E152: Real estate chaos, WeWork bankruptcy, Biden regulates AI, Ukraine's “Cronkite Moment” & more

Jason Calacanis 0:00 Hey, everybody. Welcome to another episode of The All In Pod. The notorious threesome is here doing the show solo today.

Chamath Palihapitiya 0:08 (laughs) Threesome?

Jason Calacanis 0:08 Threesome.

Chamath Palihapitiya 0:08 Thruple. It's a thruple.

Jason Calacanis 0:10 It's a thruple. We have a thruple.

Chamath Palihapitiya 0:11 (laughs)

David Friedberg 0:12 I think it's more like a cuddle puddle.

Chamath Palihapitiya 0:13 (laughs)

Jason Calacanis 0:14 (laughs) Okay. The Dictator, Chamath Palihapitiya, Rainman, David Sacks, Consultant of Science, Dave Friedberg. Happy to be here with you guys today. We are absent. J-Cal, taking the week off. Any other housekeeping?

Chamath Palihapitiya 0:29 Let's do it. Let's jump into it.

David Friedberg 0:30 Well, you announced that we're gonna hire a CEO, right?

Chamath Palihapitiya 0:33 Oh, let's talk about that. How's it going, Friedberg, in our, uh, CEO search?

Jason Calacanis 0:37 Okay. I got to admit, I've had a few conversations but I gotta get through the list. There are 240 applicants so far.

David Friedberg 0:45 Wow.

Chamath Palihapitiya 0:46 Wow.

Jason Calacanis 0:46 And there's some really, like, great people in there so we need to figure out how we're gonna manage this, but I think we're pretty excited.

David Friedberg 0:54 I can't believe this. So many people want to work for us.

Jason Calacanis 0:56 (laughs) Okay.

David Friedberg 0:57 That's insane.

Jason Calacanis 0:58 There's some really great folks. I think the... Chamath, you posted it and people were pretty positive, right? Generally positive. Not everyone, but general.

Chamath Palihapitiya 1:04 Yeah. It was re-... It was really positive. Yeah. I mean, I think that people were very excited about the fact that we were gonna try to kind of, like, professionalize this a little bit more.

Jason Calacanis 1:14 So let's just talk about that.

Chamath Palihapitiya 1:15 Mm-hmm.

Jason Calacanis 1:15 We did the All In Summit in September. We thought it went really well. Folks really enjoyed it. The survey data of the folks that attended was really positive. So we, we wanna do that and do more of that live, in-person stuff. We all have full-time jobs and other things to do, so we need someone to come and run this as a business and organize it and carry it forward a little bit for us. And so we're really excited to hopefully get someone that can scale this. No ads ever, no subscription fees, nothing's gonna change about the pod.

David Friedberg 1:49 So it's a media and events business, and it might become a CPG business as well. Meaning... Was it CPGs? Consumer Packaged Goods?

Jason Calacanis 1:58 That's right, Sacks. (laughs) You are, (laughs) you are-

Chamath Palihapitiya 2:00 That is the correct use of the acronym, David.

Jason Calacanis 2:02 (laughs) Yeah.

Chamath Palihapitiya 2:03 Congratulations.

Jason Calacanis 2:04 Your first product, uh, would be what? Tequila?

David Friedberg 2:08 I would do, like, a tequila or, like, a hard seltzer or something like that. That seems to be a big growth category. Or we could figure out something very orthogonal. I mean, MrBeast did candy bars and we found out at the All In Summit that he's doing something like 250 million a year in revenue, growing very fast.

Chamath Palihapitiya 2:24 Yeah. We could do Sacks Nuts. (laughs)

David Friedberg 2:27 (laughs) The Sacks Nuts would be too big to eat. You wouldn't be able to fit them in your mouth, Chamath.

Chamath Palihapitiya 2:31 They'd just be old and salty. (laughs)

Jason Calacanis 2:33 Yeah.

Narrator 2:34 We're going all in. Don't let your winners ride. Rainman, David Sacks. We're going all in. And I said, "We open source it to the fans," and they've just gone crazy with it. Love you, besties. Queen of Quinoa. Going all in.

Chamath Palihapitiya 2:52 Well, I think the other thing that's worth figuring out is this idea of, like, what does, what does the community really look like? I think that's the biggest-

Jason Calacanis 2:59 Yeah.

Chamath Palihapitiya 3:00 That's the biggest upside for the CEO is, like, is it physical places like Zero Bond or is it virtual, sort of, like, community-oriented things? Is it some combination of the two? I'm really interested in trying to figure that out and, and what answer they come up with. Then the other thing that I would really like to experiment with, quite honestly, is if we could do a little bit of a tour. I just think it would be super fun to kind of go to, like, five or 10 cities and just kind of, like, crash those places and have, like, a big get-together and talk to people and do a bit of Q&A.

Jason Calacanis 3:35 Yeah.

Chamath Palihapitiya 3:35 I think the thing that is really fun is just the interactive Q&A, just 'cause it allows everybody to get involved, and then to be able to do dinners with each other and, like... There's just a really amazing community so that person should be able to figure this out. Uh, I, I don't know the answer to it, but I- I- I'm hoping they figure that out.

David Friedberg 3:49 We should give a shout-out to the guy who did the interview video or submitted. You see that? It's, like, a four-minute video that-

Jason Calacanis 3:57 (laughs) Sean, Sean?

David Friedberg 3:58 Somebody submitted his application by video on, on X.

Jason Calacanis 4:03 I think I was on his podcast. Sean?

David Friedberg 4:04 You were?

Jason Calacanis 4:05 I was on his podcast, like, a year and a half ago, I think.

David Friedberg 4:08 Can we pull it up? Welcome, welcome to my five-minute job application to become CEO of The All In Podcast. This is the American dream, baby.

Chamath Palihapitiya 4:17 (laughs)

Jason Calacanis 4:18 (laughs)

Chamath Palihapitiya 4:18 That's great.

Jason Calacanis 4:19 Well, he posted a tweet the day before saying if it gets 1,000 likes, he'll submit an application, and instantly got 1,000 likes and then he put that video together. So great job, Sean. I will be calling you later for your second-round interview. I think you're well-qualified after that submission. But I do remember, like, at the All In Summit, I've never been to a conference where I'd say, like, 95% of the audience was actually in the theater for the entire content session. Like, they really sat through it. It was really engaging. So I think that's the sort of product that I'd love to bring, bring out more, which is some of these important conversations with people that can provide a perspective that folks might not be getting elsewhere. Chamath, you also mentioned on Twitter that you're doing more content. Like, your, you called it Learn With Me. What is that?

Chamath Palihapitiya 5:10 Yeah, I mean, well, I've been doing this for a while but I just wanted to wrap it up and kind of make it into a clean kind of productized service. So, you know, I have this newsletter that I've been using weekly to just kind of share everything that I read, but then I thought, "Okay, why don't I actually, like, really invest just a little bit of time every week to curate that even a little bit more and then write little summaries of probably the three most important news topics of the week?" And I just kind of give an insight into my process. So when I read all of this stuff, usually two to three times a month but the average is around twice a month, I end up writing an essay. And it's, like, one or two pages really quick and I just keep them for myself. And it's like, right now, I'm just... I just finished one, "What is the Federal Reserve?" And the reason I did that was because Druckenmiller was on TV and he was talking about all this stuff, and I just wanted to remind myself about...... why the Federal Reserve exists the way it does. But basically what happens is from these quick essays and from what I read, I typically start every month a deep dive where my team and I, we probably allocate at least a month to a month and a half where we figure out something in really excruciating detail, and we generate a slide deck and a write-up. And then we take that, and we go and we ask a bunch of experts what they think, and then we only keep it within ourselves. But then I thought, "You know what? Why don't we just start sharing it?" So the reason I'm doing this is really to keep myself accountable to keep learning, because I feel like in the last few years, the thing that I lost most when things were going crazy was just the incentive to learn. And I thought, "If there are other people around me that are also relying on this, I'll be more accountable." And obviously, to the extent that this thing can actually be self-funding, then I, I can take some of that revenue, reinvest it in more research associates, maybe publish more content. But it's kind of like all the information I wish I had so that I can make better decisions, I'm just gonna kind of take what I have, share it with everybody, and kinda go from there. So we'll see.

Jason Calacanis 7:15 So you're charging for the kind of higher end part of it?

Chamath Palihapitiya 7:18 At the end of it, like, it's kind of like, I would say most of it is free. The Twitter spaces obviously is not because the point of these, or these X spaces, is we just don't want a bunch of bots and trolls, but there's a bunch of people that signed up to be a subscriber, so we'll do Q&As monthly for subscribers. And then once a month, I'll publish a deck, and like I said, if you want the full one, then you can be part of, like, a paying community. Otherwise, you'll get some portion of it for free.

Jason Calacanis 7:45 And then you'll have cash to reinvest in doing more content? Is that the idea?

Chamath Palihapitiya 7:48 You know, like right now, I have a couple of research assistants that really help me, and we have a pool of experts that we use. But if this thing picks up some steam and we can have enough revenue to hire three or four more RAs, maybe at some point instead of monthly, we can go biweekly. I don't know. But the idea is just to focus on sort of what I think is interesting so that I can have a general view of, of things so that I can make better decisions. And like I said, to the extent people are interested now, they can follow along at any level.

Jason Calacanis 8:17 There you have it. So people can go to your Twitter to see it, right?

Chamath Palihapitiya 8:19 Yeah.

Jason Calacanis 8:20 Okay.

