All-In PodcastOpenAI's GPT-5 Flop, AI's Unlimited Market, China's Big Advantage, Rise in Socialism, Housing Crisis
EVERY SPOKEN WORD
155 min read · 30,579 words- 0:00 – 7:32
Bestie intros! Gavin Baker, Ben Shapiro, and Phil Deutch join the show
- JCJason Calacanis
I just wanna let Freeberg know, he told me to stop taking my nicotine patches because I brought too much energy. Freeberg, you see what I got here?
- BSBen Shapiro
Nick, blur that out.
- JCJason Calacanis
See what I have here?
- BSBen Shapiro
Hey, we're not doing, we're not doing promotions for-
- JCJason Calacanis
He sent me this.
- BSBen Shapiro
We're not doing any of these promotions.
- JCJason Calacanis
What you need to know is he sent me my own flavors, Japanese Ragu and Burrata.
- BSBen Shapiro
Jason's trying to make a side hustle, just so the rest of you guys know. Jason's trying to get paid. It's not a side hustle. I have no interest in this. (laughs) He's trying to turn the show into an infomercial, and he's trying to get paid personally. Yeah.
- CPChamath Palihapitiya
Freeberg, Freeberg, I'm selling this on eBay, if anyone wants to go to my eBay site. And please buy this.
- BSBen Shapiro
Is it Phil Deutch?
- NANarrator
I'm going all in.
Let your winners ride.
- JCJason Calacanis
Rain Man, David Sacks.
- NANarrator
I'm going all in.
- CPChamath Palihapitiya
And I said-
- NANarrator
We open sourced it to the fans, and they have just gone crazy with it.
- BSBen Shapiro
Love you, besties.
- CPChamath Palihapitiya
What's his... Queen of Quinoa.
- NANarrator
I'm going all in.
- JCJason Calacanis
All right, everybody. Welcome back to the number one podcast in the world, the All In Podcast. And we were supposed to take off this week, but no. Your independent moderate moderator said, "No. Desgracia taking a week off. No weeks off." So, I told my besties, we're out gallivanting, we're doing a show on Friday, with or without y'all. Of course, David Freeberg showed up. How you doing, Davey?
- BSBen Shapiro
I'm here.
- JCJason Calacanis
You're here.
- BSBen Shapiro
I'm here.
- JCJason Calacanis
But you weren't going to come at first. You were a little frustrated that the other boys took the week off. Were you not?
- BSBen Shapiro
Well, I was annoyed. We were gonna record yesterday.
- JCJason Calacanis
Yes.
- BSBen Shapiro
I had gotten the docket, which we're supposed to do, what are we going to talk about?
- JCJason Calacanis
Yes.
- BSBen Shapiro
I read it. I mentally prepared, I drank some coffee, I get dressed in a T-shirt and I get in front of my computer. And then your co-hosts bail. And they're like, "I can't."
- JCJason Calacanis
My co-host, you're a co-host too.
- 7:32 – 18:14
GPT-5 underwhelms, benchmark saturation, OpenAI's product excellence
- JCJason Calacanis
ChatGPT-5 just broke. Large language models continue to drop. Just four weeks after Grok-4, Gavin took the crown, a friend of the pod. Sammy the Bull Altman dropped GPT-5 and, uh, two open weight models. They're not open source. We'll get Gavin's thoughts on that in a minute. It was a bit underwhelming. Uh, I'm assuming you all saw it, gentlemen, and a little bit of a messy presentation for GPT-5 yesterday. This wasn't like your classic Steve Jobs keynote. The charts were flat and wrong, miscalculations, typos, all kinds of stuff. Uh, but the model did top some leaderboards, in fairness, in the chatbot arena. But many people were disappointed, said the performance was underwhelming, and especially since when Chat- ChatGPT-4.0 came out, and obviously 3.5, these were major jumps, so. And, and part of it might have been Sam not managing the hype. He tweeted, fellow Star Wars fan Ben Shapiro will get a kick out of this, he, uh, tweeted the Death Star. I think this is a Rogue One shot, where the Death Star is coming up and, uh ... Don't get triggered, Ben. I don't want you to get into a sequels rant.
- BSBen Shapiro
(laughs)
- JCJason Calacanis
But you loved Rogue One, correct, Ben?
- BSBen Shapiro
I did like Rogue One. Rogue One is good.
- JCJason Calacanis
Rogue One.
- GBGavin Baker
Rogue One is, it's exceptional.
- JCJason Calacanis
Go ahead. Exceptional.
- BSBen Shapiro
Rogue One, Rogue One is like the last good Star Wars movie that's been made.
- JCJason Calacanis
Okay, so let's do it. Empire Strikes Back is my number one, then Revenge of the Sith, then Rogue One. What do you got, Ben? Who's your top three?
- BSBen Shapiro
Oh, I mean, I, I go Empire, and then New Hope.
- JCJason Calacanis
As everyone should.
- BSBen Shapiro
And then New Hope, and then probably Rogue One.
- JCJason Calacanis
Wow. Okay.
- BSBen Shapiro
I, I like Rogue One a lot. I think it's really good.
- JCJason Calacanis
Me too. It's a perfect film. Gavin, what do you got?
- GBGavin Baker
100% agree with Ben, but Empire Strikes Back is just so much better than all of the others.
- BSBen Shapiro
Yes.
- JCJason Calacanis
Yeah. Friedberg, what do you got in your ranking? I know you're gonna rank them.
- BSBen Shapiro
I remain adamant in my point of view that the entire Star Wars franchise is built around an anti-technology, uh, anti-Utopian view of the world, anti-progress, and, um, the Death Star-
Wow.
... is the ultimate manifestation of technology, and, of course, it's used for evil. That's kind of the main message of the, the, the series.
