The Exchanges

Q Charles Koch's father was well-to-do, right? He was in the oil business, but what Charles did with it was itself amazing.

A But this, but this is a good example, right? Because Charles' father had, there's about twenty-one million revenue when Charles took over the business, and I believe he grew it about 10,000 times, and, and, and if, but if he had to start from zero, He might be at maybe a 100th of where, 100th of where he was today, because, because that's the way these numbers work, which means he would have had much less impact on society given what he's able to do. And if, and if you and I agree that he's funding a lot of things that we think are quite impressive for society, that might not have happened if his father hadn't given him the business.

AI assessment note: “Charles' father had, there's about twenty-one million revenue when Charles took over”

Q And then, so is there that dynamic here? Uh, and I think that really depends on the capabilities. If you can, if you can commoditize it in eight months, there is no.

A It's interesting. Cause like, I feel like everyone has different answers to this. Like one answer to this, which sounds silly to me is that Nothing really matters. Uh, it's just who gets first to like AGI or ASI and the whole world hits like a singularity where there's like this godlike intelligence and everything changes. So that's like, that's like the one like really weird, like almost like religious kind of thing going on out here, which with a lot of our friends and I, and I worry some of the very top people subscribe to us. So that's like, I was like option one and that's what they're doing. They're racing towards that option two, which is like, is like that they're just going to keep being ways that the frontier stays ahead. Yeah. Of everything else for a very long time. So, so the frontier is significantly ahead in 2032, and it's still ahead, and you're still paying for it to be ahead. Okay, that's like a really good business for the next six years. It's gonna make a lot of money. Uh, whereas intuitively in these things to me, it's like eventually, when I say commoditized, eventually, like everyone else catches up. It doesn't matter that you're only, that you're three months or six months, nine months ahead, because everyone's so much better, you know, and it's good enough for everything you need, in which case it's bad for them. But that, that, that, that, that would, …

AI assessment note: “eventually, when I say commoditized, eventually, like everyone else catches up.”

Q I, I, I, I think there's, there's this really beautiful synergy of AI and humans, which is that AI has always kind of been good at the more boilerplate side of things, right? At, at taking on these more repetitive tasks, which are also nicely, you know, the humans want to be able to work on the higher level of strategic decisions or, or the, the creative side of tasks.

A This is interesting though, because this is man machine symbiosis originally with like lick litter in the sixties is you do the automatable things, the computer and then the higher level of humans. And in chess, we always talked about this, but then eventually it got good at everything. It was better than humans at everything. And it's like, it's like, there's this funny joke where you, if you, you, you're not married yet, but like, there's like a husband and wife will agree. Like the husband gets to make all the big important decisions and the wife can handle the small things. But then after like 60 years of marriage, as you guys, as it turns out, there were no big decisions. But it's like, if you give something to small things, eventually it's going to get everything.

AI assessment note: “if you give something to small things, eventually it's going to get everything.”

Q research with China. So even in that industry, though, it's slightly different than wall street pursuing profits in China. Still, there is a, a profit motive and an unwillingness to rock the boat for fear of killing the golden goose. And time and again, we still see this in various industries, right? Like when was the last time you saw a Chinese villain in a Hollywood movie, right? Uh, never.

A Both of these, they're just so shocking to me, Mike. Like, I was invited last week to some, like, big ceremony honor, you know, for some, for some non-profit, and they're gonna honor Fauci, and I wrote back, like, you realize, as far as I could tell, people saw that this was a lab-made virus, they spoke out about it, Fauci gave them a call, they changed their mind in public, then they got a big grant. Like, it's very clear this guy was bribing, as far as I could tell, these researchers, not, not to say it, right? I mean, I don't know when he's gonna get in trouble for that, or if he's gonna get in trouble for that, but it's very clear to me He's bribing them. And if you go to the Hollywood thing, by the way, I'm actually friends of people who run one of the biggest studios in Hollywood is a digital one. I won't say the name because they're, you know, they've told me off the record, but I'll tell it to you is they tell me there's two different looks that Chinese get for every one of their movies. One look is things where they say, uh, before it comes out, if you have to censor these or can't go to China, but the other look is things you have to censor for American audiences or else you never work for China again. And so they effectively get to censor These things they're doing. It's been that way for a long time now.

AI assessment note: “they tell me there's two different looks that Chinese get for every one of their movies.”

Q Can you and I, can we both agree? Washington, I mean, they do some doozies, right? But only Washington could spend trillions of dollars injected into the economy and call it an inflation reduction.

