E87: Emerging markets, Sri Lanka, 9.1% CPI, market sentiment, NASA's Webb telescope & more

0:00 Bestie intros! 1:41 Emerging markets, Sri Lanka break down 36:01 9.1% CPI print 48:15 Current market sentiments from retail and institutional investors 1:05:00 NASA's Webb telescope images 1:15:57 Beagle rescue, Biden admin's lack of private sector experience, Russia's new energy play BEAGLE RESCUE INFO: https://www.cnn.com/2022/07/12/us/beagles-virginia-facility-rescue/index.html https://www.nytimes.com/2022/07/12/us/envigo-beagles-breeder-adoption.html https://www.humanesociety.org/beaglerescue Follow the besties: https://twitter.com/chamath https://linktr.ee/calacanis https://twitter.com/DavidSacks https://twitter.com/friedberg Follow the pod: https://twitter.com/theallinpod https://linktr.ee/allinpodcast Intro Music Credit: https://rb.gy/tppkzl https://twitter.com/yung_spielburg Intro Video Credit: https://twitter.com/TheZachEffect Referenced in the show: https://data.worldbank.org/indicator/NY. GDP. MKTP. KD. ZG?end=2021&locations=VN-US-CN&start=1984&view=chart https://data.worldbank.org/indicator/NY. GDP. MKTP. KD. ZG?end=2021&locations=VN-US-CN&start=1984&view=chart https://www.wsj.com/articles/rising-inflation-and-interest-rates-heap-pressure-on-emerging-markets-11655544600 https://www.cnn.com/asia/live-news/sri-lanka-protests-07-13-22-intl/index.html https://www.reuters.com/markets/europe/emerging-markets-drive-global-debt-record-303-trillion-iif-2022-02-23/ https://worldpopulationreview.com/countries/countries-by-gdp https://www.reuters.com/markets/commodities/fertiliser-ban-decimates-sri-lankan-crops-government-popularity-ebbs-2022-03-03 https://www.weforum.org/agenda/2016/02/what-next-for-sri-lanka/ https://www.nytimes.com/2021/12/07/world/asia/sri-lanka-organic-farming-fertilizer.html https://www.bloomberg.com/news/articles/2022-07-05/sri-lanka-aims-to-stop-money-printing-as-inflation-nears-60 https://twitter.com/chamath/status/561467714485514240 https://datareportal.com/reports/digital-2022-sri-lanka https://michaelshellenberger.substack.com/p/green-dogma-behind-fall-of-sri-lanka https://www.scmp.com/news/china/diplomacy/article/3134224/why-china-building-gleaming-new-government-facilities-africa https://www.scmp.com/news/china/diplomacy/article/2186970/how-presidential-palace-burundi-fits-chinas-plans-africa https://www.forbes.com/sites/rufaskamau/2022/07/11/inflation-protests-span-sri-lanka-albania-argentina-panama-kenya-ghanahow-long-before-they-hit-the-united-states/ https://tradingeconomics.com/united-states/inflation-cpi https://www.redfin.com/news/data-center/ https://fredblog.stlouisfed.org/2014/04/the-taylor-rule/ https://fred.stlouisfed.org/series/DGS10 https://www.nbcnews.com/data-graphics/compare-photos-nasas-james-webb-space-telescope-hubble-space-telescope-rcna37875 https://www.wsj.com/articles/nasa-james-webb-space-telescope-greg-robinson-images-11657137487 https://www.google.com/finance/quote/NOTV:NASDAQ https://www.wsj.com/articles/no-business-experience-needed-joe-biden-white-house-officials-committee-to-unleash-prosperity-report-11657661328

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Chamath Palihapitiya?

  Wait, that's not even a sweater. That's a sweatshirt. No, no, no.

• 0:03David Sacks?

  It's not even cashmere. It looks like polyester or something.

• 0:05Chamath Palihapitiya?

  Okay, quick, Freebro, come on the video where you're wearing the same thing as Jake Al, so we can make a quick joke. Morons. I mean, you guys are so predictably dumb, the two of you.

• 0:16David Friedberg?

  It's so itchy.

• 0:18Chamath Palihapitiya?

  Do you have a rash?

• 0:19David Friedberg?

  Jason made me buy this outfit and I put it on and I'm like itching. I'm about to take this thing off.

• 0:24David Sacks?

  Polyester, wool, polyurethane. What's that made out of?

• 0:46Jason Calacanis?

  Okay, everybody, welcome back to the All In Pod, episode 87. Here we go. Tons of news going on. Thanks for all the great feedback on episode 86. We're going to start with emerging markets. Oh, and yeah, welcome to the program, David Freebro, excellent of science, the dictator himself from his palace in Sri Lanka, his new palace in Sri Lanka, he'll be taking over over there. We'll get into that. And Sacks is in a, in witness protection right now, apparently. Where are you, Sacks, in this white, nondescript room? Can you say where you are?

• 1:16David Sacks?

  This is my soundproof padded room.

• 1:18Jason Calacanis?

  Yeah. Oh, is that what if, that's what Biden's done? Your Biden derangement syndrome? They, they put you in an asylum? What do you do? You rock back and forth and say inflation, Ukraine, inflation, Ukraine?

• 1:28David Sacks?

  No, we just had the room soundproof for, you know, better podcasting.

• 1:31Jason Calacanis?

  Oh, look at you, taking the, taking the job seriously.

• 1:34David Sacks?

  I don't say it looks bad. I think it looks good.

• 1:36Jason Calacanis?

  Yeah, you can put a little art behind you or something. Just put one of your Monets behind you. You know, the ones you have in storage downstairs. Okay, emerging markets are facing some huge challenges right now. Quick mark, quick primer on three types of markets developed emerging and the frontier market, if you don't know. Developed markets are considered US, Japan, Europe. Their GDP growth is lower, single digits typically. In the emerging market, it's roughly defined as developing but not fully developed. That includes countries like the BRICS, which is Brazil, Russia, India, China, and recently added South Africa. Many other markets are included in that. They were previously called the third world in the 80s. People didn't like that term. Investors will bet on them having higher GDP growth, typically two times or three times what the developed world has.

• 2:20Jason Calacanis?

  China, for example, 2019, 6% growth. US in 2019, 2.1% growth. And of course, there's frontier markets. These are viewed as small, unstable, illiquid, generally risky. If you look at something like Kenya, Vietnam, those would fall into that category. Vietnam, 7% GDP growth in 2019 to the US is 2%. Sometimes people like to make bets on them. Here's a nice little chart for y'all to look at, and you can just see China versus Vietnam and the United States since the 80s. And so, why is this all important? Well, The Wall Street Journal reported last week that EMs, the emerging markets, have been feeling massive pressure. We'll get to Sri Lanka in a moment. That's a frontier market, to be clear.

• 3:02Jason Calacanis?

  But three things, well, we've got probably a half dozen things going on. Let me just highlight maybe the top five, and then I'll hand it off to the besties. You have high bond and loan yields. The debts, debt rates are increasing in the emerging markets and frontier markets. Think what happens when you got a variable mortgage, or you try to get a new market, a new mortgage. In the developing markets, the developing market investors have stopped investing in emerging markets and frontier markets, as you might suspect during a downturn. And they're even pulling money out. Then you have surging inflation. We all know about that, and we're going to talk about inflation here in the US because we got the print this morning. And slowing growth. We've also talked about this for the last six months on the program.

• 3:44Jason Calacanis?

  All these problems get exacerbated when economic growth slows, and it's slowing globally. And then finally, we have the potential issue of contagion. We don't know exactly what's going to happen when various countries are facing these challenges, although we did tell you here what would happen with the Ukraine. Shout out to Saks and Free Bird fertilizer, wheat oil, all that good stuff. And it's becoming very acute. Perhaps the canary in the coal mine is Sri Lanka. Breaking news, President Rajapaksa fled for the Maldives, and it's a state of emergency. Curfews were declared. I think that's been canceled as of the taping of this. We can get into the state of Sri Lanka. Your thoughts, Friedberg?

• 4:28Jason Calacanis?

  I know you've been chomping at the bit to discuss this.

• 4:30David Friedberg?

  Yeah, that was a good, long intro. I think, you know, the high level, for me, if you look kind of at debt markets around the world, there's about $300 trillion of global debt. And I put this chart in the chat here, Nick. You can put it on the video.

• 4:51David Friedberg?

  And about 100 trillion of that debt globally is in emerging markets. And so these countries generally have, you know, much more kind of variable GDP growth as well as challenges ultimately with their currencies. Most of this debt recently, and this has been a trend for a number of years lately, has been issued in their local currency rather than in US dollars. And so as the currency devalues, it becomes more challenging for an investor to make a return if they're investing from a US dollar-denominated base or some other dollar-denominated base. So, look, the EM, the emerging markets are heavily saddled.

• 5:36David Friedberg?

  I mean, some of these countries have over, you know, 300% or 250% debt to GDP. And what's really gone on recently is that many of them, as net importers of energy and food, are going to struggle to make the stuff they need to make at home or to feed their people at home because of the rising inflation that's been happening around the world from the producers of those goods and service of those goods. And so to import those goods is more expensive. That makes it more challenging for people to be able to afford food, to be able to afford energy. This is part of what we're seeing happening in Sri Lanka. What's compounding this is we have rising inflation in the US. So as we've been talking about a lot, the Fed's been raising interest rates here in

• 6:20David Friedberg?

  the US, which means that you can now buy treasuries that yield 3%. If you're an investor around the world, where else are you going to put your money except US treasuries in a market like this? You want to buy 3% yield in US dollars versus, you know, getting 10% yield in, you know, some currency-denominated account, some currency-denominated bond in a country you don't really know well or trust as much as the United States. And so as a result, a lot of dollars are moving out of emerging market debt into US debt, and the price of that debt has collapsed. And so we've seen in the last couple of months, a decline of emerging market debt of about 20%. This makes it harder for those countries To issue new debt to fund things and it's creating this really challenging spiral

• 7:04David Friedberg?

  that may ultimately lead to defaults. Those defaults absolutely have a trickling effect. Because if one country starts to default and you're an investor in emerging market debt, you're going to say, hey, wait a second, this, this, this, I just took a huge loss in this position. You're going to start to sell off other emerging market debt. And then it becomes harder for those countries to raise more debt and fund themselves. And it can cause a cataclysmic spiral. So, you know, it's a really scary scenario we're wading into now. And I think we really hope that the US starts to taper interest rates and we find some stability in these markets over the next couple of months. Because it's not just a food and energy crisis, it's also a humanitarian crisis. And ultimately could lead to a global financial crisis.

• 7:42Jason Calacanis?

  And in fact, the bond issuers.

