The Great Tariff Debate with David Sacks, Larry Summers, and Ezra Klein

1. 0:00 – 0:58

   Bestie intros!

   1. LSLarry Summers0:00

      Looking forward to our thing in a few weeks.

   2. EKEzra Klein0:02

      Yeah, I don't know if I'll end up being there but I'm hoping to. I'm hoping to.

   3. LSLarry Summers0:05

      Oh.

   4. EKEzra Klein0:05

      It's been-

   5. CPChamath Palihapitiya0:06

      What, do you guy- you guys have, like, a liberal cuddle party or what are you doing?

   6. EKEzra Klein0:09

      Yeah, yeah. L- Larry takes a bunch of MDMA and we all sort of go into the, the corner and hang out together.

   7. CPChamath Palihapitiya0:15

      God, that sounds incredible.

   8. EKEzra Klein0:16

      (laughs) Liberalism is wonderful, man. You should come try it.

   9. CPChamath Palihapitiya0:18

      That's not liberalism. It's called something else, Ezra.

   10. EKEzra Klein0:20

       (laughs)

   11. CPChamath Palihapitiya0:21

       Sorry, Niki, is our crypto czar joining us or no?

   12. JCJason Calacanis0:24

       He's, uh, I'm talking to (beep) now. It looks like he is...

   13. CPChamath Palihapitiya0:28

       Oh, zing! This is gonna be great.

   14. LSLarry Summers0:30

       This will be like ratings bonanza.

   15. JCJason Calacanis0:32

       All right. We do have David Sacks here.

   16. CPChamath Palihapitiya0:33

       All right.

   17. JCJason Calacanis0:33

       David, make sure you have your quick time on.

   18. CPChamath Palihapitiya0:35

       Look at Sacksy-poo, looking so presidential.

   19. JCJason Calacanis0:37

       He looks thin, doesn't he?

   20. CPChamath Palihapitiya0:38

       Oh, he looks fabulous.

   21. JCJason Calacanis0:39

       I'm going all in. 50s are back in town. All right, here we go. Let your winners ride.

   22. CPChamath Palihapitiya0:45

       Rain man, David Sacks.

   23. JCJason Calacanis0:47

       I'm going all in.

   24. NCNikki (producer / crypto czar)0:48

       And I said-

   25. DFDavid Friedberg0:50

       We open sourced it to the fans and they've just gone crazy with it.

   26. LSLarry Summers0:54

       Love you, Wesley.

   27. CPChamath Palihapitiya0:54

       I mean, queen of kin wow.

   28. JCJason Calacanis0:56

       I'm going all in.

2. 0:58 – 21:21

   Reacting to Trump targeting China and postponing all other reciprocal tariffs

   1. JCJason Calacanis0:58

      All right, everybody. Welcome back to the number one podcast in the world. I'm your host, Jason Calacanis, with my bestie, Chamath Palihapitiya, our chairman dictator, and live from, well, the administration, Mr. David Sacks, our czar for AI and crypto, and amazingly, two fantastic guests this week. We have, uh, New York Times writer and host of the Ezra Klein podcast. He's got a new book with Derek Thompson, Abundance, and he co-founded Vox in 2014, and he's our guest here today before Trump ships him to El Salvador. Please welcome, E- Ezra Klein. I'll let you start.

   2. EKEzra Klein1:36

      (laughs) Glad to be here in my final hours of freedom.

   3. JCJason Calacanis1:38

      Okay, great. Good to be here. Sorry, Sacks. Uh, uh, and, uh, with us, of course, Larry Summers, economist, former Treasury Secretary under Clinton, former Director of the National Economic Council under Obama, and the President of Harvard from 2001 to 2006. Thanks for coming, Larry.

   4. LSLarry Summers1:54

      Good to be with you.

