The Exchanges

Q Freberg, your thoughts on this? You're friends with Vinod, as you mentioned, and you've always said to me and in our personal discussions that The reason you do this pod is because you really want to set an example of how to have great conversations and learn from each other and, and the tone of what we do here. So your thoughts on this?

A The unfortunate reality in a voting system and election cycle, like we're in Vinod went and did a fundraiser. It's public, but he did a fundraiser for Biden a few weeks ago, and he wants to win the election. He wants to make his horse win. There's a lot of reasons why I'm sure Vinod has chosen that person to be his horse. And so when you get on the playing field, you got two teams and only one team wins. So, you know, everyone pulls out all the stops to win. One of the things that is done is unfortunate and it over time causes an erosion and a hardening into a kind of polarity between all people, which is that you call the other side wrong or bad or extreme. The term that he used, which really, I think Personifies the problem is he said their listeners are there are MAGA extremists.

AI assessment note: “he said their listeners are there are MAGA extremists”

Q Fred Barker, any thoughts for you about more options?

A Well, I think part of this is actually, there's been these Rules imposed by NASDAQ and New York Stock Exchange that have tried to enforce upon the listed companies rules and regulations that are not tied to securities laws, including some of these aspects of diversity of your board. And I know that there have been a lot of public company board members and CEOs that have quietly tried to push back on these rules that they're imposing. Social systems upon, you know, what is effectively a regulated exchange. And so there's certainly like an interest in a pushing for a competitive marketplace for exchanges. There was a survey done recently that showed, I got to find some of this data, but it showed the cost of going public on NASDAQ, Amex, or the New York Stock Exchange was about 7.4 million dollars. Cost of going public through an over the counter bulletin board listing service was about two million dollars. And then there's these additional kind of rules that are being imposed if you want to be listed on the big boards. So clearly there's interest and it's great to see a competitive market emerge, you know, how there have, by the way, there have been other attempts. There's that long-term stock exchange. You guys remember that a couple of years ago, incentivize long-term holdings. There was two other equity security exchanges efforts made in the last couple of years that didn't t…

AI assessment note: “I think more competition is always better.”

Q Explain that. What does that mean? Young people will be upset to know that, that both things happen.

A You've got to be able to hold two thoughts at the same time. Again, not my thought, but if you believe October seventh is resistant, you can still believe sexual violence happened. The fact that a group of feminists, none I'm particularly close to, have actually signed letters saying this didn't happen is crazy. Absolutely crazy. I mean, look, I'm going to read this. The UN special representative on sexual violence Pramila Patton traveled to Israel, and here is what she wrote. She said, Eyewitnessed in Israel were scenes of unspeakable violence perpetrated with shocking brutality. Catalog of the most extreme and inhumane forms of killing, torture, and other horrors, including sexual violence. That's the UN. They're not exactly a pro-Israel group.

AI assessment note: “if you believe October seventh is resistant, you can still believe sexual violence happened”

Q What are they doing with the extra money sacks? Because are they using that to make other people in this whole crater whole as well? So maybe they're thinking holistically, they're taking the profits of those Solana holders, let's say, where Bitcoin holders went for X. And is that going to trickle down to the equity holders? Who knows? Freeberg, you have thoughts?

A Yeah, I think the plan is that that excess capital beyond what is, quote, owed to the account holders goes to the equity holders because it's considered excess of the liabilities. Therefore, it goes to the shareholders. I'll also say In a traditional, like, brokerage, you create an account, and when you set up an account, your account has a currency denomination. It's a dollar-based account or a euro-based account, and then you, your account holds a bunch of assets, and so at any given time, the value of your account is represented to you in that local currency. The challenge with crypto exchanges is that there's often this representation of a wallet, which is meant to hold assets that don't necessarily Have the intention of being translated into a locally denominated currency, and so I think that's what makes the system different. In the case of a U.S. exchange bankruptcy, and this happens in commodity trading accounts or commodity exchanges often, there's a freezing of the assets and then a liquidation of the assets where the freezing of the assets sets the price or the value at the moment of what you're supposed to hold in that account in your currency of your account. And so the bankruptcy judge and the trustee are treating this Like a liquidation process using a local currency that was set at the time, whereas many folks don't consider that the intention of the account, th…

AI assessment note: “excess capital beyond what is, quote, owed to the account holders goes to the equity holders”

Q But will he drop out is the question we're asking you. Will he drop out?

