Why OpenAI's Code Red signals AI is already fragmented

1. 0:00 – 0:12

   Bestie intros

   1. JCJason Calacanis0:00

      All right, everybody. Welcome back to the number one podcast in the world, the All-In Podcast. In the news, in your feed, we're ready to go. We've got the original quartet here. The band's back together. All right,

2. 0:12 – 28:14

   OpenAI declares "Code Red" as competitors eat away ChatGPT market share

   1. JCJason Calacanis0:12

      first up on the docket, a code red has been called by Sam Altman. He sent a memo on Monday, told employees to stop working on side quests, you know, like ads, et cetera, and focus on the core, ChatGPT. The core experience, make it faster, make it better. And, uh, I think we all know why, because Gemini and Grok and Claude from Anthropic have been crushing it. ChatGPT-5, let's call it what it is, was a bit of a flop. It didn't por- perform to expectations. We discussed that a couple of weeks ago, or months ago. Anthropic is beating OpenAI in enterprise revenue starting this summer, and I talked about how, you know, previous episodes on the streets, I'm seeing more startups want to use Anthropic's API, uh, and also Google, Gemini's API, and, and they don't essentially trust OpenAI to not steal their business. So it's big changes right now. Here is, uh, a chart based on data from July. Most of Anthropic's revenue here is corporate. Most of OpenAI's, as everybody knows, is consumer. And here's another chart, OpenAI's new infrastructure deals versus revenue, and this is just for 2025 alone. A lot of deals being made, but competition is fierce. Chamath, your thoughts here on the game on the field. Code red for people who don't know in our industry is when everybody reports to the office and gets focused on one thing, and, uh, that's apparently what Sam's doing. How do you interpret it?

   2. CPChamath Palihapitiya1:46

      Look, I think that there are two things. Let's do the strategic lens and then the tactical lens. The strategic lens is that this is, uh, an incredibly vibrant and dynamic market, and I think it's too difficult and too early to pick winners, other than at the silicon layer, where largely that die has been cast. I think that it's going to grow, so we can talk about how there'll be more competition, but it's roughly NVIDIA plus AMD plus Google plus a bunch of inference silicon. So that's sort of that market, but above it at the model market, it reminds me, frankly, a lot of when we were building Facebook. I remember sitting around our senior executive team, six of us, looking at Myspace, who was an order of magnitude bigger than us, and at some point, we were like, "You know what? Our product is just fundamentally better than theirs." And they had 100 million plus users, and we had sort of 15, but we knew that we were eventually gonna beat them. Nobody else knew. And I feel like this market is similarly evolving, which is that you have these early winners, but there's still so much work to do. There's still so many consumer expectations to define that it's too early to know who's gonna win. And ultimately, what we are learning, especially as all these markets converge, is that distribution still matters a ton, which favors Google. It favors Meta, although Meta's quite behind, and now it will still favor OpenAI because they have 800 million monthly actives. So then the tactical thing is, what do you do knowing that this dynamic is set up to have a lot of competition? And I think what you have to do is streamline the focus and try to make a crisis out of every opportunity, because look, the companies tend to just grow. This positive entropy tends to cause people to hire at every level, and you look around, and there's thousands of people that you didn't know even six months ago. And so I think if Sam can use different points in time to tighten the core focus, they'll be better off, and I think that is what Google did a while back. If you remember the whole black George Washington thing, they were able to use that as a rallying cry to streamline the organization and to focus and to get their best and smartest people to work on the most highly leveraged tasks, and what you see now is an incredible overperformance from where they were. I've said this before, but Gemini is, is incredible. So I think that that's what's happening. Too early to call. It's a three or four horse race, and Sam needs to batten down the hatches, and I think he used this opportunity to stop a bunch of peripheral activities.

   3. JCJason Calacanis4:16

      Yeah, and as we saw, Sergey called a personal (laughs) code red. He said, "I have to get in the office. I have to inspire everybody because this, this is existential for us if we lose the search franchise," which they haven't. The code red works. So David Freiberg, maybe you could discuss a little bit code red as a management technique. You were at Google. I don't know if they were calling code reds back then 'cause you didn't have any competition, but we're in a much different world here. This is the most competitive thing we've ever seen in our lifetimes, I think.