Chamath Palihapitiya 8:20 By the way, the other thing is it's kinda cool to be in this, like, content creator economy, you know? That's the other thing is, like, I don't know about you guys, but I feel like I'm on the sidelines looking in at trends now, whereas before, I was in the middle of them. Like Web 2.0, social, I was right in the heart of it, and I was like, "Okay, this is amazing." And then as an investor in SaaS and deep tech, I was kind of in the middle of those as well. That felt great. But this last push in AI, I'm like, "Wow, I'm really on the sidelines looking in," or this content creator stuff. So, I think it's, it's a good forcing function for me to kind of learn as well.

Jason Calacanis 8:59 To be active in the content creator economy, basically, to, to understand it better.

Chamath Palihapitiya 9:02 Yeah, I don't know how else I'll ever learn how to ... 'Cause like I, I could read all the stuff I want.

Jason Calacanis 9:07 Just so you know, you do a podcast that a lot of people listen to.

Chamath Palihapitiya 9:10 Yeah, but I think that that's like a, it's the lowest order bit, quite honestly. You know, when you see, like, what Jimmy Donaldson does or even, like, Kim Kardashian, what they do as content creators, it's just an intense process that then creates all this upside. So even if what, I wanna have a more informed view of where all in needs to go, I wanna be a little bit more on the ground and actually in the engine room doing it for myself.

Jason Calacanis 9:38 Yeah. Since we started doing the pod, Saks has been creating a ton of content too. I mean, Saks, you wrote a piece this week, didn't you? In, on Ukraine? Or, like, the, the Time article on Ukraine, didn't you?

David Friedberg 9:49 Yeah, yeah.

Jason Calacanis 9:50 Like, you weren't doing a lot of content before we started doing the pod, right?

Chamath Palihapitiya 9:54 No, he was. He was writing, like, a lot of blog posts on SaaS. Those were excellent.

Jason Calacanis 9:57 He had, like, an occasional blog post, but he's, like, super active now, particularly on Twitter, no? Like, has that changed a lot?

David Friedberg 10:06 Well, what basically happened is I would express political views on the pod, you know, on a weekly basis.

Jason Calacanis 10:12 Yeah.

David Friedberg 10:12 And I wasn't really tweeting much about politics, but then it all kind of bled together. I mean, once you start talking politics on a pod, people were clipping it, they were putting it on Twitter, and then I'd have to respond to it, maybe correct-

Jason Calacanis 10:25 Yeah.

David Friedberg 10:26 ... misinterpretations or respond to attacks or whatever. So it ki- all the politics and business stuff just kind of bled together on Twitter. It'd be nice if I just had two accounts and people could just follow me for what they wanted to follow. My Substack is just business, and then I'll occasionally write an op-ed on the political stuff. So I've written a few on free speech, and then I've written a few on Ukraine.

David Friedberg 10:50 And so I wrote a piece for Responsible Statecraft this week on Ukraine, which was based on a Time Magazine story that came out. And then I did a version of it on X, kind of a long post, which I called The Ukraine War's Cronkite Moment, which descr- the, the Cronkite moment in the Vietnam War was that Walter Cronkite, who was the top newscaster, America's most trusted man in the 1960s, he went on a fact-finding mission for himself to Vietnam, and he came back and he said the war is basically unwinnable. And that's when the public sentiment really turned against the Vietnam War. It still took us five years to get out of it. But what Cronkite said, there's a great quote from Cronkite which I've included at the end, where Cronkite says, "It is increasing clear to this reporter that the only rational way out will be to negotiate not as victors, but as an honorable people who lived up to their pledge to defend democracy and did the best they could." So, that, that's basically what happened in 1968. What happened this week is that Time Magazine wrote a cover story on Zelenskyy, where the main sources for the story were all of Zelenskyy's aides and advisors. And what they told the Time reporter was that, effectively, this war is unwinnable, and moreover, Zelenskyy is delusional. That was a word they used.Delusional in, in not confronting the battlefield realities that the Ukrainian army had been decimated, and delusional in the sense that he refuses to engage in peace negotiations with the Russians. He's utterly unmovable on this idea that Ukraine's gonna somehow prevail, and the troops in the field are basically saying that they cannot follow the orders they're being given. They literally... They, they can't advance. They're being ordered to advance, and the officers in the field, the frontline commanders are rejecting the orders because they've been decimated so badly and they, they consider the orders to be impossible. So I consider this to be the Cronkite moment of the war when Zelenskyy's own inner circle is saying that the war is lost. And the only question is when are we gonna realize that and start negotiating? Are we going to continue until the very end here with Zelenskyy in this psychological bunker that he's created? Or are we gonna recognize reality the way that Cronkite urged the nation to in 1968?

Jason Calacanis 13:13 Do you think these aides to Zelenskyy proactively reached out to the journalists to try and get this story published? How does a story like this come about that provides this kind of revealing insight on the supposedly inner chamber in Zelenskyy's operations that can shed so much light on the challenges, and with him, and with the-

David Friedberg 13:35 Mm-hmm.

Jason Calacanis 13:35 ... operation? Like-

David Friedberg 13:36 I think it's a really interesting question, and I think the starting point for understanding that is that this writer, Simon Shuster of Time Magazine, wrote the in-depth profile of Zelenskyy for Time's Person of the Year at the end of 2022. So this reporter cannot be accused of-

Jason Calacanis 13:53 Oh, so sorry. This is the per-

David Friedberg 13:55 ... unfavorable coverage.

Jason Calacanis 13:55 This is the person that profiled Zelenskyy as Person of the Year?

David Friedberg 13:57 Yes. Yes. Exactly.

Jason Calacanis 13:58 Oh, wow.

David Friedberg 13:59 So I th-

Jason Calacanis 14:00 So they, so they... So through that, he probably had contacts in Zelenskyy's inner circle in doing his preparatory work for that article back then.

David Friedberg 14:07 Absolutely. Yeah. He-

Jason Calacanis 14:08 And maintained those relationships and has a back channel now to be able to get this sort of insight.

David Friedberg 14:14 Well, he was physically there. I mean, I think he-

Jason Calacanis 14:16 Right. That makes sense.

David Friedberg 14:16 He was physically there to write the Person of the Year profile, and he was physically there to write this profile.

Jason Calacanis 14:19 So this is kinda legit. This isn't some, like, weirdly planted. This is, like, a legit source-

David Friedberg 14:23 Well, that's my whole point.

Jason Calacanis 14:24 ... from a legit writer. Yeah.

David Friedberg 14:24 Is that this, this reporter is... And, and Time Magazine obviously is mainstream media, and this writer has given favorable coverage to Zelenskyy in the past.

Jason Calacanis 14:33 Right.

David Friedberg 14:33 And I believe that's what led to him having this kind of access to Zelenskyy's inner circle.

Jason Calacanis 14:38 Okay.

David Friedberg 14:38 So you have to take all of that into account.

Jason Calacanis 14:40 The key question, Sachs, is does this change anything? So does this article change the sentiment of political leaders in the US or is nothing really different, that we still need to defeat Putin, continue to feed the war machine, continue to support the effort against Putin? Or does this start to beg the question, "Hey, maybe we need to look at this tactically and, and make a change?" Is anything actually gonna change from-

David Friedberg 15:04 Well-

Jason Calacanis 15:04 Yeah, do you have any reason to think that?

David Friedberg 15:06 In, in a certain sense, this article isn't saying anything that's new. I mean, the article basically says the same things that I've been saying, the same thi- the same kinds of things that Professor Mearsheimer's been saying, Professor Jeffrey Sachs. They're-

Jason Calacanis 15:18 Yeah.

David Friedberg 15:18 All the critics of this war have been saying these things for a number of months, which is the Russians are winning, there is no feasible way for the Ukrainians to evict the Russians from their territory, we are out of artillery and other types of ammunition to give them. Effectively, the war is unwinnable and we should negotiate. So a lot of people have been saying that for a long time, but what's different now is that if you believe this publication and this writer, which I do because of his access, it's Zelenskyy's own inner circle are now saying those same things. So in other words, the so-called Putin talking points that we're always accused of are coming from inside the house.

Jason Calacanis 15:55 Yeah. So-

David Friedberg 15:55 And to me, that's what makes this a Cronkite moment. Now, will policymakers in Washington change their tune or change their perspective on this? Probably not. The uni-party of both Republicans and Democrats, there still seems to be a majority who want to fund another 61 billion for Ukraine. So is this penetrating the blob? I don't think so. I mean, but again, think about Walter Cronkite in 1968. The country basically came around to his point of view after that, but it still took five years to get out of the Vietnam War. So I think that this week was a watershed in terms of the way that public perception is gonna evolve over the next few months, but it seems like the policymakers in Washington are the last ones to get the memo.

Jason Calacanis 16:38 Yeah. Well, let's see what happens. I mean, I've shared my point of view for a couple years now. I think the US is in a, call it, subconscious conflict escalatory state (laughs) that would continue to drive us into these sorts of-

Chamath Palihapitiya 16:53 It's great for markets, by the way.

Jason Calacanis 16:54 ... conflict. Seems

Jason Calacanis 16:56 to be.

Chamath Palihapitiya 16:57 Great for markets.

Jason Calacanis 16:57 Conflict is great for markets, you're saying?

Chamath Palihapitiya 16:59 No, no, no, no. The f- th- the fact that it seems like there's a terminal outcome and all we're debating is whether Zelenskyy sees it as actually very reassuring for the market because-

Jason Calacanis 17:13 Oh, you think the markets po- you think the markets are recognizing that there may be an end to the Ukraine conflict?