- JCJason Calacanis
Wow. Way to bring the show down, Dave. (laughs)
- GBGavin Baker
(laughs)
- BSBen Shapiro
(laughs)
- JCJason Calacanis
Way to ruin all our childhoods. (laughs) Oh, Jesus.
- BSBen Shapiro
I did like the last one.
- JCJason Calacanis
We just had a Gen X moment. He's like ... (mimics gun firing) .
- BSBen Shapiro
Yeah. I did like the last one, though.
Friedberg, I'm terrified to ask what you think of, like, The Wizard of Oz, but, uh, I'm gonna go with the original.
- JCJason Calacanis
Oh, is it dystopian gender
- 18:14 – 27:27
AI's TAM, ROIC, and energy implications
- BSBen Shapiro
is, do you think that the productivity gains are gonna bleed over fast enough to justify the investment? I mean, that's like the dumb guy question, right?
- JCJason Calacanis
Yeah.
- BSBen Shapiro
Like the, like, the, like, so much money is pouring into this, and I'm looking at the valuation o- of these companies, and I'm seeing that, like, 60, 70% of all S&P 500 gains are happening in the Magnificent Seven. And I'm thinking to myself-I mean, when you look at the internet, the internet was working by '99, 2000. And it took until maybe 2006, 2007 for all that productivity to really enter the marketplace. Is this stuff gonna, gonna hit fast enough to actually justify the amount of investment, or are you gonna see a crater here?
- JCJason Calacanis
I think there's a good question for Gavin. And just to sort of set it up, we are now seeing hundreds of billions, low hundreds of billions per year being deployed. And we'll see a trillion or two deployed, I think, in the next five years on data centers and this. And we put the TAM, or I, I put the TAM last year for just bus- or last week, just for business at about $50 to $100 per business user. A billion business users in the world is gonna put you at a billion dollars in revenue, which would be like a, you know, $5 to $10 trillion TAM just for the business side. How do you calculate it, Gavin? Do you have a back of the envelope way to answer this question? And if we catch up, or do we n- even need to catch up? Is there enough capital in the world that they can be patient?
- GBGavin Baker
I think e- estimating the TAM this early, it's hard to do it with any precision. You know, I think your, your methodology is as good as any. But we can measure the economic return on these investments. You know, most of the companies investing these big dollars into AI data centers are public. They report quarterly financials. You can calculate some, you know, something called return on invested capital, and it's actually gone up since they started making these AI investments. And at first, a lot of it was maybe through OPEX savings, but that is what you would expect with AI. Um, kind of, you know, silicon to replace, you know, silicon OPEX to replace human OPEX. But more recently, you're starting to see some really significant accelerations in revenue growth. Um, you know, Meta just reported a quarter with revenues significantly ahead, and I think a lot of that was due to AI, AI making, uh, people spend longer, and AI improving, you know, the quality of their ad targeting systems such that advertisers get a better ROAS and spend more. But the economic return thus far has been here. And it is, you know, even Microsoft, I mean, for me, Copilot is not the best product, but even Microsoft on their call talked, you know, they shared some pretty astonishing stats about Copilot uptake. So, I do think the economic returns are here thus far, and that is a good sign because, you know, this early in the internet, the economic returns weren't there. And I think maybe the, you know, the, the, the biggest difference between this and the internet is a lot of the capital that went in during the internet era, which is often called the tech bubble, it was really a telecom bubble, it was deployed into something called dark fiber. And that means exactly what it sounds like, fiber optics that people spent tens of billions of dollars laying. And then it was dark 'cause it was not utilized, but there was an expectation it would be utilized. Completely different here with AI where one of the biggest problems with GPUs and, you know, AI data centers is the GPUs are used so intensively that they melt. So, all of the dollars that are going into the ground are being used. We're not building ahead of demand. In fact, we're clearly still behind demand. You know, so it, it can always change.
- JCJason Calacanis
Which is a really interesting-
- GBGavin Baker
Yeah.
- JCJason Calacanis
... observation, Gavin, because this idea of training a model, there's no analogy to that in the dot-com era. You know, you, it's not like you had to, I don't know, upload all these video files (laughs) and you needed all that dark fiber to do it. It's a silly analogy, I know, but, but that also did lead to, um, you know, the dot-com bust.
- PDPhil Deutch
Ben, the other side is the energy side of this. If the... I think that the energy implications of AI are probably bigger than the Inflation Reduction Act, and certainly will be longer-lasting. And so just to kind of give you, to give credit where credit's due, I think all the stuff we're seeing on these small modular reactors at some level owes its, uh, renaissance to, uh, AI and the energy demands of AI. To focus on energy as we'll get to later, really wouldn't exist except for the hyperscalers giving very specific concrete and immediate demands for energy that have changed the energy landscape, uh, as I say, probably bigger even than the legislation under the Biden administration.
- JCJason Calacanis
Well, give an example of what they're asking for 'cause you are, uh, active in investing in these projects. You know, what was, what's a pre-
- PDPhil Deutch
Well-
- JCJason Calacanis
What's like a large pre-AI boom project versus a post-AI boom project in, in terms of scale, footprint, investment?
- PDPhil Deutch
Well, well, a quick way to say this, and Friedberg knows this stuff as well as I do, Anthropic just released a paper this month saying, "We want 50 gigawatts of power, uh, for the AI, uh, in America and over the next three years." And so that's about as much power as was added of all of this year. So, you're talking, you know, huge amounts that in our lifetimes, you've basically been able to say that electricity demand has been zero, uh, in the United States. Now it's 2 to 3%. And a data center needs continuous power in specific locations, and it's relatively price insensitive. So, that's what's... Uh, and, and the hyperscalers, and Ben, you may or may not like this, but they're, they want carbon-free power. They're willing to pay for it. Uh, not 'cause of the government, just that's what they want for their workforce. So, when you say you hit the market with, you know, 50 gigawatts of demand, much of it clean, that changes a lot, uh, in a very exciting way. And for reasons we may get into later in the pod, it's a real pleasure not to have to rely on the government, be it Democrats or Republicans, as we think about those things.
