barrier that probably has another 5 or 10% more to run. There's a dispersion happening in the Mag 7 as of this past quarter earnings, so I think all of it has to get sorted out.

    8. JC

      You nailed it. 29 days ago, I talked to you guys a little bit about the net approval rating here and how the country's feeling, and you can see Trump's net approval rating, 9.4, and we're gonna get into the election as well, because it dovetails really nicely with this discussion. Um, it's gotten worse. Here's the numbers from November. It's gotten 30% worse now. Trump's down 13%. I attribute it, I think, to the fact that we've had all this layoff news. Inflation ticked up to 3%. Everybody knows it was down at 2.3. We had made great progress on it, but now it went back up, and there's a lot of survey data going on right now, and I think... If you look at this next chart, it's super interesting. What gets all the press is the foreign policy, right? We're talking about wars ending, and great job in the Middle East, uh, for Trump a- and Jared and- and the team. Border security immigration, of course, a big win in terms of shutting the border. Bit controversial on ICE, but, uh, that's my personal stuff so I'll leave it out here and we'll just talk about brass tacks. If you look at where the country feels Trump has fallen short, it's where he's strongest or where he was elected for being so strong. Look at these last three here, Chamath. The economy, 63% believe Trump has fallen short. Uh, looking out for the middle class, this is the one that should be the most disturbing, 65% of the country believes he's fallen short, and inflation and the cost of living, 66%. If you look at this next chart, this one has been trending online, and I've been talking about unemployment and I've been attributing it to AI. I know some people think I'm crying wolf here, uh, or I'm the boy who cried wolf, but the statistics are starting to trend towards my position, I believe. And if you look at people who are age 20 to 24, they're at 9.2% unemployment, and it is spiking. Why is it spiking? I can tell you from the front lines, uh, you know, hiring young people and being at startups with young people in them and talking to them about their contemporaries, as companies cut and they use AI to solve problems, they're saying hiring young people and training them is not as rewarding or efficient as training an AI to do the same task. And-

    9. DS

      Why do you keep thinking it's AI? Even the Amazon cuts, Andy Jassy on the earnings call said, "This is not AI. This is us digesting all this hiring-"

    10. JC

      Yeah.

    11. DS

      "... through ZIRP and DEI."

    12. JC

      Yeah, I can answer that. Yeah, for sure, he, uh, he did say that. He did also say in his memo before that, that he thought there would be a lot of changes because of AI and they had the leaked memo that they would not be hiring those, but I'm talking here specifically about youth people. And so I'll- I'll take Jassy at his word those 30,000 people are just redundancies, but what I'm seeing on the ground, because I work with startups and I work with young folks who are in them, their contemporaries are not finding jobs, and the companies that we see and the companies that are selling the t- technology solutions are getting rid of what I'll call the, like, entry level white collar work. In addition to this, student loan delinquency is also going up massively. They had a big hiatus as you know.

    13. CP

      Yeah, but doesn't this indicate that there's no ROI to this expensive degree in a lot of cases that these kids are being sold? They're being foisted-

    14. JC

      Yes.

    15. CP

      ... all this debt. This has been going on-

    16. JC

      Yes.

    17. CP

      ... since before-

    18. JC

      Exactly.

    19. CP

      ... November of 2022 when ChatGPT launched.I don't think-

    20. JC

      Yeah, but-

    21. CP

      ... AI has had-

    22. JC

      ... that's n-

    23. CP

      ... enough time to have a huge impact on this.

    24. JC

      Yeah. You're... In this case, I think you're wrong, respectfully, even though you're the czar of AI. I- I'm seeing it with young folks and I'm seeing it with the software that the companies I'm investing in are deploying in other companies. But we'll see who's right in the coming months. And that inflation back up to 3%. And so this is gonna make it particularly hard to cut rates because the reason, when we go back to slide number three there, the reason why people feel Trump has fallen so short on the economy and taking care of the middle class is because of inflation. Trump said over and over again, and some people in the administration have been very publicly gaslighting, in my opinion, the country saying, "Hey, inflation's not happening." Inflation is happening and Trump sold people that prices would go down. We're back up to 3% inflation, folks. Not only is it not going down, it's going up. And I think when you put together what people are seeing, this focus on, uh, a big, a ballroom being added, focus on tariffs, things that Americans are not seeing hit their wages, and they're seeing their kids not be able to get jobs, that 9%, this is what's concerning Americans. Trump has failed the middle class. That's the bottom line here.

    25. DS

      I don't think that that's true.

    26. JC

      The country does, 66% of them.