   5. JCJason Calacanis1:55

      Okay, we have, uh, a lot to get to here so we, uh, might as well talk about the big news of tariffs. It's day 80 of the Trump presidency, eh, a second presidency, his second term, and Trump tweeted that he paused tariffs for everyone but China on Wednesday. Basically, let me just cue up the details, Larry, and then we'll get your take on all of this. Just one week after Liberation Day, Trump announced on Truth Social that, in effect, he was raising tariffs against China, 125%, based on their "lack of respect," quote unquote, instead of negotiating, and that he was pausing reciprocal tariffs on all other countries for 90 days, and markets ripped 10% after he posted this. And today, Thursday, when we tape, there's been a massive selloff on Wall Street so the rollercoaster ride continues. What it will be on Friday when you consume this podcast is anyone's guess. S&P is down 5% today. For context, the S&P was at 5700 pre-Liberation Day, so about a 9% drop after these wild swings. And, uh, in fact, this has been historic volatility. Here are the top selloffs in history. As you can see, three of them came during Black Monday in 1987, three of them came during the financial crisis, three of them came during COVID, and, uh, coming in 11th is Trump's tariffs. Also, in the gainers, uh, you have these big rebounds. Wednesday's 9.5% recovery was number three. The administration says this was all part of a master plan, we'll hear more about that later, and that they laid a trap for China. They laid a trap. Bessent has been the spokesperson during this retreat, or whatever we're gonna call the, uh, pause, and quote, "This was driven by the President's strategy... He and I had a long talk on Sunday, and this was his strategy all along." I don't think we need to play the clip. Uh, that's the gist of it. The White House account then tweeted in all caps, my favorite way to tweet, "DO NOT RETALIATE AND YOU WILL BE REWARDED." Wall Street Journal, on the other side, posted a story about why Trump blinked. They chronicled the decision as, uh, being affected by Jamie Dimon, who went on Fox to express fears of recession while saying the tariffs were valid and that he knew the Trump and cabinet would be watching him on Fox. Other banking executives, who felt they didn't have a lot of influence in this administration, according to the Wall Street Journal, started lobbying Republican lawmakers that the Trump tariff plan would tank the economy. The White House Chief of Staff, Suze Wiel, started receiving calls from executives and lobbyists expressing concerns and, uh, the Wall Street Journal reports that Trump was influenced heavily by Bessent. They were flooded with worried calls from Wall Street and that the president was, uh, lobbied to find an off-ramp. Trump ultimately relied on his instincts, according to the administration. Larry, is this 4D chess or is this something else? What are your thoughts?

   6. LSLarry Summers5:12

      This is, uh, dangerous work with a sledgehammer on a pretty sensitive machine, which is the global economy that's having really serious, uh, consequences. First, it's important to understand that there's more tariffs that are around than you described. Even after the big back off, there's a 10% across the board tariff, a range of structural tariffs, like on steel and automobiles, and a range of new tariff threats, like on, uh, pharmaceuticals. Here's a kinda market-based estimate of what the damage that the market thinks this is all doing to the US economy is.... market's down, let's take today's number, 9%. If that's right, that would be about $4 trillion. Of course, the- uh, $4 trillion since Liberation Day, of course, markets were down coming into Liberation Day because of some anticipation of these policies. So let's be conservative and say these policies have taken $6 trillion off the stock market. Now, the stock market only measures the adverse impact on corporate profits, not the adverse impact on workers, not the adverse impact on consumers. So you need to add to that, uh, stock market number. Uh, one way of thinking about adding to it would be to say that corporate profits were 10% of the economy. So you could argue for multiplying by a factor of 10, but maybe that's being too exaggerating or too bold. So let's multiply by a factor of, uh, five, and what you get is a loss in the $30 trillion range as the present value, as estimated by markets, of what's being done. Now, I know the Trump administration sometimes likes to say it's working for Main Street, not Wall Street. I noticed that they're pretty excited about the stock market rally yesterday in a way that wouldn't really go with, uh, not caring about, uh, markets. So I think what markets are seeing what's- is what's true, which is three things. This is an inflation shock 'cause you're adding to prices. CEO of Amazon got it right, the Secretary of the Treasury got it wrong. Increases in tariffs of this magnitude, the overwhelming part of them will be passed on to consumers. So you've got an inflation shock. When you raise the prices of people, and their income, at least in the short run, is the same, they're poorer, and that means they can afford less stuff, and that pushes the economy down. And so you've got higher inflation, and you've got, um, more- uh, less demand, and therefore, more unemployment, and all of that's bad for the economy and companies. And the last thing, which I think is profoundly important, is we are trading like an emerging market country right now. For serious countries, for the United States, the pattern is that when the world gets riskier, the bonds go down in yield and the currency goes up in value because people come for the safe haven. When you're a country like Argentina, then the assets all move together, falling stock prices go with higher bond yields, go with a weakening currency. And so because of our erratic behavior, we have changed the zeitgeist surrounding America from the traditional zeitgeist surrounding America to the kind of zeitgeist that surrounded Juan Peron's Argentina. And that goes with all the other things that are happening, the more protectionism, denying the independence of the Central Bank, fiscal irresponsibility, breakdown of traditional boundaries between government and business, substantial, uh, cronyism as a strategy, authoritarian tendencies towards, uh, the opposition, lack of total respect for-

   7. CPChamath Palihapitiya10:09

      (laughs)

   8. LSLarry Summers10:10

      ... uh, the judiciary. So-

   9. CPChamath Palihapitiya10:12

      Keep going, Larry. Keep going.