- JCJason Calacanis
50 megawatts, that's a small town.
- PDPhil Deutch
Gigawatts, gigawatts, gigawatts, gigawatts.
- JCJason Calacanis
Oh, you're saying gigawatts?
- PDPhil Deutch
Gigawatts, gigawatts. Gigawatts, Ben, gigawatts.
- JCJason Calacanis
Wow, so what is that if 50 megawatts is-
- BSBen Shapiro
That's 5% of the total US electricity production, so-
- JCJason Calacanis
My Lord. So-
- PDPhil Deutch
And, and Friedberg, I think it's about what you add a year. Right? In, i- in new, a new capacity.
- BSBen Shapiro
The US.
- PDPhil Deutch
Yes. Yeah.
- BSBen Shapiro
Meanwhile, China is adding one terawatt, 1,000 gigawatts every 18 months.
- PDPhil Deutch
Well, I, I, I wanna-
- BSBen Shapiro
Okay.
- PDPhil Deutch
... say one thing about that, David. Um, but where is China getting its gas and coal from? That's being imported.
- BSBen Shapiro
It's imported.
- PDPhil Deutch
So I know... I, I get the stat on China increasing things quickly, which I think you're right on, particularly on the nuclear side. But on the gas and coal side, unlike us, they are looking to others for their source of their fuel.
- BSBen Shapiro
I think their biggest add- isn't their biggest add in hydro right now?
- 27:27 – 43:46
China's major advantage and how the US can counter it
- JCJason Calacanis
winning AI, do you consider that existential for America as somebody who's not in the industry? When you hear this discussion that we had in, in DC last week, when you hear technologists like ourselves who obviously are investing in this, this is our book of business right now, do you think we are in an existential race for humanity to win the AI race, race with China? Or do you think that's, like, a construct maybe, that's just everybody wins and it, it's not an existential race that one person wins and the other person loses?
- BSBen Shapiro
Well, as, as you might imagine, I'm definitely in the existential race category. I, I, I just... The, look, look at how China has, has utilized TikTok as a, as a psyop weapon (laughs) in, in a myriad of ways.
Yeah.
Gathering data, putting out its own propaganda at scale. And, and think about how they would do that with control of, you know, the tools that everybody uses in all of their businesses, and that's putting aside the military connotations. I was talking to my friend Mike Gallagher, who's a congressman on the sub-committee on China and who's now over at Palantir, uh, doing policy over there. And he was pointing out correctly that, you know, China's capacity if they, if they win the AI race militarily, is going to explode. And that's, and that's going to mean an awful lot for things like Freedom of the Seas, it's gonna mean a lot for, for our allies, for America's economic dominance in the world. And, and so, you know, that opens up a whole can of worms, uh, as, you know, as goes to the Trump administration's policies with regards to NVIDIA and what kind of chips we should be allowing NVIDIA to ship over to China, and-
- JCJason Calacanis
Which we're gonna get to on the docket in a moment. Interestingly enough, I... Did you, did you gentlemen see the Luckin Coffee announcement in New York City and the socialist reaction to it (laughs) by chance? Nobody saw it. Okay. (laughs) So people are not spending too much time on, uh, on the TikTok. TikTok has a bunch of, like, young socialist New Yorkers in communist T-shirts going to Luckin Coffee and talking about how Starbucks (laughs) , you know, is a, you know, are capitalists and that they're glad that the Chinese company Luckin, which does $2 coffees, has come to America to destroy the American company Starbucks and Dunkin because communists know how to do capitalism better than Americans. That is like the central position in my (laughs) hometown of New York City right now. Here's the TikTok. It's hilarious. Watch this. (laughs) Pull this up for a second, Nick. It's a, it's a, it's worthy diversion. This should... There's some red meat for-
- NANarrator
Hey, guys. Come with me to get a $2 cup of communist coffee. So this specific coffee shop has more locations in China than Starbucks does. Um, okay, I'm gonna come back to make a video there later. But, no, this company went through a $300 million accounting scandal where they faked their profits because capitalism sucks, and then they started paying their workers and putting the money back into the coffee and what actually matters, and now they're more successful than Starbucks. Back in SoHo. Of course this location is right by NYU campus. Should have paid your workers.
- JCJason Calacanis
All right. I think we get the idea. I, I have a new theory, Ben, that the Chinese... 'Cause I do... Uh, I'm with you on the existential, uh, threat of that competitor. I have a theory, they're going to try to beat us on capitalism and then use brands like we've used brands, like Apple and Google-... to defeat us. BYD producing cars now for half the price of American cars, and they're shipping them on their own shipping containers. Luckin Coffee infecting the US now. And I had a third example. Oh, and TikTok, the example you just gave, competing with and, and, and using that. What do you think of my theory, Ben?
- BSBen Shapiro
No, I think, uh, that, that's totally right. And, and the truth is that what you're talking about in China obviously isn't communism, it's, it's state-sponsored corporatism. And so you can pour extraordinary resources into, you know, one path-dependent part of industry, and, and you could out-compete in coffee if you decide to subsidize that at, at extraordinary cost, and then you can undercut the rest of the market. And, you know, this is one of the things President Trump is totally right on. When, when you talk about the tariff wars, I've always been in favor of tariffing the living shit out of China. (laughs) I think that's, that's actually quite right. I, my, my problem when it comes to the tariffs, I know I'm jumping ahead in the, in the docket here-
- JCJason Calacanis
Yeah. Go for it.
- BSBen Shapiro
My problem is that if, if, if you're gonna do it, what you really ought to be doing is boxing in China with, with free trade networks with literally everybody else, and exclude China from that network. You have to do all the preliminary steps before you box in China. Otherwise, China's able to sort of climb out the window, which is, I think, what they've done on everything from NVIDIA chips, to TikTok, to, you know, their actual tariff rate, which I believe is now lower than the tariff rate we have against Canada.
