All-In PodcastTrump vs Powell, Solving the Debt Crisis, The $10T AGI Prize, GENIUS Act Becomes Law
EVERY SPOKEN WORD
150 min read · 30,102 words- 0:00 – 1:51
The Besties welcome Gavin Baker!
- JCJason Calacanis
So, uh, Gavin, were you at the, uh, Coldplay concert in Boston last night? (laughs)
- GBGavin Baker
(laughs) Uh, sadly, I missed that. It's-
- JCJason Calacanis
You did?
- GBGavin Baker
Whoopsy daisy.
- JCJason Calacanis
Who were you with? (laughs)
- GBGavin Baker
Yeah, exactly.
- JCJason Calacanis
Woo!
- GBGavin Baker
I was at home with my wife, but yeah. Wow, how insane.
- JCJason Calacanis
There's just so many layers to that story, it's impossible to get away from. Uh, it'll be 72 hours of memes. Dave, um, were you at the Coldplay concert in Boston last night? (laughs)
- CPChamath Palihapitiya
(laughs)
- JCJason Calacanis
And if so, were you with Woody, your astronaut friend? Did you take Woody to the concert?
- CPChamath Palihapitiya
No, Counselor. I was here in Santa Cruz last night-
- JCJason Calacanis
Oh, you were in Santa Cruz on a business trip?
- CPChamath Palihapitiya
... conducting business. Mm-hmm.
- JCJason Calacanis
Okay.
- GBGavin Baker
The funny thing is, if they had not reacted the way they did, the camera would have just panned away.
- CPChamath Palihapitiya
Yeah.
- JCJason Calacanis
Yeah.
- GBGavin Baker
Nothing.
- CPChamath Palihapitiya
No one would have ever known.
- JCJason Calacanis
There is some great irony to the head of people and human resources being in an affair with the CEO, apparently, allegedly. I don't know.
- CPChamath Palihapitiya
Don't jump to conclusions, Jason.
- JCJason Calacanis
No, it could've- I...
- CPChamath Palihapitiya
He could have been cracking her back, you know, like, when you get your back typed and then comes behind and...
- JCJason Calacanis
Yes, he could've been a chiropractic-
- CPChamath Palihapitiya
Yeah, a chiropractic move.
- GBGavin Baker
(laughs)
- CPChamath Palihapitiya
Oh my God. (laughs)
- NANarrator
What's going on? Let your winners ride. Rain Man, David Sachs. What's going on? And I said, we open source it to the fans, and they've just gone crazy with it. Love you guys. Queen of Kinwa. What's going on?
- JCJason Calacanis
All right, let's get to work. It is, uh, the slow, slow news weeks of summer, and we are delighted, delighted to have fan favorite, super intelligent bestie, Gavin Baker with us from Mitrades. How are you, sir? How's your summer shaping up?
- 1:51 – 19:24
Markets: Pricing in tariffs, Trump vs. Powell, solving the debt crisis
- GBGavin Baker
- CPChamath Palihapitiya
Gavin, let me ask you a question. How do you price tariffs today? So, where do you think this ends up? Obviously, there's a lot of back and forth, and, you know, everyone's trying to make a read on what the end game is. What's your market take as you're making investments right now and where we end up on the tariff front?
- GBGavin Baker
It is a good question. It's, it's open. We're gonna see what happens with sectoral tariffs. I think it's, it's hard. You're doing the Winning AI Summit. It's gonna be hard to win in AI if we put, um, tariffs on semiconductors. But for a lot of what I do for now, tariffs are not super relevant. But, you know, for, for the market, for the economy, they are relevant. But for AI, they may be a little less relevant, because I think everyone is, is maybe a little more sophisticated about the downsides of tariffs for constructing data centers here in the United States.
- CPChamath Palihapitiya
Mm-hmm.
- JCJason Calacanis
And ultimately, don't we look at the tariff situation and say despite the shock and awe of the opening salvo, it's quite a boring position now? It just seems to be reciprocity and reasonable reciprocity at that. Yeah, that's how we would sort of categorize the end game here?
- GBGavin Baker
I would say for everyone but China. Um, you know, it is... And, you know, we're, we've clearly reached some sort of deal, uh, with China, you know, rare earths for H20s and MI308Xs. But it's interesting, and one of the, the trade deals that have been finalized is Vietnam, and there's a special carve out for goods that were transshipped from China through Vietnam. So, they are clearly focused on China, more than almost an- you know, any other country, rightly or wrongly. But yeah, and I do think there is... (laughs) You know, there was maybe three months where, where Trump said he did not care about the stock market, but now he's back to quoting the market at all-time highs.
- JCJason Calacanis
Yes.
- GBGavin Baker
He clearly cares and is clearly very sensitive to market feedback. So, I think that that will be a, um, dampening mechanism on tariff volatility. But, you know, they passed the bill, and he immediately went back to tariffs. And, you know, we'll see where we land in August. But I just think the most important thing in the market by far is AI, kind of overwhelms everything else.