• 7:44David Friedberg?

  It's highly complex, but it's something that folks are tracking very closely here.

• 7:48Jason Calacanis?

  What's happening also is the companies that were already at risk are going to start feeling this impact. We could jump into Sri Lanka if we want.

• 7:56Chamath Palihapitiya?

  Sri Lanka has, I think, a bunch of short term issues and a couple of very long term issues. Let me set the backdrop because I think this is really interesting. Let's take, um, let's study Sri Lanka through the lens of two other countries, Jamaica and Singapore. If you go all the way back to 1960, so, you know, roughly when Singapore became a nation. The Jamaican population in 1960 was 1.6 million people. The Singaporean population was 1.6 million people. Sri Lanka's population was 9.8 million. Jamaica's GDP was 700 million. Singapore's GDP was 700 million.

• 8:40Chamath Palihapitiya?

  Sri Lanka's was 1.4 billion. Now you fast forward to 2022, Jamaica's GDP is about 13 billion. Singapore's GDP has grown to about 360 billion. And Sri Lanka's GDP is 80 billion. So, like, what did Singapore do right? What did Jamaica kind of get right? Because one of the things that they kept in check was their population, even though their GDP didn't expand that much, so per capita income was still quite healthy. And then what did Sri Lanka get right and what did Sri Lanka get wrong? Well, some of the things when you look at Singapore is that they found a way to embrace.

• 9:22Chamath Palihapitiya?

  Despite a very heterogeneous culture and sets of religions inside that entity, inside that city-state, they found a way to promote multiculturalism, yet also promote English as the lingua franca. Why was that small thing so important? Because it allowed them to be a hub for the rest of the world in a way that many, many other countries couldn't do. The second thing that they had was a very low level of corruption because they had a leader, in that case Li Kuan yu. And again, some people in the West will paint it as slightly authoritarian, you know, he would paint it as Asian values, but the net result of it was very low levels of corruption,

• 10:03Chamath Palihapitiya?

  a small but highly effective public service, and meaningful investments in education and healthcare to make that country grow over decades. And within a generation, that country completely, you know, exceeded all expectations. Sri Lanka struggled through a civil war. I was a by-product of that civil war. It was partly religious, it was partly ethnic, and it was 20-plus years in the making and in the happening, and it took a very right-wing, autocratic leader, the brother of the current deposed president, to basically root it out. Now, in order to root it out, there were enormous amounts of war crimes and all kinds

• 10:47Chamath Palihapitiya?

  of things that I don't think anybody would support, except it brought some amount of stability. And so then you would have thought, okay, maybe this is the point at which you can now really start to grow. But these guys yet again found a way to navel-gaze and just to infuse so much corruption and graft inside of how the government was run. By the way, and it wasn't just the right, it was also the left. They spent two and a half times more on defense as of last year than they did when they were in wartime. Doesn't make much sense. The public service grew to the largest it ever did. In a moment where, you know, you really should have prioritized private enterprise. So all of these things sort of created a situation where they fundamentally didn't know what they were doing.

• 11:30Jason Calacanis?

  So the other two issues there, I think, and that's a great summary of like really those frontier countries and what made them emerge. Singapore also has a great strategic location, which Sri Lanka kind of shares. They're both island countries strategically located for trade. And then I guess the policies, right? Singapore went on a very, very aggressive tax and business policy effort. Did Sri Lanka do that as well? And then maybe you could speak to just how important those are as islands, you know, and their geography. Because Jamaica doesn't obviously have that.

• 12:03Chamath Palihapitiya?

  I mean, Sri Lanka has this massive growing importance as China has emerged. The problem in these last few years is that they did everything possible to not just alienate China, but to alienate everybody on every dimension possible. You know, they alienated China. The coup de grace was that there was an enormous shipment of fertilizer, chemical fertilizer, that was sent to the ports. And it was summarily rejected and turned around because somewhere along the way, the leadership in Sri Lanka decided that they were woke. And so they enforced every farmer

• 12:39Jason Calacanis?

  Oh, no.

• 12:39Chamath Palihapitiya?

  to go organic. The problem with going organic and organic fertilizer was all of the small farms shut down. All of the large farms had 20 to 30% crop yield reductions. The prices of food went crazy. They reversed policies two or three times. And really what they found is that, you know, they tried to go woke. Instead, they went broke. And all of a sudden, all these other countries who were there trying to help said, wait, what is going on here? So they offended China. They offended the Middle Easterners. They offended the Japanese by cutting a light rail project that Japan wanted to fund. I mean, in every step of the way.

• 13:12David Friedberg?

  They deindustrialized.

• 13:13Chamath Palihapitiya?

  This country found a way. They didn't deindustrialize. They tried to follow this woke agenda.

• 13:18David Friedberg?

  Well, that is deindustrialization. I mean, reversing from like the modern techniques of industrial production, like fertilizer and modern systems of farming, is deindustrialization. It's, you know, it's going to be a curse ultimately.

• 13:31Jason Calacanis?

  Sacks, to your point, we just discussed this last week with the farmers.

• 13:36Jason Calacanis?

  You know, if you're in a frontier market, trying to adopt the regulations and the strategic goals for the environment of the emerging market is like two giant hops. It's probably insurmountable.

• 13:49David Sacks?

  Well, look, there's a strong analogy between the populist uprising that's happening in the Netherlands with the Dutch farmers and the populist uprising that's happening in Sri Lanka. Basically, they're implementing the same policies. Sri Lanka is further down the road and it's a poorer country to begin with. So, you know, like Chamath mentioned, in April of last year, the Sri Lankan government banned the importation of chemical fertilizers and pesticides used in farmin's. They again went with this idea they thought they could encourage organic farming. So, the result of that was that overall production, agricultural production fell by a third and rice production fell by 43%. And rice is, you know, the biggest staple in the country. So now you've got people there starving or going hungry. You've

• 14:32David Sacks?

  got massive food insecurity as well as the whole economy basically has been crippled. And the result of that is society has essentially collapsed. So, you know, now, the question is why did the Sri Lankan government feel compelled to adopt these policies? A lot of it has to do with the fact they're getting these massive loans from the World Bank and the IMF. And the World Bank and so forth are imposing these ESG requirements. So Sri Lanka has something like a 98% ESG rating even as their economy and society is collapsing. How is that possible? Well, they're doing a great job following the prescriptions of the global elites of Davos. I mean, this sort of global elite flies into Davos from Brussels

• 15:13David Sacks?

  and Washington on their private planes. They have panels on ESG and then they prescribe these policies for countries like Sri Lanka. And this is the result. I mean, it's crazy. They've been telling us for years that somehow there's no trade-off between their environmentalist policies and creating a healthy growing economy. And this is an example of that's not true. There are real trade-offs here. And the crazy thing is that the elites expect poor people in Sri Lanka to make up for their environmental emissions. It's not really fair at all.

• 15:45Jason Calacanis?

  Here's another example. In March of 2020, Sri Lanka enforced one of the world's strictest, China-esque.

• 15:53Chamath Palihapitiya?

  Covid nine lockdowns, Covid nineteen lockdowns, despite one of the lowest death rates and infection rates in the world. And so for nearly three months, it literally crippled the economy and the livelihood of citizens there. But here's where it gets crazy. Then they actually go against global best practice and they banned the burial of Covid nineteen victims, claiming that it could lead to groundwater contamination. I don't even know how they came up with this. But you know what this did was it significantly undermined the small minority of the country that is Muslim, because a religious practice there, you know, is you bury your dead. And then that caused great pain to them. And then it, as in turn, it hurt all these international

• 16:36Chamath Palihapitiya?

  relationships with all these Gulf nations. So then you, you come all the way around and then you go back to those same Gulf nations a few months later and you're like, can I have subsidized oil? And they're like, no, not so much.

• 16:47Jason Calacanis?

  And just to paint a picture of what's happening there right now, as I mentioned before, it's, it's pretty much a state of emergency. You can see various videos trending on social media. And you always take those with some caution because sometimes people will take clips out of context or label them incorrectly or use clips from other moments in time. But what's really happening there right now, and you shared a video in our group chat, is everything is now being doled out in very small amounts. So there, there, there are lines for basic goods and inflation is crippling there. And as Friedberg mentioned, they started to pin their

• 17:26Jason Calacanis?

  exchange rate and their currency to, I guess, the world's exchange rate. And now everything is super expensive and essential imports, like food and medicine and fuel, they don't have the money to pay for it. So this is going to be a complete societal collapse, it seems. And they're going to need to get bailed out.

• 17:47Chamath Palihapitiya?

  There was a bill that was introduced in the government that said the central bank would be Forced to have a discipline on money printing. Sound familiar? In March of 2020, the Central Bank of Sri Lanka began printing money in order to finance a growing budget deficit. Again, it happens in many countries. And they did that in part to fulfill an election promise that they made that they would maintain single-digit interest rates. Again, it sounds really familiar. So they printed about 100 billion rupees in March. In the next two years, the Central Bank printed 1.65 trillion rupees. Right? So 16 and a half times that first number.

• 18:29Chamath Palihapitiya?

  And then as a result, what they saw was the highest inflation in post-independence history. So time after time, what you're actually seeing in Sri Lanka is not a microcosm of something that's endemic to whatever you want to call it, Jason. A developing country, a third-world country.

• 18:44Jason Calacanis?

  Frontier.

• 18:45Chamath Palihapitiya?

  A frontier country, a Southeast Asian country. In fact, it actually resembles many of the policies that exist in so many countries all around the world. And what's really important here is that as goes Sri Lanka, so goes Ghana, so goes Pakistan, so goes a whole bunch of countries where you're already starting to see food riots, food insecurity, energy insecurity, rampant inflation, sovereign defaults. And you have to ask yourself, like, how are we going to really tourniquet this whole thing and prevent a much bigger contagion like Freebrooke just talked about? I think it's a really important issue.

• 19:25Jason Calacanis?

  Because you mentioned COVID. It turns out a lot of these frontier countries were already on debt relief and being given a moratorium on making their debt payments since they got so walloped during COVID. And then now the other shoe drops, and here we are. There's no relief you can give them if they're already not paying their loans in some cases.

• 19:46Chamath Palihapitiya?

  By the way, here's another thing that happens in a lot of these developing countries. So in the middle of all of this chaos, what do you think happened? The parliament got together, they passed an amendment to the constitution, and it enforced and it gave incremental power to one individual, the president. And typically, in most of these countries that run by a parliamentary system, the president is a figurehead. Right? The person shows up, you know, shakes hand, kisses babies, that's it, right? Maybe convenes a senate, but that is it. Now, all of a sudden, the person has control over defense, control over budget, control over the central bank, and this person cannot be, you know, voted out in a no-confidence vote the same way that a prime minister can. That happened here as well. So, yet another example of if you start to see a bunch of autocrats in some of these

• 20:30Chamath Palihapitiya?

  developing markets feel like the answer is more power, it's been tried here, it didn't work. So, I think that there's a, there's a lot of lessons. I, I am a little concerned and skeptical that many of these other developing countries that are teetering on insolvency will actually learn what they need to hear.