   10. LSLarry Summers10:13

       What we're seeing is a- is a pattern of-

   11. CPChamath Palihapitiya10:18

       Go on.

   12. LSLarry Summers10:18

       ... America being governed on the kind of Juan Peron Argentina model, and that sometimes produces some benefits for some people in the short run, that sometimes generates popularity, uh, for it. Peron kept coming back in Argentina, but ultimately-

   13. CPChamath Palihapitiya10:38

       Okay.

   14. LSLarry Summers10:38

       ... it's extremely costly for a society.

   15. JCJason Calacanis10:41

       Sax, uh, you've- you've heard, uh, Larry's, uh, take on all of this.

   16. CPChamath Palihapitiya10:46

       Larry's giving it about a- a B+ on the Harvard grade scale.

   17. JCJason Calacanis10:50

       (laughs) Which might be inflated. I'm not sure. Sax, obviously, in the administration, you cover two things, AI and, uh, of course, crypto, and you're a member of the pod. So let's get your take on what happened this week with these tariffs. Even the most ardent supporters of Trump have felt this is chaotic, not well executed, not communicated well. What is your take, Sax, on how this was executed, and could this have been done better?

   18. DFDavid Friedberg11:23

       Well, I think what happened, if you go back to Liberation Day was only eight days ago. It was April 2nd. If I had told you on April 1st that Donald Trump would find a way to get the entire world to eagerly embrace a 10% tariff on the American market, and not only would they not complain, but they'd actually be relieved that it was only 10%, you would have said that would be an April Fool's joke. If I had told you eight days ago or nine days ago that Trump would find a way to accelerate the United States' decoupling from China, which is something he's long wanted to do, and that Wall Street would basically breathe a sigh of relief over that-... you would have said that there's no way that could happen. If I had told you eight or nine days ago that President Trump figured out a way to assert a presidential power in a way that gives America extraordinary leverage over virtually every country in the world, you would have said, "Why, I don't believe it. I don't... you know, what, what is that power?" And he proceeded to do that. And now basically every country in the world, except for, for China, is coming to Washington seeking to negotiate a new trade deal for the United States, on better terms for the US.

   19. LSLarry Summers12:32

       If you told me any of that a few days ago, I would have believed you and I would have thought the consequences would be a substantially deteriorated American economy and a substantially less secure-

   20. DFDavid Friedberg12:46

       I don't think we know that.

   21. LSLarry Summers12:47

       ... United States.

   22. DFDavid Friedberg12:47

       I don't think we know that.

   23. LSLarry Summers12:47

       It's not any surprise. There's nothing surprising about the fact that the United States has the power to extort Lesotho.

   24. CPChamath Palihapitiya12:55

       (laughs)

   25. LSLarry Summers12:55

       It's just... And that's, that's the country that was singled out in the Trump formula for the highest level of protection. There is no surprise in, uh, that. There is no surprise that the United States-

   26. DFDavid Friedberg13:09

       That's not who's coming to Washington right now.

   27. LSLarry Summers13:11

       ... has the capacity to isolate itself from China.

   28. DFDavid Friedberg13:12

       That's not who's coming to Washington right now, Larry.

   29. LSLarry Summers13:13

       It will be very, very costly.

   30. DFDavid Friedberg13:14

       Japan is coming to Washington. South Korea-
3. 21:21 – 46:14

   Measures for success of tariffs, debating the impact of letting China into the WTO

   1. DSDavid Sacks21:21

      if, what are your measures? What in two years- Good question. ... if manufacturing-

   2. JCJason Calacanis21:25

      Yeah, go ahead, Sax.

   3. DSDavid Sacks21:26

      ... you know, employment or whatever-

   4. JCJason Calacanis21:27

      Very good question.

   5. DSDavid Sacks21:27

      ... is below X, will you be unhappy? If GDP is... What, what is a, a sort of, uh, objective yardstick where we could come back in 700 days and say, "Did this work out or was this a bad idea?"

   6. JCJason Calacanis21:41

      Go ahead, Sax.

   7. DFDavid Friedberg21:41

      I would say probably the biggest thing would be whether the US can re-industrialize, to some extent, so that we're not completely dependent for our supply chains on, on a potentially hostile adversary.

   8. DSDavid Sacks21:52

      And, and what is the measure of that? Is it the, the quantity of manufacturing we're making? Is it the share of manufacturing employment?

   9. DFDavid Friedberg21:58

      I don't think it's a hard thing to understand. You know, during COVID, we learned-

   10. DSDavid Sacks22:01

       I'm just asking you to sum it very briefly.

   11. DFDavid Friedberg22:02

       Let me finish my point. I am saying it concisely. During COVID, we discovered that we were horribly dependent on a supply chain from China for some of our most essential products, for pharmaceuticals, for other medical gear that we needed during COVID.