- JCJason Calacanis
Absolutely. And, uh, I guess the other big story with, uh, the market... And we'll get into the H20s. Uh, David Sachs will be joining us in a moment, so he'll be jumping in halfway through it. But let's start with maybe this, uh, soft launch of the firing of Jerome Powell. On Wednesday morning, Bloomberg reported that Trump was likely to fire Powell soon after talking with Republican lawmakers. Shortly after that, The New York Times reported that Trump had actually drafted Powell's termination letter. Market instantly reacted negatively, dropped 1%. Bond yields rose about 10 basis points. You can see the blips here on these charts starting around 11:30 AM when the article was published. Polymarket reported Jerome Powell out as Fed chair in 2025 spiked up to, uh, 30% on Wednesday before dropping back down to 20%. Trump, uh, quickly squashed these rumors, markets rebounded, and Trump said, "We're not planning on doing anything regarding Powell." Some people speculating maybe this was Trump testing the market reaction. As you talked about earlier, Gavin, he, uh, he does seem to care about the market as most presidents do. If you remember, Trump nominated Powell as Fed chair November 2nd, 2017. And he has (laughs) gone on a tirade the last couple of months calling Powell stupid, numbskull, stubborn, low IQ, a knucklehead, mentally average. (laughs) Uh, it's a long list of descriptors of the person he placed. Powell's term ends May of next year. White House officials have confirmed Trump is in the process of selecting his successor. Polymarket says that could be Kevin Warsh, 22%, Kevin Hassett, 19%, Scott Besson, 15%. This hasn't actually ever happened, right? We've never had a Fed chair fired. But we have inflation coming back a bit. If you all remember, there's a dual mandate for the Fed to keep unemployment low, check, that's pretty good, and keeping inflation under control.That's been going very well since our massive inflation spike over the past couple years. And, uh, here we go. CPI ticked up 10% from 2.4% to 2.7%, 30 basis point increase over May. So, any thoughts, Gavin, on these macro issues around inflation coming back a bit, the, uh, the stock market at an all-time high, and unemployment? If you believe the unemployment data, and we've had a bunch of debates here about that, you know, h- how correct is it being at, uh, close to an all-time low in our lifetimes. Let's go macro.
- GBGavin Baker
Yeah. I wouldn't read too much into the CPI bouncing up a little bit. There's base rate effects, I think on a month over month, uh, basis, and if you looked at, you know, what, what economists call core, super core, different, you know, ways to maybe smooth out CPI, I think inflation is still relatively contained. As far as, but I mean, a lot of very smart people are convinced that tariffs will lead to inflation. We'll see. There certainly sound theoretical arguments for why they will, but it does look like maybe the, um, overseas exporters are eating a little bit more of the, uh, tariffs than, than people thought that they would, which is, which is good for US inflation. But, you know, the combination of a very weak dollar and tariffs theoretically should lead to a little more inflation. Firing Powell, I worry that the market only went down 1%. I do think the market would go down quite a bit more if Trump did fire Powell. I think it would be a mistake. I hope he doesn't do it. And, you know, there are very sound reasons for the Federal Reserve to be independent. And I hope he does not read from that trial balloon down 1% that that's all that would happen. Look, the world would continue spinning, America would go on, but it would be a mistake.
- JCJason Calacanis
Mm-hmm. Friedberg, we have, uh, this idea that there would be a couple of rate cuts and maybe we would get monetary velocity going again, people would be able to take more loans out, invest more in business, but with the stock market tearing it up, there's a lot of wealth being put into the system with the big beautiful bill. There's a lot of spending in there as we've talked about here. Putting that aside, it feels like the economy's in really great shape. Chances of a rate cut has now flipped. No change is now the favorite option for September, whereas a week ago, the favorite option was 25 bps. So, this idea that we're gonna cut, or the Fed's gonna cut, that seems to be changing as well. So, your thoughts on the, um, the macro picture here?
- CPChamath Palihapitiya
So, I'm not sure like, the firing of Jerome Powell necessarily solves the US fiscal challenge, which is rising interest rates on the long end of the treasury curve. So, if you look at the s- the 30-year treasury yield over time, and Nick, maybe you could pull this up while I'm talking, but as of today, we're at exactly 5% on the 30-year. And you can see that this 5% yield, which is what the market is demanding the United States government pay in order to be loaned the money to make the bill payments that the US government has to make every year, is the highest it's been. The borrowing cost is the highest it's been since going all the way back to 2007 as of today. And I think this is the real story for the United States. We have $36 trillion of debt. The average interest rate we're paying on that debt today is 3.3%. That's the average of all the treasuries that the Federal Government has issued, the Treasury Department has issued to borrow the money that it is using and has used to pay all its bills. And if you look at the 5% number, that's a 1.7% hike. At 3.3%, which is the current average rate we're paying across $36 trillion, we're, we have a run rate interest expense, so just the money we're paying each year on the interest of the outstanding debt is $1.2 trillion a year. And if this spikes up to 5% from 3.3, we're talking about nearly $2 trillion a year in interest expense. And that number's only gonna get bigger as we borrow more money each year and the loan balance goes up, the outstanding debt goes up, because we are still running a deficit. The government's spending more than it's making every year. So, the crisis that America faces is a more profound fiscal crisis, where the rates that we're having to pay are a function of what the market is telling us. The market does not want to loan the United States money over a 30-year period for less than 5% as of today. And so making adjustments to the short end of the treasury curve, making overnight loans cheaper, which is what the Fed can do, will stimulate the economy and make more money flow easily because now you'll be able to borrow money overnight to do stuff like build a building and then sell the building next week or next month, or take out a car loan and pay it down and use your car to go drive for Uber and grow the economy and other things. So, the theory is that if we can, you know, drive rates down on the short end of the curve, we'll grow the economy such that we'll be able to make those payments on the long end of the curve. Um, but there comes a point where, again, you're only gonna be able to move the market so much until the more important fiscal situations are gonna-
- JCJason Calacanis
Yeah.
- CPChamath Palihapitiya
... be addressed, which is spending, taxation, and some of the other key policy issues. So, I think what the market is saying is it's not as much about Jerome Powell and frankly, getting rid of a prudent individual may be more challenging than it is beneficial when the real challenges facing the United States need to be more heartily addressed. So, I think that's my-
- JCJason Calacanis
Yeah.
- CPChamath Palihapitiya
... kind of take on this whole point.