Chamath Palihapitiya 17:18 Well, yeah. I, I do think, I th- I do think in part. I don't think it explains why it's up necessarily today. I think that's more because I think... I, I mentioned this before, but the end of the fiscal year for mutual funds was October 31st and so there was a lot of selling going into October 31 just to capitalize tax losses and tax loss harvest, but that leaves them with a lot of cash. And so starting November 1st, w- which is day one of the new fiscal year, mutual funds are not allowed to really own cash. That's not why you pay them. And so they're gonna be active buyers, so that's why in the short term, the market is up. But if you think about the overhang of risk that we've had, right? You had one forever war and now the beginning of what potentially could be another forever war, that's definitely a dampener on market demand, right? And, and, and sentiment and investor confidence.... but if a story like this is true, it actually takes one of those big risks off the table, which is this idea that now, it's like every other kind of a thing, which is it's the reason we spend money there is not to win something that's winnable, it's just graft. It's just typical corruption.

David Friedberg 18:26 Total graft. And the article says that. It quoted a Ukrainian official as saying-

Chamath Palihapitiya 18:30 Right.

David Friedberg 18:30 ... that people are stealing like there's no tomorrow.

Chamath Palihapitiya 18:33 Right. Right, so that, that the US unfortunately enables in many places. That's not new. And so, to the extent that that's now more of the status quo, that's reassuring for investors because we're not talking about a war, we're just talking about bleeding more money, which I'm not saying is right, but it's morally more acceptable than the alternative. So, there you have it. That's generally good for markets. Now, that leaves, I think Israel/Gaza as a risk, and I think people, and I think the market still view that as a potential war. And the longer that goes on, I think that there's a very good chance that we de-risk that as well, as again, not a war, but part of that cycle between Israel and Palestine, which is conflict, timeout, conflict, timeout, conflict, timeout.

David Friedberg 19:28 Yeah.

Chamath Palihapitiya 19:28 And so if what we think is now this is just a version of conflict, timeout, and the market de-risks that, then it's actually pretty positive for equities, for startups. Because now the Fed has a reason to actually say, "Okay, the economy is cooled off, inflation is calm, it looks like the markets are stable, let's cut rates," right? "Let's, let's reintroduce some demand into the market." It's generally a good thing. And if there's no reason to be risk-off, people will use that as a reason to be risk-on.

Jason Calacanis 20:05 Yeah. Well, treasury yields thir- the 30-year-

Chamath Palihapitiya 20:08 Cracked.

Jason Calacanis 20:09 ... is, yeah, it's down, uh-

Chamath Palihapitiya 20:10 Cracked 15 bips.

Jason Calacanis 20:12 ... 15 bips.

David Friedberg 20:12 Two days.

Chamath Palihapitiya 20:13 40, 40 bips in, like, two or three days.

Jason Calacanis 20:15 Yeah, yeah, so it was-

David Friedberg 20:15 Don't you think this is because the forecast or the outlook for Q4 or Q1 next year are starting to go down quite a bit? The people are starting to see more recessionary indicators.

Chamath Palihapitiya 20:27 I think that-

David Friedberg 20:27 So you have this, like, peak 4.9% growth rate, and then re- inflation seems to be tamed quite a bit too.

Chamath Palihapitiya 20:33 I think, to be honest, the look-through on Q1 looks also pretty good and Q4 looks healthy as well. So for example, Shopify, their read-through on GDP was actually pretty healthy. Harley was on, I think it was CNBC, I saw this morning, basically saying he thinks consumer spending is still strong and it's still there. So, I think in terms of just, like, economic strength, I think it's pretty decent actually. I think what changed for the market was the Fed's rhetoric, and I think that they were holding onto this option that they were gonna show up out of nowhere with another 25 or 50 basis point increase, and I think that that's fundamentally now off the table, and I think that that's really heartening for the market, that's good for the market.

David Friedberg 21:15 Growth stocks are ripping. Affirm and Palantir-

Chamath Palihapitiya 21:18 Ripping.

David Friedberg 21:18 ... are up 20% today.

Jason Calacanis 21:20 Wow.

Chamath Palihapitiya 21:20 Ripping, ripping, ripping.

David Friedberg 21:21 Yeah.

Chamath Palihapitiya 21:21 Opendoor ripping, Doordash ripping. All these companies are up 20 and 25 and 30%. It's crazy.

David Friedberg 21:28 Yeah.

Jason Calacanis 21:29 So are we calling bottom sex?

David Friedberg 21:32 Well, maybe. I mean, I, I don't know. It's so hard to predict the markets, but if you believe that there's more upside to rates than downside, meaning that the odds of a rate decrease are much greater than the odds of rate increase from here, then there is upside to valuations, particularly for growth stocks. Also, for distressed real estate, because all these things get more valuable when rates are lower. So if you-

Jason Calacanis 21:57 Yeah.

David Friedberg 21:57 ... believe that we're gonna be in a, in a cycle of rate decreases, and that whole thing has played its way out, then everything's gonna rally.

Jason Calacanis 22:05 Well, let's talk about real estate because I think that's one of the biggest overhangs right now that hasn't fully been accounted for. There's, you know, $3 trillion of commercial real estate loans sitting out on commercial banks' balance sheets in the US today. $3 trillion. It's an insane number. And we were all talking over text the other day, as you guys know, about this building that's being shopped and got some attention on Twitter. I think the a- it's 115 Samsung. You guys know this building?

David Friedberg 22:36 Yeah.

Jason Calacanis 22:36 I've lived in San Francisco for 20... How long have I lived there? 20-some-odd years now. So I know this building, and it's 125,000-square-foot building that's gonna likely be fully vacant in, call it, two to three years. So the guy puts it up for sale, the equity owner. He puts the building up for sale and he's basically, like, running an auction on it, and the brokers are all saying, "Hey, it's currently at 199 bucks a square foot, which translates to $25 million. It'll probably get done at 300 bucks a square foot, which is about $38 million for the building." The problem is if you look at the debt on the building, there's $53 million of debt. B of A owns that note. So Bank of America in 2016 issued a $54 million note on this building. If this deal closes at $39 million, the equity owner who's running this auction to sell the building makes $0. All that happens is that money pays down the debt and the debt only gets 70 cents on the dollar, and B of A has to take a writedown on the rest. So there's a rumor that in this particular case what's happening is the equity owner of the building is putting it up for auction to show the bank, "Hey, this thing's only worth 70 cents on the dollar for you on your debt, you should restructure my debt." So apparently there have been a lot of building owners that have been going to their banks and saying, "Hey, I want to restructure my note. I want to have longer payment terms, I want to keep the rates lower for longer, I want to have some of the debt forgiven." Anything they can do to get the cost of the debt down, because the overhang of the debt on all these buildings is so significant, these buildings cannot make money and the owners will never make money, so they're like, "Why am I even wasting my time?"So they have one option, which is to hand the keys back to the bank and say, "Here you go. You auction it and sell it. Good luck." And the other option is to go to the bank and say, "Hey, restructure my debt. Let's figure out a deal." Here's the problem. The three trillion dollars of debt that we just mentioned that's sitting on all the banks' balance sheets is all being held at par. They're not discounting it at all, and they're not marking it as being impaired in any way. So as soon as they have to start writing this stuff down, the banks' balance sheets all get impaired. And so there's a real risk in the market that I don't think's been fully accounted for that we're starting to see the cracks. And to Tuma's point, this might accelerate either fed action or, as I've mentioned in the past, I think the federal government steps in and starts to issue programs to support commercial real estate developers and owners. Sachs, I know you've been following this quite a bit. You know, maybe you could share your point of view, and if I'm off on this, in terms of how significant of a problem this is. This is, you know, how much of the three trillion of debt really is impaired, and by how much should it be impaired, do we think?

David Friedberg 25:13 Massively. I think it's a huge problem. If you talk to anybody, any of these, uh, commercial real estate developers or sponsors, they'll tell you many of them are just kinda hanging on by their fingernails. I mean, it's really ugly. And you know how distressed things are when you actually look at some of these sales. That same account on Twitter that you posted, he's got like a, a tweet storm here showing about half a dozen of these sales that have happened in the last few months, and buildings are now selling for two to three hundred dollars a square foot in San Francisco. These are buildings that could have sold for a thousand bucks a foot, you know, a couple of years ago, and now they're selling for two to three hundred. The replacement cost, if you're trying to recreate these buildings from scratch, given how expensive it is to build in San Francisco and how complicated the entitlements process is, probably be twelve hundred, uh, plus a foot. So these buildings are selling for ten to twenty percent of their replacement cost. These are fire sales.

Jason Calacanis 26:12 If you look at the loans in the, in the San Francisco commercial real estate market, do you think that the loan value is probably impaired by 40%? 'Cause that's roughly what it would say on that 115 Samsung building is BofA would probably have to take a 30, 40% mark down on their debt.

David Friedberg 26:25 Yeah.

Jason Calacanis 26:25 Do you think that's the right way to think about the numbers, 30 to 40% of debts?

David Friedberg 26:28 Potentially. You could figure it out this way. A typical commercial real estate deal is about one-third equity and two-thirds debt. So if somebody bought a building at, call it, a thousand dollars a foot, they would have had to have put in, call it, 333 of equity, 666 of debt.

Jason Calacanis 26:43 Yeah.

David Friedberg 26:43 Now, if that building's only worth, I don't know, 200, 250 a foot, there's $750 of loss per foot, right? And only thr- 333, roughly half of it, is equity. So the debt is taking a huge haircut there too.

Jason Calacanis 27:00 Yeah. Debt's about 40, 50%, right? Yeah, yeah.