• 20:48Jason Calacanis?

  Well, I mean, we are the definition of the developed world reportedly, and we have a president who tried to stay in power and still in elections. So, it, uh, it literally is happening here in the United States as well. The parallels are truly terrifying. All right, the CPI, uh, I'm sorry, Sax, you said something?

• 21:03David Sacks?

  This is rolling my eyes. That's enough noise. There's no noise from an eye roll.

• 21:07Jason Calacanis?

  Ah, that's what it was. It sounded like a boulder going down a hill.

• 21:10David Friedberg?

  Wait, sorry, can I ask Chamath a question?

• 21:12Jason Calacanis?

  Yep. By the way, if people don't know, Chamath is of Sri Lankan descent, just to make that clear, if you didn't hear his little mention of him.

• 21:19David Friedberg?

  Didn't you go there a couple of years ago?

• 21:20Chamath Palihapitiya?

  I mean, here's another great example of, in this case, this was the left who managed to fuck things up. So, it's not just the right that screws things up in that country, it's the left as well. So, in this example, um, I went there and I offered to bring Google Loon, myself and Google, um, we offered to bring internet access to the entire country, like guaranteed internet access. Um, this was like five years ago, um, and we set up an entity and the government, um, tried to do the right thing and grant some spectrum. And instead of sort of like, um, fast-tracking this and allowing, you know, this project to become a reality...

• 22:04Chamath Palihapitiya?

  There was an enormous amount of infighting that essentially said that, you know, we were trying to steal the license, or we stole the license, or we were trying to monetize a license. And both me and Google were just like, forget this, this is not worth it. And we abandoned the project and walked away. Instead, Google ends up servicing a whole bunch of other countries. And the reason why Sri Lanka was part of it is because the balloons follow a certain orbit and it would have, it would go over Sri Lanka no matter what. So it's kind of like, we can light it up for free, all we need is spectrum in this country, Google's already doing that work. So, you know, I've, I've, I've gone there a few times. I found it very difficult to try to do the right thing.

• 22:44Chamath Palihapitiya?

  I think people, there's a level of infighting that I hope this crisis changes. I also think that it's an opportunity for people to reset writ large, the gerontocracy that runs many of these countries, including the United States, quite honestly. There is an opportunity, there are some, you know, of my friends who I think may emerge in the next few weeks, who are very well-known people in that country, who literally want to, step one, remove most of the executive power from the presidency, make it a true, you know, parliamentary-style system with an empowered prime minister and empowered

• 23:26Chamath Palihapitiya?

  elected officials, and let the country run and fix itself, you know, deprioritize some defense spending, deprioritize the growth of the public sector, reprioritize the growth of the private sector. I hope they're successful. I would love to invest, if given the opportunity, under those kinds of market conditions, and I would love to go back at some point. But my history with the country has been very fraught because as I've gone to try to do the work, Friedberg, people are just haters. And they just, they will cut their nose off despite the, you know, they, and they'll just do the worst things possible.

• 24:00Jason Calacanis?

  Chamath, there's a, I think you have a second swing at bat here. Only 50% or so of people in Sri Lanka have internet access, and maybe we could talk to a friend over at Starlink, and that could be an incredible mitzvah and changing thing there. If you get 100% of the country on internet, my God, that could change everything, and it seems completely doable.

• 24:19Chamath Palihapitiya?

  By the way, and this is the most literate country in the world. You have to understand, like, the people in that country, the human potential in that country is incredible, okay? There are not developing countries like this that have this type of literacy, and the kindness of the people. These are incredible, hardworking people. But the elected class is some of the most inward, navel-gazing, corrupt people. And this is the opportunity for the young people of that country to wipe the slate clean with all of them. And start over with some... I think, um, yeah...

• 24:53Jason Calacanis?

  The literacy rate is 92% or something crazy there. It's very high.

• 24:56Chamath Palihapitiya?

  It's a highly educated, literate group of people.

• 25:00Jason Calacanis?

  The truth is, the number of people living in extreme poverty has plummeted, uh, thanks to globalization. We, we went from almost, yeah, 2 billion people living in extreme poverty. Now, it's gonna be, that's gonna end in our lifetimes. We have maybe 500, 600 million people living in extreme poverty. That's because of globalization. That's the great thing that's happened. Now, what's also happened at the same time is, people have gotten out of sync. We have elites, to Sax's point, who think they know better, and they're trying to enforce on an emerging market, or a frontier market, God forbid, the things that we have the luxury of doing in the developed world.

• 25:34Chamath Palihapitiya?

  We don't even do. Wait, hold on. We don't have a green, we haven't banned chemical fertilizers in the Western world?

• 25:40Jason Calacanis?

  Well, we do have, and Europe has standards for gas mileage, as but one example. We have emission standards. We have the accords that we've been working on. All of these things are starting in the developed world, and now, exactly to what Dave was just saying, is, we're taking them from the developed world, we are imposing them. And Sri Lanka apparently embraced it. I guess to get points when they're at Davos.

• 26:00David Sacks?

  Sri Lanka is not rich enough to resist. That's the issue. So, the US has an ESG rating of 51%, Sri Lanka has 98%. Why is that? Because in our country, we're not gonna impose these crazy mandates. There's enough resistance to it. But if you're in Sri Lanka, and you have these massive loans and debt service, you have to do what the IMF and the World Bank and all these international...

• 26:25Chamath Palihapitiya?

  What your creditors tell you to do.

• 26:27David Sacks?

  Yes, exactly. They're the ones who imposed all this stuff. So, great. So Sri Lanka ends up with a 98% near-perfect ESG rating, even as the country is completely collapsing. Read the Schellenberger article here, he says, "The underlying reason for the fall of Sri Lanka is as leaders fell under the spell of Western green elites peddling organic agriculture and ESG." And then he mentions that Sri Lanka has a near perfect score of 98, higher than Sweden, which is 96, and US is 51. What does having such a high ESG score mean? In short, it means that Sri Lanka's 2 million farmers were forced to stop using fertilizers and pesticides, laying waste to its critical agricultural sector. And then it goes on from there. So,

• 27:09David Sacks?

  it was the imposition of, it's not that Sri Lanka's politicians implemented Sri Lankan ideas that caused the collapse of their country. They implemented Western ideas.

• 27:20Jason Calacanis?

  Well, I mean, we're also corrupt. So it was a combination.

• 27:23David Sacks?

  Fair enough. They implemented the ideas they learned at Davos. It's almost perverse. You've got all these, you know, Western elites, again, like John Kerry and so forth. They fly in their private jets to Davos. They come up with these ESG rules. They coerce countries like Sri Lanka to obey them. And it's the people of Sri Lanka who end up paying the price. I mean, this doesn't make any sense.

• 27:45Jason Calacanis?

  Yeah.

• 27:46David Sacks?

  What's your reaction to that, J. Cal? You somehow gonna blame this on Trump?

• 27:51Jason Calacanis?

  No. I don't know how Trump has anything to do with this.

• 27:56David Sacks?

  You're the one brought it up.

• 27:57Jason Calacanis?

  Well, I mean, I'm just thinking about it from first principles. You know, we should as a, you know, species, humanity, should be trying to trend towards taking care of the planet and lowering emissions and being in renewables. And then how we go about doing it, perhaps there was good intent here, but obviously if the country is corrupt and they're teetering already and they don't have the bankroll to do it, forcing them to do it can lead to collapse.

• 28:21Chamath Palihapitiya?

  Nobody forced anybody, but what did the score give you? It's not as if it all of a sudden got you.

• 28:26Jason Calacanis?

  Well, no, no, they force them by nature of you get your loans if you do these ESG requirements. So that is forcing them de facto.

• 28:31Chamath Palihapitiya?

  Okay, fair enough. But I'm saying like, you know, now that you have this score, it's not as if you issued green bonds and you could stave off this default.

• 28:38Jason Calacanis?

  No, I mean, no, they should do what you said before. It's like, look at the Sri, Sri Lanka should be looking at what Singapore did and just copy the playbook, right? I mean, it's so obvious that, you know, country.

• 28:48Chamath Palihapitiya?

  It requires a level of long-term leadership and a lack of, and a lack of corruption. And I think those, those two things are very hard to come by. And I think a third, which is a very controversial statement to make is, It required Singapore to adopt English as a lingua franca. Now, in fairness to Singapore, they also embraced multiculturalism, right? So you had forced, you know, not forced, but you had bilingualism in the school. So Hindi, Malay, or sorry, Tamil, Malay, Chinese, right? You could, you would learn all of those. And so, you know, you, you kept an ethnocentricity to where you came from, but they, they allowed you to understand a lingua franca that allowed you to merchandise your skills to the rest of the world.

• 29:25Jason Calacanis?

  Wait a second, Shama, are you saying they adopted the melting pot playbook and they allowed everybody from around the world to have their culture, but yet participate in a common goal? Oh my God. Literally, if you say melting pot to young people today and everybody should try to adopt, you know, a new culture, but keep some of their own, people find great offense to that. And that's what we were all taught. The melting pot is what made this country great.

• 29:48Chamath Palihapitiya?

  I think Lee Kuan Yew just called it multiculturalism. But my, my point is that, you know, I think the English decision by Singapore was important. I think steady predictable leadership by Lee Kuan Yew was really critical.

• 30:02Jason Calacanis?

  Geography policies.

• 30:04Chamath Palihapitiya?

  You know, the way in which they, they, they promoted their public sector, meaning, you know, some of the best paying jobs in Singapore was a public sector job, right? Like you, you would aspire to work for the government of Singapore. And so as a result, you had policies and movements and the movement of capital and progress and rules that were just, it's an example for, for so many countries. And you, you look where they are today for such a small population. They have the same GDP, by the way, you showed Vietnam, they have a larger GDP than Vietnam, which is an incredible statement, you know, a testament to Singapore's ingenuity. So could that have been Sri Lanka? I think so, knowing that the, you know, the, the levels of literacy and intelligence and frankly, like, look, the,

• 30:46Chamath Palihapitiya?

  the religious stability that can come from Buddhism, yet we're not there. We're, we're where we are today, which is a shame.

• 30:53Jason Calacanis?

  And this is the canary in the coal mine. I think we're going to see Friedberg. I don't know what you think is going to happen over the next six months, but there's going to be other dominoes, certainly, yes.

