E115: The AI Search Wars: Google vs. Microsoft, Nordstream report, State of the Union - Transcripts

February 11, 2023

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0:00 Bestie intro! 1:49 Report about US involvement in the destruction of Nordstream pipelines, breaking away from the military-industrial complex 28:26 Bestie refresh! 33:13 The AI Search Wars: Microsoft presses hard, Google's rough week 45:06...


with my oldest son where I don't know if it's all kids, but he's 13. He doesn't know how to answer the phone, not to save his life. Oh, he picks up the phone, huh? Hello. And so and so I said, Listen, from now on, when you call me, I expect a certain way that you pick up the phone. And that's going to be practice for you, how you interact with anybody else. And vice versa as well, if I call you, you have to pick up the phone. And if you don't, I'm hanging up right away. So yesterday, he calls me, and I'm like, Chumaat speaking, you know, it's like, hello, Chumaat speaking, dad, Hi, hello, he calls back. Hello, Chumaat speaking, dad, hug up again. We did this three more fucking times. And then finally, I said, When will you get it through your head?

can you please just answer like, if I say hello to my speaking, Hey, dad, it's your son or hey, dad, and it's unbelievable. And he's like, well, Well, none of my friends pick up the phone like this. And I'm like, oh my God. Like don't they think they need to have verbal communication skills? It's unbelievable. And then when I call him, he picks up the phone. Oh, what? Not even hello. Huh? Huh? What is that?

It's like a grunt. It's minimal effort.

It's like the minimum number of syllables. It's embarrassing. Are you kids like this? Or is it just my kid?

Actually, I don't think I've heard him pick up the phone.

I need to test that.

Rain Man, David's out. Love you, Wes.

I need some queen. The old girl was on Twitter calling me out for not denouncing the Chinese balloon in strong enough language. Although I don't think he understood the language I was using. Did you understand what the word errant means?

What did you think it meant? You know, I do understand the word errant. Is that like a teaching moment for you? Yeah, it generally means shurying off course. Do you understand the word errant? Yeah. Traveling in search of adventure, at least according to Merriam Webster. So I just thought maybe you're being a little, but I know you're a dove. but it was a little dovish thinking they were just off course. I think you'd think they were off course or they were doing it deliberately.

You buy that it was off course. Genuflect go, Genuflect, go, go, go, go.

So I knew JCal would have to join in this nationwide panic.

Over this balloon, over this balloon. I have no panic over it.

The word errands means, the word errands means, it had a Minolta camera attached to it.

JCal, I got some really bad news for you. There are these things called spy satellites and they can see everything.

No, we know about those. I want to know the, it's obvious people, they've been sending these balloons over here for a while. I just thought your framing as it was errand, as in like, well, do you think it was, I'm sincerely asking, do you think it was errand? It was an accident?

Well, here's the thing, well, here's the thing, it's such a hair brain scheme to send a balloon flying over American territory that the Occam's razor explanation here is that they somehow lost control over it. And these things are not steerable. So like my guess is that it probably wasn't deliberate just because of how stupid a plan it would be and how like obvious it would be, but it could be. I don't really know. What I do know is that the whole nation got in a lather and a tizzy and sort of hyperventilating about this balloon. And it just shows how reflexively hawkish the media is, you know, it's like, hey, can we just wrap up this war in Ukraine before we start another

war with an even more formidable superpower? Another war with an even more formidable, super power The balloon got more intentioned than us blowing up Nord stream. Okay, well, hold on.

No, what I would say about that is the media insight is the valid one. I was just responding to the errand. And I was curious if you actually thought it was an accident. I don't think it's an accident. I don't think there are accidents.

It clearly was off course and problematic. So, you know, I don't know about the intentionality of it. I, I think, I think it very well could have been intentional, but I tend to think because it's such a stupid hair brain scheme, like I almost given the benefit of the doubt, not because they're not capable of spying. I'm sure obviously they're spying on us just like we're spying on them. That's what we both do. But I, it seems like such a stupid way because you're

going to get made for TV moment. You have to understand the nature of live television and why the media overreacted to it. It's ongoing. So because it is not final, it's like a live event occurring, like when kids are trapped in a mine. Those are the best stories for CNN, because you can keep updating people and people keep turning the TV on to check on the status. So this one was just made for CNN, because obviously, we're going to shoot the thing down. And obviously, you can interpret into it if it's an accident or not. And it just gives them something to talk about on a slow Newsweek. But it is interesting. I think your point that is interesting is, is the Nord Stream story correct or not? Why is that not being covered? It's not being covered.

Because there it's not an ongoing

story. So that just shows you No, I don't think that's right. I think it's not being covered. Because the mainstream media already took a side on this. Oh, so remember, yeah. Well, it's not it's not just cynical. So when when Nord Stream got blown up, the administration came racing out with the line that the Russians did it, that they this was self sabotage. And by the way, the media repeated this endlessly. This was the media line. And it never really made sense to anyone who's paying attention. Because first of all, this was an economically vital asset to Russia. Second, it was their main source of leverage over Europe was their control over the gas supply.

So the idea that they would shoot themselves in the foot, that way, just to somehow what show how crazy they are, it never really made sense anyone was paying attention. And the fact that the administration, the media so quickly raced to that conclusion, suggested that it was maybe a cover story. Because if we had nothing to do with it, you would just be more neutral and say, yeah, we don't know what happened. But they had to like, promote this line that will the Russians did it, which just never made any sense. And now Cy Hersh has come out with this story. So it laying out in great detail how we did it. It's not just saying we did it. It's laying out who did it and how and the steps and all that kind of stuff. And just so you guys understand who this guy is, he's this legendary Pulitzer Prize winning journalist, he's like 86 years old or something like that now. But he broke during Vietnam, he broke the story of the My Lai massacre, which the military denied until he proved it. He broke the story during the Iraq War of the Abu Ghraib prison abuses, which again, the military denied until it was undeniable.

Oh, so he's political, yeah.

His Pulitzer winning is all you really need to know.

And here he is, basically another covert military action. And look, we don't know for sure whether it's true or not. But it looks it looks pretty bad.

Do you think that Europe knew? Do you think that the Europeans were told that the Americans were going to go and blow this thing up?

If that's true, by the way, the administration has said clearly, this is a false decision.

I think I think the specific code was this is pure fiction.

The Ukraine would be the most likely person to do this. You got to look for means motive and opportunity.

They don't have the opportunity to go down the story.

I don't think the Ukrainians have the capability to do an undersea mission like that. The Norwegians do and the story maintained that we did it with them. The British do story didn't say whether they were involved or not. So no, my guess is that if this was a covert US activity, it was kept to a very small group, which is why it'll be hard to

prove more definitively than the other side of the argument is this is such a provocation. And the administration saying it's fiction. So what is your response to that sex? Like, would the US do something so provocative? Or would they have somebody else do it? And would Norway do something so provocative? It seems like an extremely offensive technique as opposed to just backing the Ukraine to defend itself against Russia's invasion.

Here's the thing. Before the invasion, Biden at a press conference said that if the Russians invade Nord Stream would be no more. And they asked him, well, how can you make sure that that's a deal between Germany and Russia? We're not involved. And he said, we have ways. We have ways. Distrustment will happen. Separately, Victoria Newland, who's our deputy secular state, said something very similar about how we would stop Nord Stream if the Russians invaded. And then after Nord Stream got blown up, Blinken at a press conference said that this was a wonderful opportunity. I was extolling all the benefits of this. And then Victoria Newland at a congressional hearing said that I'm sure we're all very glad that it's a hunk of metal at the bottom of the sea, again, extolling all the benefits. And we've discussed the benefits on this program of now we've shifted the European dependence on Russian gas to a dependence on American gas.

So the fact of the matter is the administration kind of telegraphed what they were going to do. They had the capability to do it. And they had the motive to do it. So it's certainly a plausible story. You're right that we can't know for sure. It's a single source story story that depends on the credibility of Cy Hirsch. But as it stands right now, whose story do I think makes more sense? Probably

Cy Hirsch's story. You believe Cy Hirsch or the spokesperson of the CIA who wrote,

the claim is completely and utterly false. Just to be clear. Well, these same people denied Abu Ghraib, they denied me lie. They deny everything. They deny that NATO expansion or anything to do

with breaking out of this war. They denied me lie. They deny everything.

Yeah. I mean, this is one of those situations where we can't possibly know. Yeah. You make a good point, JCal, which is this, if true, and look, I'm not saying I don't know if it's- You're leaning towards believing it. I lean towards thinking it's more plausible than not. Okay. Because also like who else could have done it and who, again, who had the motive means an opportunity. But you make a great point, which is if we did it, it's an incredibly provocative act. It's basically perpetrating an act of war against a country that has thousands of nuclear weapons. Biden promises at the beginning of this war that he would keep us out of being directly involved. So this would directly contradict what he said at the beginning of this war. So I think it's a very scary situation here.

If the US didn't do it, why don't we find the real killer?

I actually have this leaning towards, yeah, no. If the US didn't do it. I actually have this. I have the theory. Here's my theory. The CIA knew how to do it. Biden wants to do it. The Republicans want to do it. Obviously, the people who are the most pro stopping Nord Stream have been the Republicans. They've led this charge even more than the Democrats. So it's a bipartisan issue. Stop Nord Stream, bipartisan issue hands down.

I think the CIA probably knew how to do it. And just like we equipped the Ukraine to do it, we might have facilitated the Ukraine and a collaborator, UK, Norway, some freelancers, you know, we have those freelance former Navy SEALs that operate. Perhaps the CIA just said to the Ukraine, here's a, you know, black ops group. If you wanted to engage them, you could feel free to do so, which would then split the difference between what Cy is saying, what the CIA is saying, which is typically where the truth lies is probably between what this investigative journalist of note has said and what the CIA is denying. The CIA probably

has plausible deniability. That's my. Well, if you could find a source for that story, J Cal, that lays out in the same level of detail that Hersh has laid out in terms of the meetings that occurred, what was approved, when, how they did it, you know, when they did it, the explosives they use, the divers they used. It goes into a fair

amount of detail. Incredible detail. Yeah. I mean, so down to what explosives, right?

But you're trying to put what you just said, which is basically you inventing a story on the same level as Hersh's story. Yeah. I understand, but he actually has a lot of detail in his story.

Here, he had, he had umpteen sources. There is a lot of people that were willing to tell the story.

No, no, I don't think that's actually the case. I don't think it has umpteen sources

and there's no on the record one main source, one main source, one main source. Yeah. There's one main one source. There's one main source. Yeah. But who provided a ton of detail. I don't know exactly how much he was able to directly corroborate with other sources. I

I don't know that. The other thing I wonder, Saks is he, with this one source story, he has a collaboration with The New Yorker. And anybody would if this was a really well sourced and you could back it up kind of story, they would love to have the ratings for this story. There's a blockbuster story.

Or as happens a long time, which we learned, was it through the Valerie Plame affair, which is that these major news publications will sometimes have a back channel back to the national security apparatus when they have something like this. And the message was you can't hit print on this. Yeah, in which case possibility to he goes and just self publishes himself, which wasn't really even an option a few years ago.