- GBGavin Baker
I-
- JCJason Calacanis
Can I-
- GBGavin Baker
Yeah, go ahead, Gavin. Build on it. So, point number one, the 30-year has gone up since Powell started cutting rates. So, th- that is just empirical proof that what David is saying, I think, is right. And second, uh-The deficit has been a feature of American politics dating back to Ross Perot's, you know-
- JCJason Calacanis
(laughs)
- GBGavin Baker
... 1992 presidential run. But it never-
- JCJason Calacanis
His independent third-party run.
- GBGavin Baker
(laughs) His, his independent third-party run.
- JCJason Calacanis
Here we go.
- GBGavin Baker
But, yes. But it, the deficit never really mattered because interest rates kept going down, such that even as our debt grew, interest expense as kind of a percentage of the government's budget stayed relatively l- low. Now that rates have gone up and don't seem like they're, you know, going down anytime soon, the deficit does matter, and it really matters. And y- you can kind of run a, a couple of scenarios, but, like, pick your, pick your metric. If the deficit kind of continues at current levels, and we were to refinance the debt at the prices that, uh, you know, David was talking about, you know, it's, it's only a few years before spending on interest is significantly larger than spending on Medicare and Medicaid or Social Security or the military. So pick something you care about. But, you know, our current course and speed, it's, it's in the not too distant future where interest expense is the biggest line item for the government, and that is not healthy. And that's why the deficit finally matters, it's just that rates are higher. But the great thing is, is there is a virtuous cycle here. As you close the deficit, rates should theoretically come down, and then those both feed on each other to kind of help the problem. And it is possible, there's no silver bullet here, but some combination of slowing government spending, extra revenue, and-
- JCJason Calacanis
Hm.
- GBGavin Baker
... you know, tariffs are effectively... We've never had a consumption tax here in America, which I think is a good thing 'cause consumption taxes are very regressive. But the reality is, like, even when Obama controlled the House, the Senate, and was the most popular Democratic president of our lifetime, I don't think federal government tax receipts as a percentage of GDP got above 18, 19%. So that's kind of the ceiling, and it, for income taxes alone. And tariffs are really just a consumption tax that kind of incents domestic manufacturing. I mean, there's all sorts of reasons they're bad ideas, you know. David Ricardo, the theory of comparative advantage, 100% correct. Free trade is a good thing. But introducing some sort of a consumption tax, growing the economy a little bit faster through deregulation, and slowing government spending-
- JCJason Calacanis
Hm.
- GBGavin Baker
... I think there is a way out of this for America.
- JCJason Calacanis
Yeah.
- 19:24 – 38:33
The $10 trillion AGI prize, what artificial general intelligence and superintelligence looks like in the economy
- GBGavin Baker
we got this incredible news when Grok-4 came out, and I think we should maybe talk a little bit here about what that big prize is. The big prize, I think is most, well, it's actually, uh, gonna be an open question, uh, Friedberg. I think the big prize is whoever wins general intelligence, superintelligence, or the biggest cluster or the most power to power the biggest cluster that powers general superintelligence. So, where do we sit on the language models today, Gavin, and Elon's recent... let- let's just call it what it is, I mean, incredibly dominant release of Grok-4. I don't think people expected that. They didn't expect him to be able to leapfrog everybody. And, and let's be honest, people are leap f- frogging each other every four to six months, so I- I fully expect Gemini will leapfrog Grok and OpenAI will have their time in the sun again as well. But this was pretty impressive, right? I would say this is the biggest leapfrog we've seen in quite some time, and I think the benchmarks that matter are ArcGI2 and Humanities Last Exam, where it did, in- in the case of ArcGI2, it's called semi-private, which is important 'cause it means that some of the questions were held back. 'Cause the criticism of these models is they memorize the answer, and so ArcGI2, it has not seen the questions before. And it did roughly twice as good as, you know, the state-of-the-art Google, OpenAI, and Anthropic models. And then on Humanities Last Exam, you know, we can call it 50 to 75% better. You know, and exceptional humans score 5% on that. It scores in the 40s. So this is incredible progress, and I think it's worth mentioning, th- this model was trained on Hopper, so this, this model is probably about as far as you can take the last generation of NVIDIA GPUs. The next models we see, you know, Grok-5, you know, o5 from OpenAI, whatever they're gonna call Gem- the next Gemini, they will be trained on Blackwell and I think that will be a really big step function. But I do think the ultimate prize here is, um, artificial superintelligence. Like, I think artificial general intelligence will create a lot of economic value, but, you know, and, you know, maybe we will be able to work less as humans, but I think ASI, artificial superintelligence is what is really exciting, in terms of maybe, you know, being able to live longer, you know, really kind of fundamentally kind of change the fabric of our lives. Can you take a stab at explaining that difference in definition to the audience who, they hear these terms and we kinda bundle them into either a transcendent intelligence that we haven't seen before that we as humans can't comprehend, it goes beyond human intelligence, or this is the smartest human on the planet, a- and where we are right now in this journey. 'Cause I think these terms are all getting muddled together, and I think we have an interesting conversation here if we parse them. I think artificial general intelligence, I would define it as an AI that can take economically useful actions in a variety of domains and be better than the average human in most domains, all domains. But that's very different than superintelligence. Okay. You know, being, you know, being able to draft a contract, that's not superintelligence, but it is useful. Being able to do a medical diagnosis, it's not superintelligence, but it is useful. You know, being able to book my travel, so on and so forth. Superintelligence means exactly what you said, that it is smarter than any human, but it has, you know, access to all of human knowledge. And I think one of the most interesting questions is what will the economic returns to superintelligence be? And they are definitionally unknowable 'cause we have never seen superintelligence before. If, as humans, we have kind of, um, pushed the limits of physics, biology, chemistry, the laws of the universe, then maybe the economic returns to superintelligence won't be that high. But if superintelligence is curing cancer and inventing warp drives, then the returns are gonna be really, really high- Huh. ... and it's fundamentally unknowable. Yeah. Okay. So we're at general intelligence. Hey, your lawyer, your tax, your accountant's gonna go much faster, they'll have a co-pilot, this is all gonna be great for a business. Every business gets 10% more efficient a month. Seems like a reasonable bogey, which means every seven, eight, nine months, every business (laughs) is gonna get twice as efficient at these kinda chores. Yeah? I think that, I wouldn't say that's a reasonable bogey, I think that might be a little aggressive. It's, you know- Okay. ... the world, the world always, it's, you know, I think it's a, a Bill Gates quote, you know the, "The world always changes less than you expect over the next one, two, three years, but way more-" Yeah. "... than you expect over 10 years." Yes. It just takes time for technologies to diffuse. You know, maybe really nimble startups will see some of the gains y- you know, that you're talking about. But I mean, if we doubled productivity, I mean, that would be, like, an economic revolution.