• 31:02David Friedberg?

  I mean, I watch for Arab Spring-type behavior, right? I mean, you saw the protests and people storming the presidential palace in Sri Lanka. You know, if I would imagine if we had a report from the intelligence advisers to the President of the United States, there's probably a long list and a growing list of these nations you want to keep an eye on right now, where there is food insecurity, energy insecurity, declining currency, you know, rising debt burden, and, you know, there's a breaking point for all of these. And as you start to hit that breaking point, you start to see more of what happened in Sri

• 31:44David Friedberg?

  Lanka. Now, when destabilization like this happens, it's scary, because what happens is there's a new power that emerges, and those powers may or may not be aligned with the interests of the United States, with the interests of allies, with the interests of the world, with the interest of Western democracy. And so there are kind of scary moments that can emerge over the next couple of quarters and years as these camels' backs start to break, as one straw after another is put on the back of these camels. So...

• 32:13Jason Calacanis?

  And who's the white knight who's going to come in and save these frontier markets? Is it going to be China, India, Russia, or the United States?

• 32:20David Friedberg?

  We're plowing $40 billion into supporting the Ukraine conflict. You know, we're busy kind of protecting our energy interests and our interests with NATO as the United States. And as you point out, China will likely end up becoming the savior and supporter, particularly where they have infrastructure investments and interests. I mean, I don't know if you guys have followed this, China's been building presidential palaces for African leaders throughout the continent. And these palaces, they're incredible. You guys should put photos of them on the video.

• 32:52Jason Calacanis?

  Oh, sorry. Wait, that's the wrong one. That's Saks's house. Sorry.

• 32:56David Friedberg?

  That's Saks's house.

• 32:57Jason Calacanis?

  No, that's Saks's other house. Sorry. Hold on. Next one.

• 32:59David Friedberg?

  Believe it or not, they might put Saks's house to shame some of these things, but they're...

• 33:03Jason Calacanis?

  Oh, look, they brought the president. Oh, yeah. Oh, sorry. That's Chama's. Next one.

• 33:07David Friedberg?

  Anyway, but yeah, this is a, you know, a moment to watch because there's a very, you know, unfortunate confluence of circumstances that may lead to destabilization, that may lead to influence and power being gained by folks that aren't direct allies of the United States.

• 33:24Jason Calacanis?

  And this is why you want to build up a great cash reserve and have a really stable economy so that when these moments do happen, you know, the good actors of the world can take advantage of them as opposed to the bad ones. And the United States is not in a great position for this. Every society, as they say, is three missed meals away from chaos.

• 33:44Chamath Palihapitiya?

  There are now a record nineteen developing countries with sovereign debt trading at distress levels. Nineteen. And two that have already defaulted.

• 33:53Jason Calacanis?

  Yeah, just a start.

• 33:54David Sacks?

  Pakistan has nukes, right? I mean, that's problematic.

• 33:59Jason Calacanis?

  Well, and Pakistan, who's famous for enabling other countries, Iran, North Korea reportedly, they look at their nukes as an export and they are more than willing to sell you nuclear technology.

• 34:10David Friedberg?

  I just sent you guys a link from Forbes. You know, there are currently, as of today, inflation protests going on across Sri Lanka, Albania, Argentina, Panama, Kenya, Ghana. And if you look at the videos and you look at the images of some of these protests, and again, there's like, you know, in the African continent, there are, you know, very radical militant groups that will try and seize power if there's destabilization at the top. And, you know, there are risks in South America. I mean, all over the world, you know, these sorts of moments can catalyze a real shift in power and influence. And there's a lot of it going on. So you better believe that folks in the US State Department and the CIA are very busy right now.

• 34:52Chamath Palihapitiya?

  If you, if you look at bond prices, the three countries that are the next closest to defaulting, so Russia has defaulted, but that was more a vagary of, you know, foreign currency controls that that didn't allow them to pay. But Sri Lanka has officially defaulted. And the next three are El Salvador, Ghana, and Pakistan.

• 35:07David Friedberg?

  Yeah. And by the way, Argentina, just so you guys know, the Argentinian print on inflation.

• 35:15Jason Calacanis?

  Oh, yeah. These things are double digits.

• 35:17David Friedberg?

  Sixty-one percent.

• 35:18Jason Calacanis?

  Yeah, yeah, yeah. If we think that our nine point one.

• 35:21David Friedberg?

  As you guys may know, they had a structural default a few years ago, renegotiation. They've been back at the table over and over negotiating for years. And now they're facing this inflationary crisis yet again. It's a scary moment in Argentina.

• 35:36Jason Calacanis?

  Yeah, this is exactly like the European crisis with Portugal, Italy, Greece, and Spain. We're going to see a lot of negotiations occurring.

• 35:46Chamath Palihapitiya?

  I really believe in this country, and I think the people are incredible. And I hope that whoever's the president basically takes as much power away from that role and puts it in the hand of the prime minister and gets out of the way.

• 35:59Jason Calacanis?

  All right. We're hoping for the best. Okay. CPI, as everybody who listens to this show knows, is a basket of goods and services and how it changes over time. You can slice and dice the CPI based on food, energy, shelter, your house, et cetera. Last two months have been just extraordinary to watch, driven, obviously, by energy, which has been driven by the Russia-Ukrainian conflict, cue the Sacks rant on Biden's administration. The core index doesn't include energy. And so if you were to look at the core index, it, and here's a chart, five point nine percent in June, and it peaked, actually, with six point five percent in March.

• 36:41Jason Calacanis?

  So that's been trending down if you take energy out of it. We haven't experienced.

• 36:46David Sacks?

  Energy and food, I think, are excluded from core.

• 36:48Jason Calacanis?

  Yeah. And if we haven't, we haven't experienced core inflation like this since the seventies or eighties. Here's another chart, just to zoom out, and you'll see exactly how jarring this has been for, basically, our generation. We haven't experienced this since, if you were born in the seventies or so, that's when it was higher than it is today. And we've had, obviously, goods and services plummet in our lifetime because of globalization and low interest rates. Energy hasn't seen inflation like this since the 70s.

• 37:19David Sacks?

  What is this chart? Is this CPI? What is that?

• 37:22Jason Calacanis?

  That is the core. So that's core. And then here is the energy one coming up next. So when you look at energy, obviously, energy has been volatile in our lifetime because a lot of the oil in the world is controlled by dictators, Middle East, Russia, Venezuela, yada, yada. But the 40% year-over-year increase in cost of gas and oil and energy has put us back to the mid 70s, 80s in terms of pain. That's this chart. So you see it spiking all over the place, but generally, it was under 20% and now we're back above 20%. It's all about the oil. Chamath, we were talking in the group chat before, you were kind of satisfied with 9.1.

• 38:03Jason Calacanis?

  Do you think the 9.1 we're seeing in the inflation print today, which was higher than expectations, what is that going to lead to in terms of the interest rate hike? 75 basis points? Or you think they just go right to 1?

• 38:16Chamath Palihapitiya?

  You know, we talked about this, that this was going to be a big print, right? I think we all expected this to be a big print. I actually also kind of put myself on a limb there and I said, you know, I wouldn't be surprised if at some point we print a mid to high 9s, maybe even a 10 handle at some point.

• 38:31Jason Calacanis?

  Yeah, we're getting there.

• 38:33Chamath Palihapitiya?

  And the reason is because, you know, rents are a little, you know, they lag in how they're reported inside of CPI. So we have a couple more months to go of rents and rents are moving or budging a bit.

• 38:51Chamath Palihapitiya?

  That's number one. We do see a little bit of falloff in energy prices, but I'm not so sure that it's enough, frankly, to move the needle. So I think that we could be in a sustained period for a while. The more interesting thing I thought today was that Canada surprised everybody and raised their benchmark interest rate by 100 basis points.

• 39:11Jason Calacanis?

  Okay.

• 39:11Chamath Palihapitiya?

  So they just came, one full point, 100 bips, and they just said, we're going for it. We need to tame this. We need to break the back of inflation.

• 39:19Jason Calacanis?

  They ripped the Band-Aid off.

• 39:20Chamath Palihapitiya?

  Yep. Yeah, and you know, and I think if you read the Fed minutes more carefully, I think Jerome Powell is basically ready to do the same thing.

• 39:29Jason Calacanis?

  Yep.

• 39:29Chamath Palihapitiya?

  After this inflation print, the expectation for July went to 80 basis points from 75, which means a small percentage of people actually think is going to be 100. And September, I think, moved to 75.

• 39:43Jason Calacanis?

  Hmm.

• 39:44Chamath Palihapitiya?

  So the question is, is that enough?

• 39:48Chamath Palihapitiya?

  I just don't know. I, uh, I don't know.

• 39:51Jason Calacanis?

  And to be clear, this is for June. The data we got on today, July 13th is for June. What we did see in July, because we can track oil prices, that's down 20% month over month. And the CPI has been driven largely by oil. So speak to that, Chamath. What do you think it's going to be in July when we get it in August?

• 40:09Chamath Palihapitiya?

  No, but yes and no, because the, again, the owner equivalent rents are up so much that they may actually, you know, break even. Right? Meaning rents go up by so much, oil goes down by so much, they cancel and we're still at nine.

• 40:22Jason Calacanis?

  Okay, so that's your prediction for July, which we'll get in August. You think nine?

• 40:26Chamath Palihapitiya?

  Yeah, I'm worried that we're in a sustained inflationary environment. I'm worried about that. I, I hope that we're not.

• 40:34Chamath Palihapitiya?

  But then the question, Jason, secondarily is then what do the markets do? And what's so interesting today is like the markets shook it all off. I mean, like you could not have had a worse inflation print. Everything was up.

• 40:45Jason Calacanis?

  Well, 10.

• 40:46Chamath Palihapitiya?

  Meaning, meaning like it was beyond the number that was expected. Every component of it was up. Everything looked horrible. And people were like, meh.

• 40:56Jason Calacanis?

  Is that because the market is future looking, Sax? The market is basically pricing, we'll get through this in six to 12 months. Is that what you're seeing?

• 41:04David Sacks?

  The markets are down right now, to be clear. The, the print was definitely worse than expected. They were expecting. Yeah, they were expecting 8.8%. It was 9.1. Last month's number was 8.6. I remember us talking about inflation a couple of months ago, saying that we thought it had peaked, you know, maybe in April or May at the latest, simply because. Inflation is measured on a year-over-year basis. And we were starting to lap much bigger comps last year. Remember this conversation?

• 41:30Jason Calacanis?

  Yes.

• 41:30David Sacks?

