Scott Bessent | All-In DC

(0:00) Chamath and Friedberg describe their adventures in DC and welcome Treasury Secretary Scott Bessent! (2:12) Scott's background, what drew him to equities, the role of macro investors (7:22) The legendary trade that broke the Bank of England in 1992, and how it relates to Main Street vs Wall Street today (21:30) Scott explains the Trump Administration's economic strategy (32:45) How this administration plans to de-regulate the economy, Fed relationship, re-financing debt (42:06) DOGE, DC grifts, shakeup at the IRS (50:51) Re-engineering social security through the US SWF, how energy factors in (1:00:02) Surprises, fixing affordability, thoughts on President Trump Thanks to our partners for making this happen: Gemini: https://www.gemini.com/allin Hims: https://www.hims.com | https://www.forhers.com iTrustCapital (use code allin): https://www.itrustcapital.com/allin Follow Secretary Bessent: https://x.com/SecScottBessent Follow the besties: https://x.com/chamath https://x.com/Jason https://x.com/DavidSacks https://x.com/friedberg Follow on X: https://x.com/theallinpod Follow on Instagram: https://www.instagram.com/theallinpod Follow on TikTok: https://www.tiktok.com/@theallinpod Follow on LinkedIn: https://www.linkedin.com/company/allinpod Intro Music Credit: https://rb.gy/tppkzl https://x.com/yung_spielburg Intro Video Credit: https://x.com/TheZachEffect

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

• 0:00David Friedberg?

  Okay, we are here in Washington DC in front of the White House. Having spent the afternoon with our friend David Sacks, our friend Elon Musk and others. We are here to learn about the debt, the deficit, what's going on in DC. And we have an incredible interview lined up with Scott Bessent, Treasury Secretary of the United States.

• 0:20Chamath Palihapitiya?

  It was amazing.

• 0:21David Friedberg?

  And it's been an amazing afternoon and we're really looking forward to it.

• 0:24Chamath Palihapitiya?

  It was amazing.

• 0:25David Friedberg?

  Well, this is the pre, the intro to the video.

• 0:27Chamath Palihapitiya?

  It will be amazing. It's not the pre, it's just the post.

• 0:31David Friedberg?

  What the fuck?

• 0:32Chamath Palihapitiya?

  We're gonna pretend it's the pre. It was amazing.

• 0:34David Friedberg?

  It will be incredible.

• 0:35Chamath Palihapitiya?

  It was incredible.

• 0:37David Friedberg?

  But how cool is the White House? And here's a bell. I'm pretty sure, I'm pretty sure the bell-

• 0:42Chamath Palihapitiya?

  I cannot even describe to you the day we had, running around. It's incredible.

• 0:46David Friedberg?

  Running around room to room in the White House.

• 0:48Chamath Palihapitiya?

  One of the best days of my life.

• 0:49David Friedberg?

  It was one of the best days of my life. It was incredible.

• 0:51Chamath Palihapitiya?

  Incredible.

• 0:52David Friedberg?

  I think this bell is probably pretty important. Can you guys get a shot of this bell?

• 0:55Chamath Palihapitiya?

  By the way, also I just want to say-

• 0:56David Friedberg?

  I don't know what it is, but it's really important.

• 0:57Chamath Palihapitiya?

  They are-

• 0:58David Friedberg?

  Yeah.

• 0:59Chamath Palihapitiya?

  The White House, the people, 201, super kind, super open, super curious. I mean, you felt it, you felt accepted.

• 1:07David Friedberg?

  Yeah, I felt accepted. But I got free soda. They have a soda machine where you can make any Coca-Cola flavor you want in the White House. It was pretty cool.

• 1:15Chamath Palihapitiya?

  I took some hummus, I wrapped it on a peep bird's face and I punched him in the face.

• 1:19David Friedberg?

  It was a cool afternoon. And this is, what is this? The east wing of the White House. And we took a walk from the west wing all the way over to the east wing.

• 1:28Chamath Palihapitiya?

  Through the portico.

• 1:29David Friedberg?

  And then we snuck in, or we didn't sneak in, we walked in. And then we're walking around the east wing, we went to all of the private rooms. I got great photos, we'll slice them into this video. And then some Secret Service dude comes up and he's like, "What are you doing here? This is the residence of the President. You have to get the [__] out." He's like, "You need to go downstairs now." So we got kicked the [__] out. But it was an incredible, incredible tour.

• 1:50Chamath Palihapitiya?

  Super great.

• 1:51David Friedberg?

  Yeah, anyway, we're excited for this interview with Scott Bessent. Hope you enjoy it.

• 1:54Chamath Palihapitiya?

  All right, besties, I think that was another epic discussion. People love the interviews. I could hear him talk for hours. Absolutely. We crush your questions, admit it.

• 2:04David Friedberg?

  We are giving people ground truth data to underwrite your own opinion. What'd you guys think? That was fun. How much crap?

• 2:12Chamath Palihapitiya?

  Well, today's a really important day. We're joined by the 79th Secretary of the Treasury, Scott Bessent. And this is an opportunity that we wanted to take as part of a longer-form way of explaining to people, not just how the economy works, but in a little bit more detail, where are we in this moment in time? Where are we with deficits, tariffs, the budget, economic, monetary, fiscal policy? How do we make sure that we all understand the plan to make America great again? So Scott, thank you for joining us.

• 2:41Scott Bessent?

  Good. Thanks for having me.

• 2:43Chamath Palihapitiya?

  I actually want to start with, let's go back in the wayback machine. So, South Carolina, your father was a real estate developer. Tell us where the passion for finance came from?

• 2:56Scott Bessent?

  Well, I don't know where finance in particular came from. As you mentioned, my dad was a real estate developer, and he was kind of boom-bust kind of guy. So I think that's where my passion for risk management came from. But I was very fortunate. Went to Yale, wasn't sure what I wanted to do. 1980, when I got there, probably you all can't imagine this, but there used to be these things called punch cards, and we'd just go on. The Yale computer system had just gone from punch cards to screens. I was going to, thinking of being a computer science major, maybe a journalist, because people actually used

• 3:37Scott Bessent?

  to read newspapers. So punch cards and newspapers, from the wayback machine. And I got an internship just for an individual, and he taught me the investment business really well. And I-

• 3:56Chamath Palihapitiya?

  And who was that?

• 3:57Scott Bessent?

  His name is Jim Rogers. He's famous. He was George Soros' first partner. He had just completed an around-the-world motorcycle trip, and written a book called Investment Biker. Fascinating guy. And-

• 4:15Scott Bessent?

  I did the investment business and I thought, this is really what I like because it's quantitative. So I had to use my quantitative skills, but you're also constructing a narrative. And it's also like human emotions.

• 4:30Chamath Palihapitiya?

  And you were trading equities, bonds, everything, currencies?

• 4:33Scott Bessent?

  Well, I started out with equities and I did that for several years. And then I actually ended up at Soros Fund Management. I worked for a fellow who's my mentor, Stan Druckenmiller, who's incredible. I think he's on, he's more than 40 years now, never a down year. And when you're sitting next to him, I think, what am I doing all day?

• 4:56David Friedberg?

  And notorious for going all in several times in his career.

• 5:00Scott Bessent?

  All in, all in.

• 5:03David Friedberg?

  Only when he's right.

• 5:04Scott Bessent?

  Yes, well, but he is the best at changing his mind of anyone I've ever seen.

• 5:11Chamath Palihapitiya?

  So Druck has that famous adage, invest then investigate.

• 5:15Scott Bessent?

  Well, he has several. And I'm trying to get him to write a book because he has so many of these great things. Maybe you will compress him. But invest, investigate, it takes courage to be a pig.