   4. DFDavid Friedberg4:45

      Google had an early lead in search, and then Microsoft launched, and it formed a code red model at Google that was called Project Canada as the code word for Microsoft, and there was a weekly war room meeting and a whole bunch of strategy and product decision-making that was driven around the impending threat from Microsoft because Microsoft was such a big behemoth, so well capitalized, had incredible engineering talent. Part of the response was to set up an office in Kirkland to recruit engineers up in Seattle to aggressively grow that base. There was a whole bunch of tactics that emerged from the strategic lens of Project Canada. It is a very powerful method. It is how the United States got to the moon in a race with Russia. It is how we are now in a race for supremacy in technology and AI against China. Having an impending threat is a very strong motivational tactic, it is a very focusing setting, and it drives innovation, and so we'll see what happens. ChatGPT was basically the market monopoly in AI or LLM chat interface, and it only had one way to go, which was down. Google, I think, at this point has roughly 14%. So here you can see...Open AI is on the decline. Obviously, a little over a year ago, they were at 90% plus market share in generative AI traffic and today Gemini is at 14, 15%. The depth, the flywheel that Google has built gives them such extraordinary advantage.

   5. JCJason Calacanis6:22

      Okay, let's go to Emperor Palpatine. Uh, this is-

   6. DFDavid Friedberg6:24

      (laughs)

   7. JCJason Calacanis6:24

      ... coming together as exactly as you orchestrated, you as the czar of AI and crypto, thank you for your service, civil servant David Sacks. You wanted to see vibrant competition. Well, here we have it. Assess the playing field as you see it from D.C.

   8. DSDavid Sacks6:40

      Well, first of all, let me give credit to Sam for calling this code red, breaking the glass, and pulling the, the alarm. I think it's so easy for CEOs in general to engage in happy talk and ignore problems, especially when discussing them is gonna create a PR story that they don't like. And I do think one of the things that's unique about Silicon Valley is just that the founders and CEOs do treat the situation of their companies in a more existential way, because we actually do have tremendous competition. And so anytime I think a CEO is willing to, again, take a bad PR story in order to focus their troops on a real business problem, I think they deserve credit for it. Because I think when you look at the rest of the Fortune 500, you know, these CEOs are just kind of managing PR all the time. Now, with respect to the ecosystem as a whole, it is very competitive, and I think we've got five major companies, and they all have their strengths. So ChatGPT is the leader in consumer. They have something like 80% market share in consumer use of LLM chatbots. But then Google came out with their new Gemini 3, and they were starting to take share based on the strength of Gemini 3 and the integration it has, obviously, within Google Search. 'Cause it's very easy for people to discover it when they do a Google search, and now they're seeing that it's actually pretty good. So they were starting to take share from ChatGPT, and I think that's why Sam issued the code red. Then you've got Anthropic, like you mentioned, where I don't particularly love what I've called the regulatory capture strategy, but I have to acknowledge their products are very good. Everybody seems to say that they have the best coding assistant, and they're carving out a very lucrative niche in enterprise. And then you've got xAI, which I think is the best at current events because of the integration with X, and also Elon seems to be able to scale his data center, his training cluster the fastest. He's got, you know, he had Colossus 1., now he's got Colossus 2, and that portends good things for Grok 5. It's gonna be trained on the largest cluster of Blackwell's. So in any event, you've got all these companies that are doing pretty well. I guess Meta has sort of hit some headwinds, but they're gonna continue investing tremendously in AI, and they've got deep pockets to do it. So I think that they'll come back. And, you know, what you see is all these companies are kind of leapfrogging each other. You get a new version, and then they sort of leapfrog each other in terms of benchmarks.

   9. JCJason Calacanis9:07

      The leaderboards are showing that. Yeah, Sacks, when you look at the leaderboard-

   10. DSDavid Sacks9:10

       Yeah, exactly.

   11. JCJason Calacanis9:10

       ... it's constantly Grok comes above Gemini, Gemini comes above Grok.

   12. DSDavid Sacks9:13

       There's a lot of leapfrogging going on.

   13. JCJason Calacanis9:15

       Etc.