  Well, the lapping effect turned out not to be enough. And inflation is still rising, so we have not yet peaked on CPI. I understand that core we have peaked, but deciding to exclude energy and food, I mean, that's a pretty arbitrary decision. Those are two really important variables that matter to the ordinary American, for sure. So we solve this problem, and to Shama's point, we don't know when it's going to be, when it's going to subside. And I think the big question now is, when does inflation finally peak and start going down? Back to where it should be, and then how much, how severe a recession do we have to have in order for the Fed to solve this problem?

• 42:11Jason Calacanis?

  It feels like things are turning over in real estate. We talked about that last week. The number of homes being listed is skyrocketing. The number of mortgages being originated is plummeting while the rate goes up. So we're going to see mortgage rates probably go 6%, 7% towards the end of the year. That's going to put a huge kibosh. The high-end real estate is also starting to get hit massively. The number of listings is going up in the high end, and the number of sales is plummeting. So that was one of the cards we wanted to see turn over, and it looks like that's turning over.

• 42:45Chamath Palihapitiya?

  Just one small clarification is, you know, we obsess over CPI right now because we're all kind of these fake macro wannabe traders, but I just want to remind you, because the Fed has been pretty clear about this, they don't focus on CPI. They focus on something else instead called PCE, which is the Personal Consumption Expenditure Price Index.

• 43:02Jason Calacanis?

  Yes.

• 43:04Chamath Palihapitiya?

  And I don't know what the flow-through from CPI to PCEPI is exactly, but that is the broadest measure of goods and services, which does include food and energy. So it stands to reason that PCE may stay elevated for a while, which may give the Fed enough of the motivation they need to go 100, to go another 100, or maybe go 170, and then a 75. I think that David's point is right, like All this taming that we've been expecting to see, we haven't seen it. And so every month, it's like, oh, it's coming next month. Every month it's been, oh, it's happening next month. At some point, you may just have to say, maybe we're in like a sustained period for a while. And I have to believe it's going up before I believe it's going to stay stable or go down.

• 43:49Jason Calacanis?

  Well, we did see energy go down. Housing, we are seeing now starting to contract. The number of price cuts has been surging, according to Redfin. So I think we're starting, and the layoffs obviously happened two months ago. So don't we think that we're starting to see the headwinds? And then we were talking to a buddy of ours who's big in the airline space. He said, God, and I think you were pointing out this statistic, that Heathrow is now capping the number of people who can fly because it's been so crazy.

• 44:17Chamath Palihapitiya?

  Heathrow is so overloaded with with traffic of passengers that they today came out and said, we are capping the number of passengers to 100,000 a day. No more.

• 44:28Jason Calacanis?

  And this is after the cost of those flights was skyrocketing, you know, six, $7,000.

• 44:34Chamath Palihapitiya?

  I really go back to what Sacks, I really go back to what Sacks said before. The nugget for me of this entire summer was what he said about his takeaway from the COTU conference, right? Just to remind people, you know, that the person said something to the effect of, oh, well, look, all these other people will be saving money and cutting jobs. I intend to hire and, you know, nothing has changed for me. And the comment that I made in our group chat is, well, maybe that's the psychology of everybody.

• 45:02Jason Calacanis?

  It's not just the CEO of a company.

• 45:04David Sacks?

  Yeah, just to be clear, what COTU did is they polled all the founders in the audience. The poll results showed that on the one hand, everyone in the audience understood that we were headed for a big downturn and economic conditions and fundraising are going to be much tougher. On the other hand, all the founders, or two thirds of them, said that they were going to use this downturn to accelerate their business as opposed to cut. My one-on-one conversations with the various founders basically are in line with that, which is, it's all not me. You know, I know everybody else is going to be impacted, is going to have to cut, but I'm going to be the one exception. And there will be exceptions, absolutely, but everybody can't be the exception.

• 45:40Jason Calacanis?

  So I hear, you know, I'm saying, I'm going to still buy my car. I'm still going on my summer vacation. Everybody else has to make cuts.

• 45:46Chamath Palihapitiya?

  Well, it doesn't matter what they say, consumers are behaving that way. You know, American Airlines basically put out what they where they thought they were going to be. Their stock was up 10%. You know, Heathrow says, we have too much traffic, we're going to cap it at 100K. There was an article about, you know, US home prices and rents. And there were these two housing companies in the Wall Street Journal that were profiled. And both of them serve middle income neighborhoods in Houston and these other places. They're like, we've never done better business. And, you know, there are fewer and fewer people buying homes because of mortgage rates. They all want to rent. We, you know, are complete have, we have complete ball control. And so where, where is the stopping and the slowing down of spending? It just may be reflexively this thing where everybody feels like to be, you know,

• 46:29Chamath Palihapitiya?

  to have the polite dinner conversation, they have to talk about how they're pulling back. It doesn't seem like anybody's pulling back.

• 46:35Jason Calacanis?

  Austerity measures have not hit yet.

• 46:37Chamath Palihapitiya?

  Yeah.

• 46:37David Sacks?

  Well, I think, I think they are in the process of working, but it just takes a while. I mean, what I would say is, look, we are 100% going to solve this inflation problem. Why do I say that? Because price levels are fully within the power of the Fed. They just have to raise interest rates high enough. Paul Volcker proved that in the early 1980s. He had to raise interest rates as high as 20%, but he crushed the inflation 1970s. But that's what it took. So I have no doubt that the Fed can stop inflation. I think the question is, how much pain are they going to have to inflict? How high do rates have to go? And how long do we live through this sort of stagflationary period? And that's the unsettling thing is where it is, it doesn't seem like we're anywhere near the end of this yet.

• 47:20Chamath Palihapitiya?

  I wrote this, I wrote this last week in a little note, but this is why if you look at the Taylor rate, again, and, you know, people have a bend in the Taylor rate. It's not what it used to be, I guess, but, you know, it's still pretty directionally accurate, which is what is the true equilibrium interest rate? That allows us to basically manage and meet supply and demand together so that we have a calm, stable economy? And that, that stable equilibrium rate is approaching 5%. You know, our target, the, the collective wisdom of the, of the market believes that 3% is enough to get the job done. We're right now at 1.5 to 1.75.

• 48:01Chamath Palihapitiya?

  So if there's any number between three and five, that is the true price, we have a lot of work to do to get there.

• 48:13David Sacks?

  Yeah, I think that's a really good point because the the 10 year T bill has been kind of floating around 3%. So that is the long term expectation of the interest rates that's required to have sort of normal inflation. But what if it's 4% or if it's 5%? If that ends up being the case, it'd be a huge downside surprise to the stock market.

• 48:33Jason Calacanis?

  Well, how would you define that? 10% pullback, 20% pullback from here?

• 48:38Chamath Palihapitiya?

  Well, you have a bunch of things. Look, we talked about this other issue before as well, which is if you believe the stock market is fairly valid, you have to believe that prices are right and that the earnings are right, right? So because it's effectively, it all boils down to the price earnings ratio of the S and P 500. And I'm going to still maintain that the E is wrong. The earnings are wrong for most of these companies. So let let why? Well, one is that when these companies start to report their quarterly earnings, starting in the next few days, the year over year comparison is going to be to the numbers that they posted in Q2 of 2021, which by all accounts was a blowout number. Why? Because the number before that was 2020, where their business was zero.

• 49:23Chamath Palihapitiya?

  Right? So you have these incredibly tough comps in terms of growth percentages that you have to reach, which I don't think are achievable. Second is everybody's costs of making and selling things is going up, which stands to reason that unless you raise prices quickly enough, your profits will go down. Third, if you actually do business outside of the United States, the US dollar has rallied so much that you actually have less income that you're making in these other countries when you convert them and bring them back to the United States. Now, most people look through that last issue. But the point is, if you add this all up, there is a reasonable probability that the all the Es are wrong.

• 50:04Chamath Palihapitiya?

  In which case, we have to reassess what the right E should be, in which case, what is the right PE?

• 50:10Jason Calacanis?

  Yes, and earnings are a function of what you spend and what you make, so that's why we see so many companies doing layoffs, cutting people, Microsoft, Google, everybody is now putting people on notice that they have to perform.

• 50:23Chamath Palihapitiya?

  They're firing white collar labor, but they're hiring, you know, blue collar labor faster. And so, you know, we're actually going to see a downtick in productivity, right? You're replacing a person that, you know, may sit down at a desk and use a computer eight to 10 hours a day to do something, but you're hiring a lot of people that, you know, may get paid by the hour or may get paid a, you know, fixed salary if you do the right kind of work, but that qualifies as more contractual blue collar labor. The difference in that is a productivity difference, ultimately.

• 50:51Jason Calacanis?

  Yeah. And just so everybody knows, for PE's price earnings ratios over time, here's a quick chart for you. Currently, and this is for the S and P 500, we're currently at 20 or so. And we have twice in our lifetime, kind of hit that, you know, 13, 14, 15 level. So we could have a 25% correction from here in the stock market. If you look at the highs, our recent high in December of 2020, we're at 38 price earnings ratio. So we've fallen from 38 down to 20, you know, almost in half, and we could still go down 25% from here.

• 51:34Jason Calacanis?

  And that would basically not even set a new record, that would just hit the last two crises we had.

• 51:40Chamath Palihapitiya?

  The thing that, the thing that I think will work against this happening, Jason, so yeah, you're right, that maybe it goes to 3,000 or 3,200. But if you look again today, you know, and what I mean by like, the market has roughly shaken this off, like the fact that the markets right now, as we, as we talk, are, you know, are essentially down half a point. You know, the S and P is down, you know, 12 points. It means that they are looking for any and all reasons to say, this is a solved problem, move on, nothing to see here. Now, that is a psychological reaction. Most of that, if you actually, I called a friend today and I said, where are the flows? And he said, you know, retail

• 52:22Chamath Palihapitiya?

  right now is where all the flows are, meaning it's retail that's buying, they're in the 30th, 35th percentile of where they normally buy, which is a pretty healthy signal.

• 52:30Jason Calacanis?

  Wait, explain what you mean.

• 52:33Chamath Palihapitiya?

  So the way the market works basically is you have buyers and sellers. And, you know, to make it really, really simple, you have hedge funds as one class of buyer.

• 52:44Jason Calacanis?

  Sure.

• 52:44Chamath Palihapitiya?

  You have ETFs, but they're not really.

• 52:47Jason Calacanis?

  Exchange traded funds.

• 52:48Chamath Palihapitiya?

  Yeah, but they have fixed strategies and so, you know, they're hedging, they're moving, but whatever. And then you have retail. Okay, so it's retail and hedge funds. Those are the two main pockets of where the flows come into the stock market from. And you can get a real sense of what's happening, what the psychology of the market is, if you see what those flows are. And right now, what we see is that hedge funds are largely on the sidelines. But that means is they are, well, they've been so battered and bruised, in some ways, I think they're licking their wounds. But they're mostly waiting. They're, they do not find a compelling reason to buy. Right?