David Friedberg 27:02 Yeah, and no one wants to recognize that loss. The equity holders certainly don't because they get wiped out, and even the banks are reluctant to recognize that loss because who knows what that could trigger when their balance sheets are so impaired. So what everyone's trying to-

Chamath Palihapitiya 27:17 Where are these people gonna come from, Sachs? Where are they... Where... I-... This is my, this is my big problem with this argument is I, I think that numerically, you're right, that there is this bottoming or there is just, like, a lot of value to be had, right? The problem is, and I'll g-... And I'll give you an example of a company that I own. So it's not even a company that I'm just a minority investor in. We used to be in San Francisco, and we went virtual. Now all the salaries are pegged to San Francisco salaries, but now everybody's sort of, like, everywhere throughout the country. We don't have an office space, and I'm really struggling trying to figure out how to actually bring everybody together. And my choices were, I thought, "Okay, well, let me find what it would cost to actually run this place in San Francisco," and my, my opex would have gone up 15, 20% just for the building. So then I'm like, "Okay, well, where else can I go?" And it's like, well, I could go to a place like Las Vegas, and I could put the people there. It's an hour, so it's close by. We can fly there whenever we need to. It's got no tax, so maybe that's an advantage for the employees. And so I'm in this constant hamster wheel as an owner of a business. I can't get people into the office. If I do bring them into the office, it's super expensive and it bloats my opex. So I'm just trying to figure out, how does that get resolved for people like me so that we want to go back to San Francisco and rent those buildings that are so cheap?

Jason Calacanis 28:45 Those buildings are gonna have to get written down first. So I set up my company in 2006, and I was paying $22 a square foot for my first office in '06, and then we ended up getting a really nice office, and I think we ended up paying like 35 to 40 bucks a square foot by the time we moved to a super nice office around 2010. But around that time, which was also when GFC happened, the global financial crisis in '08, '09, and that's when rates dropped to zero. And that's also when all startups and tech companies said, "Hey, let's start setting up in San Francisco," because it's mostly young people that are engineers now. They mostly wanna live in the city. They mostly wanna be single and have a good life here rather than go live in suburban Silicon Valley. And so real estate shot up because rates were zero. All the tech companies were setting up. I mean, Sachs, you had, uh, Yammer in San Francisco, didn't you? Were you on the peninsula?

David Friedberg 29:34 Yeah. Yeah.

Jason Calacanis 29:35 Yeah. And that was, like, the place to have your company was in the city, and so I would argue, like, if you go back to the '08, '09 era, that's really when San Francisco started to take off, and it was almost like a bit of an outlier of a bubble that started all the way back then. And then, you know, the ZIRP environment kept things moving up and up and up over the years that followed. I do think that this, like, this market will likely normalize back to pre-2010, pre-'09, and that's when rates were, like, in the 25 to 35 bucks a square foot range for, you know, tech real estate.

Chamath Palihapitiya 30:05 But are you saying that I will move back to that building and I'll, and I'll move my company back there?

Jason Calacanis 30:10 When it gets repriced, yes, I do think so.

Chamath Palihapitiya 30:13 Are you sure?

Jason Calacanis 30:14 I don't see how, I, I don't see how the market stays where it is. Yeah.

David Friedberg 30:16 Tuma's argument is basically on the demand side, basically saying, "Where is all this demand gonna come from?"

Chamath Palihapitiya 30:21 I think you could give it to me for zero and I wouldn't bring my team back there. I'm just asking, like, again, the math all makes sense on a spreadsheet, but the big issue is, as an owner of a company, why would I ever bring my team back to that place? And I'm struggling even at, like...

Jason Calacanis 30:35 Oh, you mean because it's a nasty city because it's all messed up, the city is messed up generally?

Chamath Palihapitiya 30:38 Well, first of all, well, if you're, if you're asking me to bloat my OpEx 10%, 20%, the answer is absolutely not will I do that. Then if you're saying, "Well, Chamath, how about at zero?" Let's just go to zero, right?

Jason Calacanis 30:48 Yeah.

Chamath Palihapitiya 30:48 It's free. Take the building.

Jason Calacanis 30:49 Yeah.

Chamath Palihapitiya 30:50 I still wouldn't do it because then these people have to move from all around the country, come back here, and all of a sudden just live in a slimy dungeon.

Jason Calacanis 30:57 (laughs) Yeah.

Chamath Palihapitiya 30:59 So how does that get solved? So that building should be zero.

Jason Calacanis 31:02 Sax, you own buildings in San Francisco. What's your answer as a landlord?

David Friedberg 31:06 Yeah, I only own buildings in Jackson Square, which is, like, the one decent part remaining of San Francisco, and which is actually where people want to be. And we've seen pretty good leasing activity there because it's, as people get driven out of Market Street and out of SoMa-

Jason Calacanis 31:19 Yeah, yeah.

David Friedberg 31:19 ... they actually, they substitute to Jackson Square. Look, I think Chamath makes a good point, which is the demand picture for San Francisco is really unclear. There's something like, call it, 30% vacancy.

Jason Calacanis 31:29 Yeah.

David Friedberg 31:29 So there's an enormous number of these zombie buildings, and it's really hard to understand where the demand is gonna come back to fill them. Now-

Jason Calacanis 31:38 Right.

David Friedberg 31:38 ... the counterargument to that is, yeah, but it's so cheap. I mean, these buildings are so cheap. They're basically selling for almost land value.

Jason Calacanis 31:47 That's Chamath's point. It's like it goes to zero, yeah.

David Friedberg 31:50 So if there's a recovery, then it's very asymmetric, right? I mean, you could get 3 or 4X upside on your money very, very quickly. Rates come down over the next couple of years. You could refi your equity out. So that's the counterargument is, yeah, we're not exactly sure where the demands comes from, but if you are willing to have a long-term outlook, like five or ten years, then there's a pretty good chance it'll come back somehow. I think one of the things that has to happen in order to foster that demand is for there to be some fundamental changes in the politics of the city. And the question is, how does that happen? And I think one of the ways it could happen is the city starts facing huge budget shortfalls, which are coming. There's a h- there's gonna be a huge budget shortfall over the next year and next couple of years because there's no activity. I mean, a third of the economic activity of the city has just dried up.

Chamath Palihapitiya 32:40 And what about the rest of the country? So tell me, like, if, if this is what's happening in San Francisco, what's happening in Boston, Dallas, New York City?

David Friedberg 32:47 Well, I don't think those areas are as impaired. They don't have the vacancy rates that San Francisco does. I mean-

Jason Calacanis 32:52 So i- if you look at the total-

David Friedberg 32:53 ... another major market is 30%.

Jason Calacanis 32:55 So just coming back to my prior question, if you were to assume San Francisco commercial real estate debt is impaired on the order of 30%, what do you think the debt load for the, for all commercial real estate around the country is impaired? Is it 10%, 15%, 20%?

David Friedberg 33:10 I don't know. I mean, it-

Jason Calacanis 33:11 Oh.

David Friedberg 33:12 I, I think that you probably, for San Francisco, I'd say probably half the debt should be written off. I don't know-

Jason Calacanis 33:18 Wow.

David Friedberg 33:18 ... what it is for the rest of the country. There's already half a dozen of these buildings that have traded in the range that we're talking about, and there'll be about 20 more that are coming to market that'll trade in the next year. It's gonna be fire sale after fire sale, and you, you have to clear out all of th- this bad equity, and then you've gotta clear out all of this bad debt, and then the market can reset itself.

Jason Calacanis 33:38 Okay, so let's, so, so let's just-

David Friedberg 33:38 But, look, Chamath, Chamath has a, has asked the-

Jason Calacanis 33:41 Yeah.

David Friedberg 33:41 ... you know, $64,000 question here, which is when will the demand come back and what will it consist of? And that is the leap of faith here that you have to make. Just to finish the point I was making, the city, the politicians are gonna be under extraordinary stress because there's not gonna be any budget. So what are they gonna do? Are they going to lay off half the city employees, reform pensions and salaries, or are they gonna start to realize that all of their crazy transfer taxes, all of their crazy regulations and entitlements needs to be stripped away to start fostering real activity in the city? Are they gonna start investing in police again? Are they gonna start cleaning up the city? Are they gonna act as a partner to business? I mean, that's where the incentives are gonna be, is for them to start acting like a partner again. And again, that's a huge leap of faith given how crazy left-wing the politics of San Francisco have been, but they may not have a choice 'cause it's gonna come down to, do we fire half the government employees or do we start working with business instead of driving them out of the city?

Jason Calacanis 34:42 I don't wanna get too caught up in San Francisco politics and San Francisco as a region. I think, you know, we've, we've hashed that one out. But the bigger question is if there's this impairment on $3 trillion of commercial real estate debt across the country, who eats the loss? So who owns all the equity in these buildings and where does that ultimately flow through to? What are the second order effects and who owns the debt and where does that all flow through to? We know the debt sits on the commercial banks. Do the bank stocks get beat up? The market's been cognizant of this. Folks have been shorting and selling regional bank stocks. And then Bill Gross, the well-known bond trader who used to run PIMCO, came out this week and said, "Hey, I've been tracking all these regional bank stocks. They're down so much, it's insane. They're ch- they're trading at a huge discount to book. I'm gonna start buying." And then this morning he put out a tweet saying, "I'm buying these stocks," and he listed the names of the bank stocks. He's like, "The bottom's been hit." Do you buy that? I mean, has, has this already been priced into the market that this debt's gonna be written off at some point and all these balance sheets are impaired?

Chamath Palihapitiya 35:40 One of the-

Jason Calacanis 35:40 Because these banks are trading at a big discount to book value.

Chamath Palihapitiya 35:42 Well, well, book-

Jason Calacanis 35:43 So, you know, it's, yeah.

Chamath Palihapitiya 35:43 Well, book value is a term that you need to put in quotes. So my question-

Jason Calacanis 35:47 Yeah.

Chamath Palihapitiya 35:47 ... would be what are the rules around the real mark to market? Because I think that when we talked about the banking crisis, the biggest problem was these guys were playing fast and loose with valuations. And so are these things actually valued to market and do they have to?

Jason Calacanis 36:01 They're not, yeah, no, that's the point. That's why they're trying to avoid these sorts of transactions.

Chamath Palihapitiya 36:05 Well, so then these book va- these book values are illegitimate.