A No, he's already said he won't. Look, the problem that people in the Democratic Party have who have this concern about Biden losing the election because of this cognitive issue is that there is no mechanism to replace a candidate who has won all the necessary primary votes against his will. Biden has said he's going to be the nominee. He has no desire to drop out. So unless he changes his mind or there's some act of God, he's going to be the nominee. The time for Democrats to make this change was a year ago. It required mounting a primary challenge to Biden the way that Dean Phillips has done. The problem is that the Democratic Party elders and the powerful people in the party said, we're going with Biden. And so no one wanted to run against him. And they basically Set up the primary calendar so that Biden would win, and he is going to win. He'll have all of the primary votes he needs locked up by the end of March. And Dean Phillips is not going to be able to basically stop him. So there is no mechanism to remove Biden. He's going to be the candidate, you know, barring act of God, unless he can be persuaded to step down. So it's not going to happen.

AI assessment note: “No, he's already said he won't.”

Q And what's your prediction this year, Sachs? Biggest business deal. Sachs, what do you got?

A My biggest business deal is whatever the Fed decides to do to replace or extend BTFP, the Bank Term Funding Program. Um, remember that the BTFP, which is what the Fed used to bail out the regional banking system, Last year. And was it like March or April? It was only supposed to last for one year. It's supposed to be a temporary program, but I do not think that the balance sheets of regional banks are healthy enough to survive without this continued liquidity from this program. So I think the feds can have to do something to either replace the program, extend the program. They're going to have to do something. And I think that regional banks are still in pretty bad shape with You know, impaired commercial debt portfolios, and they need this liquidity as long as the yield curve remains inverted. So, I think the Fed is gonna try and somehow figure out a program to keep these guys Liquid until they can de-invert the yield curve. And I think the Fed's trying to massage all of this into place without there being a recession.

AI assessment note: “My biggest business deal is whatever the Fed decides to do to replace or extend BTFP”

Q Okay, what was the, what do you perceive was the problem with your talk, or what they perceive the problem with your talk is?

A So the last day of the TED conference, they have a town hall. People from the audience come and give feedback. The town hall opened with two people denouncing my talk back to back. The first said that it was racist and dangerous and irresponsible, and the second guy, who's actually a guy I knew, he said that I was willing to have a slide back into the days of separate but equal, which was totally the opposite of my talk, and I I implore anyone to just go online and watch it, go on YouTube, decide for yourself whether these criticisms bear any resemblance to, to reality. But that was the idea, that the talk is racist, that, you know, I'm, I'm some kind of pro-Jim Crow person. It's really, really deranged kind of criticisms.

AI assessment note: “The first said that it was racist and dangerous and irresponsible”

Q Which is, you have massive youth unemployment in China and waning growth, and so the simplest and most reductive way for China to basically grow and to appease, you know, 25% of young people, mostly men, from not uprising, is to essentially create demand, and the best way to create demand is to essentially create, you know, a war machine. And that is why they go to war. Is that?

A I would say, ah, ah, I appreciate that option. I've worked very hard on the 12 scenarios for getting to war. If there's a war between the U.S. and China in the next year, or four years, or decade, how is it gonna happen, in my view, the most likely? Not this way. It's gonna happen the same way the last war happened. Now, if I were to take a quiz here, since I know we live In the United States of Amnesia, ok. But, ah, when was the last war between the US and China? I'm not going to give you a quiz, but I'll tell you the answer was, 1950. What? Ok, and what happened? In 1950, ah, North Korea attacked South Korea. Ah, almost pushed them off the whole peninsula. The U.S. had just won World War II. That's five years after the end of World War II. MacArthur and American troops were in Japan. They came to the rescue of South Korea. They pushed the North Koreans right back up the peninsula. And the 38th parallel, which had been the starting point, they pushed right across without even thinking, and were pushing right towards the Chinese border, the Yalu. So you're now one year, this is 1951 year after Mao has just won the Chinese Civil War. He hasn't even consolidated his position. The U.S. is Superman. We've just dropped two bombs next door in Japan in World War II, monopoly of nuclear power. The likely, the possibility that China would attack the U.S. It was unimaginable, certainly t…

AI assessment note: “how is it gonna happen, in my view, the most likely? Not this way.”