• 53:26Jason Calacanis?

  But they have to buy at some point, right, Chamath? This is their business.

• 53:29Chamath Palihapitiya?

  No.

• 53:29Jason Calacanis?

  Well, I guess they would have to find other opportunities, right?

• 53:32Chamath Palihapitiya?

  Their business is to make money relative to their index. And so if their index gets torched, them doing nothing makes them look like geniuses. So they don't necessarily have to buy at any point. They just need to make money at, in the end. So right now, we're in a situation where the markets are looking for a direction. Retail seems to think that direction should be up. Hedge funds don't have an opinion or saying, we're just going to wait this thing out.

• 53:56Jason Calacanis?

  Okay.

• 53:57Chamath Palihapitiya?

  Meanwhile, the data, at best, is a question mark. And I think that's the, that's the tension we have right now in the stock market is the psychological desire is for this thing to be over. Meaning, I think people want to hear inflation is done, we're starting the recession. Give us three or four quarters, we'll be out. Here's a steady state interest rate, let's go tech.

• 54:18Jason Calacanis?

  People want to accept the reality. Friedberg, does that mean that we're bouncing along the bottom for the next year? And then this is the time or the opportunity to buy? I don't want to give financial advice, but what are your thoughts if hedge funds and retail are kind of waiting in the wings?

• 54:31David Friedberg?

  Are you asking me if the stock market is at a bottom?

• 54:34Jason Calacanis?

  Are we bouncing along the bottom? Yes. Or what would you, how would you describe the next year? If you were to look at it? What do you think?

• 54:40David Friedberg?

  I'll tell you guys some stories. I went to a conference in March with a lot of fund managers, probably managed several trillion dollars in total. People were like in shock and awe at that conference because they had taken such significant write downs and they were still getting written down. So all their investments were off. They were off 40% from the peak. They were freaking out. Things were collapsing. No one was doing anything. They were all sitting on the sidelines, hanging out, waiting. I went to a conference last week. And so the tone and the demeanor was just like morose. Last week, I went to a conference with a lot of managers, also probably managing trillions of dollars across the pool.

• 55:21David Friedberg?

  And people were just kind of, they had accepted this new reality and they were kind of willing to look at new things. And, you know, they were no longer engaged in trying to shore up just their portfolio. And a lot of the stuff we talk about, which I think is tactical on the ground, how do we deal with our businesses? And our portfolio of investments that we actively work with in the private markets? They were much more interested in kind of starting to explore and think about new things. And I hadn't seen that three months ago.

• 55:49Jason Calacanis?

  So that's a positive sign.

• 55:51David Friedberg?

  From a market participant point of view, I think that folks have kind of call it accepted a new normal, an inflationary normal, a high volatility normal, you know, a normal of uncertainty, a normal of kind of recession. And as people have started to kind of internalize that new normal, I think they're now starting to say, okay, what should my action plan be? And that action plan is I've got trillions of dollars of capital sitting on the sidelines. What should I start to do with it? So, you know, my, my very, very, very anecdotal experience has been that significant market participants, I think, are going to start to perk their head up this quarter and start to think about doing new things. What that translates into in terms of, you know, stock price movements and indices?

• 56:36David Friedberg?

  I don't know. I've always said that there's going to be a huge variation in outcome during this big, this year. And some industries, some sectors, some types of businesses will outperform others. And so I don't want to create generalized statements about indices. But I do think that capital activity is going to start to come back this quarter, where people are going to start to think about what to do rather than pull everything out because of the massive shift that's happened in the past couple of quarters.

• 57:00Jason Calacanis?

  Sax, what are you as a market participant thinking? You're looking at Series As, maybe doing some opportunistic flat rounds. Are you looking at the startup market, mid-stage market and saying, hey, this is an opportunity. Maybe I should start looking to put some money to work in the next six to 12 months. Or are you?

• 57:20David Sacks?

  We're still investing.

• 57:21Jason Calacanis?

  You're still investing?

• 57:22David Sacks?

  Yes.

• 57:22Jason Calacanis?

  So as a market participant, you're investing. What are you seeing?

• 57:25David Sacks?

  But we see that the pace of deal making has slowed way down because founders know that valuations have gone down, the fundraising environment is tougher. So last year they're raising every nine months. Now they know they should probably be raising it once every two years. So the pace has slowed way down.

• 57:40Jason Calacanis?

  That's a good thing?

• 57:42David Sacks?

  Yeah, I think it's more, it's healthier. Yeah, it's more normalized. You know, last year, the companies that could raise did raise. They have big war chests. So I think there's going to be a delay. It's definitely a slower period. We've done a couple of growth deals recently. I think the fact that Tiger and the other kind of crossover investors, the fact they've pulled back way back from venture markets gives smaller firms like us an opportunity to do growth deals.

• 58:06Jason Calacanis?

  So how did you make the decision to invest in those companies?

• 58:10David Sacks?

  They're both companies we've known for a long time, have wanted to invest for a while. So, you know, the, the opportunity arose to invest and it was way less competitive than it would have been last year.

• 58:20Jason Calacanis?

  This is what you call opportunistic. You, you knew the firm, you had high confidence in them and opportunistic, they need money.

• 58:26David Sacks?

  Yeah, we've basically done two deals in the last like four months.

• 58:29Jason Calacanis?

  And what was your pace, let's say 18 months ago?

• 58:34David Sacks?

  It was a little faster than that for sure. There's just more deals, deals happening, so.

• 58:39Jason Calacanis?

  Interesting.

• 58:39David Friedberg?

  If you want to think about tail risk where there's some event that can massively shift the market, you know, the, the indices south, right? Make them go negative and everyone pulls money out of equities or out of bonds further. There are some of those events brewing, right? We've talked about the consumer credit

• 58:56Jason Calacanis?

  Taiwan.

• 58:56David Friedberg?

  Risk. We talked, maybe Taiwan, maybe this emerging market crisis that may kind of be emerging. These are like little turtles putting their heads out. They may not come out, but there's enough of these turtles now, you know, kind of circling you that, you know, there's still reason to be wary.

• 59:14Jason Calacanis?

  Let alone a black swan event, which would be undefined.

• 59:17David Friedberg?

  These aren't even black swans. These are just like significant

• 59:21Jason Calacanis?

  Known risks.

• 59:21David Friedberg?

  Yeah, known but significant risks, right?

• 59:24Jason Calacanis?

  Yeah.

• 59:24David Friedberg?

  And if any of them do kind of take off, um, you know, we're already in a very shaky kind of period right now where we're trying to manage inflation and recession. And, you know, businesses are trying to raise capital. And again, this is why a lot of biotech companies are trading below cash because the expectation is they're not going to be able to raise capital. I mean, any one of these

• 59:42Jason Calacanis?

  And they'll go out of business.

• 59:43David Friedberg?

  They'll go out of business. So any of these things pop up, boom, you know, you start to see things go. So I think that's the reason people, investors, portfolio managers are not going to kind of rush back into putting more money into equities is just, you know, sitting around waiting to see how a few of these things dissolve, um, you know, before kind of taking action.

• 1:00:02Jason Calacanis?

  But there are companies that do not face the risk of ruin. They just are sitting on so much cash, they have so much revenue that there's no chance of that happening.

• 1:00:08David Friedberg?

  Yeah, I've always said it doesn't matter. If you find a great business and you believe in that business over the very long run, you don't need to worry about timing the markets. You put money in that business as long as you get a fair valuation for it today relative to what it should be priced at, based on what markets are telling you today.

• 1:00:23Jason Calacanis?

  Well, a 20 PE would be more than fair historically.

• 1:00:26David Friedberg?

  Maybe, who knows? But like whatever that, whatever that is, but if you find a great business that you think is going to compound value for you over the very long run, market cycles don't matter.

• 1:00:35Jason Calacanis?

  And long run, you mean a decade?

• 1:00:37David Friedberg?

  Yeah, call it a decade. And you know, Saks's business that he's invested in, these are tech companies that I don't think they're planning to go public next year. He's making an investment in a business that he considers to be a great business that can compound value, not, not compound valuation, but compound business value, meaning they can do something more valuable next year than they were doing this year and continue to accrue an advantage in their business that allows them to accumulate earnings over time or accumulate revenue that ultimately translates into earnings over time. And there are many businesses that are public that, that operate like that, that regardless of any of these turtles popping their head out, those businesses will perform well over the next decade. And I think, you know, that's always a great place to invest.

• 1:01:16Jason Calacanis?

  So we basically went from D-Day, Saving Private Ryan, and seen, you know, in the first quarter, to now people have accepted we're in wartime and we're not shell shocked, and some people are looking for opportunities. Chamath, you found an opportunity? Maybe you could talk about the deal you did this week.

• 1:01:31Chamath Palihapitiya?

  You know, I tend to agree with Friedberg. I mean, you find these businesses that you like, and if they appeal to you and you do your work, that's the most important thing. You shouldn't be afraid to write a check.

• 1:01:41Jason Calacanis?

  Can you stop right there and just say, define what you mean by "do the work"? Because everybody hears you say that. What does that mean for an investor, for somebody like yourself? What does doing the work mean?

• 1:01:50Chamath Palihapitiya?

  It really depends on the sector. So, for example, when, you know, when, when we were, when I was trying to underwrite Open Door, what I really wanted to understand was, you know, what do take rates look like in all these various markets? Well, how do I think take rates will evolve here? How do value-added services work? What kind of margins can you sustain? What is the sensitivity of different parts of the real estate economy to interest rates? You know, that's an example of work. When I was underwriting SoFi, you know, what you're trying to understand is, you know, how do banks generate net interest income, you know, NIM? How does that change over time? How does bank charters change that? You know, how do loss rates change in, in, you know, times of economic expansion versus recessions?

• 1:02:35Chamath Palihapitiya?

  How do you price all of that into a fair, fair value of a business? It's just a lot of really detailed diligence to understand all the facets, or as many of the facets as possible of a business, that allow you to have a clear-eyed sense of what's possible. Then there are others, which are pure technology bets, where you try to understand either the biology or the technology. So in the case of the deal that I did, you know, today or this past week, myself, a bunch of family offices around the world, led by a great chairman Pablo Laguerta, who started a phenomenal business called Rolte Pharma, which is public,

• 1:03:17Chamath Palihapitiya?

  Carlos Slim, a bunch of folks, we put in about half a billion dollars to... To help advance into, you know, clinical trials, this business that's trying to provide a solution to chronic kidney disease. So in that example, it was a lot of scientific diligence on what are the existing solutions? How do they work? What is the mechanism of action inside the body? How is this the same or different? What does the early data say? How are the clinical trials structured? And then you come to an answer. In this case, I decided the bet was worth taking and, you know, like

• 1:03:54Jason Calacanis?