- JCJason Calacanis
Let me bring it to you, Friedberg, 'cause I think this is, like, a super introdis- interesting discussion. Our bestie Bill Gurley has a position that, hey, everybody can win. It's not an existential they win or we win. I mean, obviously it's a competition, but there could be many winners. What's your take on all this, Dave, and if any?
- BSBen Shapiro
Well, I'm in the place, like I've said before, it's kind of like who's gonna win the internet if we said that back in 1996. Like, no one, quote, wins the internet. It's an open standard. It's a platform. It's an evolution of, uh, access for markets, of productivity for the world. I think AI is very similar. I don't think that there's, um, you know, there's this concept that you end up in some sort of state of superintelligence that perhaps reigns supreme and creates superiority. But there's many vectors of competition. So within drone warfare, as an example, there's gonna be a massive vector of competition. It's pretty clear that remote autonomous devices are gonna be the kind of front lines in battles going forward, and China has both a manufacturing, productivity, materials advantage over the United States on that front. So it's not about having the best model, it's about having a supply chain that can support their ambitions in warfare. And similarly, in economics or in business, there's many dimensions upon which we're gonna have advantage over China, and China may have advantages over us that are gonna be enabled, accelerated, or magnified by, by tools in AI. Actual models, I think, are gonna be this continuously kind of evolving set of systems that it's unclear w- where things are gonna head. But to, to kind of bring up your point, I do think that the CCP has a unique ability to throttle up and throttle down entrepreneurship to drive productivity in that nation. When they throttle it up, you end up seeing massive gains in individual capital accumulation, which is counter to the Communist Party's intentions, and so then they throttle it back. And as you can see in this image from the Financial Times, this shows the number of companies founded in China by year. It peaked in 2018, which, by the way, aligns pretty well with the peaking of venture-
- JCJason Calacanis
Mm.
- BSBen Shapiro
... capital investment in China from the United States and from VCs around the world, and then it began its rapid decline because there was a set of policy changes. The, uh... You guys may remember Jack Ma disappeared, and these other sorts of things happened around that time. And so there's this challenge to the CCP that resulted in them throttling back the entrepreneurship. I don't think you can have massive, true, natural market progress without having entrepreneurship, without having a, a more free market. And so they are, I would say, rate-limited at this point by this particular chart in terms of their competitiveness. We can argue about their resourcefulness and their ability to do central planning and central command of the economy, but at the end of the day, much of what brought the Chinese... There was a great, um, podcast on this by the guys from the Brookings Institute years ago, uh, where they talk about what got China out of poverty, um, you know, where their GDP per capita went from whatever it was, 3,000 to 30,000 in a very short period of time. And it wasn't the government central planning. It was the entrepreneurship of the peasants and their ability to kind of self-organize, and self-mobilize, and build, build business, and create better productivity from the ground up. And it was the individual Chinese citizens that, that drove that economic boom, not central planning. Central planning had some enabling factors, but that was really important. And so I do think one, one of the challenges ahead is, is this entrepreneurship suppression that's manifest. And Gavin, I'm sure you have a point on this.
- JCJason Calacanis
Gavin, y-
- BSBen Shapiro
Yeah.
- JCJason Calacanis
Yeah. Well, I was gonna say, Gavin, the East-West Conference that our friends at CO2 do was named after, like, this really amazing boom period we had, uh, 15 to 10 years ago where Americans were not allowed to invest in China. (laughs) And not only that, people had to, American companies had to s- like, basically divest. They shut down in China all the education companies that were venture-backed, nationalized those. Jack Ma went for painting lessons, et cetera. So... And he's an incredible painter right now, by the way. Some of those oil prints are, I think, are gonna be (laughs) much bigger in their impact than Alibaba. (laughs) But Gavin, y- you would, I think, agree, like, we... In investment in China, we were on a really great track that got shut down. Do you think when superintelligence comes that that is the race? 'Cause we're looking at general intelligence, you know, a lawyer, an accountant, a developer, but superintelligence, I think, is where people get to the existential piece. Yeah?
- GBGavin Baker
Yeah. Well, they for sure believe it's existential. I have it on good authority that if you work for DeepSeek, you are not allowed to be in the same room as an American while you're in China, and you have kind of a CCP minder, um, with you most of the time. And that's, that's kind of astonishing. Um-You know, so they believe it's existential. Um, the second thing I would say is I do think they are making an effort to throttle it up. You know, Xi Jinping had a, uh, a dinner with kind of, you know, 20, um, entrepreneurs. I think Pony Ma from Tencent was there, you know, the DeepSeek CEO was there. But they kind of gave pride of place to the people who were making physical goods plus DeepSeek and maybe de-emphasized su- some of the social networks. And the last thing I would say, just a stat that just builds on what David just said about, you know, how entrepreneurship amongst kind of, like, rural Chinese is kind of what jumpstarted China's economy. I think at th- towards the end of the Soviet Union, they could not produce enough food using kind of, um, socialist systems so they let 2% of the acreage in the Soviet Union kind of like be, you know, more entrepreneurial and self-organized, and that 2% of the acreage produced a majority of their food. You know, it just kind of shows the superiority of kind of capitalism to socialism in, in a world in which there are resource constraints.
- JCJason Calacanis
What's better, what's better, Phil, capitalism and democracy, capitalism and communism? D- y- you know, long term, I think we all agree, we have the winning combination, I hope.
- GBGavin Baker
Yeah, well-
- JCJason Calacanis
But in the short term, this sounds like an incredible advantage-
- GBGavin Baker
Yeah, well-
- JCJason Calacanis
... to put your finger on the scale and say, "Hey, BYD cars can lose money forever. We just want to kill the American car industry, we want to kill the German car industry."