A It is pretty ridiculous. It's, it's pretty ridiculous. It scares, it scares me. We need to, we need to get the deficit from two trillion down to not much of a deficit if we're going to fix it. But I, I hope, I hope you're right and things turn over and then it's not a replay of the late seventies. That'd be much better. Uh, one last question on the tech stuff. I really liked your letter to Mark Zuckerberg in twenty-twenty-two saying that they had to get fit. Basically there's warning of bloat. I think this is similar to what a lot of us are saying to a lot of our companies who are feeling very expansive in twenty-twenty-one. And I mean, have you seen things get fit overall in general in Silicon Valley? Is there still a lot of bloat? Like where are we right now on that?

AI assessment note: “It is pretty ridiculous. It's, it's pretty ridiculous. It scares, it scares me.”

Q way to think about it is it's not a single country anymore. It's Sunni versus Shiite. Right? It's a bi-national thing. And actually, a lot of people on Blue Team think of it this way. This guy, Podorzer, uh, in the Atlantic, who, this, had you seen this article? He's like, it's actually a bi-national republic, and we should not think of Reds as fellow Americans. Do you see that?

A I, I didn't see it, but I could believe it. I mean, this is like the Tim, I think Tim Urban had a really good book on this, and where people, it's happening, people's tribal brains, and like the giant golems they form to fight each other. I think it's very unhealthy, and it, America's definitely moved them more that way. I mean, I'd have to say, Balji, your other analogy works well for this, too. In the 19th century, I mean, we had a civil war, right? I mean, in the 19th century, we had all sorts of divisions. We had, newspapers were either one side or the other. I mean, this, this was, this was, this was, there was, there was a time when we had this. This is not abnormal to human nature. It's actually, it's actually, this is actually, I think, like, the 19 fifties were more the exception. Not, I mean, and there were tribes then, too. It's just, the tribes have come to the fore again, and they've become the main thing, which is very sad.

AI assessment note: “I, I didn't see it, but I could believe it.”

Q or they wanted things to be true, and I think it's important. The pursuit of wisdom requires staring uncomfortable truths in the face, and I think it's good to have The not teardownness, but the unflinching reality of scholarly analysis. I think that's critical, but it also has to be buttressed with, okay, but who is great? Who does represent the good? Who does embody virtue? Who are we celebrating?

A But I like what you said about Plutarch. I mean, looking at Thomas Jefferson, obviously he was a flawed individual, but obviously, I mean, even as Obama said back when it was more popular to say it, he was probably the most learned man to be in the White House, and it was just extraordinary intellect. Extremely impact on our country. Go back. I don't agree with everything. He sounds like he was a bit of a jerk, but he's a genius, and he influenced our nation, and the idea that we have to take down statues of him and take down statues of him out of museums and stuff, it just, it seems like it's maybe good to emphasize the virtues, even if we're going to also acknowledge the flaws.

AI assessment note: “it's maybe good to emphasize the virtues, even if we're going to also acknowledge the flaws.”

Q money. And what they want to do is not only make their lives better, which is very important, but they want to try and export all the things that they're building, eight Get off the oil economy. It's very, very important for them. But secondly, to contribute to the world, and you see it so much in the region. What can we do to make the world a better place?

A These people have so much wealth and money from the energy, from the oil economy. They're trying to transition out of it. You know, I, I found it really interesting. UAE obviously learned a lot from Singapore, a very well-run small state. They're clearly learning a lot from Israel, secretly before, openly now. Um, you, you know, what's fascinating to me when I go there, I meet such competent people now in the UAE From Britain, from, you know, from different parts of Europe, and it almost seems like the, the civil servants in, in, in England, they would go run the world in the British Empire, and like, they actually had quite competent civil servants, apparently, for a couple hundred years. It seems there's no, there's nothing for them to do anymore, and so it seems like a lot of the most confident young people out of Cambridge and whatnot, now are recruited by these places like the UAE, and they're helping run the world from there instead.

AI assessment note: “UAE obviously learned a lot from Singapore, a very well-run small state.”

Q They have a car payment, an insurance payment, and gas. Are they not making enough to cover that, and then some? Why would they do it?

A Obviously. I think people don't understand markets very well. It's very annoying. It's our friend, I love Joe Green, but he's like, oh, he's like, back then, he's like, it's not paying them enough, it's wrong. I'm like, dude, I think it's like this, unfortunately on the left, it's an arrogance where they assume people just don't know what they're doing. You know, I, I saw a great story about this also. Apparently there's the guys who come here from other countries, just work an Uber really, really hard for like a couple years, and then they buy like apartment complexes back in these other countries. So I thought it was kind of a neat thing. Just get their whole family set up back home, and then go back and do it.