- JCJason Calacanis
I mean, we're seeing it in programming. I'm, I, I, I... For sure. If you talk to the average developer, they, I think, would say they're getting 5 to 10% better a month, better being defined as faster shipping more code, rule of 72, hey, you know, every year- (laughs) ... at least you're gonna, (laughs) you're gonna be twice as good. Yeah. I think that actually seems to be happening with developers. I think it is happening with software. I think software is the first area where you've seen a real, true, kind of economic productivity impact, generalized. A lot of companies are having incredible su-success with AI for customer s-, you know, support, for sales. I think you see it more in startups than big companies, but it, the impact it has had on coding is undeniable. Freeberg, let me swing this around to you. We've got the super intelligence out there. We've got AGI out there. One of the things Gavin said was, by definition, you can't quantify (laughs) the gains of super intelligence. That is the big prize here. That's why people are putting this much money into these kind of data centers. Yeah? In your mind? It's not just the general intelligence, that would be the silver medal. People are going for the gold here, not general intelligence, super intelligence, breakthroughs that we can't imagine. Am, am I... Would you say that's a fair way to, uh, sum up the massive interest in investing in these projects?
- CPChamath Palihapitiya
Yeah, I mean, I think there's something where everyone has identified this asymptotic return moment, where if you get to that moment, you're limitless in terms of the upside. Is there one winner? I don't know. I don't think so. But I, I would also kind of reframe this as being some binary condition that I think we're talking about it, as being, quote, "general intelligence", super intelligence, as being on a spectrum of leverage towards complexity.
- JCJason Calacanis
Mm-hmm.
- CPChamath Palihapitiya
Complexity meaning, like, I can do a simple task, like instead of writing a letter and putting it in an envelope and having some guy carry it to my mom, you know, and she gets it the next day, I can digitally get her that message instantly over email. That creates an incredible amount of leverage and solves a lot of the complexity of getting her that communication from me. So if I, as a human, said, "I would like to harness fusion power," similar to what the sun uses to make energy, and I want to do that on Earth, today, we're in, call it year 40 or 50 of a research cycle of humans trying to solve that particularly complex problem. It's a scientific problem, it's a discovery problem, it's an engineering problem. And this idea of super intelligence is that it could give us immense leverage in solving that complex problem that we otherwise may be challenged to solve over decades or hundreds of years, or think about one day solving a problem that would take humans thousands of years to solve. I, I don't think that humans are limited in our ability to solve problems. I think we're limited in terms of time and what intelligence, what digital intelligence gives us is leverage on time so that we can now tackle ever more complex tasks that as you think about these tasks, the amount of time isn't just an incremental one year or two years, but it becomes 100 years or maybe 1,000 years. So this relates to, I think, projects around physics, around chemistry, around transportation, around biology, where we're probably fundamentally scratching the surface today, and where the super intelligence is an enormous leverage creator for us. And so I don't view it as some like species or race that independently persists in its own intentions, but it is a tool that provides leverage in a way that is orders of magnitude greater than the leverage we got from yesteryear's digital tools and probably today's D- AI tools, and probably tomorrow's g- general intelligence tools, is kind of how I would, I would think about it. And, you know, maybe it's because one model does so much stuff better than any human, you can call it super intelligence, but I think functionally, leverage and co- into complexity is, is where this becomes super compelling for humans, and it's why I think we can and should be highly optimistic about living very long lives and traveling anywhere we want and having abundance in food-
- JCJason Calacanis
Yes.
- CPChamath Palihapitiya
... and having abundance in resources, and having abundance in recouping our time to do the things we want to do instead of the things that we have to do today, because we don't have access to this incredible leverage. So that's where I get kinda compelled by the... Yeah.
- JCJason Calacanis
Gavin... I love it, Freeberg. I think it's a great way to look at it, but l- I wanna go back to the silver medal here in this sort of competition. Gold being super intelligence, we start solving fusion and really big problems on deep research cycles and the velocity of that goes up. But just going back to the silver, you know, everybody in the economy becomes, I don't know, single digits more efficient every month and, you know, some amount every year. I've been trying to back of the envelope what I think the value is for, uh, a human being in the West in the modern world, and what they should spend on AI per month. I've come up with a number of about 75, 150 bucks. Somewhere in that range is a no-brain- brainer to spend on your AI per month as an individual working in the world. If that's the premise, right? I think there's a billion people in the developed world who could spend, let's call it 100 a month, so 1200 a year. Doesn't take a genius to figure out this is a trillion dollars in revenue. Based on market cap, that's probably $10 trillion in market cap, and then we just have to back into the spending what it costs to build this. You're doing these kind of calculations, I'm sure, at Atreides, yeah? And, and where this general back of the envelope that I've come up with in my mind for a mental model that there's a $10 trillion prize, $1 trillion in revenue, just in the silver medal, does that jive with the spending we're seeing today? I think people are putting in $10 billion worth of equipment a year i- across five different companies, right?