Q Do you agree with that, Graham? From both sides. From the inside.

A I, yeah, I, I, I mean, again, I live on the other side, I live on both sides of this curtain, and I would say inside, there's much more debate, and there was much more debate than we take credit for. George Bush made a terrible, terrible, terrible mistake in invading Iraq in in 2003. Who, who, who said that to him? His father's closest advisor, Brent Scowcroft, who was joined at the hip with the father, said to him, this is a terrible, dumb mistake. He even went so far as to write an op-ed about it, after he had, now, he did not write an op-ed without talking to Bush's father. Would George H.W. Bush have done this? No. If Gore, if the, if the count had gone right in Florida, and Gore had been president, would we have gone into Iraq? No. So, electing the right president, and having the right, so if it had been the Bush 41 team, rather than the Bush 43 team, we wouldn't have made that mistake, so.

AI assessment note: “I would say inside, there's much more debate, and there was much more debate”

Q efforts and the dollars that have gone into trying to solve this problem through decriminalization that has obviously led to massive problems in inner cities? Is it a problem, the criminalization in this country, the incarceration in this country? And if so, what's the right path to addressing it? And obviously you have an intimate history here, so you would know this better than most that we would talk to.

A Look, I think it is a problem, and let me tell you what I did as governor. We did criminal justice reform in New Jersey, and we did it in a bipartisan way, and this is what we did. I thought that the biggest problem we had in New Jersey was our, um, our state constitution required, it was a shall issue state on bail. Everyone was entitled to bail under our constitution, and the only factor that could be taken into account constitutionally, David, was risk of flight. So if you had a rap sheet as long as my arm and your arm put together, that could not be considered by a judge in whether or not to grant bail or not, nor could the, the nature of the violence you committed in those acts. I saw that as the enormous problem. I agreed with Democrats that on a lot of these minor drug crimes, and I don't mean dealing crimes, I mean possession crimes, with addicts being arrested for small amounts of possession, that we had become a debtor's prison in New Jersey. That if somebody couldn't afford the 500 bucks For the minimum bill, which was usually 5000 dollars. They spent more time in, in, in county and state prison than they ever would have spent if they had, you know, just pled guilty and been allowed to plead guilty and get sentenced. So the deal we made was this. On certain defined nonviolent crimes, I would agree to the state law allowing release on people's own recognizance. In ret…

AI assessment note: “Look, I think it is a problem, and let me tell you what I did as governor.”

Q Well, I mean, if you thought his answer was sophomoric, why'd you endorse him two weeks later?

A I endorsed him because I was convinced he was going to be the Republican nominee for president. And I didn't want Hillary Clinton to be the president. And so having been in that race, competed with him after he won South Carolina, convinced he was going to be the nominee and having at that time had a 15 year relationship with him. My view was I could go in there and try to make him a better candidate. And if he won a better president. And that's why I endorse him. Absolutely nothing to do with his sophomoric answer on that. I didn't like his answer, um, on the wall either saying Mexico is going to pay for it. I thought that was sophomoric as well, but you know what? In American politics, You don't get to all vote for the candidate you want to vote for. Um, you get to vote for the ones who are left. And if, if I had my first choice in 16, it would have been me, but that didn't work out. So I defaulted into Trump because I thought he was a better choice than Hillary Clinton. And by the way, still do think he was a better choice than Hillary Clinton.

AI assessment note: “I endorsed him because I was convinced he was going to be the Republican nominee”

Q Is there anything about Joe Biden's policy in Ukraine that you would change?