   12. JCJason Calacanis22:16

       Sure. So what would be, if you were to put a metric on it, um-

   13. DFDavid Friedberg22:19

       Just as one example, but we've also learned that our entire supply chain for all sorts of industrial products now is dependent on China and other countries.

   14. JCJason Calacanis22:27

       Okay.

   15. DFDavid Friedberg22:27

       So-

   16. JCJason Calacanis22:27

       So let's be more precise. We have 4% unemployment at the record low of our lifetimes and do you think Americans want to work in these factories? And if so, which factories? Obviously, pharmaceuticals. That's a dependency. Obviously, building ships and weapons, that's a dependency. I think we can all agree on that and that might be hundreds, low hundreds of thousands of jobs. Do you believe we should be making Nike sneakers here? Do you believe we should be making jeans here again? What, what would be the objective measure of success? Like, a certain number of jobs, certain number of factories, certain fa- types of factories? Because the other piece that I don't understand, and maybe you can inform me here, Sax, is number one, who's gonna do this work if we're, uh, gonna be deporting millions of people and we have the lowest unemployment of our lifetimes and we have automation coming to these factories and Americans don't want to take these jobs historically? How is this all going to work? It seems a bit farcical to me that we're going to bring these things back.

   17. DFDavid Friedberg23:22

       I don't think the, the millions of Americans who lost their jobs in the heartland because we let China into the WTO, which is something that Larry, I think, supported and championed ... co-author-

   18. JCJason Calacanis23:31

       We're talking about decades ago though, right? Yeah.

   19. DFDavid Friedberg23:33

       That's what started this whole thing.

   20. JCJason Calacanis23:34

       Yeah. Okay.

   21. DFDavid Friedberg23:34

       Okay? I don't think those millions of people want to lose their jobs. So-

   22. LSLarry Summers23:37

       Respectfully, you're talking nonsense.

   23. DFDavid Friedberg23:39

       What are you talking about, Larry?

   24. LSLarry Summers23:40

       Respectfully, David-

   25. DFDavid Friedberg23:41

       You were treasury secretary when we walked-

   26. LSLarry Summers23:43

       Could you name one, David-

   27. DFDavid Friedberg23:44

       ... when we walked China into the WTO and you're just still-

   28. LSLarry Summers23:46

       David-

   29. DFDavid Friedberg23:46

       ... defending it.

   30. LSLarry Summers23:47

       David.
4. 46:14 – 1:02:01

   Is the US being exploited on trade? Was free trade a mistake?

   1. DSDavid Sacks46:14

      China.

   2. LSLarry Summers46:14

      I would like to hear a defense from somebody.

   3. CPChamath Palihapitiya46:18

      I'll, I'll give it to you.

   4. LSLarry Summers46:18

      Uh, uh, I... Uh, Ezra and I agree, specific policies. I'd like somebody to explain to me why it's a remotely sensible theory to say that the United States is being exploited by any country where the overall pattern of trade is, uh, such that we are running a trade deficit. And maybe in the process, you could explain to me why my grocery store is exploiting me because I'm running a massive trade deficit with them.

   5. CPChamath Palihapitiya46:50

      Okay, trade deficit, Chamath or Sax? Who wants to take it? I can start, then maybe Sax can, Sax a-... So let, let me actually start by giving some credit to where Biden did do a few things right, just in the spirit of finding some common ground. Inside the IRA, I think that there were two things, and I've said this pretty repeatedly but I just want to put it on the record again. The ITC credits and the ITC transfer markets for those credits, the tax equity markets, are critical industries in America to support private investment in all kinds of very complicated markets, energy markets being the most important. And what the Biden administration did, to their credit, was remove the uncertainty, because those things had to be renewed over and over again, and they gave us a very long window where we could underwrite investments. To your point, Ezra, that was smart. But it's important to also remember that in order to get Biden's budget done, what they did was they had Manchin roll over on permitting reform. And Ezra, you know this probably better than all of us. When you look inside of the CHIPS Act, as smart as that initial policy was, if you ask, "Why has nothing actually happened? Why have no fabs actually been built, other than grandiose statements?" The answer is that, which you speak to in your book. It's just this complete malaise and inability to actually get these things permitted and turned on, even when it's right. So I just want to acknowledge that that's there. So Larry, t- very, very importantly to your question, the thing that we have to acknowledge is that in certain countries...What you have is a very blurry line between private and public industry and they have this very tight coupling. And again, I hate to go back to China but it is the best example of this where what do they have?

   6. LSLarry Summers48:39

      Why don't you choose one other country just for the sake of it?