   14. DSDavid Sacks9:15

       There's a lot of also, I'd say, specialization now going on in the ways that I just mentioned. All these companies are developing strengths. There's sort of verticals happening.

   15. JCJason Calacanis9:24

       Yes.

   16. DSDavid Sacks9:24

       And so I've described this as sort of a, a Goldilocks scenario, where you're making a lot of progress on AI but the market is remaining very competitive. Ideally, it does not consolidate just to one monopoly player, like we've seen in other tech markets, because then you end up with a big tech company that's got too much power and control. That's not generally a great thing for consumers or for citizens.

   17. JCJason Calacanis9:44

       What does it say about us versus China, Sacks? What does it say versus, us versus China? That was, that was the dialogue a year ago. Oh my God, China. Oh my God, China. Where are we at today? Because this is impressive, this vibrant competition.

   18. DSDavid Sacks9:56

       Well, look, competition brings out the best in the American system, and I think that that is what creates the most progress, and that's what's gonna allow us to win the AI race against China. China has a lot of competition too, but they do tend to anoint national champions more. I guess they usually do it more after a competition stage, so you know, maybe it doesn't prevent competition. But look, China's formidable. They got a lot of good AI companies too, and this is gonna be a horse race. But again, there's no question that the American system-

   19. JCJason Calacanis10:22

       You feel good about it?

   20. DSDavid Sacks10:24

       For sure, but look, there's no question that in the American system, uh, the, it's competition that brings out the best, and that's what we're seeing right now.

   21. JCJason Calacanis10:31

       Yes.

   22. DFDavid Friedberg10:31

       Jason, what do you think?

   23. JCJason Calacanis10:33

       Interestingly, I just want to build a little bit on what Freeberg showed. The way I'm sort of seeing this is now ChatGPT versus the world. 36 months ago, ChatGPT, OpenAI had 100%, right? They started the category, as you pointed out correctly, David. And, um, their decline in market share is increasing in velocity. Uh, if we were looking at just 12 months ago, they had 84% of the space, and, uh, now they're at 68. So they've, they've, this is accelerating. You pointed out, Chamath, correctly why it's accelerating. Distribution matters. We've talked about it countless times here. Meta is forcing you to use their AI search, which is pretty bad, I'll be honest. Every time you do a search on Instagram, it's annoying. But those all count as users using the product, just like Slack faced competition from Microsoft Teams when it bundled. And so I just tracked this out, and this is what I think is gonna happen over the next four years. I think we're gonna see OpenAI go down to about a third of, of the market, and I think the other players are gonna take two thirds. The reason I think this is because, to Sacks' point, specialization is happening. If you look at Nano Banana, which is the image processing over at, um, Google, it's fantastic. Grok Image is fantastic. So you can have four different, five different choices for images. You can have four or five different really credible choices. Now, you have to look also at the competition and what Sam is facing. I've known Sam 20 years now. He is a consummate deal maker, perhaps too good at deal making. He was incredible at recruiting, and his PR game was very strong.Everybody realizes that. And look at who he's facing, Freeberg. Elon at Grok, Sergey and Sundar at Google, Zuckerberg at Meta, Dario at Anthropic, Satya at Microsoft, who's his partner who's now his competitor. Elon was his benefactor, now his competitor. You got the open source projects, DeepSeek, et cetera, Sax in China. And then his former employees are trying to kill him as well. So you have Ilya doing Safe Superintelligence, which hasn't launched yet. And MIRA, doing Thinking Machines. She's, you know, obviously was doing all the video stuff. So I think what we're gonna see here, if we're sitting here, I don't know, next year, they're going to be, in the next 12 to 24 months, under 50%. And these companies are explicitly trying to kill OpenAI. They r- the amount of bad will that Sam has built is colossal and I think it's from doing too many deals. And if you look at what he did to NVIDIA... NVIDIA put out a statement recently that they have the option to invest. So we were sitting here two months ago, and I know people in the industry were staying up late at night worrying about all these deals Sam were do- was doing. All those deals apparently are coming out that they're options. These weren't real deals. A lot of them were options and so Jensen came out and said, "Hey, we have the opportunity to invest in OpenAI." But you remember Sam did that AMD deal the week after he- two weeks after he did the OpenAI deal? A lot of this is creating bad feelings and I think we're at peak OpenAI right now. I said it on the show a couple weeks ago, I think the pair trade is to, to bet against every... It's ChatGPT versus the world, and I think the world wins two thirds.