- GBGavin Baker
Well, I think they're putting in quite a bit more than 10 billion per year. Um-
- JCJason Calacanis
Um, each? (laughs)
- GBGavin Baker
No, no. No, no. Each... each is putting in-
- CPChamath Palihapitiya
No, no. Google alone is doing 70 billion this year.
- GBGavin Baker
... each is putting-
- CPChamath Palihapitiya
Each is putting in 70.
- GBGavin Baker
Yeah. Most-
- JCJason Calacanis
But is that... is that 70 billion they're putting in this year gonna be repeated for the next five years so it will be 350 billion?
- GBGavin Baker
If you look at-
- CPChamath Palihapitiya
TBD? (laughs)
- JCJason Calacanis
(laughs)
- GBGavin Baker
If you... Well, yeah, TBD. The future is always uncertain.
- JCJason Calacanis
Yeah.
- GBGavin Baker
But, um, you know, if there are economic returns to that, they will keep doing it for sure. You know, something interesting is, you know, AI is, you know, as we discussed in previous All-Ins, extremely compute-intensive. And it's just at no point in my career as a tech investor except the very beginning which was kinda the end of the PC wars which Dell won by being a low-cost producer, going direct, cutting out the working capital, you know, the components in a PC depreciate, so if you have to go through a, a store, um, where, where it sits on the shelves, you're at a big disadvantage from, you know, either a, you know, call it a cost or a quality perspective. But at no point in the 25 years I've been a tech investor has being the low-cost producer mattered. Being the low-cost producer is really gonna matter in AI because, um, at some level, the amount of tokens you produce is intelligence because of test time compute, um, you know, post-training reinforcement learning. And so if you can produce those tokens at a lower cost, you'll have a big advantage. You know, if for that 75 billion or 30 billion or 50 billion you're spending per year in cap ex you can produce more tokens, that is a profound advantage. I don't... Like, your, your calculations, like, just as a back of the envelope, you know, kind of scratch, they seem reasonable to me.
- JCJason Calacanis
The trillion dollars a year in revenue because of AI seems quite reasonable when you frame it as $1,000 for a person to be, whatever, 30, 40, 50% more efficient at work every year.
- GBGavin Baker
Yeah. And it's just u- we can probably go back and look at kind of like the early days of, you know, cellphones and what were people willing to pay relative to disposable income.
- JCJason Calacanis
Your PC analogy would actually be the perfect one. A PC at back in the er- that era was, what, three, $4,000 per person? They lasted-
- CPChamath Palihapitiya
Right. Yeah.
- JCJason Calacanis
... three years. So it was exactly-
- GBGavin Baker
Yeah.
- CPChamath Palihapitiya
Yeah.
- JCJason Calacanis
... a thousand a year.
- 38:33 – 52:42
Sacks and Bo Hines join to discuss the GENIUS Act and the CLARITY Act passing the House this week, and what it means for crypto in the US
- JCJason Calacanis
All right, listen, here we go. Calling in live, got a Breaking Bestie coming on board here. Uh, David Sacks calling in live. I c- I see the pale yellow paint, uh, and an ancient building. You must be in some sort of wing of the great White House. Is that correct, David?
- DSDavid Sacks
I am. Well, I'm actually not in the White House per se. I guess I'm on the White House grounds. We're in the, uh, Eisenhower Executive Office Building. That's where my office.
- JCJason Calacanis
Yes. I can tell from that building-
- DSDavid Sacks
Friedberg and Schott have been here. (laughs)
- JCJason Calacanis
Yeah, no, i- they said great things like ... And I checked my calendar.
- DSDavid Sacks
It is beautiful, JCal. I'll s-, I'll send you some photos. It's great. Yeah.
- JCJason Calacanis
Well, no, but the calendar's wide open between now and the All In summit, allin.com/yada-yada-yada. So the window's there, Sacks. The window's wide open. And I'll see you in the cafeteria, I guess.
- DSDavid Sacks
Play your cards right on stage next week, JCal-
- JCJason Calacanis
(laughs)
- DSDavid Sacks
... and you might get invited after the, uh-
- JCJason Calacanis
But, yeah, you fl- (laughs)
- DSDavid Sacks
... the AI summit we're doing.
- JCJason Calacanis
Yeah.
- DSDavid Sacks
Yeah.
- JCJason Calacanis
Absolutely. Let's, uh-
- DSDavid Sacks
We got the AI event in DC next Wednesday, which has been publicly announced, so it's gonna be exciting.
- JCJason Calacanis
David, you, uh, you brought a friend today. Maybe introduce your friend and tell us, uh, what you got done. What have you gotten done in the last week for the American people? They wanna know. What ... 'Cause you weren't here last week doing the pod, so you must have gotten something done for the American people. Let's hear it.
- DSDavid Sacks
Well, first of all, this is the czar behind the czar, Beau Hineman.
- JCJason Calacanis
Okay.
- DSDavid Sacks
He's the executive director of the president's working group on digital assets. So that's the working group that I chair, but he actually does all the work. He's the executive director, and he's here every day. And, um, he's been working on crypto pretty much nonstop since we started the administration. And he's kinda the unsung hero within our operation here on these two bills that just passed the House, which are historic and quite momentous.
- JCJason Calacanis
So, uh, Beau, welcome to the program. And, uh, maybe you could tell us a little bit about these bills and what they do for the American people.