- PDPhil Deutch
Well, first of all, nothing can lose money forever. But, but the one thing I think is implicit in what Dave and Gavin said is you need rule of law. You can't just have innovation, you need rule of law. And it's yet to be shown that China can do that in a way that will create long-term success absent government propping it up. A- a- and I'll give you an example. We've had factories in China, one making wind blades, and basically every day was a renegotiation on terms-
- JCJason Calacanis
Mm-hmm.
- PDPhil Deutch
... no matter what you wanted to do. And if you didn't control the chop, the, the, the, the thing that made the stamp, you didn't actually control the factory. That is not a long-term recipe for success, and I think eventually, no matter how strong the centralized government is, you've got to have a rule of law if you really want to see decades and decades of, of, uh, innovation.
- JCJason Calacanis
Okay. Gavin, go ahead.
- GBGavin Baker
Just real quick, I 100% agree you need rule of law. It's essential for, you know, any system of government and, but particularly for capitalism. I mean, in some ways capitalism is the rule of law with private property. But I would say going back to 2018 being, like, kind of glory days for China, they were working. You know, the, these kind of internet entrepreneurs, they did create kind of the only kind of internet companies that were capable of challenging American internet companies, not just in China, but globally. And obviously most American internet companies aren't allowed to par- par- to participate in China, but, you know, the problem was those, those, you know, CEOs became so powerful that they were, started to feel comfortable challenging the CCP. And, you know, Jack Ma made some comments in 2000, I don't remember exactly when, that were just vaguely critical and, you know, that was it. You know, then he disappears, you know, reeducated-
- JCJason Calacanis
Okay. Can we, Gavin, can we stop with the... Hey, wait, hold on a second. Pull up my... Hold on. Pull up this picture. Gavin, you keep saying he disappeared. He opted in to oil painting. That beautiful painting-
- PDPhil Deutch
(laughs)
- 43:46 – 52:38
Political parties picking winners, energy subsidy reversal, how the bureaucratic branch was created and how to fix it
- PDPhil Deutch
I don't quite get Democrat versus Republican on the topic of how they give support to the private sector and what counts as picking winners and what doesn't count as picking winners. When I look at this administration and previous, I'm not sure I see... I think they're both very activist. They both kind of seem to pick winners and losers. And I, I feel like that distinction's kind of lost a little bit. Is that, uh, uh, is that make any sense to you? Like one had the IRA, but then the other has like rare earths or this or that. Like it's very hard, uh, when they switch like that, Ben, it's really hard to know where solid ground is as an investor.
- BSBen Shapiro
I mean, listen, I, I totally agree with you on that. And I do think that the centralization of power in the federal government and the choosing of the winners and the losers over the course of the last several decades actually, has been really denigrating for, for private industry. I mean, I'd prefer that, that nobody was picking winners and, and losers. Uh, but I, I think that, you know, if, if you basically are now relegated to a choice between the winners that are picked by the Trump administration and the winners picked by the Biden administration, you know, from a political point of view, I'm, I'm gonna pick the winners picked by the Trump administration. I think they're, they're doing a better job picking the winners. But just on a principled level and, and, and a general market level, I'd prefer that nobody be, be doing these sort of subsidies. I don't like industrial i- I don't like centralized planning and central industrial policy is why.
- PDPhil Deutch
S- so let me just... I think-
- JCJason Calacanis
Agree.
- PDPhil Deutch
... I would, I agree with you almost 80%. And, and, and David, this is where I think I disagree with both of you a little bit. The subsidies, right, have really helped solar, wind, EV, a lot in other industries outside of energy as well. So I think what I would love to see is rational subsidies that consistently last through Republican and Democratic administrations. And we had that a little bit with Bush and Clinton with some of the renewable stuff, David, like Governor Bush put in wind requirements in Texas that carried through. But if we keep flipping back and forth, we inhibit-
- BSBen Shapiro
Yeah.
- PDPhil Deutch
... one of our greatest strengths, which is our technology and innovation. And Gavin, I don't-
- JCJason Calacanis
Freeburg, Freeburg wants to get in this. Go ahead. Great point, Phil, by the way. Great point.
- BSBen Shapiro
Here's a counterargument I'd make. The subsidies, while they may have benefited those two particular industries, created a financial disincentive for investing in nuclear, and so there's always a loser, and the loser isn't always necessarily the target. The target was oil and coal or oil and gas and coal or whatever it was, carbon-based energy systems. That was the target when there were subsidies for solar and wind, was let's accelerate these deployments and get this market to start moving. It does two things. One is it doesn't force a natural market dynamic where you have to ultimately get the cost of solar or the cost of wind turbine production low enough that it makes economic sense from an ROIC basis that investors would natively want to make that investment. They're making the investment 'cause the government's paying half the cost. And the second thing is it then makes nuclear non-competitive, and therefore, the, the R&D investment dollars that were supposed to go into nuclear that would have allowed us to accelerate to Gen 4.0 systems, which by the way China has now done, went away. And so now-
- JCJason Calacanis
But, but-
- BSBen Shapiro
... we are several decades behind where China is with respect to nuclear, which is ultimately the most scalable energy production system we have.
- JCJason Calacanis
Phil, go ahead. And then Phil, I want to get through a couple of the charts you, you took the time together to put together here as we wrap energy up.
- GBGavin Baker
Before you go into ener- energy, I do have a politics kind of question I would love to pose to Ben, if that's okay.
- JCJason Calacanis
Yeah, please.