AI assessment note: “Obviously. I think people don't understand markets very well.”

Q thinking about what radical reform would look like. And, and I'm sorry to get us on this high horse, but, but I think it's incumbent to the innovators to actually come back and say, no, it should look like this. If we want to compete with China, Russia, North Korea, Iran, Whoever thought we'd be, like, shooting at Houthis? I mean, how many people could find them on the map?

A The whole thing is so one-off right now, Steve. You're right. I mean, I literally was on the phone with a congressman two nights ago because the head of the Secret Service is working with him to try to, like, do something to try to protect. I'm not going to say who, but you can imagine who's being threatened right now in our country, uh, you know, after, like, one of them, and they need some new technologies we have access to, and it's, it's kind of an embarrassing mess, like, if you want to try to do something competent quickly versus do it the right way. So I think you're right. I think you're right. We need to come up with the frameworks. There's, the, the, the thing I would say is I do think there's something about big trusted primes run well that's very positive as well. I actually would like there to be seven or eight new primes that are really well run and trusted, you know.

AI assessment note: “I actually would like there to be seven or eight new primes”

Q defense industrial base that essentially keeps replenishing the platforms, and that's what we're talking about doing with our platforms now, right? If you have a treatable platforms that are meant to go and deter an enemy and you send them out into combat and they don't come back, You better be able to backfill them, otherwise you're essentially out of ammo, and if you're out of ammo, you lose. Right.

A People don't realize how much war is an engineering game. When you talk about engineering, right? Engineering is, is dealing with scarcity, right? So if you want to design a bridge, anyone could build a bridge with infinite money. The question is, how do you build it really, really safe to last a long time without, you know, by using a 100th less metal, right? That's, it's the same thing with everything else we're doing. And so one thing, of course, our most important adversary, unfortunately, right now is China. China is the, is the biggest adversary. And I think most Americans would be pretty shocked to learn like how much more shipbuilding capacity China has. What's, what's, what's the situation right now?

AI assessment note: “People don't realize how much war is an engineering game. Engineering is dealing with scarcity”

Q education and healthcare. You know, people talk about folks in the Valley being self-made, and that's largely true in the sense that it's not dynastic wealth, but if you look at the stories of most of them, They largely came from stable families. They largely had a good education. They didn't have huge healthcare issues. And so what I'm talking about is how do we get folks that those basics?

A And, and, and no, and I think, I think on the side of getting people basics, I think, I think we're aligned. I guess we probably have different views on how much taxes can just can distort things. I'm curious, like the health care row is something I'm working a lot on here in Texas. On the health care policy side, um, one of the issues, and I, and I'm obviously very pro-Texas, I moved here, but whenever you have one party in charge of a state, sometimes that party gets influences. And so one of the influences in Texas is the health systems and insurance companies are very connected with the Republican Party. And they stop a lot of competition, and so I, you know, you know, in my view, healthcare costs would not go up nearly as much if it was easier to compete with the hospitals, if you had more telemedicine, more innovation, if you had APIs, you know, into the data to allow people to build apps. Um, are, are, are, are you a fan of, like, using innovation in healthcare to make it more affordable as well? Is that part, is that part of the answer?

AI assessment note: “healthcare costs would not go up nearly as much if it was easier to compete”

Q And that just seems like, that's like, kind of twisted, right? Because hating Islamophobia is not more important than loving Islam.

A Yeah. That's, that's very well said. You know, it's, it's interesting because there are so many ways to talk about all these things with race, but I, I feel like, so I, I, I guess you say I'm Jewish on one side. I'm mostly Irish on the other side. My ancestors got the shit beat out of us for hundreds of years on both sides, but obviously not as much maybe as others did. But I, I guess I'm told I present as white and so therefore I shouldn't talk about race in America at all because it's too dangerous and I'm just gonna, it's just not appropriate. Like that's the message I hear because I actually have a lot of thoughts and opinions on it, but I'm like, you know, and I, and I have nuanced thoughts and I, You know, a big part of my Jewish history is fighting for civil rights in my family. We're very involved in that. But, but I'm just told, listen, you're not really supposed to weigh in on these things. It's just, it's too dangerous. It's going to get in the way of everything you're trying to do and trying to build. That's kind of been my, been my default. You know, I got, get in trouble when I say something about it. Like, like, how should we be approaching this? Because it seems like it's so sensitive that it's, it is dangerous.