No, yeah. So I mean, this is this is the Rosh Akhtas of Rosh

Akhtas, you have the media, you got the CIA, it's fodder for a great movie. When I go back to Jay Cal is I think you can lay out some theories about let's say, you know, the polls did it or maybe Ukrainians with the British or something. Yes, you could lay out those theories. But the media wasn't willing to entertain any of those theories. When this news broke, what do they do? They blame the Russians. And that story made no sense. But they said it so definitively.

I'm just on that, I'm looking for Nick, if you could pull up the source of the administration blaming the Russians, I just

want to make sure we're actor-blinded at a press conference. Yeah, I just want to make sure it was sabotaged by the Russians. Now they didn't push it that hard. But what's interesting is the Biden administration set up but they didn't keep coming back to it. But the media really ran with it. And when people on both the left and the right, like people like Jeffrey Sachs on the left and Tucker Carlson on the right, basically started to question whether the U.S. could have done it, they were accused of being conspiracy theorists and, you know, Putin Stooges and all the rest of it. And now all of a sudden, here comes Seymour Hirsch with a pretty detailed story,

lending credence to that point of view.

Yeah, I just wanna make sure we have to have this. It just may indicate we don't know everything that's going on with this war. And I think the longer this goes on,

the more dangerous it is. Freiburg, do you have any thoughts on geopolitical issues and who might have blown up Nord Stream? Now, what are your sources saying, Freiburg?

What are your sources in Science Quarter saying? Speculation is best left to the future. I don't know about the whole speculating on what could have been done in the past by someone.

Those are conspiracy theories and a little dangerous. No, they're not actually conspiracy theories. To be calm. Nord Stream was blown up. You understand that, right?

No no, I'm saying J. Cal's theory is just a story

with no evidence.

You gotta bring data to the table. Yeah, I think you gotta bring data to the table, pure speculation. You gotta bring data to the table to make it...

Pure speculation.

Pure speculation. By the way, speaking of which, Radak Sikorsky, who is a Polish diplomat, I think he was their foreign minister, When Nord Stream blew up, he tweeted a photo of it saying, thank you, USA. Which was one of the reasons why people thought that, okay, like, yeah, of course the US did it. Who has the capability to do it? Who has the motive to do it? Who said they were gonna do it? And who benefits? We Bono!

Who benefits? Who was conducting NATO exercises in that region? Right.

Three months before the thing blew up. Right, yeah, exactly. And Jeffrey Sachs pointed that out on, I think it was a CNBC interview before they basically stopped him because he's not allowed to talk about this on network TV, apparently. But he basically pointed out there were US radar signatures in the area.

President Joe Biden declared that, this is from Bloomberg, that a massive leak from the Nord Stream gas pipeline system in the Baltic Sea was an intentional act and that the Russian statements about the incident shouldn't be trusted. It was a deliberate act of sabotage and now the Russians are pumping out disinformation lies. Biden told reporters Friday at the White House. So he didn't exactly say the Russians did it. He just said, it's an act of the mediate of the Russian.

What's that? What's that, the media did. You could do one of these montages where it was like Russian sabotage.

In fact, go to Matt Taini's blog. Go to Matt Taini's blog. Biden didn't say it was sabotage.

He said it was an act of sabotage. If you actually look at what Biden said, everything he said is absolutely true if the US also did it. Correct. Every single sentence that Joe Biden said is 100% true whether we did it

or whether Russia did it.

Every single sentence

that Joe Biden said was 100% true. It was a deliberate act of sabotage.

In fact, he said, bias. Think about it. If we did it, we know they didn't do it. And then we have to be like careful

about suggesting they did it. Well, what do the Germans think? Cause this is the Germans pipeline. So if we blew it up, that's also, explain to me your thinking on the chess board of our relationship with Germany, if we blew it up, would they not also see that as a hostile act?

This is why I ask that.

Because if you're new, because I think you have to tell Germany that it's gonna happen. And I think the quid pro quo with Germany is some amount of guaranteed supply that the US directs into Europe so that they know that their long-term LNG supply is intact so that they become ambivalent, right? There's a point of indifference where the Germans say, okay, we don't know when this thing is gonna get turned back on. And we don't know what the implications of it are. Here's what our demands are, meaning our energy supply, our energy needs are. And so as long as the United States can say, look, worst case, we have stuff in the SPR that we can give you, there's probably a point of indifference where the Germans say, okay, we're just gonna turn around and not say anything. And I'm curious, did the Germans say anything

when this happened?

No, not that I love. I'm looking for the, I was literally just typed to Nick, what was the German's position on this? Because- That's interesting too. That's a tell. Oh yeah, if you're breaking this down like a poker hand, who are trying to figure out,

that's interesting too. That's a tell. Struck this hand, right, preflop.

It's like you know where both of these folks are, right? Okay. There was a really interesting video that a guy named, uh, Matt or failure who puts together these really funny videos that he put together these montages of media reactions to things. And what he shows is that, you know, you can have like 20 different media outlets and they all use the exact same words. And when he clips it together, you can see that the reading from somebody's talking points and it's not really clear who. And, and basically if you look at his video here on who blew up Nord stream pipeline, you see that there was like a party line from the mainstream media on this stuff.

A Nord stream too. We will bring it into it.

But how will you, how will you do that?

I promise you we'll be able to do it.

Nord stream pipeline.

I mean, we'd have to conclude without together that we'd have to conclude

most likely Russia said it's most Russian sabotage on its own infrastructure.

The common sense matter.

I think it's Putin's way of sending a message. What Putin is saying to us by blowing up his pipeline is, look, I can blow up a pipeline.

Everyone knows that Putin did this himself.

Are these talking heads smoking gun without the direct proof?

Yeah. I think logic and common sense will tell you that without the evidence, Russia was behind the incident.

We can say it for sure. Who sabotaged the Nord stream to pipeline?

I had enough. This nonsense. Come on. That's just, you know, it's these talking heads who have no firsthand experience and they're more than willing to comment on this stuff.

It's hysterical.

You know, it's great. It's more than willing to comment on this stuff. It's fantastic.

It's fantastic. All his videos are like that where he has one on the Hunter Biden laptop as well, where again, he's got like 20 different talking heads and media outlets all portraying it in exactly the same language.

And it makes me realize that there's a narrative around things and it makes me realize that there's a narrative. On the Sunday morning shows, you hear the same narrative from each side. How does that actually get coordinated? Each side builds those bullet points, emails there. What do they call them? Surrogates. They email all the surrogates and say, just keep saying these things over and over again to codify. Yeah. It's a WhatsApp group. It's a WhatsApp group. And they're just like, save this over and over again.

How does it work, Sacks? I think it's partly talking points, memos that go out to chat groups. I think it's also just people looking on Twitter. And then there's like certain key nodes that they follow and they know, okay, this is the party line because such and such key person is saying it and they take their cues.

It's that, uh, memetic, memetic effect that you guys always talk about. People. Memetic, yeah.

The memetic, the thing to understand is that all of the prestige outlets repeat the same party line and have the same perspective.

Yeah. You got it.

You got to do your own search for information. This is the beauty of Substack, actually. This is why Substack is so important is it actually gives you an alternative. Yeah. It gives you an alternative because like you've got 10 different.


Mainstream media networks or newspapers or magazines, but they all have exactly the same talking points, except maybe Fox news is kind of the one exception. Although even Fox on the whole Nord Stream thing, you saw that Fox can be pretty militaristic and they had the same general's basically blaming the Russians for this on Fox.

Yeah. Germany's position is just, Hey, everybody, uh, this is sabotage.

So that's it, but not who did this sabotage, but not who did this sabotage. I think you asked a really good question there about the German interest in this. Right now, the German economic interest and the German foreign policy interests are not aligned. What's clearly best for the German economy is to have cheap natural gas powering its industries, even if it comes from Russian pipelines and they no longer have that anymore. In fact, they may never have that again. So they're going to pay a very high price economically, maybe forever. And remember there, there are whole economies based on the industry. They're very industrial power. So if this war drags on for a long time, I think Schultz might be in some political trouble precisely because he's gone along with the Americans on this. And there is, there is a growing political opposition to this war inside of Germany.

War fatigue is a real thing and this thing's got to wrap up at some point. Any final thoughts, Freiburg? I know you didn't get too involved in that conversation, but what is, uh, any, any game theory from you? No. Okay. There you have it folks. Salton of science checking in.

What's the problem? You don't want to criticize the establishment.

Well, no, I mean, you predicted, well, no, I mean, you predicted. Why don't you have my position on this?

Is it because I'm trying to understand because I don't make it because I'm not a pro establishment. I think you know that. I think I'm, I'm just analytical around the fact that I think there's a strong orientation towards conflict. And I think there still is. I don't think that there's much of an incentive or a motivation to back down cause this conflict creates a significant amount of debt owed back to the U S. It creates a potential future asset stream. I don't think anyone else creates a realignment of power. Everyone's looking externally as internal, you know, economic conflict and wealth disparity issues arise and economic growth is challenged and inflation is soaring. It's a great place to, you know, address one's energy. So I think all of this stuff is detailed analytical shenanigans around who's saying what or who's doing what. I think the underlying thesis and the underlying river that's flowing is one that's like looking for external conflict. I think the same is true with the U S and China.

And I think that's a military industrial complex is going to benefit massive limits, the longer this drags out, the more the conflict in Taiwan heats up, the more we're going to invest in our military.

You're talking about, you know, we often talk about these things as if they're like top down, like master plan driven. And as we all know, like they're more Ouija board driven. It's a bunch of guys, they got their hand on the Ouija board and they're all just had a little too much caffeine. You know, and in this case, I think it's just more about like, everyone's a little anxious and the anxieties leading to a desire for more conflict. We're not happy at home. If you're happy at home, you're not looking externally for conflict. That's true in nearly every developed nation on earth today. That's it. I don't know. I like your position. I think it's a great take. I think it's a great.

I don't know. I like your position. It is a great take. I think it's a great take and I think there are a lot of interests who benefit from war, and I think the foreign policy establishment is funded by those interests and it's kind of wired for war at least in terms of the reflex right even something as relatively harmless as a balloon I saw becomes like a casus

belli it's like people are ready to go to war against China over that I saw a couple military leaders give a talk a few months ago it's in a private thing so it wasn't on public record with the establishment no yeah I was at the establishment gathering you do one gen you flex on each knee what was striking to me in this particular thing where these guys were being interviewed on stage I'd like a dinner thing and they were on my phone yeah so oriented around their next steps in escalation and I think it speaks to the points acts like none of them were thinking about like where are we out today how do we guess late what is this going to get there was no conversation at all from anyone about resolution or de-escalation with every single one of them is all about like my orientation for getting bigger going deeper going harder going stronger, making this thing bigger. And I think that was really scary to me, because I didn't, I didn't hear anyone having a conversation around like, how do we, should we even consider whether or not this doesn't get bigger? Everyone was thinking, asumptively, it was going to

get bigger. I like the Ouija board, you have to follow the financial incentives. When the last time we looked at this, right, Leon Panetta and all these other guys who were screaming for war, they were getting paid by the military industrial complex. I remember when Lloyd Austin was nominated as defense secretary, he had some conflict issues, because he was just on the board of Northrop Grumman, or one of these big military industrial companies. And so of course, these generals have to push for war, because as long as they're girding for war, they're guaranteed to have

for them a very lucrative job once they leave the military. The Ouija board, though, Saksa, and I'll throw it to you, maybe you can keep this metaphor going. The media has got their hands on it, they want ratings, you have the Energy Industrial Complex in this German conflict, who seeks to benefit massively if people invest in renewables, or you find other, you know, oil, you know, off Norway. Norway's oil is one of the largest reserves that's untapped. So you have this Ouija board. Media, energy, and the military industrial complex all moving it at once. Maybe

you could speak to that analogy speak to that analogy. Everyone wants to move it to the side of the Ouija board that says escalate. There are very few people that are that have the energy to

move it to the other side that says de-escalate. It's not profitable. De-escalation means less energy, more or less investment. So, yeah, you're going to go escalate.