   24. CPChamath Palihapitiya13:46

       They can still be in a good place. I think you're right that this market probably gets split up three or four ways, and so the winner probably gets a third of the market. Most other markets that end up in a three or four person race ends up in that space. But a third of a market can still be very valuable if that market has five or six billion people using it.

   25. JCJason Calacanis14:07

       Absolutely. It's gonna be tremendous, yeah.

   26. CPChamath Palihapitiya14:08

       And that can still support a multi-trillion dollar market cap, so I don't think it's, it's by any means a death knell for OpenAI, but it does mean that a lot of these projects probably need to get shuttered because you need to just do a few things very, very well. Because consumers will start to split their purchasing decisions, if you will, or their usage decisions across vertical things for specific purposes. So yes, I may use Grok Image because I love that and it's just much better, but then I may use Anthropic for Cogen while I use Gemini for deep research, and then I use ChatGPT for conversational search.

   27. JCJason Calacanis14:46

       Yes.

   28. CPChamath Palihapitiya14:47

       Now all of a sudden I'm using all four, that's highly realistic, that outcome. In fact, I look at my phone now, I try to limit the number of apps on the phone, but I have Gemini and Grok as the two anchor apps.

   29. JCJason Calacanis14:58

       Mm-hmm.

   30. CPChamath Palihapitiya14:59

       Because I'm so reliant on both of them and I just keep going back and forth between them now.
3. 28:14 – 51:24

   David Sacks vs. New York Times

   1. JCJason Calacanis28:14

      in the future. All right, there's another thing that went on this weekend, big tech story. And at the risk of being a little naval gazing here, we're gonna cover it, The New York Times versus Mr. David Sacks. On Sunday, The New York Times published an article titled, "Silicon Valley's Man in the White House Is Benefiting Himself and His Friends." Sacks, you're obviously the man they're referring to. Five reporters worked on this- (laughs) ... story for approximately five months is what we hear. And this story attempted to frame you, Sacks, as conflicted first that your firm, Kraft, has investments (laughs) in companies. New York Times key claim, quote, "Mr. Sacks has positioned himself to personally benefit. He has 708 tech investments, including at least 449 stakes in companies with ties to artificial intelligence." And for background, Sacks, Elon, you all joined as special government employees, SGEs. These are different than cabinet members in a bunch of different ways. Basically, they can't work more than 130 days. They're allowed to split time between their day jobs in DC. They don't have to be approved by the Senate, and they provide special expertise, as Mr. Sacks is doing as the czar of crypto and AI. Second major claim, raising the profile of All In. Quote, "Mr. Sacks has raised the profile of his weekly podcast, All In, through his government role and expanded the business," which is super hilarious 'cause (laughs) I think our traffic peaked right before the election. Uh, but Sacks, uh, obviously you got a ton of air cover. People thought the story was biased and a hit job, and it fell pretty flat. What's your take on this? Maybe take us behind, take us behind the story. Well, I think maybe a good place to start is with the reaction to it. Like you said, there was this huge outpouring of people in Silicon Valley who reacted in a way that showed that they understood that this story was a hit piece, that it was biased, and I'd say most importantly, it didn't even live up to its own headline. It didn't prove the thing that they were asserting in the headline. And so everyone could just see on its face...

   2. DSDavid Sacks30:13

      ... that it was a hatchet job. And so everyone started reacting that way, and it was nice to kinda get that outpouring of support from so many different people in Silicon Valley, including many of the companies who we just talked about are so vigorously competing with each other. I mean, I think this might be the only thing that Sam and Elon have agreed on in the last year.

   3. DFDavid Friedberg30:30

      (laughs) Yeah. Didn't you tell everyone to put these tweets out? I mean, like (laughs) clearly-

   4. DSDavid Sacks30:34

      Right. So that- that- that was sort of the next-

   5. DFDavid Friedberg30:36

      ...clearly you were ... yeah.