• 5:28David Friedberg?

  Right.

• 5:29Scott Bessent?

  Right? So, and then I was hooked on markets because, again, it was everything. It was quantitative, it was qualitative, and it's real time. You get real time feedback all the time. And you're, you can have a long-term view, but then you're trying to gauge the short term against that. And I loved it. And for 35 years, I've gotten into, I did what's called macro investing. So eventually I was trading currencies, bonds, commodities.

• 6:06Scott Bessent?

  The equities, some credit, and I got to travel around the world, meeting leaders, and trying to figure out what the next move was in policy.

• 6:17David Friedberg?

  I think this is important because I've spoken with folks who trade in macro. And a big part of the role of being a macro investor, macro trader, is really knowing where central bank action is going to be, really knowing how government bonds are going to move, and spending time with economists, not just central, but around the world, and learning a little bit about how capital is flowing all over the world. Is that kind of the right way to describe that role of being a macro investor, just for folks?

• 6:46Scott Bessent?

  It's a lot of that. There's another great macro investor called Bruce Coder. And he had this saying that, he said, you know, "I succeeded because I could imagine a different future and believe it could happen." So, the key is to believe it could happen, and then manage the risks. So, could you imagine what would happen if the Iron Curtain came down? What would happen? I mean, you all do this venture capitalists, but like, you know, how could the world live in a different state?

• 7:22Chamath Palihapitiya?

  Okay, well, let's hold that idea and double-click for us to 92. It's probably one of the most famous moments where the broader world at large met macro trading. And this is really where you, and Druck, and Soros basically broke the back of the Bank of England. And it's really an interesting window into assessing all of these things. So, can you give us the conditions on the ground at that moment, and what new reality you saw for England? And then, it would be great, from there, we'll contrast and compare to America today.

• 7:59Scott Bessent?

  So, it's a great historical example, and it also kind of brings in three dimensions. So, I was the analyst. Stan was the portfolio manager and then in a way George was the risk manager. So I was running the UK office, I was on the ground in the UK. And I had this light bulb go off and I thought, the fulcrum thought, or my differentiated view was that the UK had just had a big housing boom. And UK mortgages at that time, they didn't have long-term mortgages, they were all floating rates.

• 8:41Scott Bessent?

  So if the Bank of England raised rates on a Wednesday, your mortgage went up on a Friday. Yeah. The UK had hooked into something called the exchange rate mechanism. They had to balance versus the Deutschmark, they had to stay within a band. I noticed that if they raised, or I thought if they raised rates to try to stay in the band and protect the currency, it would be unsustainable because British homeowners would get bankrupted. Stan's great feat of analysis was figuring out that these bands set up this incredible asymmetric bet.

• 9:22Scott Bessent?

  Because I can push them up against one side of the band and their mandate is just to push me back to the other side. So we just lose two and a half percent. And Stan tells this great story of telling George Soros, "Oh, well, you know, here's what I want to do." And he says he told him, and George says, "Well, how much do you want to do?" And he said, "Probably 100% of the fund." And he said Soros gave him this really sour look. And he thought that he had said something wrong. He goes, "Why wouldn't you do three times that?"

• 10:01Scott Bessent?

  So, anyway, it was, we pushed them against the band, the Bank of England, the British government had to buy this unlimited amount of pounds. And they started raising interest rates and this was September of 1992. And eventually...

• 10:24Scott Bessent?

  They just weren't able to sustain the pressure from the high rates. And came out and then the asymmetric risk reward was we made about 20 something percent in a day.

• 10:36Chamath Palihapitiya?

  Yeah.

• 10:37David Friedberg?

  Right.

• 10:37Scott Bessent?

  And it was back to what was really Stan's genius is I don't know if either of you played backgammon, but in backgammon, there's the move after the move.

• 10:45Chamath Palihapitiya?

  Yeah.

• 10:46Scott Bessent?

  And so Stan, we'd made all that money and we were kind of here for it. Okay, now what? Because there's going to be the trade after the trade. So we made that much in a day. But then it was actually the trade after the trade. This isn't well publicized. I think we made another 20% during the rest of the year.

• 11:07Chamath Palihapitiya?

  Wow.

• 11:07Scott Bessent?

  Yeah.

• 11:08Chamath Palihapitiya?

  So in that moment, what you're really observing is that the real economy is somewhat dislocated, maybe meaningfully dislocated from the financial economy in your operating. And I think you've said this now many times and you've basically used the terminology, the Main Street, Wall Street dichotomy. How do you observe the moment in 2025, the maybe what rhymes with the early 90s or other periods where you've been trading actively?

• 11:36Scott Bessent?

  Well, look, I think it goes back to something that's unsustainable is unsustainable. And one of the reasons I'm sitting here now is about 18 months ago, I went to see President Trump. I'd known the Trump family for 30 years. I'd never known the president that well. But to tell him that I want to get involved in the campaign because I was so alarmed with what the Biden administration was doing with the deficit debt and deficit.

• 12:12David Friedberg?

  Endless stimulus, endless spending.

• 12:13Scott Bessent?

  Endless spending, but endless spending when we were in solid economic territory or not in a war, first time, first time ever. And I thought it was very cynical.

• 12:27Chamath Palihapitiya?

  Yeah.

• 12:27Scott Bessent?

  Because I actually thought, well, we're going to spend, spend, spend. And then there'll be no choice but to raise taxes.

• 12:33Chamath Palihapitiya?

  Right.

• 12:33Scott Bessent?

  So you'd go into this equilibrium that you could just never get out of. And you become kind of a European style social democracy, you know, the malaise.

• 12:43Chamath Palihapitiya?

  Yeah.

• 12:43Scott Bessent?

  And, you know, I also think that we're very cynical on immigration.

• 12:47Chamath Palihapitiya?

  Right.

• 12:48Scott Bessent?

  Because if you take. Kind of the stated number 12 million, the president's number 22 million. I don't know what the truth is, kind of lean toward the president. But it was, oh, we're going to let all these people cross the border. You can't ever make them, the problem's too big to make them go home. But I like to stay in my finance lane. So the finance lane was, we're going to just go to the point of no return and kind of inflict these, the progressive financial values on the country. There'll be no way out.

• 13:22Chamath Palihapitiya?

  You had very meaningful wage suppression in that period. And you had an equity market that was incredibly well bid, just because the money supply was just always there.

• 13:31Scott Bessent?

  Well, it was always there. And you had these distributional aspects, because back to your question, Wall Street versus Main Street, that, it was driving me crazy when Vice President Harris said, I'm going to fight for the middle class, and she'd eviscerated the middle class. Or these policies, inadvertent, intentional, had eviscerated the middle classes and really the bottom 50%. So we're in this.

• 14:01David Friedberg?

  Because purchasing power goes down, inflation went up.

• 14:05Scott Bessent?

  Well, if you didn't have assets.

• 14:08David Friedberg?

  Right.

• 14:09Scott Bessent?

  So.

• 14:10David Friedberg?

  That's really important. I think people don't understand this, that if you had stocks, if you had assets, your assets inflated. But if you didn't, the cost of everything inflated, but you didn't have the ability to purchase, because your wages don't go up.

• 14:21Scott Bessent?

  Yeah. Not only did inflation go up, but if you look, Jason Trinidad has this thing, I think he calls it the everyman index. And so CPI went up about 22 during the period. But the everyman index was up over 30, 35%. Because the bottom 25%, the bottom 50% of wage earners have a different basket than we do. And it inflated much faster.

• 14:51David Friedberg?

  100%.

• 14:52Scott Bessent?

  Used car prices were up.