- BHBo Hines
Yeah. Well, first of all, David, you're, you're too kind. We've had a blast working together. I mean, we connected, uh, back in transition, I think, in late November, and we started mapping out a plan for this. And to see it come to fruition this week is, is really like ... It's unbelievable. Um, the fact that we had the bipartisan votes we did today in the House, um, is remarkable. It's unprecedented, and it shows you that, you know, leaders on both sides of the aisle understand that our country has to be at the forefront of this technological development. But let's start with GENIUS, because I think GENIUS is really the foundation for everything else we can build upon in this space. A lot of industry cares about market structure, as do we, and we wanna see it done on the president's desk as well. But GENIUS is unique, because it really updates the payment rails inside of our current financial system. I mean, th- the payment rails have been archaic, and I've likened it to the fact of the ways in which we've communicated have changed quite dramatically over the course of the last several decades. The ways in which we move money really haven't, and we have the technology there in blockchain technology. So what we're doing here is we're fixing the plumbing of our financial system. We're securing US dollar dominance for decades to come. If you wanna access our capital markets, you're gonna have to use a dollar backed stable. You're also providing a pathway for, you know, tokenization of public securities and 24/7 markets and the things that people have dreamed about for, for quite some time. This is a revolutionary piece of legislation. And the fact that it had this much bipartisan support is incredible. It's a testament to President Trump's leadership. It's a testament to our fantastic AI and crypto czar, David's leadership. I mean, he's truly been the guiding star behind the ideology and what we're pushing here. And, you know, he has a phenomenal team as well. I mean, I'd r- I'd be remiss not to thank Tracy, who's David's chief of staff. I mean, in the midst of all of the chaos to get this done, and, like, there were so many steps to this. We had to beat the banking lobby to get it past the Senate. Then it moved over to the House, in which we had to, to, to basically fight some members that, that really misinterpreted or misunderstood what this bill actually did. And the president stepped up. David stepped up in an enormous way. It wouldn't have happened without either of them.And so now, we have this bill heading to his desk tomorrow. And to pivot to market structure really briefly, this provides, like, the rules of the road for the exchanges, the brokers, everyone in the space. They desperately need it, so th- that we can break down the wall between traditional financial institutions and these digital asset players. I think that's, that's well underway. Obviously, you know, getting a vote as strong as they did in the House is indicative of what can happen in the Senate. If we deliver on these two pieces of legislation, I mean, that's about 90% of what needs to be done for crypto to make the US and crypto a capital of the world, and, you know, uh, it's, it's just remarkable. I mean, we're, we're over the moon.
- JCJason Calacanis
Okay, Sacks, you got these two things over the finish line. Congratulations on that. Lots of compromises you had to make, so I wanna get into what were the compromises to get this done.
- DSDavid Sacks
Just to clarify one thing when you say finish line, so like Bo was saying, there's two bills. There's the GENIUS Act, which is the stablecoin legislation, and then there's the CLARITY Act, which is market structures. Basically, all the other tokens besides stablecoins. Where we are is that both passed the House today, but GENIUS has already passed the Senate. So it is going to the President's desk tomorrow, and it will become law. We're doing a bill signing with the President. By the time this pod is released, it will probably be law. I think we will have the, the signing. CLARITY started in the House, and so it has passed the House and now it's going to the Senate.
- BHBo Hines
Okay.
- DSDavid Sacks
And they still have to do their hearings and markup on it, and we expect that'll happen over the next couple of months. In fact, the chairman of the Senate Banking Committee, Tim Scott, has said that he wants to finish with the market structure legislation by the end of September. So if all goes well, then we could be looking at a second bill signing in, say, October. And like Bo said, that would be pretty much the crypto industry's wishlist for having a clear legal framework in the United States for both stablecoins and other crypto tokens, so it's really pretty amazing. I mean, when I started this job, I'll just tell you, one of my friends in Silicon Valley said that, "You know, you may be able to get some AI things done, but you'll never get anything done on crypto." And, and the reason is because the entrenched interests are too powerful, and they'll stop it. The banking lobby will stop it, or Elizabeth Warren will stop it, or just all the, uh, uh, status quo players who could get disrupted by blockchain-based technology will somehow find a way to stop it. And that didn't happen. Like, we've actually now moved forward. GENIUS is about to become law, and I think CLARITY is looking like it's gonna have the votes in the Senate as well to become law. So it's really pretty amazing how much progress we've made in just six months. And like Bo said, this really comes down to President Trump's leadership. He made the promises during the campaign to prioritize crypto, to make the United States the crypto capital of the planet, and it was his negotiating skills and deal-making that made this all happen. I mean, (laughs) this p- past week has been a little bit of a roller coaster. There were reports over the last couple of days that the whole thing was falling apart and wouldn't happen. There was a moment, I think this has been publicly reported, but give you some color on it, is there were 12 members of the House whose votes were necessary to advance the bill to this vote today, and at a certain point, President Trump brought them into his office, the Oval Office, and worked out all the differences personally, and that's what put this bill over the top. If it wasn't for the President's direct involvement and action and understanding of the issues, he listened to all the concerns and he paid attention to the ones that were real and then rebutted the ones that weren't, if it wasn't for his direct involvement, we would not be here today.
- JCJason Calacanis
And he understands crypto. He's involved in it, is, uh, seems to have an understanding of the value of stablecoins for the US dollar. That seems to be a key motivator for this being bipartisan. You got, um, twice as many Democrats as you thought you would get. Is that because people wanna make sure the dollar supremacy gets locked in, and stablecoins is a way to do that? Because you can't have a stablecoin unless it's backed by a dollar.
- DSDavid Sacks
Yeah, I mean, like I've talked about on, on this show before, it shouldn't be that hard to sell regulation to Democrats. I mean, what we're doing here is providing a regulatory framework for the industry. They didn't have one before, and that's why the number one stablecoin player in the world right now is an offshore entity. They will have to come onshore as part of this bill in the next three years. So what we're doing here is creating a regulatory framework. But the reason why it's substantially bipartisan is because the industry wants this regulation because they want the stability it gives them-
- JCJason Calacanis
Mm-hmm.