   7. CPChamath Palihapitiya48:43

      We can use Korea, we can use Japan, we can use Germany, okay? There are instances where the government balance sheets support private industry. They can support them in three different ways. Number one is the tax credits that they can use, the subsidies that they can use to build the things that they need. Number two is how then they can support that in the active selling and engagement in public spot markets to shape the demand curve of the things that are made. And then number three is the taxation on the backend, the terms of repayment, and the capital cycle. Those are things that, in the United States, we overwhelmingly turn the responsibility over to the private markets to do. We are the cleanest, the purest form of capitalism in that sense but many other countries are shades of this. And again-

   8. LSLarry Summers49:38

      Huh, I- I-

   9. CPChamath Palihapitiya49:38

      ... let's not talk about China which is a th-

   10. LSLarry Summers49:39

       I agree with you.

   11. CPChamath Palihapitiya49:40

       So Larry, hold on a second. So Larry, so what you have is how do you defend dumping? How do you defend that? How do you defend spot market manipulation that drives American companies out of business? How do you fight that? And I think-

   12. LSLarry Summers49:54

       Here's the problem. If President Trump had announced a big broadening of anti-dumping law to confront a variety of instances of what he s- what the administration, after careful economic analysis, saw as inappropriate subsidy, I might or might not have thought that they were doing that in the right way but we wouldn't be having this argument. The front pages would not be about tariff policy day-after-day and the stock market would not be down by $5 trillion. The central thing we are discussing is not whether there are sensible modifications to trade policy to respond to bad practices in other countries or to promote resilience. Those are technical debates that frankly aren't that interesting to a large number of people. The question is whether declaring that we need a whole new era of U.S. economic policy around universal tariffs against everything is-

   13. CPChamath Palihapitiya51:06

       So I think that that's so...

   14. LSLarry Summers51:08

       ... a rational step-

   15. CPChamath Palihapitiya51:08

       I hear you. I hear you.

   16. LSLarry Summers51:08

       It's a rational step forward-

   17. CPChamath Palihapitiya51:10

       Larry-

   18. LSLarry Summers51:10

       Or-

   19. CPChamath Palihapitiya51:11

       And what I would say-

   20. LSLarry Summers51:12

       ... using bilateral trade surpluses as a judge.

   21. CPChamath Palihapitiya51:14

       Now we're talking, now we're talking about the Monte Carlo simulation of how to achieve the outcome. And what I am saying is there is just as much as you and I want to guess, the fundamental and honest answer is none of us know. The people in the White House, what they know, they will share a little bit at a time because the reality is if y- what you wanted was a white paper or if what you wanted was paint-by-numbers, I think back to David's point, all that would do is just take any leverage that they had and give people the opportunity to shape their response. And I think in traditional game theory, and I, and again, in traditional game theory, I think the right thing to do is when you're playing poker, you play street-by-street. What's the flop? Make a set of actions. What's the turn? Make a set of actions. What's the river? Make a set of actions. And I think if you're gonna play to win, this is what they should do. Keep their cards very, very close to the vest, realize that you can't necessarily surgically go and attack the lithium market first, then the rare earth market second because it all goes back to the same balance sheet. It's the same actor over and over.

   22. DSDavid Sacks52:23

       I think there's a useful analogy to draw here. I think a lot about an article Mark Danner wrote in the New York Review of Books many years ago about the Iraq War. And i- it's an article that has stuck in my mind forever because what he says about it is that one of the, the difficulties of the politics of the Iraq War is there was no one war. There was everybody's private war that they were projecting onto the Bush administration. You had the liberal humanitarian vision of why we were going to war and what that war would look like, you had a realist vision for it, you had a vision that was more about, uh, weapons of mass destruction and keeping the homeland safe from terrorism, you had people believe there was an Iraq Al-Qaeda connection. There were really dozens of these which is how you got as broad a coalition behind as bad a policy as that together because everybody said, "You know, they're being a little bit vague about what's really going on here and why we're really doing this but I bet you if you go into their heart of hearts, what they want is the thing I want, even though the policy doesn't quite match what policy you would get from starting from my premises." And that's really what I hear here. I hear it on this show but I hear it in general in the discussion around this, that there are a lot of different objectives being projected onto Donald Trump and his trade war, the objectives do not fit the policies we're seeing, the objectives are not, uh, stably articulated by Donald Trump or the people around him nor is any specific objective being articulated in a stable way without contradicting objectives also being (laughs) articulated at the same time. And look, maybe in the end, and this is why I wanna push you all on metrics, you get something you like out of this but you're giving away a lot of clarity just on the trust that what is happening is people are keeping a good hand of cards with a good strategy of poker hidden from you as opposed to what's happening is what we seem to be seeing in public which is Donald Trump is a chaotic and erratic person, they are making policy in a chaotic and erratic way, that policy is having chaotic and erratic consequences and then they are operating and moving on the fly in a chaotic and erratic fashion-

   23. JCJason Calacanis54:31

       Sax, you heard Ezra say that they've, he feels this administration's being a bit chaotic in the approach here. What's the counter to that? You heard Shamit say, "Hey, this is a really thoughtful, they're holding their cards close to the chest."