You know who warned us about the military industrial complex? Yes. Dwight D. Eisenhower, a supreme highlight commander in World War II, wins the war, patriot war hero, top general, becomes president, Republican president, and his departing address warns us that, yes, we need a defense industry, but they become a vested interest in favor of foreign interventions and war. And where is the interest on the other side of it, I can tell you this, the American people don't want to be in a war with Russia. I don't even think most American people want to send 100 billion over there. They want to send 100 billion to their cities to fix crime and all the other problems.

Homelessness. If you've never seen that farewell address from 1961, it is well worth watching. You can find it on YouTube. Just search for military industrial complex Eisenhower. And this is a person who was part of the military industrial complex saying, watch out for this. It was a very prescient warning. Can you of which he spoke? Yes. He was in the machine. He helped build the machine. Welcome to the All In podcast with us again, David the Dove Sacks, Chamath Palihapitiya, and the Sultan of Science, who is on his podcast. Oh my God, so many podcasts you're doing.

The Sultan of Science is in prescient warning. Hot demand. What are all these podcasts you're doing, Freiburg? All these science podcasts

pulling you in. I did a podcast with Brian Keating last week, who was really kind enough to reach out. He's had some awesome guests. He's a cosmologist at UCSD professor down there. And we were supposed to record that day. And then we canceled I think last minute, right? Yeah, I was only supposed to be on with him for an hour. And I'm like, Oh, well, my next thing just got freed up. So I ended up doing like three hours. There was I was so I was like exhausted that

day. So I look really hungover on the video and probably par for the course. Yeah, but no Lex Friedman for you. So Chamath and I have done Friedman, Lex Friedman, but you have not he's invited you yet. Lex has Lex invited you? No, no, he's not. Here's my invitation.

Where's my what's going on here? Collectible for Lex? What are you doing a lot? Yeah. No,

no, he's not.

Where's my invitation?

Where's my I don't know what's going on here. All right, let's know Davos and no Lex free moon. Yeah

What's going on? You know, what's going on? You would never do anti-establishment. What's going on? No, I'm too anti-establishment sucks. That's

Nobody nobody's inviting this quartet to anything We're not doing all in live from Davos, it's not happening bugs. Sorry That he

Marks, I don't wanna be part of any club that would have is a member. Absolutely. And they also don't watch it there Anyway, so yeah, it works out for everybody It does fill me with like a rage where I actually might agree to doing the all-in summit again

Absolutely. And they also don't watch it there anyway, so

By the way proposal coming your way this weekend if you want to really really really thumb your nose at the establishment Yes, let's do it set it during the exact same dates and times as an establishment conference Oh the all to double and then invite all the best guests so that they are they come towers

Just a suggestion to choose all Ted to choose all Ted Conference you could call it the anti establishment. Oh, that's a tagline. Let's come up with a tagline

Let's come up with a tagline that just tweaks everybody and then we have a list. We should create the anti list

You know, they have their like establishment list. We shove the anti list. That's a good point

I like the anti establishment start with them. I have a great Vanity Fair Establishment thing story. Okay, I snuck on that list. They put me on that list a decade ago Let's pull it. Let me find a link go on keep and the most incredible thing about it Is that when you go to the event, which was kind of a cool event. We all had photos taken by Annie Leibovitz Oh, and I have a montage of some of the people that took photos that day That's pretty cool me Aaron Levy Priscilla Chan Bezos bunch of people but I look like it

I was about to say I was about to say this before you had when just when you had the dad bod and no fashion sense Yeah, it was like yeah. Oh look you look great. Here it is. I just think yeah, basically I had no stylist

God, I was very shitty. It was like glasses. It was like a year or two post Facebook

It was not a good look for me not Tom Ford

Blazer thing which is like a really tired look for a Thing which is like a really tired look for a silky skinny jeans those like a little just don't pull up the Chamath pictures when he's wearing like oh my god

You know his Macy's shirt if you do the Google search you put the images before 2011 you will find some off photos You know his mace I wore the same thing every day for four years five years is brutal. Oh my god. What is my

We gotta break this down. Yeah, see this is when the sweater game was not tight. This is like sweater 1.0 games

It's also Tom Ford. This is I didn't know what I was doing back then to stop but keep these pictures off, please

Look, oh, he's also got the watch subtly peeking out. This is back when he was like, oh, I got a Rolex

Whoo, that's a petite. But anyways, yeah

This is what the watch is rolling At a zero. I don't know that watch That's a six or two or two, but yeah, same story same same Jake out same same same same same same Same same same. All right. Listen, I got an Apple watch and I'm gonna Oh

Out of zero

Or two, but yeah same story same same Jake out same same same same same same

Well, listen, oh That's a dad. There's a dad, but yeah, he's gonna spares the dad vibes Wow

That must have been from yeah, I feel 13 14 years ago. Yeah, yeah Yeah, 13 14 years ago Wow

Oh god, you had no style. I really didn't it was

Rough I mean don't pull up pictures of me. I was fat. Yeah. Yeah. Yeah pictures of me eating egg sandwiches all over the internet Oh, yeah, it shall be Jake out. Oh, man. Look at that face. There is well, that's plus 20 pounds Let's keep this gun search wars Microsoft first is Google. Okay, it's been a rough couple days for Google We've all seen it Google and Microsoft both did live demos of their new genera AI. Yada. Yada You guys all know about chat GPT, but now Bing is integrating it into their search engine getting there before Google and Microsoft CEO Satya Nadella. He is going ham.

He looks great. He's fit He's wearing a tight t-shirt and he is saying he's gonna make Google dance dance Google dance he is getting up in their business and Listen, he is in a distant second place. So it makes sense on the other hand Google's AI demo was Frankly a bit of a disaster poorly received stock. They dropped 12% since his event and their Presentation did not include the chat bat barred because in search because it wasn't working It seems like there was an error in it when they said what new discoveries from the James Webb space telescope Can I tell my nine-year-old and barred answer that it took the first pictures of a planet outside our solar system? Which is false, which of course we all know about chat GPT. It's only right half the time And it's a little woke on the margins so anyway, there was a screenshot circulating today, which is probably false, but It says the following me and a bunch of co-workers were just laid off from Google for our AI demo going wrong It was a team of 168 people who prepared the slides for the demo. All of us are out of jobs I can't imagine that's real but if it was that would be a hardcore moment for Google to fire a bunch of people for screwing it Up. Listen, you worked in the belly of the beast for your Berg. What are your thoughts on?

Being poking the tiger and telling Google dance, you know Sundar dance, you know What's interesting is Google's had like an incredible AI competency particularly since they bought deep mind and it's been predominantly oriented towards kind of You know internal problems You know there they demonstrated last year that their AI Improved data center energy efficiency by 40% they've used it for ad optimization at copy optimization The YouTube follow a video algorithm So what video is suggested to you as your next video to watch which massively increased? YouTube hours watched per user which massively increased YouTube revenue, you know What's the right time and place to insert videos in YouTube or insert ads in the YouTube video? So, you know autofill in Gmail and Doc So so much of this competency has been oriented specifically to avoid this primary disruption in search obviously now things have come to a bit of a point because You know this alternative for search has been revealed in chat GPT and you guys can kind of think about search and you know We've used this term in the past Larry and Sergey the textbook that they read, you know One of the original textbooks that's used in internet search engine technology is called information retrieval information retrieval So information retrieval is this idea that you you know, how do you pull data from a static dataset? And it involves scanning that dataset or crawling it and then creating an index against it and then a ranking model for how do you Pull stuff out of the index to present the results from the data That's available based on what it is you're querying or you know, and doing that all in a tenth of a second So, you know, if you think about the information retrieval problem, you type in the data or some rough estimation of the data you want to pull up, and then a list is presented to you. And over time, Google realized, hey, we could show that data in smarter, quicker ways. Like, if we can identify that you're looking for a very specific answer, we can reveal that answer in the one box, which is the thing that sits above the search results, like if you said, what time is it? You know, when does this movie show at this theater? So they can pull out the structured data and give you a very specific answer rather than a list from the database. And then over time, there were other kind of modalities for displaying data that it turns out were even better than the list, like maps, or shopping, where you can kind of see a matrix of results, or YouTube, where you can see a, you know, longer form version of content. And so these different kind of, you know, information, retrieval, you know, media were presented to you. And it really kind of changed the game and created much better user satisfaction in terms of getting what they were looking for. The challenge with with this new modality is it's not really fully encompassing.

So if you can kind of think about the human computer interaction problem, you want to see flight times, and airlines, and the price of flights in a matrix, you don't necessarily want a text stream written to you, to give you the, you know, the the answer that you're looking for, or you want to see a visual display of shopping results, or you do want to see a bunch of different people's commentary, because you're looking for different points of view on a topic, rather than just get an answer. But there are certainly a bunch of answer solutions for which chat DPT type, you know, natural language responsiveness becomes a fantastic and better mode to present answers to you, then the matrix or the list or the ranking and so on. Now, the one thing that I think is worth noting, I did a back of the envelope analysis on the cost of doing this compared to chat GPT. So so Google makes about $3 per click, you can back into what their revenue per search is, and bunch of different ways. One way is three bucks per click, about a 3% click through rate on ads. Some people estimate this is about right, about five cents to 10 cents. revenue per search done on Google, or anywhere from one cent to 10 cents.

Even if even if they don't click the ads, because one out of 100 people click an ad, and that's where the money comes from.

but the money comes from. So let's just call it five cents, right? And you can assume a roughly 50% margin on that search, which means a 50% cogs or cost of goods or a cost to run that search and present those ads. So, you know, right now Google search costs them about, you know, call it two and a half cents per search to present the results. A recent estimate on running the GPT-3 model for chat GPT is that each result takes about 30 cents of compute. So it's about an order of magnitude higher cost to run that search result than it is to do it through a traditional search query. Which makes today, that's right. And so that's the point. Like it has to come down by about an order of magnitude. Now, this then becomes a very deep technical discussion that I'm certainly not the expert, but there are a lot of great experts that there's great blogs and sub stacks on this on what's it gonna take to get there, to get a 10X reduction in cost on running these models. And there's a lot related to kind of optimization

on how you run them on a compute platform.