• 14:53David Friedberg?

  Car insurance.

• 14:54Scott Bessent?

  Car insurance, rent, groceries. And, you know, like, not only is it unfair, but it's just unstable.

• 15:02David Friedberg?

  Right.

• 15:03Scott Bessent?

  And.

• 15:04David Friedberg?

  Create civil issues.

• 15:05Scott Bessent?

  Yeah.

• 15:06David Friedberg?

  Societal issues. And so, yes. But sorry, as you guys got into looking at this, and I remember Stan talking about this in the summer.

• 15:16David Friedberg?

  Of 23, I think it was, or 23, yeah. And what was the point of view on what should have been done at that point in time? And then how much farther did it go? How much longer did it last?

• 15:28Scott Bessent?

  Well, I think what happened, the Democrats will tell you that the big spending bills were needed for rescue. And I would say in March of 21, the economy didn't need rescue, was already in recovery. So these were rescue-sized packages. And even Larry Summers, I remember there was a great debate between Larry Summers and Paul Krugman. And Summers, I think, said, look, this is at least 900 billion, a trillion too much. And the Federal Reserve was, summer of 23, 22, Federal Reserve was very slow, off the mark.

• 16:11Scott Bessent?

  And we ended up, and, you know, again, imagine, top 10% has assets, stock market is flying, you're in the bottom 50%, you have no assets, but you have debt. So credit cards are up, mortgages, impossible to buy a house, house prices had gone through the roof due to COVID. So it really did end the American dream. And, but we'd been suffering these distributional effects.

• 16:42David Friedberg?

  Scott, what is the American dream today, do you think?

• 16:45Scott Bessent?

  Look, I think the American dream's what it's always been. But after World War II, I think 90% of American families, the children made more than the parents. Now, I think it's 50/50. But it's to own a home, it's financial security, it's to some level of comfort, it's purpose in your work, it's to be able to support your family, to be able to have choices to not have to work two jobs. I made a remark at the Economic Club of New York.

• 17:26Scott Bessent?

  Last week, two weeks ago, and Mike Pence decided he was gonna troll me. And, because I said the American dream is not built on cheap goods. Right. And he said, "Well, yes, it is." And, you know, I just say, "With Vice President Pence, this let them eat flatscreens economic policy, that doesn't, isn't what people want. They don't want the bobbles from China." It's like the old- They want progression.

• 17:56David Friedberg?

  People want progression. I mean, I remember reading, um, there's a, uh, I think Jonathan Haidt had some work on this a long time ago, where happiness is measured by your change in net worth or income per year, doesn't matter what your absolute levels are, by all these socio-economic kind of surveys that they do. That feeling like you're having some progression in life is what folks are looking for. And I wonder whether solving for that, we created a system, and I'd love your, point out your read on this, that we said everyone should own a home, that's the American dream. And in order to do that, people put most of their net worth into a home. 60%, I think, of middle-class net worth is tied up in their, in a single asset. And then in order to get them to feel like

• 18:38David Friedberg?

  they're progressing, we've created a system of loans and a system of kind of economic and fiscal policy that ultimately drives the value of the home up every year. Now we're kind of in an unsustainable housing bubble. Most people can't even afford to buy a home. What did we get wrong there? And how does that affect what the American dream should look like going forward?

• 18:56Scott Bessent?

  Well, I think a lot of it's scarcity. Because what you're talking about is, like, out in San Francisco, super tight zoning laws, so there's scarcity for homes. If you think, like Ivy League education, all of a sudden, you gave all these people access to Ivy League educations, you brought in international students, but the number of degrees awarded, Harvard, Yale, Princeton, probably hasn't changed very much since the 1950s. So, you created just this demand for scarce things, which leads to this anxiety. Mm-hmm. But you also-

• 19:40Scott Bessent?

  Created, I think, a sense of hopelessness through

• 19:44David Friedberg?

  I can't access, I will never get, I will never be able to pay down my student loan. I will never be able to afford a home. I can never see my income growing to give me access there.

• 19:53Scott Bessent?

  Yeah, and

• 19:57David Friedberg?

  So is that a dereg solution? Is that the

• 20:00Chamath Palihapitiya?

  Well, I think the first part of it is it's a data problem because in order for the government, I mean, the one thing that struck me about, I think, the Trump 2.0 administration is I think you have a better beat on the fact that this data is not as reliable as other administrations would say they were in order to do whatever it is they wanted to do anyway. So it's sort of like, let me just find the data that justifies what my action is. And part of why you can't, I think, tell this story is do you trust the GDP numbers? Do you trust non-farm payrolls? Do you think these are reliable enough for you to act on behalf of the United States?

• 20:36Scott Bessent?

  No, look, they're subject to big revisions over time. And I thought one of the big mistakes the Biden administration made, and thank goodness they made it, was they refused to, they went with the numbers, not what the American people were feeling. They said, no, it's a vibe session and you really don't understand how could you have it? This has happened, this has happened. When in reality, I was on Meet the Press yesterday and there was something that said, well, the American people don't believe Donald Trump's doing enough on the economy. And I told the host, I said, you know, the one thing I'm not going to answer is that they don't know what they're talking about.

• 21:20Scott Bessent?

  I have to have respect for how they feel. And then we need to go back and look at what is causing this anxiety. So that's what, that's what we're going to do.

• 21:31Chamath Palihapitiya?

  So let's peel the onion back. What do you think is causing this anxiety? Where are the levers that maybe the federal government can control in releasing some of the pressure? And what are more market functions that just need to clear up some of these?

• 21:47Scott Bessent?

  Well, I think there are We're trying to do three things and I think you may have talked about it last week, week before. The three legs on the stool. Three legs on the stool. And from the outside, that you intuited that very well. I would do just a little refinement on that. That's what I was gonna ask you, yeah. Just tell me where I was right and wrong. But you were adjacent to everything. So on one, we are trying to bring down this massive federal debt, cut the spending, but in a controlled way. You can't do it all at once.

• 22:30Scott Bessent?

  I don't like to repeat private conversations with the president, but I'll repeat this one because I think it's very, it really illustrates where his head was at. First time I went to see him, saw him at Mar-a-Lago and walked in the door and he said, Scott, how are we gonna get these debt and deficits down without causing a recession? Fantastic. That's a great question. And that's exactly where we are now. How are we gonna get the debt and deficits down, not cause a recession? And I said, sir, when you win, you didn't get us here. We're gonna set a goal by 2028, we want to get back to the long-term average, we're gonna deflate it slowly and...

• 23:15Scott Bessent?

  Long-term average being about 3% deficit to GDP? About 3, 3.5% deficit to GDP. And I keep saying, the US, we don't have a revenue problem, we have a spending problem. Because we are averaging right about 18% revenue, and I'm talking about federal government. Federal government only. We're at about 18% and Biden administration blew it out, blew the spending out to 25. Normally, it's about 21, 21.5. We have the 2% inflation, nominal GDP, take, real GDP is 1.8, so we get nominal GDP 3.8 and it all works out.

• 23:59Scott Bessent?

  And it was very interesting, I had one of the heads of one of the Singapore Sovereign Wealth Funds here last week. Guess what Singapore spends in terms of spending to GDP?

• 24:12David Friedberg?

  Deficit, 3%?

• 24:13Scott Bessent?

  They have no deficit, but they spend 18%.

• 24:16David Friedberg?

  18%.

• 24:17Scott Bessent?

  18%. And he said, you know, he said, "We have a lot in common with the Trump administration. We like small government, we don't like immigration, illegal immigration, and we like personal safety," which I thought was very interesting.

• 24:31David Friedberg?