- DSDavid Sacks
... in terms of having that legal authorization. They wanna make sure that if, you know, 4 years, 8 years from now, 12 years from now, whatever, there's not some new Gary Gensler who comes in and turns the whole industry upside down because he doesn't like some aspect of what they're doing and he just starts prosecuting them, which is what the industry experienced over the past four years with Biden's war on crypto. So we, meaning the, the Trump administration, could fix the, the Gensler issues just with agency rulemaking, and we're certainly on that path to do that, but if you want long-term stability that goes beyond just this administration, you have to get legislation. You have to canonize it into law. And that's why the industry was so interested in getting these bills passed. So I think that's why you're seeing some bipartisanship here. Like Bo said, I do think that there's a substantial number of Democrats who understand that this technology is the future and it's a positive thing for the US. What could be bad about allowing digital dollars, which extends the dollar's dominance online, so that it basically bolsters the dollar's status as the world's reserve currency? Over time, as we get challengers from BRICS, for example, this is gonna make the US dollar stronger. And every time a dollar token trades somewhere in the world on a crypto wallet, there has to be a physical dollar in a US bank account invested in a US Treasury, and that creates demand for our debt, which is another positive thing. And there have been studies done that show that...The results of this bill could be trillions of dollars of new demand for our debt, which is only a positive thing.
- 52:42 – 1:06:06
AI Infrastructure: $90B in new investments announced, Nvidia H20 export restrictions lifted
- JCJason Calacanis
We should talk a little bit here about infrastructure sacks. You were in Pittsburgh this week. There were some announcements. This was another bipartisan win, I think. Shapiro was there. A bunch of investment going on there. Maybe tell us a little bit about the progress made in Pittsburgh with regards to AI and infrastructure.
- DSDavid Sacks
This was a energy and innovation summit that was organized by the Pennsylvania senator, Dave McCormick, and his wife, um, Dina Powell McCormick. And they did an amazing job bringing together all of these different companies and interests that have a stake in energy in Pennsylvania and, and the development of AI. And Pennsylvania is, I think, it's the number two energy-producing state in the US. It has tremendous amounts of natural gas. They feel like they can expand that. I think there's been a lot of fracking in the past there. For example, they even have nuclear Westinghouses there. And it makes sense to have the data centers near the power source, right? And so we know that these big AI data centers can be powered by either natural gas or nuclear. And so Pennsylvania just makes a lot of sense as a place to build this AI infrastructure. So this was a summit to announce new investment in Pennsylvania, something like $90 billion. President Trump was there to keynote the summit and talk about these investments. It's his policies towards energy that he started describing long ago. I mean, remember, uh, he made the campaign promise of "Drill, baby, drill." He's been talking about the need for energy expansion in America for many years, and I think he was very far-sighted in seeing that energy is the basis for everything. It's the basis for AI. It's the basis for all other kinds of growth. So by promoting energy dominance, we also get AI dominance. And we've talked on this show before about how we're gonna need that energy to power the electricity of all these new AI data centers. So this summit brought together all these different groups. And the thing I thought was really interesting, the thing I learned from it was just how diverse the business interests are that are gonna participate in this whole AI boom. It wasn't just big tech. Yes, Ruth Porat from Google was there.It's also small tech. There was hardware companies, there were robotics companies, but there were also these energy companies. There was nuclear, there was gas. The trade associations were there. It's construction, it's electricians, it's carpenters. And so there's a huge diverse array of different parts of the economy that are gonna experience growth from this AI boom that's taking place. It's not just a Silicon Valley thing. So, that was what I took away from Pittsburgh and it was a really cool experience being there.
- JCJason Calacanis
I thought there were two interesting notes as well. Hydro, I saw Google was investing in hydro and upgrading some dams there. This is, I think, Gavin, one of the great upshots of the AI boom is that the AI companies, whether it's Meta or Google, they're so motivated that they'll actually go and upgrade the infrastructure. They'll invest in the, you know, small modular nuclear reactors that are coming and, uh, even gas turbines, uh, obviously natural gas is, is a major part of this as well and, and you saw that up close and personal with the build out of Colossus here, Gavin.
- GBGavin Baker
Yeah, absolutely. I mean, electrical production is fundamental to AI. If we do not significantly increase kind of domestic energy production and electricity generation, you know, we are already at a disadvantage to China, and I do think we want to close that kind of electrical generation gap as quickly as we can. You know, and natural gas is great, nuclear's great, solar's great, batteries are great. We need it all.
- JCJason Calacanis
Yeah.
- GBGavin Baker
All of it.
- JCJason Calacanis
And Sax, uh, I saw your favorite governor, Josh Shapiro was there, and, uh, he was being very positive about finding common ground on energy, economic development, and, uh, saying, "Hey, this is like a great example of bipart- bipartisan efforts to collaborate." So maybe you could talk a little bit about that 'cause you had two great moments of collaboration between the Trump administration and the Democrats. This is, uh, this is good for the American people, yeah? Both on the crypto project and on AI in Pennsylvania.
- DSDavid Sacks
I've never met Shapiro. I did see him there at the event-
- JCJason Calacanis
Oh.
- DSDavid Sacks
... but I didn't see him on the stage.
- JCJason Calacanis
Yeah.
- DSDavid Sacks
I don't know if he was part of the round table, so I don't know exactly what his status was. But what's interesting about Pennsylvania right now is that it's a state that's turning red. And so, you see-
- JCJason Calacanis
Hm.
- DSDavid Sacks
... that Fetterman, who's probably the most right-wing-
- JCJason Calacanis
(laughs)
- DSDavid Sacks
... member (laughs) of the Democratic Party in the Senate, and Josh Shapiro obviously is tacking towards the center because they see the direction-
- JCJason Calacanis
Yeah.