   24. DSDavid Sacks54:42

       ... maybe you could clarify what your position is. Is this too chaotic, or is this crazy like a fox?

   25. DFDavid Friedberg54:47

       What I'm hearing is a bunch of process objections to Trump's policy, and I'm hearing a bunch of nitpicking. "What about Lesotho?" Or whatever, okay? Look, this is a very unrealistic view of politics when we've had a bipartisan consensus in Washington for decades that unfettered free trade is a good thing, no matter how big our trade deficits got, no matter how rich and powerful China got, no matter how unfair the trade practices got, no matter how many millions of our jobs and factories got exported overseas. This has been the bipartisan consensus in Washington. And Larry, you're right that it started before the Clinton administration, and the George W. Bush administration definitely accelerated it, but there has absolutely been a bipartisan consensus in Washington that this sort of unfettered free trade policy was good for the country. Now, how do you change that? Now look, you can nitpick this and you can make all the process objections you want, but Donald Trump has changed the conversation-

   26. DSDavid Sacks55:42

       I just wanna be clear, Ezra, my objections are-

   27. DFDavid Friedberg55:43

       ... and as- let me finish. Let me finish.

   28. DSDavid Sacks55:44

       Okay. But you keep saying I- I've offered a process objection-

   29. DFDavid Friedberg55:46

       Can I finish?

   30. DSDavid Sacks55:46

       ... when I'm objecting to the absence of clear goals.
5. 1:02:01 – 1:19:39

   Recession chances, How the Trump administration gathers information

   1. DSDavid Sacks1:02:01

   2. JCJason Calacanis1:02:01

      Chamath, let's look, let's try to look forward here. This obviously has been a cataclysmic, chaotic, intense, whatever descriptor you want to use of the past week-

   3. CPChamath Palihapitiya1:02:12

      Productive.

   4. JCJason Calacanis1:02:12

      ... is... Okay, sure. And it's certainly created massive swings in the market. Is this all going to cause a recession? Is this too violent of an approach to markets? That is, I think, a valid, uh, criticism that people have, including, you know, the majority (laughs) of business leaders are saying, "Hey, I think I have to start layoffs." You had United Airlines say, "We're not gonna give any guidance." This feels to business leaders, Republican business leaders primarily and market participants, as just far too chaotic and they can't plan. And if they can't plan, then they stop planning, which then is gonna cause layoffs, it's gonna cause bankruptcies, and, uh, who knows what the second and third order consequences are gonna be. So what's gonna happen here over the next couple of weeks and months?