  Sorry, so let me just understand, so deflating government spending is key, but the big challenge has been that we have now accumulated 30-some-odd trillion dollars nearly of debt, and the interest on that debt has started to grow. We now have to pay 1.2 trillion dollars in interest payments per year, so that starts to consume more of the spending budget that we have at the federal level, which means we can spend less on the rest of the federal government's programs. Meaning you have to cut a lot more than you otherwise would have, which is what makes it so difficult and so painful. Is it realistic that you can get Congress to act in the way that Congress needs to

• 25:14David Friedberg?

  act to get to the level that we need to get to, given the high interest payments and the high debt level that we have?

• 25:20Scott Bessent?

  Yeah, and with this Republican Congress, and I'm not sure what a deficit hawk is, but I think I would qualify as one, and a lot of the Republicans, I actually have to coax them, you can't do this all at once. I was with one of the Congressional Budget Committees two weeks ago, and, you know, they really want to cut this fast. And I said, "You do realize every 300 billion we cut is about a percent of GDP, so you could..." So, we are trying to land the plane.

• 25:56David Friedberg?

  Right.

• 25:57Scott Bessent?

  Well, and...

• 26:00Scott Bessent?

  The plan, because that's really what I'd like to talk about today. I think there are three plans here. But Plan One, we're going to delever the government via the spending. We are also going to shed excess labor from the government. So on that side. And then on the other side, we're going to deregulate the financial system. The regulated financial system's really been in what I call a regulatory corset for a long time. And as we deregulate that, then the private sector can releverage. So government deleveraging, private sector releveraging.

• 26:41Scott Bessent?

  And the employment, or the folks who lost their government jobs will be picked up by the private sector.

• 26:50David Friedberg?

  But this is really important, and I think this is the most critical thing. I'm really glad we got the chance to talk today. Because I hear so much about the conversation on any one of these topics, independent of the others. And there's a relationship between them that I think is critical to understand on how this administration is aiming to drive an economic recovery that is not inflationary, is sustainable, and also will allow people to have the American dream in a way that they can have access to today.

• 27:18Scott Bessent?

  Yeah, and so part of fixing the affordability crisis is what can, and we come back and talk about it if you want, but where can we get prices down? You know, like eggs are easy, but the other side of getting prices down is getting real wages up. So on getting real wages for working people up, it goes back to the Main Street versus Wall Street. And the second plan is to reorder the international trading system and bring manufacturing jobs back to the U.S. And have, reinvigorate the middle class, because again...

• 28:02David Friedberg?

  Through tariffs.

• 28:03Scott Bessent?

  Well, to use tariffs... We're needed to bring other countries into line.

• 28:12David Friedberg?

  And to create an economic incentive to onshore for some industries and some supply chains?

• 28:18Scott Bessent?

  Well, so there's tariffs. Then I think there are three other things we can do, which are the centerpiece of the administration. We can have the low and predictable taxes. We can substantially slash regulations because regulations are the equivalent of-

• 28:38David Friedberg?

  It'll drive investment dollars, private investment dollars.

• 28:40Scott Bessent?

  Yep, and predictability in regulations. And then cheap energy.

• 28:46David Friedberg?

  Right, and sorry, what is the relationship between the tax cuts and the getting to 3%, 3.5% deficit as a percent of GDP?

• 28:57Chamath Palihapitiya?

  Especially because the CR unfortunately gave folks a get out of jail free card because we kept the, you know, $2 trillion cap for an exit loan.

• 29:08Scott Bessent?

  Yes, but you gotta have, I've been in this building, I think this is my seventh week, President Trump, been back at the White House for eight weeks. So you actually do need time.

• 29:22Chamath Palihapitiya?

  Yeah.

• 29:23Scott Bessent?

  So a lot of people who weren't happy about the CR, but shutting down the government wouldn't have been productive, either politically or economically.

• 29:32David Friedberg?

  So, sorry, does tax cuts get made up with tariffs? Or does tax cuts get made up with cutting government spending?

• 29:40Scott Bessent?

  Well, tax cuts will, so tax cuts and deregulation will change the growth trajectory.

• 29:48David Friedberg?

  Grow GDP.

• 29:49Scott Bessent?

  Will grow GDP. If trend line has been 1.8, if you can move the growth to three or above-

• 29:56David Friedberg?

  Right.

• 29:57Scott Bessent?

  Then you really change their trajectory. And if you can keep expenses flat or do the unthinkable and cut expenses, then you can really-

• 30:08David Friedberg?

  So this is important, so sorry, government revenue as a percentage of GDP can go lower. If you have lower expenses and a faster growing economy.

• 30:17Scott Bessent?

  Yes.

• 30:17David Friedberg?

  I think that's like really important for folks to understand that relationship. And so in isolation, tax cuts might reduce revenue. But when done with reduced government spending and deregulation and a reordered international trade model, you theoretically will accelerate economic growth in this country, increase government revenue overall, even with a lower tax rate. That's kind of the theory.

• 30:38Scott Bessent?

  Yeah. And I'll tell you, shame on me. I was in the investment business 35 years. I talk very confidently over the CBO scoring says this, and it turns out, I didn't know you know what about CBO scoring. Like when you're on this side of the wall, you realize how crazy it is.

• 30:55David Friedberg?

  Right.

• 30:55Scott Bessent?

  It's crazy.

• 30:56Chamath Palihapitiya?

  So it's quite a gamable system.

• 30:58David Friedberg?

  Yeah.

• 30:58Scott Bessent?

  It's very gamable. And one of the most gamable parts of it is in normal CBO scoring, that, so we're calling, we're saying that we want to renew the tax cuts.

• 31:10Chamath Palihapitiya?

  Right.

• 31:11Scott Bessent?

  We're actually just renewing the current tax regime.

• 31:15Chamath Palihapitiya?

  Right.

• 31:15Scott Bessent?

  That somehow, after they expire, then they go back to the old rate. Spending never changes. Like spending never has to get renewed.

• 31:28Chamath Palihapitiya?

  Right.

• 31:28Scott Bessent?

  And I think, when I look and think about a mental model and how do systems work? How do they break down? One of the things that has caused this spending bulge is this idea that you never had to re-score spending.

• 31:41David Friedberg?

  Oh, it's not. And the incentive model is when you have a constituency that you represent as an elected representative, that's earning from that spending, they're telling you, if you want to get re-elected, make sure my earnings stay and get me more. And then every year, you've got a set of elected representatives whose, you know, primary objective in a democratic system is to go in and get more money for their constituents. How do we solve that fundamental problem? How do you think about that?

• 32:08Chamath Palihapitiya?

  Well, first of all, do you actually think that that's true? Do you think that most politicians are here to just get money for their...

• 32:14David Friedberg?

  Good question, yeah.

• 32:16Scott Bessent?

  Yeah. I mean, it's OPM. It's other people's money, but they...

• 32:21David Friedberg?

  Danny DeVito had that movie.

• 32:22Scott Bessent?

  But you would regard that as being a good politician.

• 32:26David Friedberg?

  Right.

• 32:26Scott Bessent?

  Like you brought home the bacon for your district.

• 32:29Chamath Palihapitiya?

  Yeah.

• 32:30Scott Bessent?

  That, because...

• 32:32Scott Bessent?

  The CR, a lot of people didn't like it. But one of the things that a lot of people didn't like, there were no earmarks in it. How dare they? Totally.

• 32:41Chamath Palihapitiya?

  The Christmas tree bill that kind of shows up at the 11th hour.

• 32:44Scott Bessent?

  Where everyone gets a little bit.

• 32:45Chamath Palihapitiya?