    27. DS

      I think everybody can find a piece of data to hang their bias on and I think that what this most recent spate of elections show is that most people are looking for some form of a price break. And so if you're a New York mayoral candidate and you offer giveaways, you get a lot of attention. If you're running for governor and you offer giveaways, you get a lot of attention. The question is, why is that happening? And I think it's fair to say that the reason why that's happening is that we have now spent a lot of time setting the table for a wave of domestic policy initiatives, and I think now is just the opportunity to follow through on those. I, I think that what we need to do is we need to just figure out where the pressure is, and I think Trump is doing this. So for example, today he announced that Eli Lilly and Novo Nordisk would be selling GLP-1s for, like, $149 a dose. I think, like, that's, that's good. Is it as expansive? I think it could be probably more expansive. But there are all of these other programs that I think need to get addressed. The student loan thing is a key one. It's time for legislation that says we're gonna stop federally underwriting these things. Force it into the public market, force it into the open, allow transparent pricing of loans and risk, and you can stop that curve dead in its tracks. We need to clean up the AI stuff. So there's a bunch of things now where when the government shutdown ends, we just gotta get to its legislative agenda and start to fix domestic policy. But you can't do that when folks won't even come together, folks won't even end the shutdown. So I think, Jason, part of this is a frustration that's gonna keep brewing that I think is less a reflection on him, but more a reflection on the point where we're at is that people want these structural problems fixed. That can only happen through legislation. Tha- But that can't happen if the House and the Senate are not even convening because there's still a shutdown.

    28. JC

      Yeah. A- And people are seeing equity holders like us, people in crypto get rich. We're all up 20, 30% this year and the working man in this country and the working woman is not. That's the truth of it and I think that's why... And 60%, by the way, 60, 65% of the country blame the Republicans for the shutdown and people aren't getting food stamps and, you know, people aren't getting paid and people see their healthcare prices are about to spike. So we're doing all these tax cuts. It's great that the economy's ripping for equity holders, but there's a reason why two-thirds of the country feels this administration has failed the working man. It's time to get back to work. It's time for Trump and his group to get focused on the people who put him there, not just the people like us who are extremely affluent already. What do you think, Brett?

    29. BG

      If you're right and we have inflation over 3% next November and you have higher youth unemployment and the economy is only growing at 1.5% and interest rates stay high, then I think, uh, it'll be a rough midterm for the Republicans. I don't actually think that's the flight path for the country. I actually think you are gonna get three to four rate cuts. I actually think you are going to see a re-acceleration of GDP. I don't think that these job cuts are the result of AI, but that's what makes a market. I think you heard the president say after the elections this week that, you know, that there are a lot of things around affordability that gotta be delivered that aren't being delivered. And that number one affordability issue starts with interest rates being lower, and he's been pounding the table on that all year long. But listen, I think a big mistake by Republicans in this, uh, last election cycle is they weren't talking about affordability and the people they lost to were talking about affordability. So I think on that, uh, score, you're correct, but I- I happen to think that inflation, uh, is gonna continue rolling over. I think you see some one-time effects in here. Um, and so I'll take the under, Jason-

    30. JC

      Cool.

  7. 1:05:41 – 1:17:17

    Zohran Mamdani wins NYC, socialism's rise in America, solutions, should Republicans end the filibuster?

    1. JC

      to circle here. The Zoron has won (laughs) New York City. The Dems won across the board. Zoron won every borough except Staten Island. He finished with 50.4% of the vote, nine point lead over Cuomo. Curtis, uh, was a distant third at 7%. No surprise if you're on Polly Market 'cause they have been saying this for months. Pull up the chart, Producer Nick. Thank you. He's been a big favorite since he crushed Cuomo in, uh, the primary in June, and he's held the lead the whole way. He's a self-proclaimed Democratic socialist. Some people think he's a communist. Um, and he's the first Muslim mayor and the youngest in over 100 years. Big promises seem to have resonated with young folks, especially women in New York, affordability, rent freezes, free public transit, higher taxes on the rich. You're gonna pay an extra 2%. I think you'll be 54%. We have the highest tax rate in New York, the highest tax rate in the nation. And hilariously, he had (laughs) super villain Lina Khan to his transition team, (laughs) and, uh, she's gonna go break up the bodegas. Um, and shout out to our friend who's not here today, the sultan of science, David Freberg, predicted the rise of socialism on this very show about six months before anybody knew who Zoron was.

    2. HO

      Here's the clip. Give him his flowers since he's not here.

    3. NA

      The party line is that socialism was defeated in this election cycle, and that there was a resounding kind of vote from the American populous against socialism. And I actually think... My, my contrarian belief is that we'll see a rise, a dramatic rise in socialist movements in 2025 in the United States. We're gonna see an unleashing of, uh, economic growth because of deregulation and AI. There's gonna be some parts of the economy that are gonna be big winners and some parts of the economy that are gonna be big losers. When you have this sort of a change this fast, there are often large contingents of people that are left behind. And when that happens, I do think that the socialist policies and the socialist movements gain steam. Growth does not mean that it benefits everyone equally, and I think that some folks... We'll see people go from being billionaires to hundred billionaires to the world's first trillionaire, and it will also start to fuel this rise. So, I think that we will see-

    4. HO

      Hmm.

    5. NA

      ... an increase in the breadth and depth of socialist movements in the United States.

    6. HO

      Chamath, what can we learn from the Mamdani effect?