   5. CPChamath Palihapitiya1:03:01

      So just on the recession question, and I, I'd like to give an answer to Ezra and Larry. I think that, and I've said this for about a year, it was clear to me that we were sneakily in a recession before. And the reason was the vast amounts of money and deficits that were being pumped into government services that perverted the actual GDP picture in America. So as DOGE sort of slows down that money flow and as the consensus in Congress gets to a better budget, I think that you're going to see that the government was probably responsible for 100 to 150 basis points of just waste. And if you take that out, you will technically be in a recession. That was independent of these tariffs. And I think that that's where the true economy, Jason, was. And I think that we're going to just find that out. So that's that. On where we go from here, I can give you an anecdote and I'll give you a projection. The anecdote is this weekend, my wife and I were in bed and a person called me, very successful businessman who was representing the president of a country saying, "Hey, Chamath, I need some advice. What do we do here?" And we walked through the three things that he and his government, that their government were trying to figure out because they wanted an off-ramp. They were like, "I'm ready to cry uncle. We're ready to tap out." And again, he was calling me as a private citizen, but I think this conversation was very instructive. Number one, he's like, "Look, we have these really high tariffs on inbound American products. We're happy to cut these things to zero." And I said, "Well, you should do that." Second, while we were exploring, he's like, "Yeah, you know, we have a enormous capital purchase with Airbus." I said, "Cancel it, swap it to Boeing." He's like, "Done." And then the third, which was interesting, is he's like, "We need to import an enormous amount of energy." And I said, "Well, who do you give that concession to right now?" And it was a non-American company. And I said, "Well, why wouldn't you just RFP that to an American business and let them compete?" And he's like, "We'd be open to that as well." So he said, "You know, we're getting prepared. We want to find a way to talk to the Trump administration." And I'm like, "Great, however I can be helpful, I'm help, I, I'll be helpful to you." I got off the phone, I looked at my wife and I said, "If even 30 of these 75 countries do a deal anywhere remotely close to this, this was an enormous win." So let me give you my projection, Jason, of what the art of the deal could be here. What you do is you can rewrite Bretton Woods 2.0. What was Bretton Woods 1.0? It was fixing exchange rates, it was setting up the IMF, it was setting up the World Bank. Those were the conditions on the ground post World War II, it made a lot of sense. What would we do if we had to write the Mar-a-Lago Accords right now? I think what we would do is work backwards from the question that Ezra asked and the answer that I gave. How do we create resiliency in these critical markets, number one, a framework for that. Number two is, how do we create limits for government sponsored intervention against capital for-profit companies, many of whom are American, so that we can actually compete on a level playing field? And then number three, very simply, if you can do business in my country, why can I not do business in yours? And I'll just give you that story for one second. I was responsible, I was the head of every single entity of Facebook outside of the United States. I opened every market. My team and I created a framework for dominating. I figured, we figured out how to crack Brazil, India, Russia. You know the one market that we never could ever make a single iota of progress? Say it, Jason, with me.... well- China, China- ... China, Russia. (laughs) No, Iran. We won in Russia. So my point is, in every single market except one, is it that we were s- just lucky? In 174 markets and one we were stupid? No. So I think that the Mar-a-Lago Accords, this sort of Bretton Woods 2.0, is the outcome, Ezra. It will basically use tariffs as a way to get these governments to a table and allow us to negotiate a much fairer economic quid pro quo.

   6. DSDavid Sacks1:07:15

      Here's my concern with, with this theory, and I wanna leave out the, the... I'll leave the, the sort of question of what the real economy looked like to Larry. This world, in which what is happening is a business leader who represents a country is calling you and saying, "Okay, what do we need to do to deal?" Right? They're coming to Donald Trump, and they are gonna come to Donald Trump. As Larry said earlier, there's no doubt that y- the US economic leverage is enormous and virtually every country faced with our might is gonna try to cut a deal with us. But then there's a call they're not making to you, that they're making to someone else, which is, "We have allowed, or we have approached the US as a functionally benign partner for a very long time, and now they're becoming a dangerous partner. They are very, very strong, and they will use that strength to crush countries smaller than them when it suits the whims of a personalist regime run by a person who his feelings, even about people that the US or countries the US traditionally considered allies, like Canada or much of Europe, uh, change." And so yes, on the one hand, for the next year or two, we want to avoid getting a big tariff slapped on us, and so we gotta figure out what is it that if we offer it to Donald Trump he will say to himself, "That was enough, uh, of a give that, you know, I can move on to someone else, I can make them the, the focus of my ire"? And on the other hand, they're going to begin to build fortresses and deals and partnerships and approaches that make sure they are less exposed to our ability to wield this power against them in the future. But before I came on this show, I had gone on X and I saw a clip of you going around where you were saying that one of the problems with the Biden administration was that you couldn't get anybody on the phone, and in the Trump administration, you make the call, the deputy chief of staff picks up, you say, "Hey, I need you to talk to, to this company. They... I work with them. They're freaking out about the tariffs." The deputy chief of staff tells the company, they, they work something out.

   7. CPChamath Palihapitiya1:09:16

      No, no, no, not that they work something out. They listen.

   8. DSDavid Sacks1:09:18

      They listen. This, this world in which we are doing the deal-making by individual relationships, by who can get their calls answered, not by rules that feel clear and stable-

   9. CPChamath Palihapitiya1:09:30

      Ezra, that's how the... Ezra, that's how the Biden admin-

   10. DSDavid Sacks1:09:31

       Hold, hold, hold on a sec. Hold, hold on a sec.

   11. CPChamath Palihapitiya1:09:32

       No, but that's how the Biden administration worked, Ezra.

   12. DFDavid Friedberg1:09:34

       I listened to that clip. That's not what Chamath said.

   13. CPChamath Palihapitiya1:09:35

       And that's not what I said.

   14. DSDavid Sacks1:09:36

       Well, well, Cham- Chamath, you can, you can explain. You can-

   15. DFDavid Friedberg1:09:37

       No, Ezra, you're trying to make it sound like corruption.

   16. DSDavid Sacks1:09:39

       Ho- hold on one... I, I... Hold on, I will fin- I will finish-

   17. CPChamath Palihapitiya1:09:42

       Ezra, under Biden it was George Clooney that was making the call. Who cares what George Clooney thinks?