   6. DSDavid Sacks30:36

      That was the next big lie that the media tried to perpetrate, was somehow that this response was, uh, coordinated by me. No, and the- the reality is-

   7. DFDavid Friedberg30:44

      Which, by the way, was crazy 'cause you told me explicitly, "Stand down. I don't need you to do it." And I was like, "Leroy Jenkins." And I just went in, and I was like, "I'm tweeting about this bullshit."

   8. DSDavid Sacks30:52

      No. The o- I never told anyone to do anything, except for you guys.

   9. DFDavid Friedberg30:55

      Yeah.

   10. DSDavid Sacks30:55

       And I told you guys not to react to it 'cause I didn't want them to Streisand the story-

   11. DFDavid Friedberg30:58

       Yeah.

   12. DSDavid Sacks30:59

       ... you know, where you basically draw even more attention to it. That was my media plan. And then what happened is the story just went viral-

   13. DFDavid Friedberg31:04

       (laughs)

   14. DSDavid Sacks31:04

       ... anyway because all of Silicon Valley reacted on their own in a grassroots and authentic way because I think they were actually genuinely offended by how bad the story was, how ridiculous it was on its face. And so they reacted, and then that became the story. And so this whole coordinated narrative became, in a way, part of the- the media industry's coverup for itself, like, their attempt to explain away why everybody thought that the story was so bad. Let me just say, I do think that this outpouring of support does illustrate something important, which is just how much power and respect the New York Times has lost. You know, 10 years ago, if the New York Times ran a hit piece on somebody, even if other people didn't like it, they wouldn't wanna say anything 'cause they'd be afraid that they would be the next target. And that mystique and that fear has completely broken down. People can kinda see the New York Times for what it is, which is basically a bunch of political activists who are pretending to be reporters. And essentially, they just launder the point of view of their anonymous sources, who are basically left-wing Democrats, and try to portray those viewpoints as somehow being neutral or objective truth, right, because they're kinda presenting themselves as these neutral arbiters of the truth. And I think everyone can kinda see through that sham at this point.

   15. DFDavid Friedberg32:27

       Yes.

   16. DSDavid Sacks32:28

       The thing they started with was the headline.

   17. DFDavid Friedberg32:30

       Yeah.

   18. DSDavid Sacks32:30

       And that was the one thing they refused to change, no matter how many times we refuted their narrative. You know, what they would do is every couple weeks they'd send us a new fact check, and we would basically debunk it. And we can show you some of those fact checks if you wanna see 'em to see where the story started and what they're trying to prove.

   19. DFDavid Friedberg32:45

       Yeah, let's do that. I think our audience would really enjoy.

   20. DSDavid Sacks32:47

       And what would happen is every time we would debunk one of their accusations, they would just come back to us with a new one every couple of weeks. The only fixed point in their reporting was this idea that I had to have these conflicts of interest that were benefiting myself and my friends.

   21. DFDavid Friedberg33:01

       That you were self-dealing.

   22. DSDavid Sacks33:02

       Yes, exactly.

   23. DFDavid Friedberg33:02

       Zacks, let me ask you a question. So one of the statements that was made, and then-Governor Newsom repeated it at Andrew Ross Sorkin's DealBook conference yesterday, is that you did not put all of your investments into a blind trust. "You should have done that," is what Newsom said on stage. Can you just address that? Like, and what actions you actually took when you chose to take the office? What were you legally required to take and maybe why you didn't do a blind trust, or maybe you did. I don't know.

   24. DSDavid Sacks33:29

       Well, no. We looked at that.

   25. DFDavid Friedberg33:31

       Sorry. Zacks-

   26. DSDavid Sacks33:31

       Yeah.

   27. DFDavid Friedberg33:31

       ... just give me a second. I just wanna say this because y- you're not gonna say this yourself. But I remember when you were going through this, you were so concerned about the perception of a conflict of interest that you took such extraordinary measures about the degree at which you were selling things and getting rid of things to make sure that you could do the job cleanly and wholly. I watched you-

   28. DSDavid Sacks33:54

       Right.