Today, which makes today the type of compute hardware that's being used all the way down to the chips that are being used. So there's still quite a lot of work to go before this becomes truly economically competitive with Google. And that really matters because if you get to the scale of Google, you're talking about spending eight to $20 billion a quarter just to run search results and display them. And so for chat GPT type solutions on Bing or elsewhere to scale and to use that as the modality, you're talking about something that today would cost $80 billion a quarter to run from a compute perspective if you were to do this across all search queries. So it's certainly gonna be a total game changer for a subset of search queries, but to make it economically work for these businesses, whether it's Bing or Google or others,

there's a lot of work still to be done. The great part about this Chamath is that Bing gave 10 billion to our friend Sam and chat GPT to invest in Azure, which now has the infrastructure and will be providing the chat GPT infrastructure to startups or corporations, big companies and small alike. So that $10 billion should do enough to grind it down between software optimization, data optimization, chip optimization and cloud optimization.

Yes, you would think so or no. The ability to run this at scale is gonna happen because we're getting better and better at creating silicon that specializes in doing things in a massively parallelized way. And the cost of energy at the same time is getting cheaper and cheaper along with it. When you multiply these two things together, the effect of it is that you'll be able to run these models the same output today will cost one, one 10th, as long as you ride the energy and compute curve for the next few years. So that's just gonna naturally happen. I have two interesting takeaways. And one is maybe a little bit of a sidebar. So the sidebar is if you guys were sitting on top of something that you thought was as foundational as Google search back in 1999, would you have sold 49% of it for $10 billion? Hard though. I think the answer is no.

I think the answer is no. Not in an environment where you have unlimited ability

to raise capital. This is something that we've said before, which is that chat GPT is an incredibly important innovation, but it's an element of a platform who will get quickly commoditized because everybody will compete over time. And so I think what Microsoft is doing is the natural thing for somebody on the outside looking in at an entity that has 93% share of a very valuable category, which is how can I scorch the earth? And so Microsoft effectively for 10 billion, but almost 50% of a tool. And now we'll make that tool as pervasive as possible so that consumer expectations are such that Google is forced to decay the quality of their business model in order to compete. So that as Friedberg said, you have to invest in all kinds of compute resources that today are still somewhat expensive. And that will flow into the P&L. And what you will see is that the business quality degrades. And this is why when Google did the demo of Bard, the first thing that happened was a stock went off 500 basis points. They lopped off $100 billion of the market cap, mostly in reaction to, oh my God, this is not good for the long-term business.

Explain why it's not good for the long-term business on a mechanical basis. When you get an answer, you don't have to click the links.

No, right now, if you look at Google's business, they have the best business model ever invented on earth ever for a profit company. It just reigns money. This is a business that this year will do almost $100 billion of free cash flow. It's a business that has to find ways, and we kind of joke, but they have to find ways to spend money, otherwise they'd be showing probably 50 or 60% EBITDA margins, and people would wonder, hey, wait a minute, you can't let something like this go unattended. So they try to do a lot more things to make that core treasure look not as incredible as it is. They have $120 billion of cash. This is a business that's just an absolute juggernaut,

and they have 10 times as many employees as they need to run the core business.

That says enough. I don't know what that is, but my point is that it's an incredible business. So that business will get worse if Microsoft takes a few hundred basis points of share, if Meta takes a few hundred basis points of share, if Tencent does, if a few startups do. Quora, by the way, launched something called Po, which I was experimenting and playing around with last weekend. If you add it all up, what Satya said is true, which is even if all we do collectively as an industry is take 500 or 600 basis points of share away from Google, it doesn't create that much incremental cost for us, but it does create enormous headwinds and pressure for Google with respect to how they are valued and how they will have to get revalued. And that's what happened. So the last thing I'll say is the question that I've been thinking about is what does Sundar do? So what's the countermeasure? Yes, this is what I was gonna get to. I think the countermeasure here, if I was him, is to go to the board and say, guys, we're gonna double TAC, right? So TAC is the traffic acquisition cost that Google pays their publishers. It is effectively their way of guaranteeing an exclusivity on search traffic.

So for example, if you guys have an iPhone, it's Google search, that's the default search in the iPhone. Google pays Apple. This year, this renegotiation for that deal could mean that Apple gets paid $25 billion for giving away that right to Google. So if these, Google does all these kinds of deals. Last year, they spent, I think, $45 billion or so.

So about 21%, 21%. When you think about that, Chamath, Google basically paid Apple, which was working on search technology. They were working on a search solution. They paid them to stand on the business.

And they're paying everybody. So I think the question for Google is the following. If you think you're gonna lose share, and let's say you go to 75% share, would you rather go there and actually still maintain your core strangle hold on search? Or do you actually want 75% share where now all of these other competitors have been seeded? Well, you can decay business model quality and still remain exclusive if you just double the tack. And what you do is you put all these other guys on their heels, because as we talked about, if you're paying publishers two times more than what anybody else is paying them, you'll be able to get publishers to say, hey, you know what, don't let those AI agents crawl your website because I'm paying you all this money. Remember that, right? So do not crawl in robots.txt equivalent for these AI agents. And I think that that'll put Microsoft and all these other folks on their heels. And then as you have to figure out all this derivative work stuff, all these lawsuits, Google will look pristine because they can say, I'm paying these guys double because I acknowledge that this is a core part of the service. So that's the game theory I think that has to get figured out. But if I was Sundar, I'd double the tack.

I think I'd love the second part.

Absolutely, this is what if I was Sundar, I'd double the tack. I think I'd love the second part because, hold on, let me get saxophone. I love the second part, Chamath, because in this clip I'm about to show, Nilay Patel from The Verge did an awesome interview with Satya and he basically would not answer this question at least to my satisfaction, which is, hey, what did the publishers get out of this? You've ingested our information. How do we get paid? Watch this clip, it's very telling.

The answer, or even in the chat session. But if I ask the new being, what are the 10 best gaming TVs? And it just makes me a list. Why should either user then click on the link to The Verge,

which has another list of the 10 best gaming TVs? Well, I mean, that's a great question, but even there you will sort of say, hey, where did these things come from? And would you want to go dig in? Like that, even search today has that. Like we have answers. They may not be as high quality answers. They just are getting better. So I don't think of this as a complete departure from what is expected of a search engine today, which is supposed to really respond to your query while giving them the links that they can then click on

like ads and search works that way. In my mind, there's a terrible answer. He needs to address how they get paid. He punted the answer and just said, hey, listen, search works his way. Sax, will the rights to the data, will Google just say to Cora, hey, we'll give you a billion dollars a year for this data set if you don't give it to anybody else. They should. Maybe. Sax, the strategist, let me hear your strategy here. You are now CEO of Google.

What do you do?

Don't give it to anybody else. I think there's maybe even a bigger problem before that, which is I think the whole monetization model might change. So the reason why Google monetizes so well is it's perceived as having the best search. And then it gives you a list of links and a bunch of those links are paid and then people click on them. Now, I think when you search in AI, you're looking for a very different kind of answer. You're not looking for a list of 10 or 20 links. You're just looking for the answer. And so where is the opportunity to advertise against that? I mean, maybe you can charge like an affiliate commission if the answer contains a link in it or something like that, but then you have to ask the question, well, does that distort like best answer? Like, am I really getting the best answer? Or am I getting the answer

that someone's willing to pay for? This is your key insight. The fact is if Google gives you an answer, you don't click on ads. Google has had a very finely tuned balance between, hey, these first two or three paid ads. The paid links might actually give you a better answer than the content below them. But in this case, if the chat GPT says, hey, this is the top three televisions, these are the top three hotels. These are the top three ways to write a better essay. You don't need to click. You have not been given answer and the model is gone.

The page you have to remember.

Now being given the link is still a subset in that case. So at Google, we used to have a key metric was the bounce back rate. So when a user clicks on a result

on the search results page,

user clicks on a, we could see whether or not they came back and searched again. And so that tells you the quality of the result that they were given, because if they don't come back, it means they ended up getting what they were looking for. And so ads that performed better than organic search results, which means someone created the ad, paid for it and the user clicked on it and didn't come back and came back with less frequency than if they clicked on an organic result. That meant that the ad quality was higher than organic quality. And so the ad got promoted to kind of sit at the top and it became a really kind of important part of the equation for Google's business model, which is how do we source? How do we monetize more search results where we can get advertisers to pay for a better result than what organic search might otherwise kind of show. And so it's actually better for the user in this case than say, just getting an answer. For example, I'm looking for a PlayStation 5. I don't wanna just be told, hey, go to Best Buy and buy a PlayStation 5. I wanna be taken to the checkout page to buy a PlayStation 5. And I am more likely to be happy if I click on a result and it immediately takes me to the checkout page. And Best Buy is really happy to pay for you to get there because they don't want you looking around the internet looking for other places.

And we can't convolute all search queries. Not all search queries are hey, what's the best dog to get to not pee on the floor or whatever kind of arbitrary question you might have that you're doing research on. Many search queries are commerce and tension related. I wanna buy a flight to go somewhere. I wanna book a hotel to go somewhere. I wanna buy a video game system, et cetera. That series of queries may have a very different of modality in terms of what's the right interface versus the chat GPT interface, where, yeah, there's a lot of kind of organic results that people sift on the internet for today. And the question earlier can be resolved by Google doing a simple analytical exercise, which is, you know, what's it going to cost us and what's going to give the user the best result? And that's ultimately what will kind of resolve to the better business model. It's really measurable. I think on Chamath's point, you know, today, Google pays Apple $15 billion a year to be the default search engine on iPhones on the Safari browser. That's only about a quarter of Google's overall tack.

The majority of Google's traffic acquisition cost is actually not being paid for search. A good chunk of that is being paid to publishers to do AdSense display ads on their sites. And Google's rev share back to them for putting ads on their sites. So you know, the tack number, I think maybe you kind of want to move the needle, but the majority of Google searches don't come through the default search engine that they pay to be on it might it might move the needle a bit, but I don't think it really

changes the equation for them to be on it. My comment is more tack has to become a weapon on the forward foot number one. So if you're going to spend 21% of your revenue on tack, you should be willing to spend 30 to 40% to maintain the 93% market share. I don't think what you want to see is your profit dollars decay because you lose share. It's rather better for you to spend the money and decay your business model than have someone to communicate for you in

general. Apple, at this point, Apple is really the only tack line I've never heard not talking. I

understand. I'm not talking about today. I'm not I'm not talking. I'm not talking today. I'm saying take that idea, you have an entire sales team whose job it is right now to sell AdSense. Right. You have an entire group of people who know how to account for tack and how to think about it as a cost. But if you're basically willing to say, out of the hundred billion dollars of free cash flow, I'm willing to go to 80 or 70 billion of free cash flow, combined with the hundred billion of short and long term investments I have, and I'm going to use it as a weapon. And I'm going to go and make sure that all of these publishers have a new kind of agreement that they signed up for, which is, I'll do my best to help you monetize, you do your best by being exclusive to our AI agents, right? So you deprive other models of your content on your pages, because that will get litigated. And there is no way just like, again, if you say do not crawl, you're not allowed to crawl if you're Google or Microsoft or searches. So I mean, this is going to happen for these agents.