AI assessment note: “there are so many ways to talk about all these things with race”

Q It's pretty crazy. He got like teenage boys to go and sleep with, you know, men in the Navy to find guys who are gay to get them thrown out. And, uh, you know, this was something where obviously getting those, like, young men to do this was a huge scandal, and he did all kinds of crap like that, right?

A So, I mean, he, he had the biggest criminal right, the SEC Act of 1934, the all, by the way, since we're talking about banks in this conversation, all of our banks are in straitjackets that were created for them in 1934 to prevent them from innovating in ways that they naturally would have. Like, all of our banks would be using much more advanced technology. You and I would not be putting money in banks without All sorts of new, distributed, advanced technology that's just illegal, thanks to, obviously, like, you know, JFK's father, who was one of the major criminals at the time and had done a lot of scams, so he got put in charge of this, you know.

AI assessment note: “by the way, since we're talking about banks in this conversation”

Q My sense for, like, fiction is that you might want to just see yourself be, like, Duke Atreides or something, right? Like, you want to be Luke Skywalker versus, like, some other random human that you probably don't care about anymore. But, like, the sports story, right? Like, Jake actually had to get in the ring and, like, fight A bigger man.

A You want the real story about the real people you're seeing live. I was with a friend who's a very famous actor a couple days ago in LA, and he's like, dude, he's like buying out these in-person spaces and stuff, and like doing things that are going to be more about like, like in-person leisure events and stuff, because it feels like you need, you do need more real life stuff, right? I want to ask you guys about culture a little bit. You, you, I think, I feel like you're, you know a lot more about where culture is going than me. I don't understand these kids these days. You guys, you guys, you're a genius. You know, in the 19 seventies, sixties, Kids wanted to be astronauts. We had a lot of cool science fiction. We kind of looked up to the future as like this really exciting thing. And obviously, like you said, a lot of people want to be YouTubers partially because you're influenced, which is, which is not, it's not bad, but, but should they be all trying to be influencers? Should they be trying to be more like Palmer? Like, like, like how should people be, be looking up to things?

AI assessment note: “I want to ask you guys about culture a little bit.”

Q Why do you think there isn't more of a positive sum mindset around the internet?

A It's interesting. I think, I think, I think you're right. I think if people can't build themselves, they probably don't have, they probably don't have the ability to imagine is what, what, what they, what they, they or their friends could create that could be different. It, it, it, it is very strange to me. I'm, I'm, I'm, I'm a venture capitalist and I'm a builder. And so I'm constantly seeing all these new possibilities in the biology world that we talk a lot about in this podcast or, you know, with tunnels with Elon Musk to completely change how all of our cities work. I hate traffic. I hope you didn't run into too much coming over here today, but You know, it's, uh, I think Austin's not too bad yet at this time of day. But, you know, and there's all, there's all these other, there's all these, there's all these things in space that are possible. There's all these things with cheap energy. I mean, I think people don't even realize how it's very likely we have very cheap energy in 10 or 20 years, and it just completely changes all these possibilities for our world. And let's, we can all, we can all have our own palaces underground, you know. There's just all these things, there's infinitely, or, or in the ocean, or in space. And there's just, there's, there's, there's all these new ways you can, like, hack with DNA and create things, create new species, create old species. The…

AI assessment note: “if people can't build themselves, they probably don't have... the ability to imagine”

Q look, I'm only going to, I like, normally I would review these 20 operative people. I'm still going to review them, but everyone else, instead of saying go, no, you say, Hey, You didn't pass our first filter, but if you want, here's an amazing test. And like, we're going to look at the people seriously who do a great job on it. Like, why would you not do that?

A This is my controversial point of view is that it used to be like, 30 years ago is, oh, the SAT is kind of unfair if you're poor because you can't get as good of like a study tutor, but like now there's things to study online that are free that I, I think it's, I think there's almost no excuse, not just to have agency. Now, I guess some people in some areas where they don't have access to computers or they're not, don't have access to food or whatever, fine. Like there's probably some extreme poverty that still blocks you, but in America today, I think it's more about agency and culture. And, and then intelligence. Now, now I want, I want to ask about these tests. Like what should the best talent assessments measure? Because obviously there's like IQ is a very big part of this. Uh, but then there's other things as well. And like, like, like, how do you think about that? What are the vectors you're measuring?

AI assessment note: “This is my controversial point of view is that it used to be”