- GBGavin Baker
So, um, I, my, my parents were visiting me for the last week and, um, we, we had a lot of lively political debates and, you know, this trend of the imperial president in America, you know, which I think really accelerated with Biden and now has, you know, further accelerated with Trump. I... Their hypothesis, which I think is correct but I'm curious for Ben's, is that is a function of the fact that Congress by and large can no longer effectively legislate. Every once in a while they'll do the IRA or the one big beautiful bill, but by and large Congress is not doing their job. So for 30 or 40 years, a lot of the governance was done actually by the ju- judicial branch. And if we have to choose by being governed between the judicial branch, which is unelected, and the executive branch, which is at least elected and accountable, I would rather have an imperial president, um, who we can judge and vote out of office than an imperial judiciary. Just curious for your thoughts, Ben.
- BSBen Shapiro
Yeah, I mean, I, I obviously think that's true, but I think the trend goes back, you know, more than a few decades. I think that if you're really gonna go to the deep roots of this, you have to go back to the roots of the administrative state in the early 20th century, because the reality is the reason you have an imperial presidency is 'cause the federal government just does way too much shit. I mean, the federal government (laughs) is just way too big. They're way too intrusive. Uh, they're, they're, they're way too powerful. And so once that becomes a, a giant grab bag of cash, then whoever controls the federal government wins. And now if you're a legislator and you can kick all responsibility for your policymaking over to some unelected bureaucrat in the executive branch, that's precisely what you're gonna do. The founders gamed for ambition, checking ambition. They never really gamed for people trying to kick responsibility from one branch to the other. They, they, they thought the other way. They thought Congress was gonna defend its own prerogative against imperial overstep by the presidency. And instead, thanks to the administrative state-... congresspeople and senators started to realize, "Hey, what if I just pass, like, this very vague omnibus package, and then I kick it over to a bunch of regulators? And the regulators do all the work and take all the heat, and I can go back to my hometown and tell them how much money I brought home?"
Yeah. It's a fascinating, uh, uh- 100%. 100%. ... situation. And when you kick it back to home, I don't know if you guys saw this, uh, town hall, um, that went explosive. (laughs) There's been a number of them. Ben, you must have covered it.
- PDPhil Deutch
While you're pulling it up, I, I, I do wanna say that I do think we don't wanna throw the baby out with the bath water. That is to say, the government and a number of government employees and career civil serv- servants are doing God's work, whether it's on safety or, uh, defense or intelligence. And what I don't love is a tone of critical- criticizing lifelong government workers when none of us would really do that job at the pay they're taking. And maybe, I don't mean to make it, let me not say the people on this call I don't know as well, but many of my friends. And I, I, I do think there needs to be a, a, a beat for those people that are doing incredible work-
- BSBen Shapiro
Hm.
- PDPhil Deutch
... for little or no recognition or pay, and they, we can't paint with too broad a brush. And I think that's important.
- BSBen Shapiro
Oh, no, I'm, I'm not blaming, I, I, I'm not blaming-
- PDPhil Deutch
No, yeah, I, I, I don't know much about that.
- BSBen Shapiro
No, no, I know. Listen, I-
- PDPhil Deutch
I think, I just think we don't hear enough of that is all I'm saying.
- BSBen Shapiro
I'm not saying, I'm, I'm, I'm not blaming the bureaucrats who are there-
- PDPhil Deutch
Yeah.
- BSBen Shapiro
... to, and, and are given responsibilities to do a thing. I'm blaming Congress for having kicked them the authority in the first place. If you're gonna place, you know, blame with, with somebody, you have to give it to the, the branch that actually abdicated its duty and decided to construct an entirely different branch and then throw off all, all accountability-
Yeah.
... to that branch.
That's right. That's right.
- 52:38 – 1:10:00
Socialism, OBBB impact on energy, does socialism in the US rely on Mamdani in NYC?
- BSBen Shapiro
It seems to me like nobody's happy. If you, if you missed it, there was this, like, crazy town hall. It occurred in, um, Nebraska (crowd cheering) and everybody was upset. Friedberg, I wanted (laughs) to make sure you saw this. I should have sent it to you earlier. I'm not sure if we talked about it in the group chat. But you had people who were, at once, upset in Nebraska about the government spending too much, them not, the, the Medicare cuts, Medicaid cuts. People were universally on both sides absolutely infuriated at the state (laughs) of affairs. Nobody's happy now. Friedberg, your thoughts on this sort of, you, you kind of predicted it with the socialist side, but it does feel like- My prediction will- ... everybody's unhappy. My pre- my, my prediction will ring truer than any of us hope. Socialism will sweep over this nation, I fear, and I think it's a cancer. And it's gonna be worse than what we saw with woke stuff. It's gonna be just like, "I'm losing out on everything." I mean, people are stagnant in wage growth. There is no one in the United States, including wealthy people who haven't taken significant notice of the increased cost of groceries and the increased cost of buying home goods. Jason, I'm assuming you must have noticed as well how much groceries have gone up in price. Everyone's rent goes up every year. There was this TikTok rant that went viral this week about this woman that's like, "Why does my rent go up every year? My salary doesn't go up." We're in this really difficult moment because of what Ben pointed out, which is that we've basically funded the government to do everything for us. And by my calculation from last year, I think nearly half of Americans are employed directly or indirectly by the government at this point. And as a result, because of that and the inefficiency of government allocation of capital, everything inflates in cost and we're entering this era where some people make the joke that the train has left the station, you know, it's, it's this moment- All right. Let's finish up with these two charts here, Phil, on energy, and then I wanna get into tariff.
- PDPhil Deutch
Well, I, I just wanna, I just wanna say one thing, David. I still think when it comes to innovation, rule of law, capitalism, freedom, we are the best at it. I think that the-
- BSBen Shapiro
There's still gravity. There's still gravity, Phil. At the end of the day-
- PDPhil Deutch
(laughs)
- BSBen Shapiro
... arithmetic is arithmetic.