Jason Calacanis 36:08 Inflated. Yeah, and that's why they're trading at a discount. But Bill Gross is now saying they're trading at such a discount to whatever the accounting is that they're, like, now well below-

Chamath Palihapitiya 36:15 Maybe he's right.

Jason Calacanis 36:15 ... the fair value. Yeah, he's-

David Friedberg 36:16 That's the argument for San Francisco real estate. I mean, sorry, that at least for these fire sales that are happening.

Jason Calacanis 36:21 Yeah. Well, Sax, let me ask you one more question. So I mentioned the Biden program. Biden announced this program, which is, uh, effectively $45 billion in federal money to convert commercial buildings into condos and residential buildings. He basically relies on a 1998 transportation and infrastructure bill.... that provides authority to the federal government to issue low-interest loans for specific infrastructure projects. If you're a developer, is it realistic that this money's gonna unlock potential for increasing affordable housing density in urban centers by converting office buildings into residential buildings?

David Friedberg 36:59 People talk a lot about these office to residential conversions. The problem is, it's easy to say and much harder to do. Most commercial office buildings don't meet the structural requirements or architecturally, they're not really suitable. If you think about most commercial office buildings, they've got really big floor plates and if you think about, like, restructuring them into apartments, there's not proper window coverage, there's not proper utilities. So it's a lot harder than it sounds. And I'd say most office buildings don't meet a lot of the requirements for this. But I think what's good about this executive order, even though I don't really believe this is a great use of 45 billion, is that it's sending a signal to all of these cities, all these local governments, that we need to get with the program here. In other words, you've got, you know, a blue executive sending a message to all these blue cities and states that commercial real estate is in distress and you need to loosen up your entitlements, you need to loosen up your regulations. It's sending a message to the City of San Francisco and all these other cities that you guys need to start doing positive things. And this is my point about, will San Francisco start acting like a partner for real estate development, which is how you make real estate work, or will they continue to drive all of these crazy regulations? So I, I mostly see this Biden program as symbolic.

Jason Calacanis 38:25 I see.

David Friedberg 38:25 But the question is whether the symbolism will actually drive better behavior by these blue cities.

Jason Calacanis 38:31 I personally think they're just trying to find more ways to pump money into supporting commercial real estate markets because of the issues we just highlighted. And I think this is the first of what will likely be several programs to support, framed as things like affordable housing, but really designed to support the economic loss impairment that's gonna be inevitable at some point.

David Friedberg 38:49 Right. But, but, you know, you can't, you can't convert, uh, an office building to a residential building without rezoning-

Jason Calacanis 38:55 Oh, yeah.

David Friedberg 38:55 ... typically.

Jason Calacanis 38:55 Totally, yeah.

David Friedberg 38:57 And this is where you need action by these city governments. They've gotta rezone, they've gotta reduce the regulations, they've gotta eliminate these transfer taxes. Um-

Jason Calacanis 39:04 Good luck.

David Friedberg 39:05 ... they have to make these project... Yeah, exactly. They have to make these projects economically viable.

Chamath Palihapitiya 39:09 I think that we'll be able to look back and San Francisco will be an incredibly measurable experiment on the return on invested capital-

Jason Calacanis 39:22 So many things, so many things. (laughs)

Chamath Palihapitiya 39:23 ... on, on the return on invested capital of progressive left ideology. And it will be a great case study. Now, if it works, it will prove that all of these ideas that were kind of talked about in kind of, like, high intellectual circles has some value. And if it fails, which it looks like it's failing, it'll never be tried again for a very long time. Either way, you're gonna have a very clear answer and the good news is we're, we're probably another five or 10 years away from that bottoming.

David Friedberg 39:58 Well, actually, can I just ask you a quick question, Chamath? So there was a article here saying that the City Controller's Office for San Francisco has released its projected budget shortfalls for the coming years. It's almost half a billion for 2024-'25, reaching 1.3 billion in '27, '28. So what do they do about this? I mean, they don't have the money.

Chamath Palihapitiya 40:23 They'll borrow money. They'll borrow money. And you, you can look at all of these other municipalities around the country as examples, but counties and municipalities and cities that are in much worse fiscal shape than San Francisco was able to stay incompetent for a lot longer. And so that delta T of incompetence tends to be about five to 10 years. I would say the midpoint is eight. So if we're starting now, you'll probably see some rationality by 2032, 2033.

David Friedberg 40:51 (laughs) Right.

Chamath Palihapitiya 40:53 That's how much borrowing, David, I think you can tap in the, in the muni market because, you know, again, this is sort of the, the double-edged sword, right? Like, when you're a triple tax advantaged borrower, you can paint the case for being in San Francisco, which is part of California, et cetera, et cetera, et cetera, and your alternative is to own something in a state that's not nearly as economically vibrant. It's a pretty easy case to make to be able to borrow the money, I think. And so the problem is that it'll take, like I said, another probably eight years, 10 years, so before the, the spigot gets turned off and they have to make some harsh changes. So they'll keep running this experiment for at least, I think if you wanna be conservative, for at least a decade, another decade.

David Friedberg 41:34 So they'll just pile on the debt until it just breaks.

Chamath Palihapitiya 41:36 They'll just pile on the debt. Absolutely.

Jason Calacanis 41:38 I don't wanna keep harping on San Francisco. Let's, let's move on to WeWork 'cause WeWork feeds into this real estate piece. I don't know if you guys saw this article that, uh, Wall Street Journal reported that WeWork is gonna file for chapter 11 as early as next week. They have a significant debt burden owed to SoftBank Vision Fund as part of their go public. They've signed leases in office buildings in San Francisco and elsewhere around the country. $10 billion in total lease obligations due starting in the second half of 2023 through the end of '27. And after that, an additional $15 billion starting in 2028. And as of June, WeWork had 70- 777 locations, including 229 in the US in major cities. The business made about, call it 840 million bucks in revenue last quarter. So that works out to, call it a three and a half billion dollar revenue run rate with, you know, $10 billion of lease obligations starting next year. So the business is just drowning in these lease obligations and to restructure 777 lease obligations in this environment that we're talking about while doing what Chamath is saying, lowering rents to attract employers to show up and actually rent space from them is...... obviously causing the business model to distort even worse than it has been historically.

Chamath Palihapitiya 42:53 They burned $8 billion of free cash flow in, since Q4 of tw- ni- 2019. $8 billion of free cash.

David Friedberg 43:02 There's no question that, that WeWork has been a capital destruction machine. That being said, I actually think that some private equity player is gonna buy this out of bankruptcy and make a fortune.

Chamath Palihapitiya 43:12 I agree with that too.

David Friedberg 43:14 Because out of those 777 locations, a lot of them are good locations and have good tenancy, they probably generate good revenue. The problem is that the leases are just bad, and bankruptcy gives you the power to break those leases or renegotiate them. So, a really smart private equity player would come in here and say, "Okay, we're gonna take these locations. We're gonna divide them into three buckets. Bucket number one is we're gonna get rid of them because they're just bad locations. We don't want them. There's just no occupancy. Bucket number two is we're gonna go to the landlord and say that, 'Sorry, like, this lease doesn't work for us. We will be willing to work for you as an operator of the space, and you'll pay us a fee and a rev share on whatever it makes, but we can't pay you a guaranteed rent.' So, that's bucket number two. And then bucket three, which will be the best locations, they'll go back to the landlord and say, 'Here's 60 cents on the dollar. We're willing to pay you this in, in rent. That's it. If that's not good enough for you, we're breaking the lease. We're out.' And those landlords are gonna have to accept it because who are they gonna get who's any better? And they don't even have the TIs, they don't have the capital to put some new tenant in there." And even if they could put someone in there, it's not gonna be at a rent that's much higher than 60 cents on the dollar 'cause WeWork made a lot of these top-of-market leases. So, I think the landlord will take the bird in the hand. So, think about it. Some private equity player goes in there, renegotiates all these leases, sheds the bad ones, and all of a sudden, the business is gonna make a lot of money. And the reason why it's gonna make money is because WeWork poured all of this, uh, capital into renovating these spaces and making them really nice. I mean, if you go into a WeWork, they are really nice spaces, and the reason for that is because WeWork spent billions of TI dollars making these things incredibly nice. Was that a wise investment? No, it was a terrible investment, but that money has been spent and already lost. That, that capital's been wiped out. So, whoever buys this thing out of bankruptcy now is gonna be the beneficiary of all of those ab- absurd TI dollars that were spent when Adam Neumann...

Chamath Palihapitiya 45:20 Oh, my God. You just convinced me. Let's go buy it.

David Friedberg 45:22 (laughs)

Chamath Palihapitiya 45:23 Let's put it in a bid. Is it filed? Is it filed?

David Friedberg 45:27 The brilliance of Adam Neumann was somehow convincing-

Chamath Palihapitiya 45:29 Wow.

David Friedberg 45:29 ... all these investors to put in billions of dollars into TI money on the theory that it was a software business. This was never a software business. It's a-

Chamath Palihapitiya 45:39 (laughs)

David Friedberg 45:39 ... real estate development company.

Chamath Palihapitiya 45:41 It was Regus.

David Friedberg 45:42 It was Regus. (laughs)

Jason Calacanis 45:44 It was Regus.

Chamath Palihapitiya 45:44 It was Regus.

Jason Calacanis 45:44 So, so I got SoftBank put in a total of $16.9 billion in equity and debt-

Chamath Palihapitiya 45:50 Oh, my gosh.

Jason Calacanis 45:51 ... into WeWork. Isn't that incredible?

David Friedberg 45:53 Who did?

Chamath Palihapitiya 45:53 Oh, my gosh. SoftBank.

Jason Calacanis 45:55 SoftBank, which is mostly through the Vision Fund, which is, as you guys know, 45% Saudi money.