It's unrealistic to expect that it won't. So my point is, Google should do this and define how it's done before it's defined for them. Because right now people are in this nascent phase where everybody thinks everybody's going to be open and get along. And I just think that

that's unrealistic. So I mean, it's a really important kind of philosophical question. First off, like Google today, just so people know on AdSense is typically paying out 70 cents on every dollar to the publisher, there's you know, it's a it's a pretty, you know, generous and it's the way they've kind of kept the competitive moat, you know, wide and kept folks out of beating them on third party ad network bids because they bid on everything. And they always win because they always share the most revenue back. So they own that market with respect to acquiring content, you know, the internet is open, it's an open protocol, anyone can go to any website by typing in the IP address and viewing the content that a publisher chooses to make available on that server to display to the internet. And there's a fair use policy. And there's, you can you can type

in an IP address. I think 15 or 20 or 30% of the pages on the internet right now are apps that are

closed, Facebook's close, Instagram, Instagram, I'm talking about the open internet, right. So like Like the content on the open and I'm saying the open internet matters less and less. Yeah. I don't know. I mean, look, you're right. Maybe there's the enhancement of the models. But my point being that if the internet is open and you and I spent a billion lifetimes reading the whole internet and getting smart and then we were the chatbot and someone came and asked us a question and we could kind of answer their question because we've now read the whole internet. Do I owe licensing royalty revenues to the knowledge that I gained? And then the synthesis that I did, which ultimately meant excluding some things, including some things, combining certain things. And the problem with these LLMs, these large language models, is that you end up with a hundred million, a billion plus parameters that are in these models that are really impossible to deconvolute. You don't know. We don't really understand deeply how the neural network is the model is defined and run based on the data that it is constantly kind of aggregating and learning from.

And so to go in and say, hey, it learned a little more from this website and a little less from that website. I'm not saying that.

It's a practical impossibility. I'm not saying that. I'm saying when you look at transformer architecture today, every LLM that you write on the same corpus of underlying data for training will get to the same answer. So my point is today, if you're a company, the most important thing that you can do, especially if you have a $1 trillion plus market cap that could get competed away is to figure out how to defend it. And so all I'm saying is from the perspective of a shareholder of Google and also from the perspective of the board of director or senior executive or the CEO, this should be the number one thing that I'm thinking about. And my my framing of how to answer that question is build a competitive moat around two things. One is at the end, which is how much money and what kind of relationship do I have with my customers, including the publishers, and can I give them more so that number two is I can affect who they decide to contribute their content to. So you're right. Let's assume that there are five of these infinite libraries in the world. You mean non public content? How important and also public. How important is it if Quora says, you know what, guys, I've done a deal where my billions of page views and all of that really rich content, Quora is incredible content.

Google's paying me two billion a year. And so I've decided to only let Google's AI agents crawl it. And so maybe when there are questions that Quora is already doing an infinominal job of answering, I think it does make a difference that Google now has access to Quora's content

and others don't write for a hot minute, they did have access to the Twitter firehose. And that was the premise was we could get this corpus of data that we can have in a very limited, restricted way. They paid Twitter a lot of money. I don't think that those deals exist anymore, Twitter, I mean, you guys might know better

than I do, but I don't think they exist anymore. Here's where, Chamath, I think you're right. And maybe, Dave, I think you're being too forgiven. These models know where they got the data. And they can easily cite the sources, and they can easily pay for it.

And if you want to see an example of this, you're absolutely right. The video in the Wall Street Journal, where Satya was interviewed, showed a demo. And you're exactly right. They actually showed, Jason, in the search results, the five or six. But it made no sense, because it's like, how do you know that those are the five most cited places that resulted in this?

Well, by page rank technology, or the authority of the website, or the author. But let's pause for a second here. There is a company called Niva.com. I'm not an investor. None of us are. It's a former Googler. They have 78 employees, I think, according to LinkedIn. I just typed in, what are the best flat panel TVs? Here's the result. And as you see, sentence by sentence, as it rewrites another person's content, it links with a citation, just like the Wikipedia does. And when you scroll to the bottom of it, it tells you, hey, this is from Rolling Stone, this is from Best Buy, this is from Ratings. And if that answer is good for you, and you trust those sources, those people should get a commission.

Every time there's a thousand searches, and you come up, you should get a dollar every time your data was used. And if not, these sites should sue the daylights out of Google. And for Google to say they can't do it is hogwash. Why isn't it fair use? It's not fair use, because in fair use, you have the ability to create derivative works on future platforms. And you are taking this person, the original content owner's ability to exploit that. And you are co-opting it, and you're doing it at scale. And that is against fair use. You're not allowed to interfere with my ability to make future products, David, you know,

this is an attorney.

Data was used.

And if not with this site, you don't want to attribute it.

The problem with that, not an IP lawyer, sorry.

All right.

Well, I play one on TV and this podcast. The problem with that idea, just from a product perspective for a second, is that if you limit how they can tokenize to just being all entire sentences, the product will not be that good. Like the whole idea of these LLMs is that you're running, you know, so many iterations to literally figure out what is the next most best word that comes after this other word. And if you're all of a sudden stuck with blocks of sentences as inputs that can't be violated because of copyright, the product will not be as good. I don't just don't think it'll be as useful.

Correct. These are also not deterministic models. And they're not deterministic outputs, meaning that it's not a discrete and specific answer that's going to be repeated every time the model is run. These are statistical models. So they infer what the right answer could or should be based on a corpus of data and the synthesis of that data to generate a response to a query that reference. That inference is going to be, you know, assign some probability score. And so the model will resolve to something that it thinks is high probability. But it could also kind of say, there's a chance that this is the better answer, this is the better answer, and so on. And so when you have like you have in the Internet, competing data, competing points of view, competing opinions, the model is synthesizing all these different opinions and doing what Google search engine historically has done well, which is trying to rank them figure out which ones are better than others. And that's a very dynamic process. And so if as part of that ingest process, one is using some open, openly readable data set, that doesn't necessarily mean that that data set is improving the quality of the output or is necessarily the answer from

the output. Correct. Let me just give everybody a quick four factor education on fair use. And here it is from Google's actual website, because they deal with this all the time. And when you look at it, the nature and purpose and character of the work, including whether such use is not profit or educational purposes. So that first test of fair use is hey, if you're using it educationally, and you want to make a video that is criticism of Star Wars prequels or how to shoot a shot like this Quentin Tarantino, if it's educational, it's fine. And courts typically focus I'm reading here from Google on whether the use is transformative. That is whether it adds new expression or meaning to the original or whether it merely copies the original. It's very obvious that this is not transformative. They're just rewriting it. The nature of the copyright

transformative to me I don't think so. Not at all, not about their comment on entirely new content.

They're just rewriting it. They're not actually adding anything to it. Transforming would be fine if a human does it. It's not. So you might be fine.

For me. Transforming We write someLSR pretty cool- listen,

Jake, I think we write something animations. Listen, Jekyll, I think the rights issue is just like the cost issue, which is a problem today,

maybe, but it's going to get sorted out. But here, let me finish.

The new technology waves that are this powerful don't get stymied by either chip costs or legal rights issues. They do buy pork. It's going to get worked out. You're 100% wrong.

It's going to get worked out. They do buy their drifts. You're 100% wrong. YouTube got stopped dead in their tracks. And the only way YouTube and Naps are got stopped in in the tracks, I predict this is going to get stopped dead in its tracks with YouTube level.

Napster was pure piracy. Napster was pure piracy. This is different.

And Google was enabled piracy and then they had to build tools to fight a

dentistry with JCal. I deeply disagree with you. I just agree with both you guys.

You guys both think that all, that costs can stand in the way of the AI. No, it's going to stay standing in the way.

relief ease. Happen to it. It is already happening. What's the conversation for it? Actually, I wanted to take my experience. I would like to make my point.

We don't see your amateur is already happening. Let's move the conversation for it. I actually, I wouldn't like to make my point. We don't need your amateur lawyer opinions.

Um, I'm going to give my point. If you want it or not. the effect

An hour for pertain to be Let's look at this

Before from you

Let's look at this Before from you here it is. Okay. Take it easy mr. Sub better call J Cal The time you've done this the effect listen to this the effect of the use upon the potential market for or value of the Copper work who uses that harm the copyright listen to this very important

You've done this Over the world like Skynet J Cal is gonna be like I thought we'd stop this with rights

But companies using a I to steal content will be effective use The original copyright owner's ability to profit from his original work by serving as a replacement Take out their

Original work by serving as a replacement

Okay, great. Okay, you made your point

We need to get to Marjorie Taylor green For you to show let's cue up Marjorie Taylor green

Let's cue up Marjorie Taylor green hold on hold on I have something. I have another aspect of the AI thing. I want to talk about Is this like the internal rights issue that you're going on? So I had an interesting you know AI experience this week and I think we're all gonna start having these stories


Script of how to talk to your Every week there'll be some new like use case that you see that you're kind of blown away by Though the use case I saw this past week in a product demo Was they were showing me like an Excel spreadsheet like a very complicated it can sell spreadsheet modeling and financial asset and they had a plug-in to a chat GPT type AI and So they just asked it they typed in. What does this spreadsheet do and it spit out like a one paragraph Explanation of what the spreadsheet did and it was really good I mean because me just eyeballing the spreadsheet I could not have figured out like instantly What that thing did it would have taken me like a while to figure it out It told me here are the key inputs here the key outputs, so that was number one Then they they did something I think even more interesting which is they said give me the formula that tells me when the yield is above 2% and this and that and that. And the chat GPT spat out a formula that was like perfect Excel logic. That was something that, you know, you or I could never figure out, right? You need like a super pro user of Excel to basically know how to do this stuff. So it spit it out and like boom, it worked instantly. They copy and paste into the spreadsheet and you could basically, like the spreadsheet was much more advanced now. So what it got me thinking about is that we're going to have these little assistants everywhere. You combine that power with say speech to text, right? Because we could have just talked to it. The speech to text would transcribe the instruction, spit it back out and you're going to have these like little personal digital assistants in applications. I think, you know, it's pretty obvious to see how AI could replace call centers with, you know, having the frontline call center operator be, instead of being a human, it could be like an AI.

But this is actually even before that. Like you could actually, I think in every single application that we use, there's going to be an AI interface and like it is probably going to be voice-based where you can just say to it, Hey, I'm trying to accomplish this. Like, how do I do it? Can you just make it happen? Totally. And it's going to be really powerful actually.

I have an idea. I was hanging out with Andre Carpathy and I gave him this following challenge. So there I was. So there I was. I said, if you had to build Stripe challenge, I said, how many engineers do you think it would take you and how long would it take you to build a competitor? I was just, just a thought exercise. You know, it would take hundreds of millions of dollars and years. Now imagine you could, you were feeling threatened by Stripe. Imagine you're a large company, fees a MasterCard just as an example. You can now actually get one or two really smart people like him to lead an effort where you would say, here's a couple hundred million dollars to compete with Stripe, but here are the boundary conditions. Number one is you can only hire five or 10 engineers. And so what you would do is you would actually use tools like this to write the code for you.

And the ability to write code is going to be the first thing that these guys, that these things do incredibly well with absolute precision. You can already do unit testing incredibly well, but it's going to go from unit testing to basically end-to-end testing. And you'll be able to build a version of Stripe extremely quickly and in a very lean way. So then the question is, well, what would you do with the 200 or 300 million you raise? And my thought is you use it again as tack. You go to customers and you're like, well, listen, if Braintree is going to charge you one basis point over Visa MasterCard and, or sorry, a hundred basis points and Stripe or 50, you know what? I'll charge 10.