- PDPhil Deutch
When Jimmy Carter lost the presidency, there was 12 years of-... Republicans and then there was Democrats. It may be that socialists ro- I don't think socialism ever in the United States, the way left, let's say, the left side of the Democratic Party wins for 12 years, David, maybe. I don't see that. But if you wanna see that, you can. But it will swing back. This country is incredibly resilient and I have complete faith in that resilience.
- JCJason Calacanis
Love it.
- BSBen Shapiro
Can I just add-
- JCJason Calacanis
Love the optimism. Hold on. Let, like, let me just get these two charts out of the way real quick. Uh, finish up the energy charts here, um, and then we'll, we'll, we'll continue the discussion as we pivot over to tariffs, which is obviously related to all this.
- PDPhil Deutch
All right. All right. So Da- David?
- BSBen Shapiro
Yes.
- PDPhil Deutch
I wanna go back to this because I think... I can't... I wanna... I can't emphasize enough how much I love you and think how smart you are, and I also think the last argument made was absolute bullshit.
- BSBen Shapiro
Regarding what?
- PDPhil Deutch
The idea, the idea that the subsidies that went to wind and solar were at the expense of nuke is nutty. A- and let me give, let me tell you why. The issue with nukes, and you say this so wonderfully on China, the issue with nukes is regulation and, what Ben was saying, over... W- we're stifling innovation there. And we've got to figure out a way, and I think the Secretary of Energy and the president have done a great job of this, to rationalize the regulatory framework around nuclear power. That what's bothered... What hurts nukes is not their cost per kilowatt subsidy, it's the massive amounts of bureaucracy around them. So if you were to give the nuclear power industry five or 10 cents a kilowatt hour, that doesn't help them with their big problem. So... And wind and solar, that's what you gave them. And the sizes are different as well. And one's a distributed resource and one's a centralized. So I guess what I'd say is, I don't think we have to treat them the same. I'm 100% with you that we should be subsidizing nuclear power. It's clean, it's base load, it's reliable. We can do small module reactors. They can be used for data centers. All of the above. We don't have to pit our children against each other, and in this case, they really aren't against each other. Just like-
- BSBen Shapiro
And the chart you're showing, explain the chart you just showed, and then-
- PDPhil Deutch
So, so-
- BSBen Shapiro
Sorry, but why should we... And then I have a second question for you, which is, why should we subsidize nuclear when we have hundreds of billions of dollars being spent by the most powerful Mag 7 c- companies in the world and sovereign wealth funds who want to invest in it? Why did, why do the taxpayers have to pay for that? You can get to that in a second, but walk me through this global elec- electricity generation chart you pulled up here, just real quick.
- PDPhil Deutch
So, so, so what this chart shows, um, is how quickly electricity has come on f- uh, from solar, the growth rate of solar and so... Actually, there may be a ChatGPT chart on the uptake in AI. But what you see is the yellow, the hyperbolic growth of solar, and so this goes to the fact of it really has been a success. Cost been at 80 or 90% and it's beginning to grow. And I agree with David, eventually you have to have storage with solar so you can't quite, uh, uh, match gas to solar but we've had incredible success reducing costs of solar and wind, and incredible growth. And so that's what the result of those incentives have been. It's been successful that way. So-
- BSBen Shapiro
And now the second chart here, the OBBB chart.
- PDPhil Deutch
Well, the, yeah the OBBB chart. This just goes to show that when you take away incentives, you lose some generation. And so the point of this chart is, if we really need all we can eat on energy for artificial intelligence, and if artificial intelligence, the race is the, you know, race for national security, uh, and dominance of the world, I... This is saying we're taking a step backwards on this supply. And again, it's not either or, David. I would say do as much solar and wind as you can, as much SMRs as you can, do as much energy to make us a dominant player, uh, in artificial intelligence, as well as other things. That's the-
- BSBen Shapiro
Freeberg, your response.
- PDPhil Deutch
Sorry, that's, that's what I'd say.
- BSBen Shapiro
No problem. Freeberg, your response. Yeah. So again, I, I think the point I was trying to make, Phil, is by driving the private market capital into solar and wind, because it is now discounted, so you get a high rate of return by applying your capital there. You're not likely to put that capital in the development or the extension of nuclear technology. And the, the lack of investment in improving nuclear technology... Yes, you could argue there's regulatory burdens and so on, but it's largely been inhibited because there have been these other subsidized paths to market with energy. And as a result, we missed a window to catch up to Gen 4.0, which is, just so everyone understands what that means, these are these very clean, meltdown-proof nuclear energy production systems that are being deployed at scale in China now, and the US doesn't have any, and we have no path to getting these deployed. Secretary Wright's going to speak at the All-In Summit. He, he has said, the Department of Energy, that in the United States, we are likely going to have a Gen 4.0 reactor deployed or started production in 18 months, but we'll see. But we are so far behind because no capital went into it. And that's because the capital was redirected into these subsidized markets, and that's the disincentive that arises when the government gets involved in markets. The government creates these, these financial incentives that, number one, create bubbles in those markets. And number two, take away the incentives for capital to flow to the best path for long-term returns, which is what's happened in energy in the United States.
- PDPhil Deutch
Yeah. So in, in the small modular reactor, the Gen 4.0 stuff, we, as well of others, have investments there. Uh, great company we like called NextEnergy. Talk about the book there, Jason. But I think it's fair to say that the money flowed into those sectors when the hyperscalers committed to them and showed they were serious about the demand side from the private sector. And they have been... There's been a catalyst for the administration because it's had four or five executive orders-
- JCJason Calacanis
... try to get rid of the bureaucracy. So I guess I would say, David, in my experience as an investor in this space, the dollars flowed when the market spoke and the hyperscalers said they wanted ... and were behind the SMRs. And second, it was further, uh, invigorated when, as Ben says, the government took a step back and stopped being a yoke on the industry. Neither of those have anything to do with subsidies to solar and wind.
- GBGavin Baker
Can I just say one thing about socialism? Because I thought it was a really important thing that David said.