  Yeah. Can you talk about, so we talked about this deregulation as this one very important lever, right? So how do we add 50, 100 basis points of growth back in? We're going to do it through deregulation. How do you undo the financial corset, as you said? What are the, what are the sort of three or four big ideas that you'd like to affect?

• 33:03Scott Bessent?

  Yep, so we are re-examining all the bank regulations. And why are they there? Why, why do banks have to, I can't remember, it's 5% or 7% to hold treasury bills? What are the regulations? Why do, I had a whole group of community bankers or small banks here last week. And why do they have to hold the same amount of capital that JP Morgan and Wells Fargo and Citi hold? Yeah. When they don't have the complexity, they don't have, why do the regulators? One of these small bankers said, well, you know, Bank America does it this way.

• 33:47Scott Bessent?

  Well, Bank America has a trillion dollars in deposits. This was 183 million dollar bank. Yeah.

• 33:54Chamath Palihapitiya?

  Well, when you look at the regulatory overhang of some of these things, Basel I, Basel II, you have all of these frameworks. And then as a result, all these organizations that are running around trying to help you administer this complexity, all it does is just lower economic activity in the end.

• 34:09Scott Bessent?

  Well, and but it's, I know you all talk about incentives a lot. Back to incentives, what's a regulator's incentive? Just to keep tightening the corset? They don't care about growth. Yeah. They, they don't care about the common sense. Turn off, turn off every risk, it's their job.

• 34:30Chamath Palihapitiya?

  If you had to create a metric then to say, okay, here's how we're going to measure this undoing of the financial corset. Is it sort of the lending velocity by private lenders so that the private releveraging can occur? Is that a good way to think about that?

• 34:44Scott Bessent?

  Or is rates a way to think about it? Well, it doesn't have to be rates, but. If we do all the things I was just talking about, if we deregulate, if we have cheap energy, if we shed excess labor from the government, if we get government spending down, then rates, inflation should come down, rates should come down. But on the question of how are we going to measure it, I don't have any problem with private credit. I actually think it's exciting.

• 35:15Chamath Palihapitiya?

  Yeah, it's dynamic.

• 35:17Scott Bessent?

  It's dynamic.

• 35:17Chamath Palihapitiya?

  It meets the business where it is. Yeah, I agree.

• 35:19Scott Bessent?

  And the strength of the US financial system is the depth and now the breadth. But you could see that what's happened, that so much lending is being pushed outside the regulated banking system, that tells you it's overregulated. So now, so one test will be, how has bank lending, especially small regional, small banks, community banks, the, come on, and these small banks, the small banks and community banks, they're 70% of ag loans, they're 40% of small business loans. And that's one of the reasons Main Street's been stifled.

• 36:02Chamath Palihapitiya?

  So can you talk about then, how you will work with the Fed in sort of the change of all of this financial machinery?

• 36:11David Friedberg?

  And do you need to work with Congress too, to make these changes?

• 36:14Chamath Palihapitiya?

  And also just generally, maybe your thoughts on just the Fed in this process of helper, foe, like where do they stand?

• 36:21Scott Bessent?

  Well, the Fed, I 100% support the Fed's autonomy in monetary policy. I don't agree with it all the time, but that...

• 36:33Chamath Palihapitiya?

  It's how it is.

• 36:35Scott Bessent?

  It's how it is. And so, and I said, I won't comment on prospective policy, I can talk about their mistakes in the past, which have been numerous, but I think, like with any system, as it expands beyond sort of the core, I actually think...

• 36:59Scott Bessent?

  That some of the things they've done in regulation, some of the things they've done kind of climate and DEI, some of the things, maybe even non-standard monetary policy threatens their independence. And I want them to stay strong, robust, and independent on monetary policy. On regulation, I think that they have been much too harsh on especially the smaller banks, medium banks. So there's three main bank regulators. There's the Fed, Office of Control of the Currency, OCC, and the FDIC. And then there are other regulators, the

• 37:41Scott Bessent?

  SEC, CFTC. But the banking regulators at the federal level are those three. Here at Treasury, we have something called FSOC, Financial Stability Oversight Council. And I chair that. And via that, the President's Working Group, which is another convening mechanism, that I plan to just keep pushing for safe, sound, and smart deregulation. Like, why are we doing this? Why are we doing that? And again, that there's a capital charge to banks for buying Treasury bills.

• 38:22Chamath Palihapitiya?

  Totally.

• 38:22Scott Bessent?

  So I actually think there's a chance that if we take, it's called the supplementary leverage ratio. If we take that away, it becomes a binding constraint on banks. We might actually pull Treasury bill yields down by 30 to 70 basis points. Every basis point is a billion dollars a year.

• 38:46Chamath Palihapitiya?

  Can we talk about that for a second?

• 38:47Scott Bessent?

  Yeah.

• 38:48Chamath Palihapitiya?

  So I think, and I've said this for a year probably, but one of the biggest mistakes that I think Janet Yellen affected was this continued issuance of money on the short end of the curve to finance these deficits, which gives you, you inherit, an incredibly difficult challenge, I think, over the next nine months. I think there's like nine or 10 trillion that has to get refinanced. Do you want to talk about that?

• 39:14Scott Bessent?

  Yeah. Look, I thought that when rates were low, you're supposed to turn out rates.

• 39:21Chamath Palihapitiya?

  Exactly.

• 39:22Scott Bessent?

  And instead, the

• 39:25Scott Bessent?

  The Treasury for the past few years has pulled rates in and I think part of that was to keep rates lower, that they changed the issuance schedule when rates moved back up towards 5 percent. I have maintained that policy, but I'm maintaining it because, let's go back to David's question, when are we going to see the results from getting the government spending under control? And I don't think the markets recognize it yet.

• 40:01David Friedberg?

  Yeah.

• 40:02Scott Bessent?

  Again, if we do...

• 40:04David Friedberg?

  They're not sure what to believe. I mean, we hear this commentary a lot, like, what do you really... There's just a lot of uncertainty. There's a big spectrum of opinions there.

• 40:13Scott Bessent?

  Yeah, like, the central value tendency, you're right, the central value tendency, like, what's the center of it? Because the range of outcomes is so broad and, you know, like, we know there's a problem there, we know there's waste, fraud, and abuse. Quantify it. Quantify it. So I think as we are more able to quantify it, we will get credit for it.

• 40:39David Friedberg?

  So let me go back, so outside of waste, fraud, and abuse, as it's termed, I want to go back to the question I asked earlier. How much does this administration need Congress to act to get to 3% to 3.5% deficit to GDP? And what's your read on the Congress and how willing and able they are to take the action that's needed here?

• 41:03Scott Bessent?

  Yeah, I think there are a lot of headlines, especially after the CR, about the Democrats being in disarray, and media likes to write about disarray. I think the untold story here is Republicans have, for a change, actually been very disciplined. And I think a lot of that, President Trump is kind of shepherding the party, shepherding the movement. Imagine, he said, "Oh, that Mike Johnson will never get reconciliation instructions out of, he's got such a slim majority." Well, he did it. He did it, yeah.

• 41:45Scott Bessent?

  That he'll never be able to pass a clean CR. He did it.

• 41:50Chamath Palihapitiya?

  He did it.

• 41:51Scott Bessent?

  So let's see what happens with the budget. So we need Congress to be our partners on the budget. They're very engaged, the House and the Senate. Everybody recognizes that if we don't get this done, it's going to be the biggest, it's pass fail. It's the biggest tax hike in history.

• 42:09Chamath Palihapitiya?

  Where does Doge come in?

• 42:11Scott Bessent?

  Well, Doge, that's the cost cutting. And it's the first time we've really ever had business people look at it. This Clinton Gore Commission that we hear a lot of like, or hear a lot about, I think it was a bunch of business school professors. And

• 42:29David Friedberg?