   18. DSDavid Sacks1:09:45

       Didn't you just say on, uh... Well, I was very, (laughs) very critical of Biden

   19. DFDavid Friedberg1:09:48

       No. Ez- I saw that clip, Ezra, and what Chamath said...

   20. DSDavid Sacks1:09:52

       But, but, but Chamath, didn't you say the problem was you couldn't get any calls returned?

   21. DFDavid Friedberg1:09:52

       Hold on. What Chamath, what Chamath said is simply that the White House listens when he calls.

   22. CPChamath Palihapitiya1:09:57

       They listen.

   23. DFDavid Friedberg1:09:57

       Whereas he couldn't get his calls returned by the Obama administration.

   24. DSDavid Sacks1:10:01

       Great. I think we're actually not saying something all that different here.

   25. DFDavid Friedberg1:10:04

       No, you in... You made it sound like corruption, like... Like it was to help a company.

   26. DSDavid Sacks1:10:07

       But what I'm s- but what I actually do think what Trump is working through is deal-by-deal patronage based on how he sees the company. Uh, I'm sorry, the other country, instead of the-

   27. CPChamath Palihapitiya1:10:15

       That's not what happened. Ezra, can I just make sure that this is clear to you?

   28. DSDavid Sacks1:10:18

       Yes.

   29. CPChamath Palihapitiya1:10:18

       This is a 150-year-old American business. I have no interest in that company except of friendship. These are Americans hiring Americans, trying to compete with China, who were very negatively affected, and all I said was, "Why don't you have a chance to explain what's happening on the ground?" My point that I was trying to make, and maybe I didn't make it clear enough, so let me set the record straight. The Trump administration, what I have seen as a businessman, is willing to hear the conditions on the ground. As a businessman, when I was building, Ezra, just to be clear, critical rare earth supplies for America under the Biden administration, battery can materials to compete with China under the Biden administration, AI chips to be the best inference solution under the Biden administration, I couldn't get a call back. That's just the facts. Not because I wanted anything, just to tell them what was going on.

   30. DSDavid Sacks1:11:12

       So fair enough.
6. 1:19:39 – 1:51:00

   Future of the Democratic Party, Abundance agenda, DOGE

   1. JCJason Calacanis1:19:39

      all day long here. But I wanted to talk about the future of the Democratic Party while we're here. Ezra, you har- have been on a tour talking about exactly how incompetent, how terrible of a campaign they ran. What is the future? And I'll let Larry get, you know, his, uh, his two cents in here as well. Is there any saving this party, and if so, what would it look like?

   2. DSDavid Sacks1:20:03

      Well, well there's a... The problem with a party in the campaign, let me bracket that 'cause, so m- my book Abundance is more about how Democrats govern at both the state and, and local and federal level, and some of the pathologies of governance there. They make it hard for, for liberals to achieve their goals. There are versions of this on the right, but I'm not really writing about that in, i- in this. So my book Abundance by Derek Thompson is about the tendency Democrats have to subsidize things where they are choking off a supply of the thing they want people to have more of. So think about housing in California, you get rental vouchers from the federal government, but we make it incredibly hard to build homes. Clean energy, which a lot of the Biden administration's policies were about putting huge subsidies behind the building of more clean energy, but they didn't really do anything to make the permitting, the citing, the city capacity to do all of that, uh, capable of building that amount of, of clean energy at the pace they foresaw us building it, right? That they wanted us to build it. And behind this, and, and I can sort of go into a lot of detail here, but there's a, a diminishment of state capacity that comes from wrapping the state itself in red tape and regulation. I think we think, and have an intuitive way of thinking, about the idea of deregulation on the private sector, right? When the government is imposing regulations on private companies and it's making it hard for those companies to act, to do business, e- etc. But this happens first and foremost on the government itself. One of my favorite examples I've been using lately, there's a new RAND report that looks at how much it costs to construct a square foot of housing in California, in Texas, and Colorado. And it does it on, on two kinds of housing, market rate and it does it on affordable housing subsidized by the public sector. And the cost of creating house in California, market rate is 2X in California what it is in Texas. But when you get into that publicly subsidized housing, where you have all these new standards and rules and regulations being triggered by the addition of public money, it goes up to about 4.4X. And so you have this real problem, I think, in a way of governing that evolved in the '70s, the '80s, there's a kind of small government version of the Democratic Party, the new left, more individualistic, that was worried about too much exercise of government power. And now that we are in a different world with different problems, we're thinking about re-industrializing, we have a housing shortage, and you have things like the Biden administration which really are thinking about how to build a lot more in America, but you don't have either a policy architecture or I would say a governing culture that makes that possible.

Episode duration: 2:01:57