Margin to acquire customers.

Destruction, margin destruction. Totally.

And this is going to make everything. And this is going to make everything. That's what's so interesting. So take any business that's a middle-man business. I think this is the point. Any middle man business right now that doesn't have its own competitive mode can be competed against because now you can take all of those input costs that go into human capital, you can defer that, have a much smaller human capital pool and push all of that extra money into traffic acquisition and sub-situation.

The government in Silicon of being more efficient.

This is going to lead to that efficiency. The net benefit of all of this is economic productivity because the end customer that's using that tool that you just mentioned, they now have a lower cost to run their business. And their total net profits go up. And this is what happens with every technology cycle. It always yields greater economic productivity. And that's why the economy grows. And that's why, I just want to say this is so important. That's why technology is so important to drive economic growth, not debt. We've historically used financial engineering to drive economic growth. And this is why we need immigration. Technology and innovation drive this.

What are we talking about? What we're describing here is, is AI making it harder and harder to make humans productive. So you want to like bring in millions of more, it's more

productive to bring in millions of more productivity per human labor. One human can do the coding

that 20 humans would do before. Per human of labor. One per human is skilled enough to

use the AI.

Guys, guys, guys, go back to like traditional capitalism, go back to traditional capitalism for a second. So go back because the striped example is another good one. So if you have this business model, right, how does the ecosystem get efficient, right? How do we create more opportunity to use Freiburg's language? Well, the only way that it really happens, how does cost go down is that certain entities become big enough that they can drive the prices down, right? An Uber, a DoorDash or whomever says, yes, I need payments capability. So Braintree, give me your best bid, checkout.com, give me your best bid. Adien, give me your best bid. Stripe, give me your best bid. You compete it down, right? Amazon comes in. Walmart comes in.

They do it in physical CPG goods. They do it online. They do it for all kinds of technologies. But you've never had an internal form that can create hyper efficiency and basically create customer value. Like this thing can, because this thing can allow let me show you an example Julian 10 person companies to get created that can do the work

of 10,000 people. These are so cool, traditional capital. Hold on, let me show you two things. These are two moments I had this week. This first one was called Galileo AI. It was just a tweet. You describe the design of an app. And here they say an onboarding screen of a dog walking app. Incredible. And you type that in. And it gives you a welcome screen. That's like a seven out of 10.

Then it says, Oh, a way for people to change their name, phone number, password, you know, that classic screen on any app, I need to change my thing. Boom, it gives you that. Well, then at the same time that people are making text to UX user interface. Beautiful here, this stuff will get dumped into Figma. But then there's GitHub co pilot, which if you haven't seen, we all know it here. This is allowing you get a GitHub co pilot GitHub is bought by Microsoft, another one of Satya Nadella's incredible acquisitions. This guy's like the new Zuckerberg. I mean, what a what an incredible person to come after a bomber who's just so effective at what he's doing. As you're writing your code, it fills in your code, it knows what you're writing, just like in an email. And it's a smaller subset of information than email, email, you could write anything you could be, you know, talking to a lover or a business person, whatever here, when you're doing programming, it's a much finer data set. These two things are going to come together where you're going to be able to build your MVP for your startup by typing in text, and then publish it, you're not going to need a developer for your startup that is transformative

in the world. Let me ask you guys a question. Do you think that this leverage and I argue this is all about like leverage, it's one person can generate x units of output, more? Yep. Do you guys think that this commoditizes and puts at risk? Saks in particular, like all of enterprise sass, because it becomes such a commodity to basically build a business that does something now? Or does it create much higher returns for investors? Because you invest so much less capital to get to a point of productivity with that business

or revenue of that business than was needed before? I'm not sure. I tend to think that if it gets easier, then everything becomes more competitive. So right. I don't know. But

So value gets competed away.

By the way, I would slightly disagree with the characterization.

Does this scare you as an investor in?

I don't know. I mean, like, I don't know. I mean, like, for example, in that demo we just saw, what does the AI do? It exports the new design assets to Figma format, because that's the standard. Yeah, just make sure you're faster. If you can create a sass product that becomes a standard, everyone's still going to want to use it. And there's like really good reasons for that. So I don't know. I don't think business software is going away. I also don't think that, like, you're not going to need to hire engineers because copilot is just going to do it for you. I think what copilot will do is make your typical engineer more productive. Yes.

They had some graphs around how like copilot reduce coding time by 50%. Right. So I think you'll be able to get a lot more out of your developers. I think that's sort of the key is a lot of the drudgery work gets taken care of.

Because that's the standard. Yeah, just make sure you're faster. Right. The answer, Freeburg, to your question is, I think more startups more niche startups will make better products. And then you'll just have many more folks like making sass for dentists. Making sass for dentists.

Making sass for dentists. Sure.

Are those ventures, because they don't get big enough, right? I mean, in that case, in that case. to entry price matters. It will be poor returns. Well, entry price matters too. If you're investing at $5 million, like I do, in companies, when they're just on napkins and back of envelope,

there's plenty of room. If you have a $200 million exit, that's a 40th. But there could be a lot of new categories too, a lot of new categories. A lot of personal industries that get disrupted. We're thinking about just software, displacing software. It could be software displacing like industries that aren't even software games.

There's a lot of Eyes, which I think I totally agree. I think the entire video game industry is going to get completely rewritten with AI because you're not going to have a publisher anymore that makes one game that everyone consumes. You're going to have tools that everyone creates and consumes their own game. You guys want to watch this cool clip? It's 58 seconds long. Go ahead. This has a music clip.

A clip here to the music clip day here on all in, but I thought it was really cool. Is this AI turning you into Eminem? This is what the world's

waiting for. I hope it's you doing it. I'm naturally Eminem like but this is a only in your anger.

A sound getting lost on an underground this is the future rave sound. I'm getting lost in an underground.

So Eminem

David Guetta playing Eminem. A track with Eminem's voice

right? And the track just became hugely viral and then the track just became hugely viral that I made as a joke and it works so good I could not believe it. I discovered those websites that are about AI. Basically you can write lyrics in the style of any artist you like. So I typed write a verse in the style of Eminem about Future Rave and I went to another AI website that can recreate the voice. I put the text in that and I played the record and people went nuts.

Alright it's that is nuts. It's nuts and the crowd went wild for it. So here it is folks whoever makes the best Friedberg M&M hybrid rap with David Sacks as the

hype man's getting a free VIP ticket to All in Summit 2023. I think we need an AI performance at All in Summit 2023.

1000% you and I are so in sync these days for you. There are gonna be a lot of interesting mashups that get created like for example you'd be able to create a movie where let's say you want to make a Western and you want John Wayne to star in it. I mean obviously you get the rights from the Wayne estate but no actor ever goes away. You could think there's gonna be a database of all of them.

Let's say you want to make it better. You're gonna be writing the script as you write the script the AI is gonna be showing you that scene in real time and you don't have to publish it. It'll just change in

real time. Just like Instagram and TikTok basically democratize like everyone's ability to create and publish content. This takes it to a whole another level where the monopoly that big production houses have because they have the big budget so they can afford to make a big movie. If that cost of making a ten million dollar movie goes to ten thousand or a thousand dollars of compute time anyone sitting in their studio in a basement can start to make a movie and it really changes the landscape for all media not just movies music video games and ultimately the consumers themselves can create stuff for their own enjoyment and the best of those products win now but but having

free individual yeah I mean the best way now but but having free individual just become a lot more like the music industry I mean remember anyone can

really create a song now and people do go viral on TikTok and they uploaded on

disro kid and it's on Spotify if you guys see this article in the New York Times that was kind of throwing some shade at the CEO Goldman Sachs David

Solomon yes see the headlines see the headline you look great in the picture

but I didn't read it cuz I figured it's hate they were talking about his his side gig as being a DJ but specifically they called out a potential conflict of interest and it's related to this because what I guess he had gotten a license to a Whitney Houston song and he remixed it and released it on Spotify because what and her biopic is about to come out and they thought that there could be this a perceived conflict because Goldman works on behalf of the publishing company and my thought was along the lines of what you guys said like why is this a story meaning David Solomon should be able to go to any website license the song make it and then submit it back to them for them to approve because the quote in here that that matters is the company that licensed it said we are in the business of making sure this body of music stays relevant so obviously you want Whitney Houston songs Michael Jackson songs you want John Wayne you want these people to live on in culture because it's part of

our culture look at this subhead David Solomon brushes off DJing the better way

to maximize it will be like this go and use it create a derivative work let us see it if we like it so like Guetta should be able to just give that back to

Eminem if Eminem school with it he should be able to ship it and just be done what a non-story like the New York Times on so anti-billionaire so David Solomon brushes off DJing as a minor hobby that has little to do with his work at the bank but his activities may pose potential conflicts of interest it's like what are they writing about is there not something more important than

this just so do we think that David Solomon or any CEO of any major bank on Wall Street would put their job at risk running one of the 20 or 30 most important institutions in the financial architecture of the world to license a Whitney Houston song that they can play at Coachella I mean does that from pass

the smell test no no and and just for the record iconoclastic David Solomon you're going to be doing the opening night DJ set for all in Summit 2023 the grift the grift is on let's get a book if the New York Times hates him you got anybody the New York Times hates on you got a slot you got a slot that's it that will be our lens your Dave Chappelle Dave Chappelle for sure 1000% I mean he

looks good it looks like he's living his best life so finance them somehow it

just like it fends them that a corporate CEO could well that anybody's happy well that anybody's happy

I think it's kind of cool this guy yeah fuck yeah fuck yeah I've always wanted

to be a DJ yeah oh you know spin the one and two after party and we'll use AI to

help you out when I should have been learning out of DJ I was playing the

violin you should get up there and Urkel your violin under a DJ set ten years we can play a duet together I played 14 years I played in an orchestra oh my god

I never knew this never again this is all kind of revelations happening here by the way here was my most pull up that first chat GPT I gave you this was an aha moment me and Saks were doing our weekly mastermind group Saks and I get together we kind of like co-mentor each other here was a mastermind this was a chat GPT I did this one because I was trying to figure this out how do I make my spouse and kids feel heard and in chat GPT gave us a great one give them your full attention number two empathize number three validate their feelings they

have it Saks just put that into your stuff let me use this as an example what public so that's obviously the aggregation and synthesis of lots of different self-help websites how do you describe attribution of that answer to a

particular content publisher honestly serious question fair use derivative work

I think no monetization opportunity there there's no monetization yeah you say that cuz you hate content provides but here I tell you that's a big deal publishing I think the GPT the chat GPT no I they know who they got it from

lots of websites it's a very smart synthesis it's not pulling a result from someone's website it's like read hundreds of websites and it's like average them

bulldog the algorithm is not just where you could lay for the average it's that's complete bullshit they could say as we ingest this stuff tag it and when we take it that is how it's being done and then you could

publish it when you publish it you say hey where do we show

are you saying there you say there's not bullshit that is what you said is

exactly how it's being right and J slals if let's say that the AI is using a hundred different websites and synthesizing a hundred websites what's the incentive for the marginal hundredth website to say well opt me out unless you Right, so that's the shakedown. Google or OpenAI will just be like, okay, fine, we'll just work with the other 99.