  Tell us the name of the company and what they do.

• 1:03:56Chamath Palihapitiya?

  The company is called Pro Kidney and basically the idea is that it uses your own body to help heal your kidneys if you are on the verge of chronic kidney disease or you are getting dialysis, et cetera. And essentially, how it works is it removes cells from your body, from your kidney, actually. And then it does, basically puts it into a centrifuge, does some specific things to it, grows and amplifies certain cell lines from your kidney and then reinjects those back into your kidney and tries to improve what's called your EGFR, which is your estimated glomerular filtration rate, which is essentially a number that we can use to estimate how efficient your kidneys are. And essentially,

• 1:04:38Chamath Palihapitiya?

  when you are, you know, a type 2 diabetic, or you have chronic kidney disease, or kidney failure, or you're on dialysis, it's because that filtration capability has failed. And so all these toxins are getting pushed back into your body. And so, yeah, we took a, you know, half a billion dollar shot. I wrote $125 million check. I hope it works.

• 1:04:58Jason Calacanis?

  That's amazing. Friedberg, we saw some satellite images this week. Biden, I guess, announced them. They looked pretty trippy. Explain to us what the downstream effect of what is, I think, the most clear picture we're seeing of the cosmos ever created and what that could actually do for humanity.

• 1:05:18David Friedberg?

  Well, this has nothing to do with Biden, but

• 1:05:23Jason Calacanis?

  No, I just that Biden showed it on Monday. I just that's all it is. He made it. They specifically had him share it, which I think maybe they were looking for a mini win or something.

• 1:05:32David Friedberg?

  Good for him. Um, he has nothing to do with this program. Um, I don't mean, I just mean that like the scientists and the engineers that worked on this for many years deserve all the frigging credit. The James Webb Telescope is a space telescope, just like the Hubble, right? Remember the Hubble Space Telescope? And this is a massive improvement over the Hubble. So imagine you're, you're in a boat and you're trying to look at the bottom of the ocean. You take a bunch of binoculars, a pair of binoculars, you look into the ocean and you try and see what's at the bottom of the ocean. How hard that would be, right? There's all this murky stuff in the water. It's going to be really hard to see it. The, the reason that we create a space telescope is so that the same problem that we would have looking at a telescope through the earth's atmosphere doesn't impact the light coming into the telescope. And so

• 1:06:13David Friedberg?

  there's so much stuff in the atmosphere, right? There's miles of molecules and dirt and dust moving around. So by putting a telescope in space, we get rid of all that murkiness. And now we can really capture the light that is coming from far, far away, concentrate that light onto really sensitive photo detectors. These are photo detectors that operate at nearly the, the coldest point in the universe, negative 263 Kelvin. And that photo detector makes it extremely sensitive. And using a 20 foot wide mirror, we can capture all the light that's coming in, concentrate onto the photo detector and, and, and read that light. Um, and so why is this important? Why is this interesting? Well, people get

• 1:06:55David Friedberg?

  really excited by and flip out over the cool imagery that they see. These images, these colorful images of galaxies and stars far, far away. What we're really doing is we're not just looking far away, we're looking back in time. So these, um, these images come to us from galaxies that are 4.6 billion light years away. So it took 4.6 billion years for that light to reach our planet. And we're actually seeing what happened in the earlier part of the universe. And we're seeing how these galaxies formed, how they're moving, how they interact with one another, how the planets, planets interact with one another. But what a lot of people miss, that's I think is the most important thing to highlight. As an astrophysicist, when you're looking through telescopes and gathering telescope data, you're not looking for imagery like we looked at today.

• 1:07:38David Friedberg?

  That's really good to sell the story and get Biden to do a press conference. What they're really looking at is spectrographs. And a spectrograph is, you know, it shows for every wavelength of light across some spectrum, what the intensity is of that that amount of light, that wavelength of light. And particularly, the James Webb Telescope has incredible micro-shutter arrays, and incredible sensitivity that allows us to go from near-infrared to infrared and some visible light, and look at that spectrograph. Why is that important? Because if you can capture the spectrograph in a very high-resolution way for a sun or for a planet far away, it can tell you very specifically what the movement is and what the chemical composition is of that object.

• 1:08:19David Friedberg?

  And from that, we can start to do incredible research and infer very important things about how planets form, how stars form, how many places like Earth might be out there, how things are moving, how much mass or matter there is in the universe. And there are two very, very big questionable phenomenons in astrophysics right now. One is called dark energy, one's called dark matter. Turns out, the majority of matter in the universe is undetectable. And there also is this really weird energy force pushing on everything in the universe, causing the universe to accelerate its expansion. So the universe is expanding, everything's moving away from itself, but it's not just expanding and slowing down, it's expanding and speeding up. And so having this sort of instrument in space

• 1:09:03David Friedberg?

  that allows us to capture in a very high-resolution way, using spectroscopy and other tools that astrophysicists use, and better map out how this is happening in different parts of the universe, starts to give us a better sense and allows us to kind of inquire and start to develop theories around what's really going on. And I want to say one more thing, because a lot of people think that this stuff is just so esoteric, and it's like, super interesting. Why are we spending $10 billion on this? Most applied engineering and the technologies that we've developed as a species started out initially as pure research with no friggin clue where it was gonna go to. Imaging DNA, penicillin, electronics, MRI machines. So many of these capabilities evolved from scientists just querying the universe and asking

• 1:09:48David Friedberg?

  questions and gathering data. And all of a sudden, they came across something, developed a theory, built an application of that theory, and a technology emerged that changed the course of our history as a species. And that's the reason to do pure research. And that's the reason it's so important for us to put $10 billion into a program like this. We're going to discover amazing things with this tool, and it will ultimately, hopefully, yield advances for humankind that we cannot even contemplate today.

• 1:10:15Jason Calacanis?

  Could be energy, right? I mean, understanding dark matter.

• 1:10:18David Friedberg?

  Understanding dark matter, totally.

• 1:10:20Jason Calacanis?

  Has changed everything in energy, right?

• 1:10:22David Friedberg?

  Jake, I'll think about it. One day, there might be a capability where we say there's a new class of matter and a new understanding of energy that we can then apply in some form of physics on Earth that we could do something interesting with. And we have to be able to query and understand the universe to do that.

• 1:10:35Jason Calacanis?

  Could we measure?

• 1:10:36David Friedberg?

  Here we go.

• 1:10:37Jason Calacanis?

  Could we measure the matter from Uranus? I knew it was coming. I mean, the Hubble telescope, actually, correct me if I'm wrong here, it actually told us the age of the universe. How much dark matter is in Uranus? A lot, a lot. You're full of it. But we now know, I mean, Hubble told us the rate of expansion of the universe, and it also told us the age of the universe, and we found all these other planets.

• 1:11:00David Friedberg?

  Totally.

• 1:11:00Jason Calacanis?

  To Friedberg's point about, you know, looking, you know, through the muddy water. Here's a great visualization. On the left, you have Hubble, on the right, you have Webb.

• 1:11:11David Friedberg?

  Beautiful.

• 1:11:11Jason Calacanis?

  And if you slide this, you can just see like, just how crystal clear these images are. And from my understanding, we found some number of universes already that we didn't know just from the first images.

• 1:11:22David Friedberg?

  By the way, I want to just give everyone a heads up. This imagery looks beautiful, and I'm going to print out a big one. I'll put it behind my friggin desk here because I think it's so fantastic. Astro photography is one of my kind of all-time, you know, favorite forms of art. But remember, this is imagery that was actually captured in near-infrared and infrared spectra. And then they converted it to visible light to make it look cool. So remember that. These images, you know, these clouds, if you were actually there, don't actually look like that color. But it's a very cool way to visualize the density and the spectral changes.

• 1:11:54Jason Calacanis?

  Where does this sit for you in terms of your excitement between the new season of Doctor Who and the Foundation series?

• 1:12:02David Friedberg?

  Jake, let me give you, let me just give you guys one more kind of... Really interesting. If you start at our sun and you look at the sun, it's super bright. If you go at the speed of light for four minutes, you reach the earth, or a couple of minutes, you reach the earth. Look back, or six minutes or seven minutes, whatever it is, look back, and now the sun looks like it does in our sky. If you go for another couple of minutes, you end up looking back from Saturn and the sun starts to look like a star. I mean, that's how dim it gets. Now imagine continuing to go at the speed of light for another hour. You look back, you'll hardly be able to differentiate the sun from the rest of the universe. Now do that for 4.6 billion years. And you're shooting away for 4.6 billion years. Now look back. How friggin hard would it be to see anything? That's the technical capability we just put into space.

• 1:12:46David Friedberg?

  We've built a 20-foot-wide mirror to concentrate the light, the photons, that traveled for 4.6 billion years, lost all of their density, lost all of the, you know, completely dimmed out, completely diffused, and we're capturing a few of them, run that concentrated way onto a detector for minutes at a time, and generate this image. It's really profound how technically complex this is. And again, that technical complexity can ultimately yield other technological tools that we could use in all sorts of industry. So I just want to highlight that.

• 1:13:19Chamath Palihapitiya?

  I posted it for you guys. It's an incredible story, but basically, this program was riddled with delays and things that weren't working, and then they put this quiet, very assuming engineer in charge of it, and he completely turned the whole thing around, and it's one of the most incredible quotes.

• 1:13:35David Friedberg?

  What's his name? Let's give him a shout out.

• 1:13:37Chamath Palihapitiya?

  His name is Greg Robinson, and he turned a $10 billion debacle into a groundbreaking scientific mission. This is the quote from the Wall Street Journal. The quote from the NASA, the head of NASA's Science Mission Directorate, Thomas Zurbekin, says it all. "There's a huge distance between success and failure, and only a few actions that move you from one to the other." He said, "Greg Robinson worked such wonders that his boss calls him, quote, 'the most effective leader of a mission I have ever seen in the history of NASA,' unquote." Really incredible.

• 1:14:15Jason Calacanis?

  Uh, this project, yeah, the 11 billion dollar project.

• 1:14:18Chamath Palihapitiya?

  Big shout out to Greg Robinson.

• 1:14:19Jason Calacanis?

  Yeah, and this has been going on for, I guess, 20 years now, uh, this process of getting this built and 10 years of really intense building. What would the next, uh, and then we'll, we'll switch over to politics for a quick second as we, as we wrap up here. Friedberg, what's the next telescope? And, and cause obviously if we've gone Hubble to Webb, what would the next one conceivably look like? And what would the timeline for that? Is there another one that's gonna come? And then what would that enable? Because it does feel like if we accelerate this, we're gonna really get a deep understanding of the universe that it, this seems to be accelerating our understanding, correct? And our technology is obviously accelerating, so feels like we could, you know, send another one of these out in the next 10 years that would dwarf this one's capabilities.