   29. DFDavid Friedberg33:54

       ... do this, and I watched you do something that I thought was so over the top, I'm like, "Holy (beep) , you really are doing this for the (beep) country." And I was so shocked-

   30. DSDavid Sacks34:01

       Right.
4. 51:24 – 1:14:15

   New poverty line, America's slow descent into socialism

   1. DFDavid Friedberg51:24

   2. JCJason Calacanis51:24

      Another story that's been, uh, trending-

   3. DFDavid Friedberg51:27

      (laughs)

   4. JCJason Calacanis51:27

      ... is the, uh, new poverty line and some of these incoming tax laws. Mike Green, an investor and fund manager, went viral last week for claiming the US poverty line math is very wrong. Historically, the poverty line has been measured as three times the cost of a minimum food diet in 1963, adjusted for inflation. Based on that measures, the poverty line for a family four is set at $31,000 in 2025. Green says the real number is over 4X higher, at $140,000. He gets that number by factoring the cost of childcare, which has surpassed housing as the largest average expense. He says measuring this number for decades has quietly broken America, and it could explain why America's middle class feels poor despite healthy GDP and historically low unemployment, 4.X, which we've talked about here. Chamath, your thoughts.

   5. CPChamath Palihapitiya52:17

      I read this. I found his claim to be pretty shocking, so I just, I wanted to dig into it. That's why I asked that we talked about it. Nick, you can probably link to it. But yeah, this thing went viral, and basically it's exactly what you said, Jason. Food costs used to be a third of living costs, and so if food used to cost $10,000, you would multiply it by three and say, "Well, the total cost of living is $33,000. That's the poverty line." And then what the government did was they created a whole bunch of staircase incentives to get people from about $33,000 to about 2X that number, to about $65,000. And then after that, you were mostly on your own where there were no real benefits like SNAP or other things. But what this person was saying is like, "Hey, hold on a second. Food costs are now 5 or 6%. And so if you gross it up for the other components, shouldn't the poverty line be something closer to $140K?" And that's a shocking claim. And so I just spent a little bit of time looking into it. Now, he has subsequently come back and refined some of the things he said. I think he may have written it in a heated moment. So for example, when he looked at that number, he wasn't looking at national averages. He was looking at a bunch of data from a high-cost suburb of New York City, I think it was like Essex County. And so if you look at the food costs plus transportation plus energy plus housing plus childcare in other places that are more a median American city, the example that I think other people were using was Lynchburg, Virginia, just as an example, it does change pretty drastically. You can use this thing called the MIT Living Wage Calculator, which we did, and if you're in Lynchburg, Virginia, the income required for a family of four to meet all expenses there is not $140K, but it's about $93K. That's still quite a big difference. And when you double-click into where these variances come, a lot of it looks like it's around housing and childcare, and I didn't depreciate how much and how expensive childcare has actually become, from anywhere between $1- to $3,000 per month, which is obviously a lot of money. The other thing is that his original article was claiming that if you're above $33K but under $65K, you're actually better off staying at $33, because every time you go up...... you actually lose a benefit, so the net effect is that you are becoming poorer. And it turns out that that math was actually false. When you calculate the net resources, meaning income plus benefits minus taxes and expenses, a family actually as they step up the staircase does earn more in disposable resources than a family that's earning less. There is a very specific part of the, what he said which I think we should focus on, which is there is an area between $45,000 a year and $63,000 a year which actually looks like a bit of a stagnation zone. So to the extent that one is to read this article, take away the kind of the buzzy title and whatnot, the thing that is important is to narrowly focus on this one issue, which is that we do have some policy failures in this zone, where earning an extra dollar often results in losing a dollar of benefits like SNAP and other things. But that's a good thing to know, because now we can narrowly say, "Okay, what are states and what can the federal government do for people in just this part of the valley, this sort of like Death Valley?" The last thing is, the article was saying, "Look, there is no real middle class. There are the people that are above the 140K and then there's everybody else in poverty." And if you look at the census data and you look at the percentage of Americans that are struggling, those that earn between 100 and 200% of poverty, that percentage has actually fallen. So the good news is the American economy seems to be doing a good job of not just getting people out of poverty, but getting people out of that struggling bracket, out of that Death Valley and into a place where they're making 200% of that poverty line. So they're moving up. So the article is important because I do think it starts to say, "Look, this affordability thing has become a buzzword. A lot of people on the left and the right are using it to try to implement and affect policy." It's really important for us to be grounded in the facts of it, and the facts are that childcare costs have become an overwhelming burden for many families. We probably need to figure out a way to deal with that. Housing costs are out of control. For younger people, student debt is problematic. But on the other side, the American economy still does an incredible job of getting people from those lower rungs to multiple 100%ages of that poverty line to get them on the way. And we just need to figure out how to push people up that staircase faster, so I'm-