A Yeah, would have been much more aggressive in providing military hardware much sooner, um, than what he did. And I think he's been, he's been the hand wringer on it. Every step has had, has been preceded by fretting and burrowing, um, furrowing brows and, and, and, uh, hand wringing. And I think if you're going to be in this, you have to give them the tools they need to win. Um, when I met with Zelensky a month ago, He made it very clear to me. He had no interest in American or allied troops in Ukraine now or ever. He felt this was Ukraine's war to win or lose, but that they needed the, uh, the, the military hardware necessary to, to compete in this war against Russia. And that, you know, my view of what their biggest concerns were, which I, the ones that I agree with are the pace of An amount of armaments that have been given, not only by the U.S., but by the rest of the NATO allies as well.

AI assessment note: “would have been much more aggressive in providing military hardware much sooner”

Q last question from my end, which is why are you running for president? Recent polling data shows a 52% unfavorable rating, 23% favorable, and you're at three and a half percent in the average of the national polls. What's the goal here? Help us understand how you think about the campaign and how you think about your future as a political operator and what your goal is with the campaign.

A My goal is to be president of the United States. And since I've been doing this for a while, I don't pay attention to national polls because we don't have a national primary. And in fact, we don't have a national general election. What we have is 50 individual state elections. That's the way we nominate candidates. And if you look at the most recent poll in New Hampshire, I'm in second place in New Hampshire at 14%. Ahead of Ron DeSantis, ahead of Vivek Ahead of Nikki, ahead of Pence, um, and behind only Trump. And now I'm behind by 20 points. I'll give you that. But I'm behind a guy who's only at 34% in that poll. And so I absolutely believe I can win New Hampshire. And I believe if I win New Hampshire, David, then the whole race changes.

AI assessment note: “My goal is to be president of the United States.”

Q this particular place to get you that magical experience. So, you know, I, I don't think you have to pick one or the other, but architecturally, 20 trillion dollars of value on the web is built around web pages, Advertising and e-commerce, right? And sending traffic to those other places. And what we're all saying unequivocally is it's moving to knowledge extraction and intelligent agents. And I think that's tectonic.

A But I still think there'll be clicks. I, you know, I Have been using barred a whole bunch and they have made massive rapid progress just to give you, but one example here, I'll share my screen. It is pretty extraordinary how quickly they're figuring this out. And I did this just in the search while we're talking about the five best Greek restaurants, uh, in the Bay area obviously came up with Kokari and, you know, other ones. And then I asked it like, Hey, what are the top items on each of these menus? They started putting images in and linking to Yelp. And then I said, Hey, tell me the most expensive wines and. It actually got that from Kokari. They have a Chateau Margaux, 2009 for 1500, Chamath. I don't think it's good enough for you, but.

AI assessment note: “But I still think there'll be clicks.”

Q ten billion from Microsoft. Everybody else get a license and try to catch up. Friedberg. We have Chamath Pro regulation licensing, I think, or just being pretty thoughtful about it. There you got Sachs being typically a free market monster, let the laws be what they are, but these senators are going to do regulatory capture. Where do you, as the sultan of science, stand on this very important issue?

A I think there's a more important Kind of broader set of trends that are worth noting, and that the folks doing these hearings and having these conversations are aware of, which implies why they might be saying the things that they're saying. That's not necessarily about regulatory capture. And that is that a lot of these models Can be developed and generated to be much smaller. We're seeing, you know, models that can effectively run on an iPhone, we're seeing a number of open source models that are being published. Now there's a group called mosaic ml. Last week, they published what looks like a pretty good quality model. That has, you know, a very large kind of token input, which means you can do a lot with it. And that model can be downloaded and used by anyone for free. You know, really good open source license that they provided on that model. And that's really just the tip of the iceberg on what's going on, which is that these models are very quickly becoming ubiquitous, commoditized, small, and effectively are able to move to and be run on the edge of the network. As a result, that means that it's very hard to see who's using what models how behind the products and tools that they're building. And so if that's the trend, Then it becomes very hard for a regulatory agency to go in and audit every server, or every computer or every computer on a network and say, What model a…

AI assessment note: “it becomes very hard for a regulatory agency to go in and audit”

Q Right. Can you compare that to the numbers before for folks to understand?