• 1:15:01David Friedberg?

  Yeah, so a, a lot of, um, uh, telescopes operate at different wavelengths and they're meant to kind of pursue different missions. So, you know, there are, there are some telescopes that are already operational in kind of the gamma ray spectra. But really, there's a, we, I don't know if we ever talked about this on the show, but one of the, the really interesting areas of inquiry, uh, is, uh, is these gravitational wave detectors. And there are new, more advanced versions of those systems starting to come online. Those are not space-based telescopes, uh, they're, and we can talk about that another time. Um, but, uh, they're creating new methods of inquiry where we're not capturing photons, light coming from far away. We're actually capturing the waves of gravity coming from, um, interactions of matter around

• 1:15:46David Friedberg?

  the universe. And it's a new way to kind of observe the universe. Those telescopes represent a new class of inquiry that was just kind of, you know, discovered a few years ago and proven out. And now there's, there's a lot of work going on into that area.

• 1:15:57Jason Calacanis?

  And Friedberg, you had something you wanted to give a shout out to?

• 1:15:59David Friedberg?

  Yeah, I just sent you guys a photo of a new dog I adopted last week. Her name is Daisy.

• 1:16:04Jason Calacanis?

  Oh, so cute.

• 1:16:05David Friedberg?

  Uh, we flew her out from Virginia. Daisy is one of 4,000 beagles that were rescued.

• 1:16:12David Friedberg?

  From a facility in Virginia that was shut down by the DOJ. This facility was investigated by PETA and the Humane Society. And they basically shut this facility down. This is, in the United States, we only do animal testing on beagles. They're the only dogs that we do animal testing on. Because they can put up with pain and they have a high tolerance and a high threshold for pain. It's a really awful fact. We need to change that in the United States. The FDA does not provide good guidance on this. So pharma companies, pesticide companies, makeup companies, very often test on beagles. So this company, you know, that was operating this beagle facility in Virginia was shut down for, you know, ethical issues at their facility. And the Humane Society took control.

• 1:16:56David Friedberg?

  The company's called Invigo. Their parent company is publicly traded. I think that the fact that we test on these beagles in this country is awful. We adopted Daisy. There are 4,000 beagles like Daisy available for adoption. I'll put some links in the show notes here. People feel free to go and grab them. I'm sure there's a long list. The dog is absolutely incredible. I think that it's awful we test on dogs in this country. And I think, I urge anyone that has influence with the FDA to get them to provide better guidance. This is not the law. It's not required. And they don't provide good guidance. And so a lot of companies, de facto, and default to testing on beagles when they really don't need to and shouldn't.

• 1:17:31Chamath Palihapitiya?

  Freiburg, let me ask you, let me ask you a question. I think it's incredible that you adopted the dog. I hope all 4,000 get adopted. How should we do testing?

• 1:17:40David Friedberg?

  Totally. I, look, I think that there's, there's really important ethical lines here and we can debate those. This is a good nuanced conversation. We use mass models in biology to explore solutions for human disease. We, we use primate models, right? Which means we use primates. We use dogs. We use cats. We use mammals. There are, there are certain things that are obviously not necessary. We don't need to take beagles and pour tons of Kim Kardashian's newest makeup line in their eyes to see what happens. It's not required by law. And it's not about getting some pharmaceutical drug approved. This is in an area that I'm, you know, I'm not going to get into the debate on, on exploring and resolving kind of pharmaceutical solutions and things that can actually...

• 1:18:21David Friedberg?

  treat human disease, what I'm particularly sensitive to is when it's not needed. And when we're taking these animals and just doing awful things to them. Uh, when there's no law that requires it, we're not putting stuff in our bodies. And this isn't about, um, you know, protecting humans. It's really about cover your ass behavior for makeup companies and pesticide companies that they don't need to be doing. And that's really what I'm addressing.

• 1:18:42Jason Calacanis?

  3,999 beagles to go. Uh, if you adopt one of these beagles, send us a photo and we'll share it at the end of next week's program.

• 1:18:50David Friedberg?

  Thanks for letting me say that, guys. It's really important to me.

• 1:18:52Jason Calacanis?

  I think it's super important and how we treat, uh, dogs who are connected to humans in a very special way. I think speaks volumes to us as individuals. Sax, would you like to, well, on the Biden administration, talk about 2022 or give us an update on Ukraine? I give you the choices.

• 1:19:09David Sacks?

  I mean, it's like elder abuse at this point. I mean, I know you're trying to.

• 1:19:15Jason Calacanis?

  Can I ask you a question?

• 1:19:17David Sacks?

  I know you're trying to tee me up here, but like, all I can say is 9.1%. I don't want to beat a dead horse at this point.

• 1:19:22Chamath Palihapitiya?

  Can I read you guys something and you can tell me? There were these, uh, there's a, there's a group called Committee to Unleash Prosperity. But two researchers, Stephen Moore and John Decker, this is in the Wall Street Journal article I posted in the group chat. The pair studied the resumes of 68 top executive branch officials. Whose work shapes the economy from President Biden and Treasury Secretary Janet Yellen to White House Special Assistance on Economic Policy. Quote, average business experience of Biden appointees is only 2.4 years.

• 1:19:55Jason Calacanis?

  What?

• 1:19:56Chamath Palihapitiya?

  Any fresh-faced 25-year-old on Wall Street has clocked more private business hours. Again, I'm reading from the journal article than most of Washington's top officials. 62% have, quote, virtually no business experience, unquote. By contrast, the average Donald Trump cabinet official had 13 years of experience in the private economy, the author said.

• 1:20:16Jason Calacanis?

  What a disaster.

• 1:20:17David Sacks?

  Well, it's like 60 something percent of Democrats want to get rid of Biden and they don't want him to run again. I've never seen a president been defected on, been turned on by his own party so quickly into an administration.

• 1:20:29Chamath Palihapitiya?

  He needs to take back ownership of the Democratic Party, which means he has to pivot back to the center. And he needs to have a wholesale replacement of. The team that he works with on domestic policy, it's not working.

• 1:20:42Jason Calacanis?

  And Chamath, that was his pitch. We're going to go back to normalcy. He was going to be, you know, more of a centrist, and that's not what we've gotten. But of course, he was handed the disastrous economy that Trump created.

• 1:20:52Chamath Palihapitiya?

  Why do you say he was handed a disastrous economy?

• 1:20:55Jason Calacanis?

  Well, because of COVID and because of the massive stimulus that we spent, those two things.

• 1:21:01Jason Calacanis?

  That was like a setup. I mean, if Trump won a second, do you think it would be much different? If Trump was running, the economy with the setup was there. Trump probably would have spent more money, right? Trump wanted to spend more money.

• 1:21:11Chamath Palihapitiya?

  It's a really good question, actually. I have to think through that. It's a really good question.

• 1:21:14Jason Calacanis?

  Let's move on. What's the update on Ukraine?

• 1:21:16David Sacks?

  There's a really interesting chess game going on right now where the Russians are slowing the flow of gas.

• 1:21:22Chamath Palihapitiya?

  No, no, it's better than that. It's better than that. They shut down Nord Stream 1 for their annual maintenance. It's supposed to be back up by July 21st. And so the real question is, what happens if Putin hand checks Europe and just takes an extra day or two to get that thing back up and going?

• 1:21:44David Sacks?

  I make a prediction. I think the Western alliance is going to fracture come this winter.

• 1:21:48Jason Calacanis?

  Yeah, Germany's going to be freezing. The Germans are not going to take this well when they can't put their heat on.

• 1:21:52David Sacks?

  Listen, a foreign policy based on virtue signaling is one thing. When your economy is good and you're not worried about your energy security and you can heat your homes. It's another thing to have a foreign policy based on virtue signaling when your economy is in recession, you got runaway inflation, and you're in winter and you can't heat your homes.

• 1:22:14Jason Calacanis?

  Your morals change real quick, don't they?

• 1:22:16David Sacks?

  Three or four months ago, the liberal interventionists were triumphant about this Ukraine war. There are three big predictions. One, that Ukraine was gonna win. It looked like Ukraine was winning the first couple of weeks, but now it looks like Russia has won this Donbass region. Number two,

• 1:22:33David Sacks?

  They predicted that we would collapse the Russian economy with all these sanctions. The opposite's happened. We've collapsed our own economy. And number three, they predicted this would strengthen the Western alliance. That's the only card that hasn't, you know, basically turned yet. And I think it will this, this winter. I think you're going to see serious opposition to the way that the Biden administration has led the Western response.

• 1:22:56Jason Calacanis?

  I, I think it's well said that if Germany has the gas lines that Sri Lanka had, uh, you would see a definite fracturing of how people look at it. Just like they flipped last week and they made natural gas and nukes, uh, nuclear power, a green energy. So yeah, their morals and ethics and their virtue signaling, uh, go as far as their wallets and their heat and meals go. As we all know, this has been another amazing episode of the All In Podcast for the Baron of Beagles, the dictator himself, and the Rain Man. Yeah, it's definitely Biden's fault.

• 1:23:29Chamath Palihapitiya?

  Now, there is no chance for any of us to pass Freebrooke on the popularity. He just, he just sealed the deal with his fucking Beagle thing.

• 1:23:35Jason Calacanis?

  I know, I know.

• 1:23:36Chamath Palihapitiya?

  What do we do?

• 1:23:37Jason Calacanis?

  I'm gonna save a whale next week.

• 1:23:39Chamath Palihapitiya?

  I am gonna bring a dolphin that I killed myself.

• 1:23:42Jason Calacanis?

  How about that? Oh, you're gonna prepare dolphin sashimi? Okay, great. That'll, that'll secure your part as the most hated bestie. We'll see you all next time on episode 88. Good luck, 88. Of the All In Podcast. Bye, bye. Love you, besties. Bye, bye.

• 1:24:02Speaker 04

  Rain Man David Sacks.

• 1:24:06Speaker 04

  And it said, we open source it to the fans and they've just gone crazy with it.

• 1:24:10Jason Calacanis?

  Love you, besties.

• 1:24:22Speaker 04

  That's my, uh, dog taking a notice in your driveway tax.

• 1:24:30Chamath Palihapitiya?

  We should all just get a room and just have one big Q, George, because they're all just it's like this, like sexual tension that we just need to release somehow.

• 1:24:38Speaker 04

  What, you're the bee? What, you're a bee? Bee? What? We need to get merch. Besties are back.