- JCJason Calacanis
Yeah, sure.
- GBGavin Baker
That it's inevitable. I would just say, to me, so much of it comes down to Mamdani. Um, if ... Like, I disagree with every one of his policies.
- JCJason Calacanis
Well, admittedly they're dumb, so-
- 1:10:00 – 1:27:51
Tariffs update: $125B+ revenue so far, India and Switzerland hit hard, Trump's ad hoc approach
- JCJason Calacanis
talk about tariffs. And so we'll get into the more specific granular ones that we've been dealing with over the last 10 days, but just big picture, here's, um, what's happened. It seems to be the Trump administration has done what they said they were gonna do, and we'll talk about the ramifications of this, but tariff revenue was up to 30 billion in July. 127 billion so far in 2025 and obviously this is, you know, three months of data basically. Here's your chart. In June, the trade deficit shrank to 60 billion or so, and that's the lowest since June of 2023. Now by doing this, of course, inflation, which is a trailing indicator could pop up at any time. We've seen a small tick, like 10% up in inflation. And if we cut rates in September, October, November time period and maybe 50 bips comes off this, inflation's definitely gonna go up. People have more money, more investment goes around and we'll, we'll probably see a three handle again. So we're gonna trade one for the other. Thoughts? And then here's your polymarket. We made a polymarket here on the pod and polymarket is an official, is the official marketplace of the All-In Podcast. Shout out to my guy Shane. Let's go next. How much revenue will the US raise from tariffs in 2025? Here's a polymarket and, uh, right now it's looking like the number is 200 to 500 billion, 86% of people are believing that will be the case. And then here's ours. I had said, "Will tariffs generate greater than 250, uh, billion in 2025?" We're sitting around 15%. Maybe this is, uh, free money in this polymarket. And that was when I created... Gentlemen, who has an opinion on the tariff policy and the revenue it's bringing in?
- GBGavin Baker
Well, it's gonna be hard to get to that number just because the tariffs only really kicked in middle of the year. You know, 30 billion, that's $360 billion annualized, right? Being in the middle of the estimate. But you didn't have a lot for the first six months.
- JCJason Calacanis
Yeah.
- GBGavin Baker
Maybe you hit the low end of that with 30 or 40 billion for the last six months but, um, but we'll see. But for 2026, that does seem reasonable.
- JCJason Calacanis
250, we're halfway there. We're at 125 so we'll see if they can keep it up and then what the impact is. Phil, what are your thoughts on this tariff policy and the revenue it's bringing in? Is the juice worth the squeeze?
- PDPhil Deutch
Well, I assume the president... Wouldn't the president say he already hit it because he got 500 from the Japanese?
- JCJason Calacanis
Reports have come out that that might... The Japanese perceive that as a loan maybe or they're going to invest in it, so maybe... And, and none of that has been officially paper. That was, uh, both sides in the EU deal were also handshakes so let's keep that in mind. These things still have to be papered, and then there's this potential that-
- PDPhil Deutch
Yeah.
- JCJason Calacanis
... tariff powers could reside in the House-
- PDPhil Deutch
Yeah.
- JCJason Calacanis
And, and Trump will not be able to do any of this and it all gets reversed in our very polarizing time.
- PDPhil Deutch
So, so I'm just gonna speak about the part of this that I have a little bit of understanding on. Uh, let's say you tariff solar panels coming from the Chinese. Uh, you could do that for a variety of legitimate reasons, equalizing playing fields, et cetera. But you are, at the end of the day, increasing your energy costs. So to me what, I struggle with is, globalization-... in, throughout my lifetime, it's been a net plus to the world and the United States. We've now increasingly focused on supply chain security and at the expense of globalization. I don't know, and I'm not smart enough to know whether that's a long term or good term, good, good trend. And so that's what I can't quite play out of my head.
- JCJason Calacanis
Well, no, in fairness, nobody knows. This is a complete reversal of what we've done. Ben, your thoughts?
- BSBen Shapiro
Yeah, I mean, uh, I think that, that there's a lot of triumphalism a little bit early on this policy. Uh, uh, y- give it six months and, and see where we're at. And one, I think-
- PDPhil Deutch
Yeah.
- BSBen Shapiro
... one, one of the indicators that's sort of fascinating is the lack of inflation because obviously a lot of people were expecting that inflation was gonna pop as soon as the tariffs kinda hit. And it hasn't been a lot of time, but one of the kind of problematic indicators is maybe inflation didn't pop because demand dropped. And so what you're actually watching is a temporary spike in the kinds of revenue that are coming in via the tariffs because it's, it's almost a, a one-time expenditure, and then the demand is gonna drop. And so what you will see is the, the tariff revenue coming into the country go down, demand dropping, inflation coming down, and that's when you will see the Federal Reserve step in and lower those interest rates in order to sort of artificially juice the economy. Now I, I'm, I'm, I, I, I do not... I, I understand, I, I think kind of what they're trying to do, sort of. I mean, (laughs) and I think they're trying to do multiple things at once, some in conflict with one another because you can, you can champion the amount of revenue that we're raising off of tariffs, but you can't do that at the same time that you're championing re-shoring because if you re-shore, then that revenue's gonna go away, presumably. Right? You're not gonna buy, be buying product from overseas, you're gonna be pr- buying product domestically and then no one is gonna be shipping anything here in the first place. Those two things are eventually mutually exclusive. And, and then if you're doing all of that while attempting to also, you know, either box in China simultaneously, but kind of not box in China, it, it seems very confounding. And the thing that, that I'm getting from most of the investors that I'm talking to is just confusion at this point. It's just a, a feeling as though we're kind of riding in choppy waters and there's no sort of stability or stasis, and so I'd like to see something, something, anything kind of sit for a few months (laughs) so we know what the hell is going on.
Episode duration: 1:50:42
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