  But here you've got real CEOs. You got Lutnik, you got Burgum, you got Elon. I mean, this cabinet is stocked full of experienced operators that can go in and identify where there's an opportunity for saving the taxpayers' money and still getting the results.

• 42:44Scott Bessent?

  Well, it's that. And we had this crypto council meeting the other day. And I was sitting, I was looking, it was myself, Secretary Lutnik and Kelly Loeffler. Everybody was a market person, like, forget business. We, and, but with Doge, that I am completely aligned with what Elon's doing. And everyone says, well, do you have to do it so fast? Do you have to do it? Like I said, I've only been in this business for seven weeks. I've only been in DC for eight weeks. But the thing I can tell you is if you don't move fast, the vested interest will weigh you down. Like the quicksand will come up or

• 43:29Chamath Palihapitiya?

  The claws get set.

• 43:31Scott Bessent?

  Yeah. Everybody's got lobbyists, everybody's got, I mean, think about it. Within a 10 mile radius of here, 25% of the GDP of the US

• 43:44Scott Bessent?

  Polls it through here.

• 43:45David Friedberg?

  Polls it.

• 43:46Scott Bessent?

  Every day.

• 43:47David Friedberg?

  Yeah.

• 43:47Scott Bessent?

  And everybody wants to just skim a little. I said to Elon, we're in a meeting, and I said, you know, people are mad at you because you're moving their cheese. And he goes, it's not their cheese, it's the American people's cheese.

• 44:01David Friedberg?

  Hundred percent. Every dollar spent goes into someone's pocket, and that person's going to fight tooth and nail to get that dollar to keep flowing into their pocket. And it's a very, like, there is no winning in Elon's role. There's, every single time he takes action, there are people that are going to come after him, that are going to come after the administration. There's no, and obviously gets recast, reclassified in the media as being something different, but there's nothing but downside as you make these changes to individual organizations that participate. And then it takes a while for the flow of that money to find its way, or those individuals to find their way back into the productive private economy. That's where I think there's a big gap and a big challenge in the perception of the actions

• 44:45David Friedberg?

  that are going on with the changes right now, is everyone sees the cuts, but they don't see the benefits. And that's nine months, 12 months, 15 months down the road, and that's a really hard thing to reconcile for most.

• 44:55Scott Bessent?

  Yeah, and I'd say there are a couple of things, too, is, one, like, everyone's hearing cuts, and they think their government service is going to get cut.

• 45:04David Friedberg?

  That's right.

• 45:05Scott Bessent?

  And they're not. I keep saying, it's the Department of Government Efficiency, not government extinction, not government elimination. And can we make it run much better with fewer people with fewer costs? And I don't want to demonize any of these federal employees. As I tell you, in this building, I've been so impressed with the quality of the people. I would have hired them in my private firm. They are great public servants. I need you to stay for the weekend, I need a 25-page memo in 72 hours. Super high quality. I actually think, when all this is done, there will have been two big savings.

• 45:50Scott Bessent?

  One will have been on these contractors.

• 45:52David Friedberg?

  Sure. Totally. We were just talking about this.

• 45:54Chamath Palihapitiya?

  We were with Elon just now.

• 45:55David Friedberg?

  They were just with Elon in the West Wing.

• 45:56Chamath Palihapitiya?

  Incredible stat, he said, I'm not going to name the firm so that I don't want to, but he said this one organization gets 98% of their revenue.

• 46:04Scott Bessent?

  I was in the newspaper, so we can say it, it's Booze Allen.

• 46:08David Friedberg?

  So we were talking about this, and then we were going through the numbers on the other firms, and it's just, the whole thing is just incredible.

• 46:13Scott Bessent?

  What kind of risk management is that, by the way?

• 46:15David Friedberg?

  Yeah.

• 46:15Chamath Palihapitiya?

  Yeah.

• 46:15Scott Bessent?

  But, but it tells you that, like, that they didn't manage their risks.

• 46:21Chamath Palihapitiya?

  That's right.

• 46:22Scott Bessent?

  Tells you how entrenched they believed they were.

• 46:24Chamath Palihapitiya?

  And how good it is for them.

• 46:25Scott Bessent?

  And how good it is.

• 46:26Chamath Palihapitiya?

  You're absolutely right.

• 46:27Scott Bessent?

  And, and the way, the way the grift works, you can only have six-month contracts, but there are people who have had forty-six-month contracts.

• 46:35David Friedberg?

  Incredible.

• 46:36Scott Bessent?

  They've been in situ for twenty years.

• 46:39David Friedberg?

  Incredible.

• 46:40Scott Bessent?

  And it's this whole...

• 46:42David Friedberg?

  I'm so happy there is transparency and visibility into this. If for nothing else, the administration providing this level of insight and data, I think, is so important for taxpayers and individuals in this country to see, to recognize, and importantly, to understand just how much of this grift is going on. It's frightening, and I'm glad that it's, like, being addressed.

• 47:03Scott Bessent?

  And, and the American people can see if they want it.

• 47:06Chamath Palihapitiya?

  So this is what I was gonna ask you. Let's just say that some, somehow the Borg slows this whole thing down. You know, what people say is that the conventionalism, well, then the only place to look will be things like entitlements.

• 47:21David Friedberg?

  Good question, yeah.

• 47:22Chamath Palihapitiya?

  Do you, do you think that that's true?

• 47:24Scott Bessent?

  Well, I, I, I think that now that the cat's out of the bag, that the American people are, are not gonna stay with this, is that maybe, again, here, maybe in the northeast corridor, there's some pushback, but when, I've seen the polling data, and the rest of the country does not want this to stop, and this administration's not gonna stop.

• 47:53Chamath Palihapitiya?

  Yeah.

• 47:53Scott Bessent?

  Like, the courts, they're trying to throw sand in the gears with the courts, and how some judge can say, "Oh, all these workers have to come back in," and, but I, I also think we've moved really quickly. Now, I think when we start putting out some of the anecdotes and the messages and talk about what's happening, like, I'll, I'll talk about it, I'll be talking about it soon, but there, there's one very large department that everybody deals with on April 15th, that... Their help desk is fully staffed 24/7, 365 days a year.

• 48:33Scott Bessent?

  They have the same number of people on Christmas Eve as they have on April 14th.

• 48:40Chamath Palihapitiya?

  Wow.

• 48:40David Friedberg?

  This, by the way, is something that I've seen being a lightning rod. Theoretically, every dollar you spend on the IRS, you get $3 back, or whatever it is. That's not necessarily true. Like, I just want to be clear that there's... You can still get all your tax revenue at the federal level, but you don't need to waste.

• 48:56Scott Bessent?

  Well, look, I mean, I'd be the ultimate chump if I said, "Oh, we're gonna cut spending."

• 49:01Chamath Palihapitiya?

  Yeah.

• 49:02Scott Bessent?

  But I also cut revenues with the IRS, which Treasury controls. My three goals are very simple: revenue enhancement, privacy, and customer service.

• 49:15David Friedberg?

  Totally.

• 49:16Chamath Palihapitiya?

  You know, there's a body of knowledge that says if we just fed in... And by the way, four or five of these companies can do this now. If we just fed in this entire federal tax code into these AI models, what you can give to Americans is a very guaranteed, resolute ability to file taxes with the assurance that there is no waste, fraud, and abuse. And now, all of a sudden, you take this incredible weight off of people's shoulders. You know, sometimes it is said that you get audited for almost political reasons, it seems like. You know, people that...

• 49:49Scott Bessent?