David Friedberg 45:59 It was Regus with much better design, but that design came at a huge expense, which was, again, this over-investment in, in TI dollars combined with the fact that they had no discipline around signing leases, and they have so many top-of-market lease deals.

Jason Calacanis 46:15 Yeah.

David Friedberg 46:15 But again, that's all fixable for someone who comes in. Old saying in real estate, that it's the third owner who makes all the money. Like, the first owner who does all the ground up, they lose a fortune and they get blown out. Then the second guy comes in-

Chamath Palihapitiya 46:28 (laughs)

David Friedberg 46:28 ... and thinks that they're gonna make it work-

Jason Calacanis 46:30 That's a great saying. (laughs)

Chamath Palihapitiya 46:31 (laughs) That's a great saying.

David Friedberg 46:31 ... but they can't make it work either, so then they get blown out, and it's finally the third person who comes in who makes all the money, and that's gonna happen here too.

Chamath Palihapitiya 46:38 Oh. Oh, my God. That's just fantastic. This is a story of the ages.

Jason Calacanis 46:42 Let's transition from one bubble to the most recent bubble, so AI regulation. Given the frenzy and frothiness and fearmongering on AI destroying the world, which I would personally argue is largely fear porn, the Biden administration took it upon themselves to try and be leaders in regulating AI and published an executive order on October 30th. This long-anticipated executive order covers a very broad range of matters in a 111-page order document. It covers very specific actions in very detailed terms, it uses technical terms of art, and I think it creates as much confusion as it does provide clarity. It's an executive order, so it's not legislation, and there is much in here that some would argue needs to be legislated. As an executive order, it can be overturned very quickly and easily by the next administration. It largely demands voluntary action from technology companies to submit their models, infrastructure, and tools for review, for proof of safety.

Chamath Palihapitiya 47:46 Don't forget the equity and inclusion.

Jason Calacanis 47:48 There's an equity и inclusion component, which is that your models have to account for-

Chamath Palihapitiya 47:51 Diversity, equity, and inclusion.

Jason Calacanis 47:53 Diversity, equity, inclusion. There's a phrase from the executive order. "The term 'dual-use foundational model' means an AI model that is trained on broad data, generally uses self-supervision, contains at least tens of billions of parameters, is applicable across a wide range of contexts, and that exhibits high levels of performance at tasks that pose a serious risk to security, national economic security, public safety, or any combination of those matters," none of which ultimately describes endpoints, none of which describes loss or applications. To me, this is the biggest problem I see with the executive order and with the approach to AI regulation broadly, particularly with what's being developed and has been leaked in what's... in terms of what's being developed out of the EU, which is that many of these government agencies, government actors are trying to define and regulate systems and methods rather than regulate outcomes and applications. For example, if you were to say you cannot commit fraud and falsely impersonate someone using software-You can rightly say that. It follows the rule of law, and we should be able to adjudicate that cleanly in courts. Instead, to have government agencies and have what this executive order describes as a Chief AI Officer in every federal agency, responsible for regulating the systems and methods of all the actors and all the private companies that are building software, to say, "This is the scale that your software can get to. You could have a certain number of parameters. If you're bigger than this number of parameters, we have to come in and check your software," creates an outlandish standard, and one that makes absolutely no sense, particularly in the context of the pace of AI's progression. Remember, the paper that was foundational to transformer model development, which is what a lot of people call AI today, which has developed these LLMs and so on, came out in 2017 and wasn't really widely adopted until 2018 as a standard. We're five years into this. So the way that we're making models, the types of models we're building, the scale of the models, the number of parameters being used, the pace at which these things is changing is staggering. We are only in the first inning. And so to come out and say, "Here are the standards by which we want to now regulate you, this is the size that the model can be, these are the types of models," it's gonna look like medieval literature in three years. None of this stuff's even gonna apply anymore. I'm just really of the point of view, as you guys know, that the market needs to be allowed to develop. If we don't allow our market to develop in the United States, India and China and Singapore and other markets will get well ahead of us in terms of their model development and their capabilities as a nation and their capabilities as an industry. And the more our government actors step in and try and tell us what systems and methods we are allowed to use to build stuff, the more at risk we are of falling behind. That's my general statement on the matter. I'll pass the, the, uh, the mic. I mean, Chamath, you were advocating for AI regs a couple months ago, I think, right? I mean, where does this fall with respect to what you were advocating for and what you were concerned about?

Chamath Palihapitiya 50:53 Well, I had a very specific lens that I viewed this stuff through, and they didn't really address it. I think that this was a little bit of a kitchen sink EO, and I think what probably happened was depending on... Look, I, I, I mean, I think the thing is like, look, they... When this process first started, it started in the Senate and it started with the majority leader, Chuck Schumer. And I met with Chuck, and then I met with Chuck's team, and then it morphed into this much bigger thing. And I think it morphed into a lot of people trying to do the right thing, meeting with a lot of very important and very famous people. And I think somewhere along the way, it just became this convoluted and confused document, because, uh, I do agree with you that it's not super coherent. There's a lot of arbitrary requirements, you know? Like, there's like... I think there's a requirement here that at a certain number of parameters, you have to like self-report yourself to the government, which is like, "What does that even mean? Why, why is that even important?" So it, it's, it's just a lot of random stuff. So it just seems like anybody who had the ear of the people writing this had a chance to write something in. So it's a little confusing. It's not going to do the job, and I think that you're right. In two or three years, we're gonna look back and this is gonna look medieval.

Jason Calacanis 52:21 I'll just say, I'll point out another point, just one of many that I could highlight in this document. I read most of it. They say, you know, there's gotta be legislation on watermarking AI content. Think about that for a second. What is AI content? We've been using Adobe Photoshop for 30 years to change photographs and change documents. We've been using various tools for doing audio generation and music. I mean, there's no music that doesn't run through a digital processor of some sort. There's no video, there's no movies that don't have some degree of CGI elements or some degree of post-production digital rendering integrated into the video itself. What makes something AI? Is it the fact that 100% of the pixels are generated by software? What if it's only 98%? Is Pixar AI? Because all of Pixar is made on computers. Is the autotuned hip-hop artist AI? Because his voice isn't coming through on the audio track. So what is AI in this definition? The fact that any piece of content needs to be watermarked if it's AI, I think is one of the most outlandish infringements on First Amendment rights I've seen and doesn't really understand any se- in any sense how software is generally used in the world today, which is frankly everywhere. And to say that now there is a certain definition of a certain type of software that we're gonna arbitrarily call AI, we wanna watermark the stuff, and we wanna get a stamp on that content so the government can track it and audit it, I think is absurd. Zacks, over to you.

David Friedberg 53:58 Yeah, okay. Three, three quick points here. Number one, AI has been convicted of a pre-crime.

Jason Calacanis 54:03 (laughs)

David Friedberg 54:04 This E- this EO, it describes, it describes this litany of horribles, this parade of horribles that's gonna happen unless, you know, the wise people in the central government, like Joe Biden and Kamala Harris, guide its development. So that's what the EO says it's gonna do, is guide the development of this technology, because if we don't, it's gonna result in all these horrible things happening. Steven Sinofsky, who was a key executive of Microsoft in the, I think going back to the '80s, wrote a really interesting blog post about this, where he, he was there at the beginning of the PC revolution with the dawn of the microprocessor in the '70s and '80s.

Jason Calacanis 54:40 Yeah.

David Friedberg 54:40 And he pulled a bunch of books off his bookshelf from that time period, which were sort of these sci-fi books, like Forecasting Doom, Infringement on Privacy. One was called The Assault on Privacy. Another one was called Electronic Nightmare. Another one was called The Rise of the Computer State, and so on. And so it was also predicting all these horrible things that would come.... from the birth of the computer and it would put all of these people out of work and so on.

Chamath Palihapitiya 55:05 Totally.

David Friedberg 55:06 But nobody allowed these fears to guide the development of the industry. There was no executive order at that time saying that we're gonna guide the development of the micro poss- processor to avoid all of these harms that haven't occurred yet, and instead we're taking a, a different approach here. And he makes the point that if the industry had been guided in that way, then it never would have achieved the potential that it ultimately achieved. And furthermore, he makes the point that a company like IBM would have been more than happy to work with the regulators to say, "Yeah, let's define a bunch of these rules to make sure that it doesn't go in this dark direction that everyone thinks it's gonna go in."

Chamath Palihapitiya 55:44 Can I-

David Friedberg 55:44 And you would have gotten very extreme regulatory capture.

Chamath Palihapitiya 55:47 Can I precog one of the crazy lines in this thing?

Jason Calacanis 55:50 (laughs)

David Friedberg 55:50 (laughs)

Chamath Palihapitiya 55:50 Here are the precogs. Well, here's one. When a foreign person transacts with an infrastructure as a service provider, so Azure, Google Cloud, Amazon, to train a large AI model with potential capa- with potential capabilities that could be used in malicious cyber-enabled activity, they propose regulation that requires that IaaS provider to submit a report. So if (laughs) you-

David Friedberg 56:15 Hmm.

Chamath Palihapitiya 56:15 You have to know (laughs) , you have to know (laughs) if a foreigner is using your APIs on AWS and then file a TPS report-

David Friedberg 56:27 Oh my god.

Chamath Palihapitiya 56:27 ... somewhere. What is going on? I have a clarifying question. What happens if you're a foreigner that's on an H1B at Facebook or, you know, Microsoft and you-

Jason Calacanis 56:36 Ah, good question.

David Friedberg 56:37 Well, and then Chamath-

Chamath Palihapitiya 56:37 You're technically a foreigner.

David Friedberg 56:39 Right. And then Chamath, meanwhile, remember when SpaceX is now being sued by the DOJ because they haven't employed enough foreigners?