And this is why content providers is my best piece of advice. You asked a question, I'll give you the answer. Content providers as a group need to get together and fight for their rights in unison. New York Times, Medicare. Fight for their right to party? No, fight for their right to get paid and to survive. I'll tell you what I think is going to happen. Talk to the chat ch B-T and say as a group, either give us these terms or don't index us. You're trying to unionize all of the content creators. Divide and unionize all of them. They should be a united front like the music industry. Why do you think the music industry gets paid by Peloton?

Because the 5 of them get together and they fight for their right to party? You're trying to unionize all the content creators. So five of them get together and they fight. And you could organize, but there's millions and millions of publishers. I think the point here is that technology is fundamentally deflationary. Here's the next great example where the minute you make something incredible, costs go down, but also, frankly, revenue and profit dollars go down in the aggregate. Doesn't mean that one company can't husband a lot of it and do incredibly well like Google has done, but it's just gonna fundamentally put pressure on all these business models, which is why I think it's important for Google to take account for Google should go and they should cannibalize their own business before it is cannibalized for them. Free bar, final word.

We're gonna take out, let me make one point.

To take account for Google. Here's another way to think about it. I think that if this goes as we all predict and everyone's saying it's gonna go, it is more likely than not that many of these quote content publishers that aren't adding very much marginal value are going to go away. That you could see the number of content sites offering self-help advice and how to do this and how to do that, 95% of them go away. Because all of that work gets aggregated and synthesized and presented in a really simple, easy user interface that makes them completely oblivious. And I'm not discrediting the value that many content publishers provide, but the requisite at that point to be valued as a quote novel content producer is gonna go way up.

The offset to that though is it's so much easier to create content because of the AI. Totally true. We have this company, CopyAI, where even before this chat GPT stuff, you would just go there and say, I wanna write a blog about X, Y, and Z. You just give it a title and it spits out a post and then they'll actually give you 10 different blog posts and then you just select the one that is the direction you wanna go and you keep doing human selection on it. By the way, that's it.

Totally true, by the way. But how does new intelligence get put back into the system? That's based on existing corporate system.

Based on existing corporate system. No, you have like a corporate blog so you publish it to your corporate blog.

My point is if there is now some new information in the world, who is going to add that to the corpus if everybody is just stealing content and rewriting it?

No, humans have always had a desire to create, most people will create for free. There's a head of the long tail that actually gets compensated, the rest of the long tails traditionally got nothing and they do it because they wanna create and now the creation... The creation's gonna explode

because it's so easy want to create. Now the creation, the crazy is gonna explode, because it's so easy.

Beethoven listened to Haydn. And then Beethoven wrote novel symphonies, and his I want to answer to that. I want to answer that, please. If chat GPT takes a Yelp review and a, you know, a Conde Nast Traveler review and they represent it based on the best content that's out there that they've already ranked, because they have that algorithm with PageRank or Bing's ranking engine, and then they republish it, and then that jeopardizes those businesses that is profoundly unfair and not what we want for society. And they are interfering with their ability to leverage their own content. It is profoundly unfair, and those magazines and newspapers need to... You're going to get steamrolled. What's that? You're going to get steamrolled. It's possible. YouTube is a great example. YouTube was going to get shut down.

Sequoia and the YouTube founder sold it to Google because they were so scared of the Viacom lawsuit and how well it was working against them. They thought, this business will never fly if we don't have a big partner like Google to support the lawsuit. They won the lawsuit or they settled it because they were able to do content I.D. and allow content creators. The only reason YouTube exists is... Hold on, let me finish. It's because they let content creators watermark and find their stolen content, and then claim it. And when they claimed the stolen content, they were able to monetize it. That's what's going to happen here. There'll be a settlement where they are going to be able to claim their content.

I will bet any thing. I will bet any amount, like you're going to get steamrolled is my prediction. What's that? You're going to get steamrolled.

The only reason they are going to be able to claim their content, anything, I will bet any amount against your, against your, your, your premonition here, J Cal, this is like

the opposite of no predominance against your, let's get it back, propose a bet. You've seen these AIs that generate images, right? Like stable diffusion and like Wally or whatever. You literally just tell it, I want this image in this style and boom, it's done. And it would take an artist weeks to produce that. And you can do it in five seconds and you could tell the AI give me 20 of those and then you just keep iterating and in five minutes you've got something mind blowing. So the fact that it's so much easier to create content, you can do the same thing with the written word. The people who need to be compensated J Cal, if they don't get what they want, they may just go away, but they'll be 10 times

or a hundred times more people. Here's how you are. Thank you for bringing up this example so that I can prove how wrong you are. Getting images is suing stable diffusion at the moment. Here is what the dipshits at stable diffusion did. They train their AI on Getty images with the watermarks on them and they've been busted and they are dead to rights now and they're going to pay a hundred million dollars or more to getting images for stealing their content and allowing it to be republished in a commercial setting. Those images are a little too good to me. Over time, this will get resolved J Cal. Stable

Stable diffusion copied the Getty image watermark, and put it on a reproduced work.

Stable diffusion, and put it on a reproduced work. Okay, I think stable diffusion is a bigger problem, is they can't do noses and ears and eyelids. That looks like a bigger problem to me.

Anyway, shout out to stable diffusion for stealing Getty image contents. So funny.

By the way, Mozart influenced by Haydn, not Beethoven, sorry.

By the way, there's a really interesting topic about AI that we don't have time to get to this week, but I think we should put it on the docket for next week, which is, should

AIs be trained to lie? Super important.

Great questions.

Because that's happening right now.

And the last thing I'll say on this, from my perspective, maybe we can jump on after this is, this is the best thing that could happen for all of the monopolists in technology, because Microsoft taking 500 or 600 basis points of share is the best way to ensure that the FTC has zero credibility in going after the course, or anybody else in tech. All of those things I think are DOA. So in some ways, actually, Google leaking five or 6% of the market share is a really

good thing, because the FTC is rendered toothless in making any claim that this is course, or anybody else in tech.

Any claim that this is. Assuming they understand that. That's just a good point. I mean, it's kind of a good news, bad news scenario with this whole thing. But the good news is that the Google monopoly has finally been cracked. The bad news is that it's Microsoft and even bigger monopoly. That's the one that's done it. But it just shows like how vulnerable all these big tech companies are TBD. And they may all end up competing with each other.

Everyone's got a tactical nuclear web now and we don't know where it's going to get pointed and who's going to set it off and where and like the weaponry has completely changed.


The weaponry totally changed. Anyway, to prove how wrong you guys are. Here is the verge. Here we go. How many times have you said we're wrong? Here's the other lawsuit. Open source. Writers. Nick, are you feeding him this nonsense? Is that what's going on? No, this isn't. I've been tracking this.

You people haven't. You guys need to watch what's happening right now. Co-pilot, GitHub, chat GPT and Microsoft are being sued by developers because co-pilot was built off of stolen content. These lawsuits are just beginning.

This will be a transitory effect and it won't change the dynamics of where this is going

over the long term. It changed the dynamics of YouTube in the long term.

So let's keep going. I don't know.

They're doing pretty good. We have a portfolio company called Source Graphics is building and the co-writing AI. Why don't you just put your logo page up if you're going to go through the whole portfolio? I mean, they're building something similar, but it's opt in. You just get all of your customers to opt into it.

You want to stay away from the plane? Let's move on. What do you want to move on?

I think SaX is pointed to about AI. Why do you want to move on? You want to do the craic down? Let's talk about AI SA. It will be a great chat. Let's talk about it next week though. Yeah, I think there's more time. The state of the union. I don't know about you guys, but I found it one of the more profoundly disappointing, saddening states of the union I've ever seen. Why? Unpack that. Why?

I think it was, you know, we often kind of focus on the one year cycle of what the state of the union says, but I think what's more important is how much the data that's coming through in the state of the union supports the more scary long term cycle. I've talked about this a lot on how scared I am about kind of where we're headed with respect to the US's ability to fund its financial obligations. And the scary moment at the state of the union, besides Biden's inability to kind of articulate much very well, which was honestly a really discouraging sight to see, was, you know, when he talked about what, you know, the Republicans are trying to cut Social Security and Medicare, the US Treasury put out a projection, which I tweeted last week.

State of the union? Yeah, I think it deserves more time.


Unpack that. Why? Unpack that. Why? Originally shared on Twitter by Lynn Alden. This is the US Treasury's forecast of debt held by the United States over time. And the assumptions in this forecast are we've got a certain amount of debt today, and we're running Social Security and Medicare forward without cuts. And so what happens as we make these Social Security Medicare payments, and we accrue and pay interest on the debt that we hold today, and we don't change the tax rates in this country. And this is what happens. And so it's a runaway kind of debt scenario, and the US, by definition, has to default at some point, because you cannot tax every dollar of the economy at 100% at some point. And so, you know, there are two ways this can go. The first way is you have to cut back on these major kind of, you know, expense commitments that naturally balloon over time.

And that is Social Security and Medicare. And the other one is that you just tax a lot more. And when you tax a lot more, economic growth gets affected, and it makes it really hard to eventually pay off that debt. And the debt continues to spiral. So I think what we saw was, number one, the announcement by Biden, hey, Republicans are the ones who want to cut Social Security and Medicare, and they all screamed and they said, no way, no way. We'll never do that. And a lot of them did interviews afterwards and said it's total BS if Biden would say that, which I think supports what the polls have shown, which is on both sides of the aisle, people do not want to see Social Security and Medicare cut in any way right now. That means you can't and you guys saw what happened in France, where they pushed back the retirement age by two years, and there was effectively riots across the country. I don't know if you guys saw this a few weeks ago, we didn't talk about it. But it was pretty brutal, pretty ugly. And so this is a real cost that's coming bare. It's coming bare in the United States, not just with the publicly funded Social Security and Medicare programs, but also with a lot of the private pensions, they're going to need to get bailed out with the same federal money, because they're not going to let those things go bankrupt.

And that's another trillion plus of liabilities. So you know, that that cost is going to balloon. And the only solution at that point is to introduce massive tax hikes. And so they propose this billionaire tax, this tax on unrecognized capital gains, it is literally if you keep Social Security, Medicare where they are, and you don't pay down the debt, and you don't grow the economy fast enough, you have to introduce significant tax hikes across corporate and the individual taxpayer base. And so you know, it really, again, if you zoom out, it really indicates this steepening curve that the US has to climb its way out of. And as you tax more, there's less to invest in the economic growth. The government is a far worse investor in economic growth than the free market. And that means that we can't grow our way out and grow GDP enough to ultimately cover our debt obligations. And this is what Dalio's book that I mentioned in 2021 was so kind of importantly sharing. This is a multi hundred year cycle, and the last couple decades get really nasty. And this chart, which is a forecast from the actual US Treasury, highlights the problem. And the comments made in the Congress this week by the president of the United States indicates how serious of a problem this is going to be, because no one wants to cut these major cost obligations that we have coming to you.