  Not almost. We have a big... We had a big announcement on Tuesday, and we brought in the 200 Biden whistleblowers, who they have a lot to say about who gets audited, who doesn't. They're gonna be sitting in this building, working on IRS matters, and understanding exactly how these audits get triggered, how these political witch hunts happen, and trying to change the ethos of the building. And again, 99% of the people at the IRS are good people. It's just like all these other agencies where they're bad folks.

• 50:32Chamath Palihapitiya?

  But to your point, this is where technology can create very reliable guardrails for the American citizen. Where it's like, okay, well, if this model says I owe $1,000 in tax, this is it. I'm not trying to change anything. I've fed it all the information. Software first, and you just know.

• 50:51David Friedberg?

  Let me go back to entitlements. I talked last week on our podcast about social security.

• 50:57Scott Bessent?

  Mm-hmm.

• 50:57David Friedberg?

  Social security has a $2.7 trillion balance, which is just basically a treasury bond that they can't trade out of. Should social security have invested in the S and P or invested in equities? And why don't we turn social security into a sovereign wealth fund and invest it for the benefit of all Americans going forward?

• 51:17Scott Bessent?

  Yeah, I think there's the optimal, then there's the possible. George W. Bush tried to privatize social security, and I saw your numbers, listen to your numbers, going way back.

• 51:33David Friedberg?

  1971.

• 51:34Scott Bessent?

  1971, and with 15, 16 trillion that we'd have. I don't know what the numbers are since W. tried it.

• 51:43David Friedberg?

  Yeah.

• 51:44Scott Bessent?

  They'd be substantial. We wouldn't be thinking about a problem in a few years. But I think now you've got to play the hand you're dealt. I think we are dealt the social security hand, and I think maybe we could re-engineer it if we could create the sovereign wealth fund and have that on the other side. There are a lot of philanthropists who are looking at baby bonds. So if you can create some kind of an investment account for newborns, then that would run on a parallel track to social security. So that would be compounding. The other thing would be a safety net.

• 52:27David Friedberg?

  Yeah, but it's still sitting in treasuries on the other side.

• 52:30Scott Bessent?

  Yeah.

• 52:31David Friedberg?

  And that's where there's an opportunity, not just to drive up returns, but participate in the American economy and give all Americans today the ability to know that they have some participation in the American economy, rather than having their retirement funds being sitting as a loan to the federal government for spending, which I think could be a big dramatic change. I don't know if they need to be independent, but I would, I think it's a It's a real opportunity for us.

• 52:54Chamath Palihapitiya?

  Are you excited by the idea of the sovereign wealth fund?

• 52:57Scott Bessent?

  I am. I'm excited by the idea. This is President Trump. Everything he does isn't in a straight line, but I guarantee you, he has a destination in mind. And the idea that he's going to be the first president in generations who is going to, he wants to create assets for the American people, not just debt.

• 53:23Chamath Palihapitiya?

  Yeah.

• 53:23Scott Bessent?

  So he wants to take the debt down. And then this idea of assets, there was a lot of talk about this economic deal we're going to do with Ukraine. That would have gone in the sovereign wealth fund.

• 53:35Chamath Palihapitiya?

  Right. Yeah.

• 53:36Scott Bessent?

  Government has big stake in Fannie Mae and Freddie Mac.

• 53:41Chamath Palihapitiya?

  Yeah. When it comes out of conservatorship, where does that go?

• 53:45Scott Bessent?

  Where does that go? As you mentioned, Doug Burgum did great work when he was governor of North Dakota. North Dakota has the equivalent of two state sovereign wealth funds.

• 53:58Chamath Palihapitiya?

  Right.

• 53:58Scott Bessent?

  For, I don't know, are they 700, 800, 900,000 people?

• 54:02Chamath Palihapitiya?

  Right.

• 54:03Scott Bessent?

  I think they had $25 billion.

• 54:04Chamath Palihapitiya?

  Right.

• 54:05Scott Bessent?

  And...

• 54:06Chamath Palihapitiya?

  Alaska permanent.

• 54:06David Friedberg?

  Alaska permanent.

• 54:07Scott Bessent?

  The Alaska permanent. But all that's from the natural resource money going in.

• 54:12Chamath Palihapitiya?

  Yeah.

• 54:12Scott Bessent?

  So to the extent we start, the other day when the sovereign wealth fund was announced, President Trump surprised me in the Oval and said, "Could you make a few remarks?" And I said, "Well, we're going to mobilize the asset side of the balance sheet." And all the gold books said, "He's going to revalue the gold." I can say today, "We're not revaluing the gold."

• 54:33Chamath Palihapitiya?

  Yeah.

• 54:33Scott Bessent?

  But what we are going to do, Doug Burgum at Interior, every other department head is looking for the assets that we can mobilize. So if we have energy leases, federal government owns, back to the housing shortage, federal government owns a lot of land in downtown urban areas. Can we, or in suburban adjacent things in Nevada and Utah, can we use that land?

• 55:01Chamath Palihapitiya?

  Do you see a wave of privatizations as a way to sort of both pay down the deficits and debts? And also just to...

• 55:07David Friedberg?

  That's important to me. Like, why put it in a sovereign wealth fund versus pay down the debt? Help kind of do the finance math for us.

• 55:14Scott Bessent?

  Oh, because you think you get a higher return.

• 55:16David Friedberg?

  Right. Anything that beats our current return, our current interest rate?

• 55:22Scott Bessent?

  Yeah, I mean, not that in keeping score, not that I watch it closely, but the 10-year Treasury today is 428.

• 55:28Chamath Palihapitiya?

  428, yeah.

• 55:29Scott Bessent?

  So.

• 55:31Chamath Palihapitiya?

  It's responding well.

• 55:32Scott Bessent?

  Can we, can we do better?

• 55:34Chamath Palihapitiya?

  Yeah.

• 55:35Scott Bessent?

  Can we do better than 428? And I think with this group and this cabinet, and if we can put in, right now, we're working on the study group for the sovereign wealth fund, and we want to do best practices. We're talking to people around the world, we're talking to investment people, we're talking to a lot of the other big sovereign funds, and we're going to do best practices. And we want this to be a legacy of that.

• 56:03David Friedberg?

  Totally. I think Dan Loeb made this comment that the Australian Superannuation, they've got 30 managers, and they have as much in their, on their balance sheet today in their fund than Social Security does, about $3 trillion, and they have 7% of our population.

• 56:19Scott Bessent?

  No, it's incredible.

• 56:20David Friedberg?

  It's incredible.

• 56:20Scott Bessent?

  It's incredible. And I was with one of the Middle Eastern funds, and I said something about oil, I mean, we haven't had an injection into the fund in 20 years.

• 56:33David Friedberg?

  Why was this such a miss for America? What happened in the United States was that we took every excess dollar we had, and we invested it in the future, we bought, we built infrastructure. What happened that kept us out of this model where others were so successful and clearly have now gotten ahead of us, and their people have a greater kind of safety net than we do?

• 56:54Scott Bessent?

  Yeah, I think it was just this idea of, it was supposed to be a safety net, not some kind of prosperity ramp.

• 57:03David Friedberg?

  The Old Age and Survivor's Disability Insurance Fund, that's what it's called, right, under Social Security?

• 57:08Scott Bessent?

  Yes.

• 57:08Chamath Palihapitiya?

  You've mentioned cheap energy as a critical part of this holistic program, I think, three times now. Where do we make mistakes in that path where energy gets out of control? What do we need to do to make sure that energy, actually, the incremental cost of the electron basically goes to zero?

• 57:28Scott Bessent?