Chamath Palihapitiya 56:44 (laughs)

Jason Calacanis 56:45 (laughs)

David Friedberg 56:45 (laughs) So it's like-

Jason Calacanis 56:47 (laughs)

David Friedberg 56:49 (laughs) ... they outlaw both sides of it-

Jason Calacanis 56:51 (laughs)

David Friedberg 56:51 ... uh, so that you're- you're- you're in non-compliance just by existing. If you ex-

Jason Calacanis 56:56 (laughs)

David Friedberg 56:57 You know what I mean? Like if-

Chamath Palihapitiya 56:58 Compliance is by death. (laughs)

David Friedberg 57:00 If you, uh, employ foreigners in the creation of these very sophisticated technologies, you're creating a national security threat. If you exclude them, you're violating their civil rights. And these, uh, regulations are promulgated by two different parts of the government. So the, the, the government is basically getting to a point where no matter which side of the regulation you choose, you're going to be in non-compliance somewhere, and this is just a recipe for the government to basically take action against anybody who they don't like politically.

Chamath Palihapitiya 57:28 Yeah.

David Friedberg 57:29 Now on this pre-crime point, you know, one of the crazier stories that came out, and I think this was in Variety, is that Biden grew more concerned about AI after screening the most recent Mission: Impossible movie-

Chamath Palihapitiya 57:41 (laughs)

Jason Calacanis 57:41 (laughs)

David Friedberg 57:41 ... in which the villain is a sentient AI that seizes control of the world's intelligence apparatus.

Chamath Palihapitiya 57:47 Is that true?

Jason Calacanis 57:49 That's not true.

David Friedberg 57:49 Well, that's what the story said.

Jason Calacanis 57:51 Didn't the press reporter ask the press secretary this and this was the response? Who said this? Says who-

David Friedberg 57:57 The White House chief of staff, I guess.

Jason Calacanis 57:59 Said Reid. Said Reid, who wa- Yeah. Wow. Unbelievable.

David Friedberg 58:01 The, the crazy thing is that I think the reason they're putting out this story is they don't want to admit how the EO really happened, which is a bunch of lobbyists came in, and like you said-

Jason Calacanis 58:10 Yep.

David Friedberg 58:10 ... a lot of powerful people from big tech.

Jason Calacanis 58:12 Yeah.

David Friedberg 58:12 They're all clamoring for regulatory capture. They're all clamoring to define the regulations so that they can benefit themselves and keep out new entrants, because one of the big targets here is going to be open source software. So if you are, for example, OpenAI, which is no longer open, it's closed source, the number one thing you want to do is pull up the ladder before open source software can get a lot of momentum. And a big part of the regulation here does apply to open source software. I think one of the most problematic things about this, just to move on to the next point, is the way that it's not just this 110-page EO that's being promulgated. The directive is for all these other parts of the federal government to start creating their own regulations. So it says here that the National Institute of Standards and Technology will develop standards for red team testing of these models. It directs the Department of Commerce to develop standards for, like you said, Freeberg, labeling AI generated content.

Chamath Palihapitiya 59:09 It directs explicitly the FTC to use existing leg- regulation to go and legislate. It re- it requires the FCC to think about spectrum licensing rules through this lens. You're absolutely right, it activates every agency of the government to create more bureaucracy.

David Friedberg 59:26 Right.

Jason Calacanis 59:26 And create... No, and more importantly, it creates authority for agencies of the government to go into private servers and run audits. You're allowing the government for the first time ever to have access to private information, private computing infrastructure, rather than do what the job of the government should be, which is to regulate the outputs, to regulate the outcomes, to regulate illegal and illicit activities, rather than i- um, regulate systems and methods that, as Saks point out, are pre-convicted of a crime. There is no crime until a crime is committed, and so this idea that the government can come in and regulate and keep a crime from being committed by auditing-

David Friedberg 1:00:03 (laughs)

Jason Calacanis 1:00:03 ... and managing all the systems and methods that software companies are using puts the United States at an extraordinary and unfair disadvantage on a global stage, by the way. And by the way, Llama2 is out there, hardware is out there, all the tooling is out there for others to start to get well ahead.

Chamath Palihapitiya 1:00:18 Good news about the immigration thing. There is... They actually, on the other side, do streamline the immigration process for people with AI or other critical technologies. So on the one hand, we should be able to hire them, but then on the back end we'll have to file a TPS report about what they do.

Jason Calacanis 1:00:34 (laughs)

David Friedberg 1:00:35 Let me just finish my point about-

Chamath Palihapitiya 1:00:37 Yeah, go ahead.

David Friedberg 1:00:37 ... all these different agencies being directed now to promulgate regulations. And by the way, there's some new committee or council that's being created of 29 different parts of the federal government that are now going to coordinate, uh, on this AI stuff, so it's going to be a Brussels-style bureaucracy. What's gonna happen is that with all of these different bodies issuing new regulations, it's gonna get more and more burdensome-... on technology companies until the point where they cry out for some sort of rationalization of this regime. They're gonna say, "Listen, we can't keep up with FCC and Department of Commerce and this NIT Standards Board. Just give us one agency to deal with." And so the industry itself is eventually gonna cry uncle and say, like, "Please, just give us one," and you already hear people like Sam Altman and so forth calling for, uh, the equivalent of Atomic Energy Commission for AI. This is how we're gonna end up with a Federal Software Commission. Just like we have a FCC to run, uh, big communications and we have a FDA to run big pharma, we're gonna end up with a Federal Software Commission to run software, big software. And the thing to realize about AI is that functionally, there's no way to really say what the difference is between AI and software in general. Every single technology company in Silicon Valley has AI on its roadmap. It's a new computing paradigm. Everybody is incorporating it. Everyone is using some elements of AI. So, this wave of AI is just becoming software. So we're gonna take the one part of our economy that has been free market and relatively unregulated, which is software, it's like the last bastion of true entrepreneurial capitalism, and we're gonna create a new federal agency to manage it. That's where we're all headed here, and we're gonna end up as an industry in the same place that pharma has ended up or-

Chamath Palihapitiya 1:02:38 No, it's a good time-

David Friedberg 1:02:38 ... telecom has ended up, which is you go for permission to Washington.

Chamath Palihapitiya 1:02:43 No, I, Nick, can you just put this up? So I, I did, you know, write a blog post sort of asking for this AI regulation, and, and I do think, like, the model of the FDA is probably the best one, where in certain use cases, I do think that you can create a sandbox where these things can be tested and I think can be evaluated. The problem is that this legislation or this executive order doesn't really do that. So, the way that I wrote this was, well, what are the arguments against what I'm proposing? And (laughs) unfortunately, I have to say every single one of those arguments is not valid.

David Friedberg 1:03:19 (laughs)

Chamath Palihapitiya 1:03:20 So (laughs) I, I think that we should have gone in the direction of, like, a simplifying assumption, which is that most of this stuff is just software, and there are going to be some very specific kinds of businesses that before you take it to market, you should do something that's equivalent to sticking it in a sandbox, letting people see it. And, and I think it's easy to define what those are actually, and the fact that we didn't do that and we have this overly generalized approach is gonna create more chaos, and people will not know whether they're in violation or they're in support. They're gonna be sort of pre-guilty, as you said, Sax, of a pre-crime, and it's just gonna, it's just gonna be chaos. So I think the answer is-

David Friedberg 1:04:00 But this is a smorgasbord for politicians because everyone's gonna be lobbying them to try and shape the regulations the way they want.

Chamath Palihapitiya 1:04:07 It's a... I think it's gonna be a smorgasbord for lawyers.

David Friedberg 1:04:11 Yeah, I mean, everyone's gonna hire lawyers and lobbyists and policy people to try and shape these regulations.

Chamath Palihapitiya 1:04:16 Good time to bet on India. Thank God for Mark, Mark Zuckerberg and the open-sourcing of the LLaMA 2 model. It's not entirely open source, right? I mean, I think the biggest thing with LLaMA 2 that I find problematic is that it, it has these arbitrager- arbitrary thresholds on the number of users one can have- Yes, yes.

David Friedberg 1:04:33 ... before you have to go back to Facebook. So I before-

Chamath Palihapitiya 1:04:35 And, and size, yeah. It's 700 million I think, right? Yeah.

David Friedberg 1:04:37 Yeah, before I give all the credit to Facebook, I'd rather say that I think there are a lot of open source alternatives, including Mistral, that I think are much better.

Chamath Palihapitiya 1:04:45 Yeah.

David Friedberg 1:04:45 And, uh, free and open and in the clear where you can have unencumbered growth not dependent on anybody else.

Chamath Palihapitiya 1:04:54 Yeah.

David Friedberg 1:04:54 Yeah, but I think, uh, your, Freiberg, your larger point about US versus India versus China, I think this could have a major impact on our global competitiveness.

Chamath Palihapitiya 1:05:03 Of course.

David Friedberg 1:05:03 Because as you look around the- what's happening in the American system, there are so many things going wrong, right? Our fiscal situation is untenable. We're mired in massive debt. We have tremendous internal division in the country. Many of our cities are rife with crime. You just look at the number of people living on the streets. It's not good. I mean, you know, there's a lot of indicators that America is in decline. We're involved in way too many foreign wars. So, there's a lot of bad things happening. However, the one bright spot that America has had going for it now, I think for decades, is that we've always been the leader in new technology development. I mean, we're the ones who pioneered the internet. We're the place where mobile took off, we're the place where the cloud took off, and everyone else has been playing catch-up with that. And I think we are in the lead in terms of AI development. I mean, other countries are doing it too, but I think that we are in the lead, and it's not because of the involvement of government. It's because we have this vibrant private sector that's willing to invest risk capital where you know that nine out of 10 checks that you write are going to zero, but that one check, that one out of 10 hopefully could be a huge outcome. So we've had this incredible ecosystem of software development that is free and unregulated that is clustered around Silicon Valley, but it, you know, radiates out to many other places. And the only reason that ecosystem has thrived and survived is the reason that Bill Gurley stated at Allen Summit, which is, what is it, 2,200 miles away from Washington, and Washington has generally kept its mitts off. And now we are headed to a place where not just AI, but basically all software companies are headed for regulation, and like I said, right now, it's 29 different agencies d- promulgating the regulations, but where this is gonna end up is that the industry is eventually gonna beg for its own agency just to rationalize all the spaghetti of different regulations. We are eventually gonna beg for our federal agency overlord just to rationalize this whole mess, and sadly, I think that's where we're gonna end up, and a lot of what is special...