A The Falcon nine. Mass to useful orbit is 17 metric tons, and the variable cost that, you know, I, I have seen Elon tweet about is somewhere around fifteen million dollars. So you are lifting more than five times the mass to orbit, and based on other statements, that hundred metric tons is a very conservative estimate, and you are doing it at call it 10 to 15% of the cost. So this is a, you know, we can all do the math, but we can envelope it, um, you know, roughly a 50 X. Huge. Change. And this, you know, massively changes unit economics for Starlink for sending anything into orbit. And as Antonio said, it's, it's great for SpaceX. It's great for America. And it's great for, uh, for everyone.

AI assessment note: “The Falcon nine. Mass to useful orbit is 17 metric tons”

Q Yeah, no, but on the M&A side, don't you think this would be like incredible?

A No, but the only reason I say that again is it is just so early. Like I, in the text, I mentioned this to you guys. I remember, and Sax and I were in the middle of this. We were both right at the beginning of social networking. Sax started Genie. I was in the middle of AIM. And all of a sudden we saw Reed start SocialNet. Then we saw Friendster gets started. Then we saw MySpace get started. And you have to remember, when you look back now, 20 years later, the winner was the seventh company, which was Facebook. Not the first, not the second, it was the seventh, which started two and a half years properly after the entire WebPoint two-o phenomenon started.

AI assessment note: “No, but the only reason I say that again is it is just so early.”

Q How do you, how do you implement that philosophy Um, differently now at Anduril so that you have a more inclusive place where folks on the left and folks on the right come together, work on things that really matter. I mean, I think everybody agrees you're building really important things in the world. So how do you do that this time around that's different from the Facebook experience?

A So a few things. One, I think that building, working in national security has been a great filter where, uh, people aren't going to come work for you unless they're okay working in a bit of a controversial field. I'm actually somewhat concerned about the Ukraine conflict in that regard, in that in the making In, in making defense mainstream, it makes it possible for people to potentially say, oh, that isn't controversial now. I'm gonna go to this place, and then I'm gonna potentially attack people for their views. But I think when you run a company that is inherently working on something that's controversial, people on the right and on the left both feel like they're on the side of this important bipartisan issue, and all of these other policy differences can kind of go to the side. And the culture at Anderil is, everyone is free to have whatever politics they want. Like, I'm a Republican. Our CEO, Brian Schimpf, is a Democrat. We both make Significant contributions to our respective sizes, and we have employees across the country. And I think also it's, it's nipping it in the bud. You know, it's about when somebody says something that is out of line, it's about getting it early and saying, hey, that's not okay at this company. We're, we're here to talk, to work on a common mission. For example, if we had a manager who then publicly went and said, the half of my employees who s…

AI assessment note: “The culture at Anderil is, everyone is free to have whatever politics they want.”

Q Amy, I don't know if you've had a chance to read Alito's draft opinion, but can you sort of walk us through his legal framework for coming to his conclusion that, that this thing needs to be struck down and what, why he's saying what he's saying?

A Yes, it is a 67 page opinion with another 30 pages or so in the appendix. And what he tackles it in two ways. The first is kind of from this originalist perspective. He looks at the idea of whether or not the right to an abortion is something that is deeply rooted in our country's history. And he concludes that it is not, that not only was there no right to an abortion, he said, until The late 20th century when, right around the time that the court issued its decision in Roe, but in fact, abortion was a crime in many places. And so, you know, he starts from that premise that, that there's no deeply rooted tradition of abortion being a right in, under the constitution. And that goes to the idea of what did the framers intend? Does it fall within this Fundamental right that would be protected by the Constitution, even if it is not specifically enumerated in the Constitution. But then he also has to look at Roe and Casey, because those laws have been in effect, that those cases have been in effect for 50 years now. The court issued this decision in Roe in the early seventies and then reaffirmed it in Casey in 1992. Because the Supreme Court and courts generally have a principle Called stare decisis that says that courts should not overturn their decisions just because they think the earlier decisions are wrong, that there needs to be a good reason to do that. And the court has nev…

AI assessment note: “what he tackles it in two ways. The first is kind of from this originalist perspective.”