And so what are you talking about? Saxton, aren't you and the Republicans, you want to cut Medicare and get rid of Biden said you guys want to get rid of it. No. Okay. What was that kerfuffle about? With your, uh, who's the person on your squad who is yelling and screaming out at the president

of the United States? No, no, no, no, that doesn't matter. That was just sort of silliness. But who was screaming at him? I don't know. But let me tell you what happened at the State of the Union is that Biden was basically trying to take a page out of Bill Clinton's playbook. When Bill Clinton lost the midterms in 1994, he basically triangulated to the center and he did two things. He started going for kind of small ball. He started playing small ball politics. It was like school uniforms and things like that that were relatively unobjectionable and that regular middle-class people could get behind. And then he basically posed as the defender of entitlement programs. Back then, in 1996, he ran against Dole by portraying Dole.

He went all the way back to Dole's vote against Medicare. This is what the Biden team is teeing up for the re-elect in 24 is they're talking about things like curbing ticket master fees and fixing right turn red lights. I mean, seriously, like total small ball. They're going to try and pretend like he wasn't the most radical tax and spend progressive over the last two years that we've really ever had in American history. They're going to try and make everyone forget that and just talk about the small objectable stuff. And then he's also going to, again, pose as the stalwart defender of entitlement programs, which are very popular. And partly they're doing this. They're ready, I think, getting ready for DeSantis on this, because if you read some of the political analysis on this and Josh Bartlow had a good column and Andrew Sullivan had a good column talking about this, that way back when DeSantis was in Congress and he was like a backbencher, he voted for some Republican budgets, a Paul Ryan budget that had some of this entitlement reform in it. So they're going to try and portray him as against entitlement reform. Now, I don't think it's going to work because all you have to say is like, listen, that was a long time ago. I wasn't voting for cutting entitlements. I just voted for my party's budget.

That's irrelevant. I can tell you I will not cut entitlements. So any smart Republican is going to take entitlement reform off the table because it is a total third rail and they will lose. And I think Trump had the right instincts on this. And I'm sure that any major Republican have the right instincts on this. What did you think of the, you see the way they're throwing Rick Scott under the bus. Rick Scott had this proposal about...

But who was screaming at him? I don't know. What did you think of the...

You see the way that having entitlements go from being sort of permanently entitled to being something that gets voted on every year. And the rest of the Republican caucus is like, hell no, we're not touching that. And they can't run away fast enough from Rick Scott. So Freiburg is right. There is no appetite for entitlement reform. And I would tell any Republican, if you want to do entitlement reform, it's got to be bipartisan. You got to do what Ronald Reagan did, which is join hands with Tip O'Neill and Moynihan, and you jump off the cliff together. Do not stick your neck out on this.

Do you have any thoughts on the State of the Union? Do you have any thoughts on the State of the Union writ large? No. Marjorie Taylor Greene yelling a liar at the President?


Okay. Well, this is the most boring segment of the show.

Well, I mean, both sides engaged in a lot of weirdness. Biden was bellowing at various points in his speech. It was quite bizarre. And you're right, there were some Republicans

in the audience who were braying like jackasses. And it's unfortunate because I think things... Utterly, utterly disappointed.

I think if the Republicans had just calmed down, I think Biden's sort of weird mannerisms where he was like practically yelling. It was like Abe Simpson, you know, old man yelling at the cloud.

Yeah, they do a good job of like right at the moment of self-immolation, they let him off the hook. Totally. It's really incredible. Republicans just, they have no impulse control. Right when they could just be quiet, sit there calm, quiet, and let Biden do the damage to himself, they just cannot. I like McCarthy.

I like McCarthy telling Marjorie Taylor Greene, and Mitt Romney telling that other liar guy to get the hell out of here.

Listen, it's always been hard to control backbenchers. This is the reality. That does not speak for the entire party.

How do you guys feel about being taxed on your change in net worth from year to year? You mean a wealth tax? Wealth tax, yeah.

If it's for billionaires, totally cool. If it's for centimillionaires or decimillionaires, absolutely off the table. It's your cut off, huh? We want those people to grow their wealth and invest. The billionaires, yeah, sure.

Is that what you think is coming, Freeberg?


So hard to execute on. What are you supposed to do? I would love to see a website where you have a piece of yarn. You know those sites where you have a little pin and you kind of push the pin out and the other one has to go in. You can't have it all. You can't have low taxes and have these entitlement programs and have this level of spending. It's impossible. You have to tax. That's the only way. Or you have to cut the entitlement programs or you have to cut the spending.

Well, you're right about that, Freeberg, but let me tell you why the American people think it would be ridiculous to cut their entitlements. They've watched as Washington spent $8 trillion on forever wars in the Middle East. They just watched as Biden spent trillions enriching the pharma companies on a fughezi that didn't work. They've just watched as hundreds of billions went to climate special interests, the Democratic Party.

Did you just say the vaccine was a fughezi?

We talked about that. I'm going to bring it back up. Hold on. They've watched as trillions of dollars have gone to the donor class and they are going to rise up and say the hell with you. If you cut off our social security that we paid into for decades while enriching all these special interests.

I don't advocate for any of these points.

These points. And the bailouts of corporations in the great financial crisis. You're right.

I think it's just an analytical certainty that you've got to zoom out and stop thinking about the yearly cycle and the election cycle on this stuff and just look at where we're headed over a multi-decade cycle. And there's just no resolution to this problem. Based on the way we're all oriented right now.

What happens if there is a wealth tax? If there is a wealth tax, let's just say,

on billionaires. Let me just say one thing. Sorry, Jacob. What would they do? Would they leave the country? Go to Puerto Rico? That did happen in France, by the way. I think 40% of the people that were taxed left.

And then they came back. They would violate our constitution.

It will be litigated for sure. If you can get the cost of energy in this country to drop by 50 to 75% and you can increase energy capacity by 10 to 20 fold, then you have a fighting chance because you can actually grow the economy out of the problem. And that's really where I am optimistic and excited about opportunities like Fusion. And you guys can make fun of me all you want. But if we can get to a point where we can increment energy capacity by an order of magnitude, there is economic growth that will arise from that, from all these new industries and these production systems. And that's how we can grow our way out of the debt entitlement tax problem

where one of those three things has to give in the absence of that. You know what the cheapest source of energy is today? Fusion. It's three cents a kilowatt hour. Fusion, you mean? No, it's

fusion. It's the sun using solar panels. There it is. Yeah, the problem tomorrow. Honestly, let me just say this one thing. The problem is, can you scale energy capacity by 10x? And can you do it fast enough? And that's the real technical while creating jobs.

That's the real techno economic question, right? Like the real technical while creating jobs.

That's the real I posted a link in my reading list today. This week, you guys can go look at it. The most prolific distribution of fusion technology is China actually deploying solar on every single rooftop in China. The United States could do it too. And you will

10x the power available. Well, yeah, I mean they are… And it will be zero.

They're increasing they're adding a half a terawatt hour. And you'll be zero. They're increasing their… It will happen in the next years. It's just sometimes we want to create intellectual complexity. I love these different forms of fusion.

I just think it's a 50 year Trodge to get it because even if we fix it, I'm not betting on it.

I'm just saying there is a one. I'm just agreeing with you. I'm just building on your point to say it's actually happening fusion is what is actually creating abundant zero cost energy today

Yeah There's and so look if we can increase energy capacity in this country by 10x energy production capacity by 10x And we can do it in the next 20 to 30 years You can have it in hand by putting so long every rooftop if we can we have a path out of the entitlement Tax debt problem. Otherwise one of those three things is gonna give and it's gonna be ugly

You can have it in hand by putting so long every rooftop. The thing that we are lacking right now is not actually the generation capability Which is incredibly cheap, but it's really scalable storage And once we figure that out, which is actually the real technical bottleneck to abundant zero cost energy We'll have your boundary condition met and we'll have it well before

different forms of fusion are commercializable France had an exodus of an estimated Forty two thousand millionaires between 2000 and 2012

And really the end before yeah, I only have to hold it. Yeah, I only have to hold it for 12 years

And then they were reversed they were just losing the tax base so violently. They had no choice

Gonna happen in California if they move

In California already without It's happening already

There's stupidly telling people that this wealth tax is gonna have a 10-year look forward So everybody I know is at least talking about hey could this happen in the next 10 years? Because if it might happen five years from now, we got to leave now

Because if I wait they're gonna chase you they're gonna chase me. Yeah specifically you

They hate they hate you no, I mean it's it's uh, it's a problem It is a serious. Let me tell you I mean to Freeburg's point. It's not just Ray Dalio the great political satirist Pedro O'Rourke who died last year He wrote that American politics is defined by the formula X minus Y equals a big stink where X is what people want from government and Y equals what they're willing to pay for government and That difference is basically the big stink and the Java politicians is to manage that stink and the problem is the politicians have not been doing a good job managing it and They increasingly do a worse job managing it. So yeah at some point. It's gonna blow up

You guys want to hear a crazy statistic? I was pulling this out You know what the budget per capita is of the city of San Francisco? So how much the city spends per year divided by the number of people that live in the city? Well, we know it's a couple of billion dollar budget. We know only a couple hundred billion dollar budget Yeah, and it's 800 thousand. It's it's it's eighteen thousand dollars and it's 800 thousand and it's 800 percent as in per year That's how much the city of San Francisco spends a third of that money By the way thirty percent of it goes to or twenty five percent goes to public health care Now when you look at that eighteen thousand dollar budget per capita It is more than every single state of the Union on a per capita basis except Oregon and North Dakota which have very weird A budget so San Francisco spends more than every other state per capita It spends more in aggregate than 16 US states And the federal budget per capita is fifteen thousand dollars the federal government's budget per capita fifteen thousand dollars So San Francisco spends more than 15 states and spends more per capita than every other state except two and spends more than the federal Government per capita and I think that really highlights and you need to tax the base to do that And now we are seeing San Francisco is the largest population of Exodus and population Exodus of any city and business Exodus of any city in the United States. That is your predictor. That is your predictor of where this goes

Well in Miami, Florida, right in Miami, Florida my contrast has no state income tax they just rely on property taxes sales tax, which California has as well there is a a

a income tax and cap gains tax of zero in Florida and they seem to make it work on

880,000 people was the peak in San Francisco 2018 2019 2020 and then in 2021 815 so some 10%

Further in 2020 Further in 2020 people think it's down to 650. Yeah, I think it is hard to track

But yeah, I think it is hard to track but yeah, well, you have a lot of people who owned homes there And maybe own second homes because let's face it It was a well-heeled group of individuals living there and a lot of them just still have their places But they've left and then they're in the process of selling their places

The point is increasing the tax rate is a great short-term solution But over the long term if that budget her citizen isn't brought in line There is no way to tax the base enough without causing the tax base to leave Forget about what my anyone's personal opinions are. That's just the economic reality of what happened in France It's what's happening in San Francisco. There's a lot of great predictors in history of where this has happened And so something has to give or you have to have a miracle like an energy miracle

But you know, we'll all keep investing for that. All right, everybody this has been an amazing amazing episode of the all-in podcast a hundred and fifteen episodes for the dictator Sultan of science and for the pacifist David the dove sacks. I am the world's greatest monitor Jake out and we'll see you next time. Bye. Bye. I love you besties