David Sacks 1:07:09 ... about our industry, which is that two guys in a garage really can get started in a completely permissionless way. I think that's gonna be jeopardized.

Jason Calacanis 1:07:16 If that's the endgame, that's genius.

David Sacks 1:07:18 I think that is the endgame.

Jason Calacanis 1:07:20 I mean, do you think that they wrote this thing in a way just to create enough confusion where we all just cry uncle and say, "Just regulate us. Give us one new..." yeah.

David Sacks 1:07:27 Yes. Yeah. Look, I don't know if it's that conscious. I think what it is, is there's a lot of politicians in Washington, and Biden and Harris definitely fall into this category, who just think that central planning or the central guiding of the economy, or aspects of the economy to avoid certain problems, that they think they can do this. They think that they are wise enough to do this, or maybe they're cynical and they just know that this is a, a pathway to campaign contributions. But either way, they kinda believe in this approach, and they threw the kitchen sink at this, 110 pages. Every agency's now gonna be writing thousands of pages and I think where it's gonna end up is with a new agency to manage software.

Jason Calacanis 1:08:07 So I think, Sax, it's a... the point you're making is one that some folks in Silicon Valley have felt for a while, which that... is that a lot of the freedom and opportunity that the United States offers pioneers and entrepreneurs has been realized and borne out in Silicon Valley. That's feeling like it's been stymied in a number of ways. But the events in Israel couple of weeks ago, in my opinion, seems to have shocked a lot of people that are traditionally very liberal Democrats into being red-pilled. I have had a number of calls with individuals over the last few weeks that have historically been very die-hard blue liberal Democrats, have spent their, their time with NGOs, with nonprofits, with various efforts to promote liberal causes. And these are folks who may or may not be Jewish, but who have been so shocked by what's happened in Israel and how many liberal organizations have created this narrative around being pro-Palestinian in a way that is being deemed and is coming across as highly, and in many cases is, very much antisemitic. And so I've had folks say, "I'm giving up everything else I'm doing, and all I'm gonna do is change the causes I'm working on now, and I have just been red-pilled." Do you guys... And, and Chamath, you shared your story on our show a couple of weeks ago, the clip of you saying that went viral, on how you kind of recognized that maybe Trump was a good president in the context of what you're experiencing with the Biden administration now, or seeing with the Biden administration now. You seem to be, like, the case study that I'm now hearing more from Silicon Valley folks, yeah, about this, this shift. I think that over the last three or four years, my political positions really haven't changed that much. Mm.

David Sacks 1:10:12 But I think what's happened is that the, the political party that I've historically been affiliated with has just kept lurching further and further to the left, and so it leaves me looking for a new home, I think. And I think that there are a lot of people that thought they were signing up for a set of beliefs around free speech, around being pro-reproductive rights, around being supportive of LGBTQ issues, but also supportive of a rational approach to the border and reasonable fiscal discipline. These are... all seem to just be totally out the window. So, I understand 'cause I've, I've actually talked to a lot of my friends, and my friends, some of them have been huge donors to both elite colleges and the Democratic Party, and they've paused all of it. And it's definitely given me pause, and I'm just trying to figure out where to go from here because I think the reality is that this is a really crazy situation. So I think that there's just a lot of people that are in the center that don't really belong anymore, the way that the Democrats represent themselves. So there's clearly something going on that we just need to get to the bottom of here, because I think it's not probably the Democratic Party that a lot of people thought that they belonged to.

Jason Calacanis 1:11:39 Do you have other friends and folks that you know that have traditionally been Democrat donors in Silicon Valley, Chamath, that you see are now maybe considering shifting where they're giving money to Republican Party candidates and causes? I think it's easy to say that amongst my friends, it's in the billions of dollars that's been paused. That's insane. That's a lot of money. Sax, y- you used to be part of a niche (laughs) ... in Silicon Valley (laughs) , Silicon Valley Republican niche. Is your niche growing?

David Sacks 1:12:11 I think so. I actually made a list of, I think, eight issues that have driven the shift. And when you say there's been a shift right, I wouldn't say that there's been a shift all the way to the right, but I think there's been a shift from the left to the center.

Jason Calacanis 1:12:25 By the way, that statement is consistent with what I've heard personally from a lot of folks, which is I consider myself a centrist now that I see that some of these liberal causes are so... they're extreme from my point of view.

David Sacks 1:12:37 Right. So let me rattle off what I think the key drivers are. Number one, reckless fiscal and monetary policies coming out of Washington. As Druckenmiller says, we've been spending like drunken sailors. Number two, the dismal state of San Francisco because of crime, drugs, homelessness, and so on, and we all know that's an extreme one-party government. Number three, the ruinous COVID policies. They botched the science, they harmed the educational development of kids, and they also harmed work culture by making employees feel permanently entitled to work from home. So that's number three. Number four, this long con of reg- regulatory capture in both Washington and Sacramento that we just talked about with AI. People are waking up to that.

David Friedberg 1:13:15 ... number five, the betrayal of true liberal values like free speech and open inquiry, number six, the way that tech visionaries like Elon have been targeted for harassment by left-wing politicians. Remember, Biden said, "We need to look into this guy"? Well, Lorraine Gonzalez was even less subtle. She said simply, "F- (beep) Elon Musk." Number seven, the growing awareness that wokeness has gone way off the rails. Uh, we saw this even before the Israel-Hamas war, but now it's, uh, number eight, is this war. It's really thrown gasoline on the fire by showing that wokeness leads to this simplistic breaking up of the world into oppressor and oppressed categories. And what we're seeing is that there's a lot of people in the woke left who are basically cheering for a terrorist organization, and they're able to rationalize atrocities because of the simplistic woke dichotomy. That being said, I do think it's possible to support the desire for a Palestinian state, uh, a two-state solution without falling into that bucket. I want to be clear about that. But I think that there's been way too many people on the woke left who have blithely disregarded the atrocities and were basically cheering for Hamas from day one on this thing. And I think that has woken up a lot of liberals, both Jews and non-Jews, who saw Jews as allies on the left. And when they see Jews being attacked this way, that has led them to really, I think, question their, their priors on this.

Jason Calacanis 1:14:41 What did you think of the Kamala Harris announcement yesterday that they're launching a program to combat Islamophobia in the US at a time when my understanding is many of their Jewish donors are up in arms about their lack of action on antisemitism? I mean, it just seems, like-

David Friedberg 1:15:00 Yeah, it just seemed tone-deaf. I mean, look, I have not seen... In this particular case, I don't think I've really seen outpourings of Islamophobia. To be clear, I'm against Islamophobia. I'm against hatred towards any particular group, including Muslims or Jews. To me, you know, any outpouring of hate towards a particular group is, is bad.

Jason Calacanis 1:15:20 Yes.

David Friedberg 1:15:20 But yeah, this seems like a, a problem that we really haven't seen, so it seems a little bit tone-deaf. And look, this administration's been kind of stumbling around on, on this whole issue. It seems like they don't really know what to do.

Jason Calacanis 1:15:30 I don't know how to quantify it. I just think it's an anecdote.

Host (uncertain which: Calacanis/Palihapitiya/Friedberg/Sacks) 1:15:33 What do you think?

Jason Calacanis 1:15:34 Um, no, I, I, like, I'm saying, uh, I don't, I don't know how to quantify it, but I think that the anecdote is a lot of folks didn't-

Host (uncertain which: Calacanis/Palihapitiya/Friedberg/Sacks) 1:15:41 No, no, I'm saying what, what do you think? What do you feel?

Jason Calacanis 1:15:45 What do I feel?

Host (uncertain which: Calacanis/Palihapitiya/Friedberg/Sacks) 1:15:46 Yeah.

Jason Calacanis 1:15:47 I mean, I'm not a party guy. (laughs) Taking a step back, this is getting ge- getting a little eht- esoteric, but I think humans organize into social systems. One social system is a family, one is a company, and I think that the government is a social system. The point of a social system is to get influence to achieve the things you want to achieve by aggregating together, by creating a tribe, by creating a system. And that's what a government is. It lets a lot of people pool resources to get things done as a group that you wouldn't otherwise be able to get done individually. Same with a company, same with a family, to support each other, et cetera. And I think that the problem with, uh, democratically-elected governments, or all governments for that matter frankly, is like any other system, they... And I've said this in the past, they have a natural incentive to grow. I met with a government person the other day, well-known government person, and I was struck by the, the tone. I- I've been struck by the tone on multiple people I've met from the government on, "Here's all the next things I'm gonna get done and here's how we're gonna grow and do more and be bigger." Just like if you're running a company, that's your incentive. That's your model of thinking. And like with your family, you want to grow the balance sheet for your family, you want to have another home, you want to take care, you want to build security, et cetera. So governments as an organizing system are no different. And so I, I think that in a democracy, over time, there is, as Sax points out, a group of folks who get elected, and as a result, like, a philosophy that endures in that system that is all about overcoming the power that is, that we all view there to be powers that are keeping us from doing the things we want to do. And I think that this is the ultimate manifestation of what happens, is that you push the