   6. JCJason Calacanis57:16

      A- and it feels like this dovetails, Chamath, with a discussion we had a couple of weeks ago when a viral clip of Ben Shapiro talking about, "Hey, just opt out of New York City, opt out of San Francisco," and this whole thing looks completely different. You know, the, the idea of somebody who is up and coming living in Manhattan or San Francisco is a bit crazy. And in other countries, we don't look at living in Paris or Hong Kong, you know, or Dubai as like that's where you start your career and you live in the, th- the city center. Yeah, Friedberg?

   7. DFDavid Friedberg57:48

      You're saying people, like, would move? I- I'm not sure I under-

   8. JCJason Calacanis57:53

      Well, the, the point I'm making is to define a poverty line for, in San Francisco versus Austin or Houston is incredibly different because the cost of living is dramatically different, 2, 3, 4X. You know the cost of a nanny in San Francisco or New York is dramatically different than if you live 30 outside of a city center.

   9. DFDavid Friedberg58:14

      One of the challenges America faces is government programs create an anchor. They are a shackle. They hold people back when they were supposed to be support payments. And the problem with this, that this article highlights is that the supposed support payments actually create an incentive or a challenge in moving up the rung or up the ladder. It's probably the case that it is a lot easier to move up the income ladder if you're in certain parts of the country than if you're in most of the country. And so most of the country is stagnating wages, but they still feel the effects of inflation, and these government programs keep them stuck in the position that they're in. This is the spiral of socialism. The government programs that are meant to provide support to people require an increase in taxation. That revenue has to come from somewhere. That taxation ultimately leads to an attrition of economic value in that region, and then you have to increase taxation more, and then you end up in this spiral. And we're seeing this now not just in New York where Mamdani's proposing to increase taxes, but across the entire West Coast. We talked about the 5% billionaire tax that's being proposed as a constitutional amendment to go on the ballot in November. There's also a major challenge underway in Oregon where the governor is now trying to figure out how to keep businesses in the state. The CEO of Columbia Sportswear, one of the biggest employers in the state, came out this week saying that his advisors have recommended that he leave the state. And in Washington, there is a proposed bill right now to implement a 5% tax on the payroll of employees making over $125,000 per year. And Microsoft, Amazon, Costco, and some of the other big employers in that state are now trying to figure out what they should do. And in California, as you guys know, in the last couple of quarters, Tesla, Chevron, McKesson, Oracle, Charles Schwab, CB Richard Ellis, Hewlett-Packard have all left the state, Palantir, SpaceX. I could go down this list. Because as the tax burden becomes too high on those companies and there's an alternative to them in the country, they'll leave. And then you have this spiral that happens where the people that are in that state say, "Wait a second, there's no jobs, there's no income gain. We need to increase taxation," and the tax bills get passed. Norway 2022 passed a wealth tax.... the wealth tax was supposed to raise $146 million of incremental revenue per year. Instead what happened, $54 billion of net worth left the country and they actually had a $448 million tax loss. The taxes declined rather than went up.

   10. CPChamath Palihapitiya1:01:01

       Did they reverse it afterwards or no?