    7. DS

      Peter Thiel predicted this in 2020. There was a bunch of leaked memos between Peter and Zuck and Andreessen, but he put his finger on it in January of 2020. I retweeted it out. Basically, what Thiel said was, "From the perspective of a broken generational compact, there seems to be a pretty straightforward answer to me, namely that when one has too much student debt or if housing is too unaffordable, then one will have negative capital for a long time and/or find it very hard to start accumulating capital in the form of real estate. And if one has no stake in the capitalist system, then one may well turn against it." This has been floating around for years, and I think Thiel yet again has seen the forest from the trees many years ago. So yeah, what is happening? I think that we've put our finger on it. We need to come back and now focus on domestic policy and fix some of these core pernicious issues. One is clearly that we now need to address how student loans are underwritten. We cannot allow generation after generation of people to graduate from degrees that they don't quite understand with hundreds and hundreds of thousands of dollars of debt that they have zero chance of paying off. That is a horrible way to start your life, and we have not done right by these folks. We need the free market to be able to tell somebody, as hard as it may sound to hear, that an art history PhD will cost you $800,000 so that the people that take it have the money or are willing to bear that cost. Meanwhile, if you became an electrician, it would only cost you 40 or 50,000, and you could have an incredible life, or if you go and get a degree in AI or stats or something. My point is that we need to differentially price degrees based on the value and the earnings power that it creates for people. That is a policy-level initiative that needs to cascade through America. That cannot happen if the government is not working, so we need to fix that. The problem with housing is much more state and local, and I'm not sure I have a, a great diagnosis for how to fix that, except that certain states just need to get their act together. I mean, in California, we have just absolutely abysmal building regulations that prevent anything and anybody from doing anything, so that's what we need to do. We need to fix these things legislatively. We need to do it right away, and we need to fix this broken generational compact. This was the first moment in years where I have now become sympathetic to this idea of student loan forgiveness.

    8. HO

      Hmm.

    9. DS

      I was never sympathetic to this idea. I am sympathetic to it now.

    10. HO

      Why are you sympathetic to it, Chamath?

    11. DS

      Because I think that we should have fixed this problem a long time ago. We should have not allowed these loans to be underwritten the way that it was for so long, not allowed all of these effective subsidies to pervert the free market's ability to tell people that some of these degrees were not worth their time. We have-

    12. HO

      Yeah, well-

    13. DS

      ... Palantir today saying that they are not gonna hire from college anymore.

    14. CP

      Let me build on that. Okay, so look, I... Just, just on the narrow loan forgiveness point, so I actually agree that maybe loans should be forgiven if you get a total overhaul of the system. What you don't-

    15. HO

      Yes.

    16. CP

      ... want to do is acknowledge-

    17. HO

      Yes.

    18. CP

      ... that all the loans are bad and that they need to be written off, and then continue making them. And that was a problem with, I think, the Biden loan forgiveness program is he's gonna write off trillions of dollars in loans while keep funding-

    19. HO

      Yes.

    20. CP

      ... the system without any reform. So, let's talk about a big reform package where we completely re-underwrite how we do this, and maybe some loan forgiveness can be part of that so that we don't have all these kids graduating who are basically socialists because they're so deeply in debt they're never gonna own capital in the system. By the way, J-Cal-

    21. HO

      Hmm.

    22. CP

      ... maybe the fact that all of these millennials are socialists might have something to do with the fact they're unemployable. Who the hell wants to hire-

    23. HO

      Fair enough.

    24. CP

      ... young Lenin 2.0 communist revolutionary to be in their company? If they don't believe in capitalism, how are they gonna work their way up through a capitalist system? Just saying.

    25. HO

      That's your best point so far. Yeah, it's your best point. (laughs)

    26. CP

      Just saying.

    27. HO

      Best point so far. (laughs)

    28. CP

      Maybe it has something to do with the fact that all these kids are socialists and junior communist revolutionaries-

    29. HO

      They don't know how to work 17 hours, yeah.

    30. CP

      ... rather than blaming our favorite scapegoat, AI. Okay, so anyway, that's that point. Now, in terms of Mamdani getting elected, you gotta remember, New York City is like 80/20 Democrat, and he won very narrowly. It was like 50.4% of the vote. So, this was not some overwhelming victory. It was a narrow victory. He squeaked by, but he did win, and it's because the base of the Democratic Party is energized by this socialist ideology. So, what we saw in this election, I think, was blue cities and states getting bluer, meaning moving to the left, and that is a problem. That is a little bit scary because...Historically, in this country, the politics was played between the 40-yard lines. You didn't have one of the parties being fundamentally a revolutionary party, and it does seem like the Democratic Party is gradually becoming a party of Mamdahnis and Katie Porters and genuine socialist revolutionaries. And, you know, if we ultimately lose, then the country's gonna be in for a big shock. But I don't think that's gonna happen, though. But this is why I think we should take very seriously the idea of if the shutdown continues, end the filibuster. Because while the country has empowered Republicans with all the different parts of the federal government, we have to deliver genuine results now. Otherwise, these socialists are gonna take over in three years.

Episode duration: 1:27:11

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