Q the gay rights law, or even, like, interracial marriage, you know, Jason's in an interracial marriage, I am, you know, many of our friends are Are gay and married? How are we supposed to think about what this does precedentially? And does it create risk that all those rights could be taken away from us or our, or people that we care about? Like, is that something that's possible here?

A I mean, I do think there's a lot of those rights are going to be challenged. Justice Alito in this draft opinion says, no, those rights are different, you know, because Only abortion rests on the purposeful termination of a human life. But, you know, to go back to what Tom talked about earlier, you know, those rights rest, you know, are also not in the Constitution, rest on this same sort of principle called, you know, substantive, substantive due process, you know, rest on a right to privacy. And there were definitely arguments made In the Supreme Court, in the Mississippi case, not by Mississippi, but by groups supporting Mississippi, that if you overrule Roe and Casey, you do have to go back and look at these other rights.

AI assessment note: “I do think there's a lot of those rights are going to be challenged.”

Q that it wasn't, or has something fundamentally changed when we look at the Supreme Court and how they're behaving now? That's one of the things I'm struggling with is, was I just, You know, living under a, a false vision of, of this institution, and now I'm seeing reality, uh, or has something actually changed with the court, and should we as a country be looking at the court differently?

A I mean, I think at least one thing that has changed is that right up until the point, you know, in the last 10 years when Justices David Souter and John Paul Stevens retired, and then Justice Anthony Kennedy in 2018, you know, Now people who are sitting on the Supreme Court, you didn't always, you know, people did not always have the sense that they were voting in the same way as the party that put them on the court. You know, Justices Souter and Stevens, it really had become a solid part of the court's liberal wing by the time they retired. Justice Anthony Kennedy was still a conservative, but he was a conservative, you know, who provided the key votes on things like same-sex marriage. Uh, and whether or not there is a right to be intimate with somebody of the same, the same gender. And so you just didn't, I think people looked at the court and didn't think those decisions are political. You know, they're not always dividing five to four on sort of so-called party lines. I think that has changed. And I think some of the, the confirmation hearings, I think in particular, Democrats and progressives feel that at least one of the seats, either Justice Gorsuch or Justice Amy Coney Barrett, was, was stolen, in effect, because Justice Scalia died in February of 2016. Senator, Senate Majority Leader Mitch McConnell refused to have hearings for the President Obama's nominee, saying the…

AI assessment note: “I think at least one thing that has changed is that right up until the point”

Q rights into Title VII. And that opinion was written by Gorsuch with Roberts, Joining him. You know, I think it was, uh, that was a six, four or six, three majority. So the idea that this Supreme Court would overturn, you know, marriage equality, you know, Bergeville, which was just, um, written by Kennedy in 2015. I mean, I understand that you're saying it's possible, but is it really likely?

A Well, look, Bostic is totally different. It's interpreting a federal statute, a law that Congress passed. That's their point. The conservatives view is like, okay, Congress passes a law to protect, you know, same sex marriage. Fantastic. Have at it. And if it has passed Title VII to prohibit discrimination on the basis of sexual orientation, fine. Uh, we don't have a problem with that, but it's, our problem is interpreting the Constitution to strike down those laws. Do you say, is it likely? You know, the, it is a, it is a bizarre circumstance, because doctrinally, when we think as lawyers, when we think as judges, it should be much harder to overturn Roe versus Wade, because we do have, this is a lot of water under a lot of bridges. Whereas with same-sex marriage, it's a pretty new thing that we've recognized in the constitution. And if you say, look, we're going to talk about the founders of the constitution. We're going to talk about originalism. I'm going to give you two propositions. You tell me which one is more likely. And that is in the year, 1800, someone said, uh, given the choice, do we protect a woman's right to have an abortion? Say in the instance of rape or incest or something like that. Or we're going to say that it is, there's a constitutional right for two men to marry each other. This is not close. It is just not close. Now I believe in both of those rights, …

AI assessment note: “Obergefell is just an easy target, to be honest.”