   11. DFDavid Friedberg1:01:03

       I'm actually not sure in the state of Norway. Microsoft's president, Brad Smith, has said that tech jobs are gonna leave Washington State if this payroll tax gets passed. And this is the, the cycle that's underway, and it starts with the government spending. If we didn't have the government spending the way it does, where the government's running a deficit, California is now expected to have a $50 billion plus deficit, then they don't need to increase taxes. And this is the core motivation. Once you're hooked on the government for some sort of benefit, it's very hard to unhook yourself. It's very hard for a company or a union or an organization to unhook themselves, and it definitionally becomes a spiral. You will not give up that benefit, and so you have to spend incrementally more and more and more and more. And as you raise taxes, you end up losing the tax base and it becomes a deficit spiral. That's what leads to socialism, and we have seen it time and again. It's not a big revolution. It's not like we see wha- where, where you go from socialism to democratic capitalism where you have a revolution in the streets. Socialism emerges slowly. It's like a quiet sort of hum and then it becomes a roar, and all of a sudden you're a frog in a pot and you don't realize you're being boiled. Pull this up, this clip from... This is Episode 7 of All-In. I don't think democracies end, um, with a bang. I think they end with a whimper, and I think that's been the case historically. And, you know, no democracy has, uh, has lasted... Our, our, our democracy in the US has, has lasted longer, uh, than many. Democracies ultimately enable, uh, freedom of operation and free markets that, um, that result in, in greater progress than any other governing system. The problem with progress is that progress is asymmetric. You have some people who progress at a much greater rate than most, and, and it is that delta that motivates the end of that system ultimately. While everyone in the United States or the average and even the bottom quartile of the population in the US is better off than they were 50 years ago in terms of income and healthcare and shelter and access to food and access to all these things, the top 1% of the US is further ahead than the median. And it is that delta that motivates the end of democracy and it is that is- which is then perceived to be unfair about this governing system, and that ultimately results in fascism or, or socialism. And then fascism results... Socialism ultimately restricts anyone from progression, and that's why fascism and socialism ultimately end up in, in, in some sort of, you know, democratic outcome. And it is a cycle, and, you know, we're kind of in this, you know, awkward phase of trying to figure out what the hell we're gonna be next. And I don't think that awkward phase, um, is realized in the next presidential term, but it is gonna be realized in our lifetime. And I think that's where we're headed. Midterms probably gonna go to the Democrats in the House, and I think you're seeing Ro Khanna... Gavin Newsom yesterday on stage at DealBook talked about redistributing wealth. Ro Khanna's talking about redistributing wealth. This is becoming the Democrat party line, and they're gonna end up trying to seize this moment to take these socialist principles because everyone is feeling the burn. They're feeling the loss of benefits, they're feeling the lack of progress, they're having a tough time moving up the income ladder, and they're having a tough time paying their bills. And so this is the moment where this Democratic Socialist movement takes foot, and probably by 2028 the presidential nominee is gonna be not necessarily a self-declared but probably a referenceable, you know, uh, socialist.

   12. CPChamath Palihapitiya1:04:20

       Democrat socialist, yeah. You need to have-

   13. DFDavid Friedberg1:04:22

       Democrat socialist.

   14. CPChamath Palihapitiya1:04:23

       I mean, best advice, have two plans. One, a state, uh, that is committed to capitalism. Texas comes to mind. And number two, you kinda have to have a country as a backup plan in case this goes across the whole country (laughs) . Have you guys been tracking the California wealth tax? As a former California resident, I'm curious how your interpreting these recent moves.

   15. DSDavid Sacks1:04:47

       I think we're all seriously thinking about moving out. I mean-

   16. CPChamath Palihapitiya1:04:49

       Yeah.

   17. DSDavid Sacks1:04:49

       ... it's kind of crazy.

   18. CPChamath Palihapitiya1:04:50

       Yeah.

   19. DSDavid Sacks1:04:50

       But did you see, I think Newsom came out and said that he was gonna oppose it, is that right?

   20. CPChamath Palihapitiya1:04:55

       But it- it doesn't matter because if, uh, the California voters voted in, it goes immediately into effect.

   21. DFDavid Friedberg1:05:00

       It's an amendment.

   22. DSDavid Sacks1:05:01

       Let's not look a gift horse in the mouth here. I think this is a moment to thank Governor Newsom...

   23. CPChamath Palihapitiya1:05:06

       Mm-hmm.

   24. DSDavid Sacks1:05:07

       ... for representing the interests of tech oligarchs like us.

   25. DFDavid Friedberg1:05:09

       (laughs)

   26. DSDavid Sacks1:05:09

       We really appreciate you coming out against this wealth tax.

   27. CPChamath Palihapitiya1:05:12

       Thank you-

   28. DSDavid Sacks1:05:13

       So thank you, thank you Governor.

   29. CPChamath Palihapitiya1:05:14

       ... to Gavin Newsom.

   30. DFDavid Friedberg1:05:15

       Yeah-

Episode duration: 1:14:16