- DSDavid Sacks
... of travel in Pennsylvania. So yeah, I think you've got some centrist Democrats in that state.
- JCJason Calacanis
Yeah, working out pretty well.
- GBGavin Baker
Josh Shapiro every two days tweets something about how he's deregulated something, he's made it easier to do business. Like, he is, he's on the program.
- JCJason Calacanis
Yeah.
- GBGavin Baker
Seems like a sensible man.
- JCJason Calacanis
Yeah, 100%.
- DSDavid Sacks
I'll just give a final shout-out to Bo here for all the work-
- JCJason Calacanis
Okay.
- DSDavid Sacks
... that he did on Genius. I mean, he's kind of the unsung hero-
- JCJason Calacanis
And Bo, how are you, uh, how are you doing all this while finishing up your degree? When do you, when do you graduate from college?
- DSDavid Sacks
(laughs)
- JCJason Calacanis
The kid looks like he's 20 years old. How old are you, Bo?
- BHBo Hines
I have the baby face. I'm 29, turning 30 next month.
- 1:06:06 – 1:18:18
Sacks interviews Senator Bill Hagerty on the passing of the GENIUS Act
- JCJason Calacanis
summit. (whoosh)
- DSDavid Sacks
All right, besties, I'm here at the White House with Senator Bill Hagerty from Tennessee, the principal author of the GENIUS Act. He, I would say along with the leadership of President Trump, are the reason why this bill happened, and that we have stablecoin legislation just signed into law by President Trump. Bill, you did a phenomenal job. I got to observe this whole process, and you really played the critical role. You were a very skillful legislator crafting delicate compromises. You were kind of the glue that held the whole thing together. Congratulations on getting this done.
- JCJason Calacanis
Thank you.
- DSDavid Sacks
Is this your first bill that you've gotten done as a senator?
- KGKirsten Gillibrand
It, it is. Um, I've, I've served in the Senate for over four years, but we were in the minority for the past four years, so this is the first opportunity since the Senate, uh, w- was taken by the Republicans to actually drive legislation through. And the fact that we had the House of Representatives and the Senate and the White House made this possible. It was just a threshold concern. We worked so hard, as you know-... to retake the Senate in 2024, to retake the White House in 2024, and hold onto the House of Representatives as it worked. And that's the only thing that's enabled us to deliver this type of meaningful legislation. And I say this too, it's been a great team that has done this. I may be the author of the legislation, but the leadership that you've brought to bear from the White House, coming in and donating your time from the private sector, working as a volunteer here, but making certain that the leadership and the vision is present here in the executive branch, you've been absolutely great. And that vision, I think, has carried forward into the Senate, the House. More and more people are understanding this and catching on. And I think what we've done today is launch the catalyst for what's going to make America the crypto capital of the world.
- DSDavid Sacks
Yeah, it's been, it's been really amazing and interesting for me to watch this whole process. They say that you shouldn't watch legislation or sausages being made, but, you know, earlier in the week, the media was reporting that this bill was dead because there were a dozen holdouts. And President Trump made calls late into the night, he gathered people at the Oval Office, he cajoled, he twisted arms, and, uh, and he also persuaded, and he, he got us over the finish line.
- KGKirsten Gillibrand
Yes.
- DSDavid Sacks
It was pretty incredible.
- KGKirsten Gillibrand
Well, I think the founding fathers made it actually quite difficult to legislate for a reason. Uh, but it is difficult. It's taken months upon months to get to this point, and the legislation, the, the GENIUS Act has been killed a couple of times in the media. Uh, Elizabeth Warren declared victory, uh, early on that she killed the bill. That didn't happen.
- DSDavid Sacks
(laughs)
- KGKirsten Gillibrand
She didn't have the juice to do it. But there've been many, many attempts-
- DSDavid Sacks
But that, that's a big deal, because until now, the crypto community has been living under Elizabeth Warren's reign of terror.
- KGKirsten Gillibrand
That's exactly right.
- DSDavid Sacks
I mean, she basically was calling the shots-
- KGKirsten Gillibrand
Yes.
- DSDavid Sacks
... during the Biden administration on crypto, and I was there when the GENIUS Act passed the Senate. I was up in the bleachers or whatever, and she was not happy. I mean, you, there were photos of her and she, she, she did not like losing.
- KGKirsten Gillibrand
There's, there's a fundamental reason for this, David, because Elizabeth Warren and her crowd want to see a central bank digital currency.
- DSDavid Sacks
Mm-hmm.
- KGKirsten Gillibrand
What they want is control of our transactions. They want the ability... They're the ones that wanted to get to a $600 threshold for your Venmo transactions, reporting everything. They want the ability to do Chokepoint 3.0.
- DSDavid Sacks
Right.
- KGKirsten Gillibrand
And if you think about it, if they had visibility in our transactions, the ability to centralize and control them, they could control our lives. It may be okay for the Chinese Communist Party, but that's not gonna work here in America, and this legislation put the final nail in the coffin to that.
- DSDavid Sacks
It's really amazing that you got it through. And to get this passed the Senate, you had to have 60 votes, right?
- KGKirsten Gillibrand
Right.
- DSDavid Sacks
Because reconciliation, you only need 50 plus 1, but for a regular order, I guess, to get past the, the potential for a filibuster, you need 60.
- KGKirsten Gillibrand
That's exactly right. That's exactly right.
- DSDavid Sacks
So what demands did that put on you in terms of getting Democrat votes? Because the Republicans have what, 53?
- KGKirsten Gillibrand
Yes.
- DSDavid Sacks
So we need at least-
- KGKirsten Gillibrand
And we didn't have all the Republicans.
- DSDavid Sacks
We didn't have all the Republicans.
Episode duration: 1:19:28
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