Q of the output of that facility goes way down. I mean, are, you know, are you hearing about more of that stuff happening, particularly during this kind of Omicron wave? Where the real effect of that hasn't really hit the supply chain system yet. And we're still kind of seeing a buildup of, you know, of demand, and we don't, you know, we haven't really kind of hit the problems.

A So for the last 18 months, China had this total zero tolerance policy and was very successful in keeping COVID out of out of their country. And so manufacturing just kept running as if not no problem in China, which is the majority of this manufacturing. With Omicron, you're starting to see that it is still taking hold and a zero tolerance policy. We haven't yet seen like major shutdowns and waves of shutdowns, but a little bit, you're seeing that here and there. The zero tolerance policy has shown up, for example, uh, at least twice where one long, one port worker in a Chinese port got COVID and they shut the whole port down for like three weeks.

AI assessment note: “We haven't yet seen like major shutdowns and waves of shutdowns, but a little bit”

Q Ryan, what is the state now? Should we be worried about the supply chain? Is it getting better? Is it getting worse? What's 2022 going to look like?

A Yeah. I mean, I think the supply chain means a lot of things, and it'll depend on what your industry is, what's really happening. But, you know, it goes for everything from manufacturing products, which means sourcing all the subcomponents like semiconductors through logistics and final delivery all the way to a customer store. And where Flexport focuses on is sort of picking goods up from factories around the world and delivering them into fulfillment centers all over the world. So kind of that global mile is what we sometimes call it. There you're seeing real disruption. Um, and it starts really with the pandemic shift in consumer behavior where people started buying more goods because they couldn't go to restaurants and travel and things. And so a lot of spend shifted onto goods and imports are up almost 20% imported container volumes. So that's the start of it all. Uh, and then what we learned is our infrastructure is dilapidated and unable to handle a 20% increase. And by infrastructure, I mean the number of ships in the world The capacity of throughput of the ports, the number of trucks and availability of trucks and chassis, which is the trailers that haul containers around. We just didn't have enough of these things or the port capacity, you know, like look at, uh, American ports operate this. I just learned the statistic pretty recently and I keep saying it cause it ap…

AI assessment note: “There you're seeing real disruption. Um, and it starts really with the pandemic shift”

Q Well, first of all, I'd be very, very empathetic. Um, I'd probably want to understand how someone could lose money, um, when they couldn't buy a stock at the all time high. So I think the details around that, I mean, if you look back, uh, and obviously this had nothing to do with the decision, right? But Thursday was the all time high.

A Yeah. Yeah. But that's, but the reason for that is because the ability of wall street bets to continue the trade was It was basically interrupted, right? They were, they were engaged in a short squeeze against these big hedge funds. And in order for this to keep driving the squeeze up and up and up, they needed to basically to, to be able to buy. And then once they got frozen out of all the online broker accounts, not just you guys, but all of them, that was that, that, that, that broke the trade, right? That's when it, that's when it crashed. But that's what they're so, but that's what they were so upset about is because they got, they got locked out of the buy side of the trade. They weren't locked out of the sell side, right? They got locked out of the buy side, and that allowed the, the big hedge funds, 24 hours to regroup and, uh, and cover the trade. The price went down, and that basically cracked the whole thing.

AI assessment note: “they got locked out of the buy side, and that allowed the, the big hedge funds”

Q Why are the, um, Futures markets still trading up one and a half points, and why are things still ready?

A You know, I, I think that, listen, The, the, the stock markets ripped the last two days, assuming that Biden's going to win. And I think what the markets are starting to price in is that this is not going to be a blue wave. There's no mandate here for massive tax reform. There's going to be a divided Senate. It's going to be hard to pass legislation. That's going to be overly onerous. That the stimulus package is going to be smaller, not larger, which is why the, the rates are backing up. So I think from a, I think from a public markets perspective, the idea that we're going to have some checks and balances in place, it can live with either the, the devil we know, uh, or it can live with Biden, but it doesn't want Biden with Elizabeth Warren as treasury secretary.

AI assessment note: “what the markets are starting to price in is that this is not going to be a blue wave”

Q Sachs, uh, we'll give you the, the final word here. Uh, is this a good thing for humanity, for international relations, that China is, you know, having a little bit of a hand check here, like, hey, there's going to be a limit to how you can operate in the West, uh, or is this a personal vendetta from Trump, and then what do you see going forward?

A Um, it's, it's true that, I mean, first of all, our social networks are not allowed over there. So I don't think we need to feel bad about, um, you know, not allowing their social networks over here, but besides reciprocity or the lack of it, um, I think the deeper reason for this is just around, uh, data security and, and how the, You know, and I think that the CCP has given us adequate grounds here to ban not just TikTok, but, you know, apps like that, um, because President Xi himself declared this policy of civil military fusion, which means that any business, um, in China, any business asset there, including data, can be appropriated to serve the, the ends of the Chinese military or the Communist Party, and, you know, the, the CCP has set up this vast surveillance Apparatus over its own citizens. It's, um, asserted, um, extraterritorial sovereignty over former Chinese citizens, meaning dissidents. Um, so the, the Chinese diaspora anywhere in the world, uh, they've asserted sovereignty over that. And, um, you know, recently there was a pretty remarkable speech by the FBI director, Christopher Wray, describing, you know, Operation Foxhunt, which is the Chinese effort to track down and presumably Ultimately punish Chinese dissonance anywhere in the world. And as part of that, that the Chinese have sort of weaponized AI and social media. And so, uh, he also described, I mean, t…

AI assessment note: “I think the deeper reason for this is just around, uh, data security”

Q What does it mean? Are those jobs going to still exist? Are a lot of the lawyers who are coming out of school going, oh my God, was this a good idea or a bad idea?

A The job will exist. The tasks will be different, right? Um, in order to have a partner-driven model, you need to bring people up the ranks, right? In the same way as you do with software engineers. You need to have junior engineers so that one day you can have senior engineers and know what they're doing. Um, But the way to get there is very different. The way of getting there today will not be lock yourself in the physical data room, read through every single document, mark the errors, and, you know, go fax it, right? It's, and it's also no longer just look in the virtual data room and control F. It's orchestrating the agent that will be doing that work.

AI assessment note: “The job will exist. The tasks will be different, right?”

Q And it did absolutely fantastic. But then the government of the United States said, Hey, we cannot as venture capitalists invest in China anymore. So what are your, what's your take on the, the opportunity in China? Will that return? And just the, the experience you had with all those incredible hits at the time.

A When we first went into China, it was 2007, I think. Uh, the world was flat. It was the moniker at the time. China had gained admission to the World Trade Organization in, I think, 2001. And we all believed that it would integrate into the global economy. That premise proved wrong, and so we had a period where it was really interesting to be able to share knowledge and share ideas and sort of figure out how we can build a globally interconnected set of systems and companies, uh, and life just got too hard for that, honestly, and we saw just more division between the two countries, so we embarked on global separation just over two years ago, and what used to be Sequoia China is now an independent business called Hongshan, And they're off to the races. I think there's a real challenge in China right now. Uh, some stat I got recently, in 2018, there were 51,000 companies started in China. In 2023, it was 1200.

AI assessment note: “I think there's a real challenge in China right now.”

Q on to worst performing asset. We're cooking with oil. Worst performing asset. I went with energy, Chamatho and tech energy, junk debt. Sachs went with office hours in San Francisco, and Freberg went with consumer credit. Wow, I think we nailed it in almost all those cases here. What do we got for 2024? It's actually got a 2024 prediction of worst performing asset. Again, this is not investing advice.

A Yeah, so I'm not going to trade on this, so just take it with a grain of salt, but I would bet against the magnificent seven just because I believe that what goes up must come down, and the hotter they are, the harder they fall. I'm not saying that the magnificent seven are actually going to go down. I'm just saying that the S&P four 93 Are gonna catch up a little bit. So I would book this as a spread trade where I would bet on the S and P four 93 over the magnificent seven, because again, I just think that there's gotta be some catching up here and the huge gains made by the magnificent seven were really based on story, you know, based on AI. And I don't see why those gains should be limited to The Magnificent Seven if AI is going to play such a big role in the economy.

AI assessment note: “I would bet against the magnificent seven just because I believe that what goes up”