  Well, I think the biggest challenge we're having right now is trying to get private sector to lock in for some things that might not have a payoff for five, 10 years. And how do we avoid student body left, student body right with administrations coming and going? So we're trying, we're working on that.

• 57:50Chamath Palihapitiya?

  Well, this is an incredibly nuanced and I think an important point because we have this very vibrant, as you know, tax equity and transferability market that allows a lot of these organizations to make these five and 10-year investment cases. And, you know, for all the issues with the IRA, of which there are many, I think the one narrow aspect that it did was it calmed the markets about the future of those specific ITC credits and transferability. And it's a critical thing because there was a report, you probably saw it, but, you know, FERC said 90-plus percent of our incremental electrons as of December were from sources that were leveraging these ITC credits and that transferability. So to your point, we have this very delicate balancing act of making sure we...

• 58:35Scott Bessent?

  But there's the tax side, but then the regulatory side. With fossil, it's tougher because it crosses a lot of state lines, there's a lot more permitting, a lot less permitting for solar farm, for wind, for geothermal.

• 58:52Chamath Palihapitiya?

  Yeah, yeah. And nuclear?

• 58:54Scott Bessent?

  Nuclear is going to be a big part of it, but it's not going to happen tomorrow.

• 59:00Chamath Palihapitiya?

  We got to fix the supply chain and the regulatory.

• 59:02Scott Bessent?

  Well, we got to fix the supply chain, we got to fix the regulatory.

• 59:08Scott Bessent?

  We've got to decide which model are we going to go with. And I'm told that you two probably know more about nuclear than I do.

• 59:18Chamath Palihapitiya?

  He loves it, I hate it.

• 59:19Scott Bessent?

  Okay.

• 59:20Chamath Palihapitiya?

  Well, no, I don't hate it. I like nuclear. I just think it's 10 years old.

• 59:23David Friedberg?

  He's a loser. Don't listen to him.

• 59:25Chamath Palihapitiya?

  It's just not an investable thing for the next decade.

• 59:27David Friedberg?

  But we can do that. But it's important because the question is when it becomes one, that's when we know we've fixed the problem.

• 59:34Scott Bessent?

  But to the point that it's not investable, that's where the government needs to step in.

• 59:39Chamath Palihapitiya?

  Sure, absolutely. I 100% agree with you.

• 59:42Scott Bessent?

  That's where we have to bridge to the technology. We have to do the time arbitrage.

• 59:49Chamath Palihapitiya?

  100%.

• 59:50Scott Bessent?

  And also, I'm told, especially with the smaller plants, that you need to cluster them. And you've got to find somebody who wants to cluster them.

• 1:00:00David Friedberg?

  And let me ask you one more question as we kind of get to the end. But what's been the most surprising thing for you in this role since you've been in office?

• 1:00:10Scott Bessent?

  The national security aspect. That I would say 40, 50% of my day, Treasury does a lot of national security work. Whether it's CFIUS in terms of foreigners who want to buy US assets, whether it's sanctions, whether it's OFAC, anti-money laundering. We've just designated the Mexican cartels as foreign terrorist organizations. President Trump, over the weekend, launched a very aggressive strike on, missile strike on the Houthis assets.

• 1:00:52Scott Bessent?

  Well, underneath that, we'd already been working for several weeks on their bank accounts.

• 1:00:58Chamath Palihapitiya?

  I see.

• 1:00:58Scott Bessent?

  Or anyone who is adjacent to them. The Iranians supply the Houthis with their ecosystem. Previous to my getting here, Treasury had disrupted the ecosystem so much that the Iranians used to hand them cash. Now they're just handing them here, take this oil tanker and try to sell it. So there is the ability to break that down.

• 1:01:27Chamath Palihapitiya?

  When you go home and you're talking to your kids, you're talking to your husband, and you're like... This was so cool. There must be these moments where you're like, this was so cool. Do you have any anecdotes that you're comfortable sharing where you're just like, I can't believe I'm doing this job?

• 1:01:44Scott Bessent?

  Well, there have been several, but a good example, my family was actually there. Because after the inauguration, I asked President Trump, may I bring my family in, say hello, get a photo, and we're sitting in the Oval, so it's myself, my 11-year-old daughter, my spouse, 15-year-old son, and President Trump's having a great conversation with them. And then he said, oh, Scott, while you're here, let me call in these other two people, and we need to discuss this. So they actually got to see government being done live. So there's that.

• 1:02:29Scott Bessent?

  I have to say, I think the moment with President Trump, Vice President Vance, President Zelensky, was kind of a once-in-a-lifetime thing in the Oval Office. I hope it's once-in-a-lifetime. But I was sitting there, kind of in the front row of history, Vice President, Secretary Rubio, myself on the sofa, and watching President Zelensky do what I thought was the biggest diplomatic own-goal in history.

• 1:03:05Chamath Palihapitiya?

  Yeah, I think you said it very well in TV afterwards. It really, really was, based on... And you said, because you were there, you tried to negotiate with him in Kyiv, it was a very escalated, I think you used the word escalated, or high-decibel conversation?

• 1:03:19Scott Bessent?

  High-decibel, yes. Yeah. So, but kind of, my job for 35 years was to be outside the room, trying to put my ear to the door, maybe lift myself over the transom, figure out what the leaders needed to do, were going to do, and then how it would affect the markets. And now, it's...

• 1:03:44Scott Bessent?

  Fantastic and amazing and stimulating and a little scary being the person in the room who has to, what should we do, what can we do, how's it going to affect the markets, how's it going to affect the real economy, what's it going to do to working people in America?

• 1:04:03Chamath Palihapitiya?

  So how do we fix affordability?

• 1:04:04Scott Bessent?

  We're just going to have to go through and where's the problem, what's the solution? In terms of, are the insurance markets broken?

• 1:04:18Chamath Palihapitiya?

  Right.

• 1:04:19Scott Bessent?

  What can we do, there's been no, and I've been involved in the house building business, there's been no technological change in house building in 50 years, maybe 60. Some of the building codes go all the way back to the Chicago fire. So what can we do that, the way we categorize housing, it's stick-built or modular. Is there something in the middle, prefab? Because the more that comes out of a factory, the more that is standardized, that neighborhoods

• 1:04:55Scott Bessent?

  from DC to Bethesda to Potomac to, you could be in contiguous neighborhoods and if they're different municipalities, they'd all have different building codes, not zoning, building. And why is that? They're adjacent, why do the houses have to be? So is there some kind of window guidance that the federal government can give in terms of the more that comes out of the factory, the cheaper it'll be, the faster we can make it, things like that?

• 1:05:28Chamath Palihapitiya?

  Is there pressure that you could apply or influence you can apply? One of the things you mentioned earlier was just, you know, take San Francisco, there's an artificial constraint that's created by the zoning paradigm and it's not clear how you unlock that. Maybe is it up to private citizens to sort of like have regime change at the local level? But how do we sort of unclog that part of it to marry up with this kind of stuff? Because it would be great if you could just build up in many places.

• 1:05:55Scott Bessent?

  Yeah, well, I think there are a lot of things where you can look around and find What's interesting that something, what's something that's interesting that's being done somewhere? So, I lived in Greenwich, Connecticut for a while, maybe the richest suburb in America. There's a ton of multifamily there. Very expensive, very nice multifamily, there's some affordable housing, but Greenwich is not all 10 acres and a horse farm. The state of Connecticut has put in a, I guess it's a law, that every municipality has to

• 1:06:38Scott Bessent?

  allocate 10% of vacant land to multifamily. And if the zoning board won't give you a hearing, you as a developer, you as a nonprofit for housing, can go over the top and go to Hartford. And then Hartford will give you the authority. Well, no town wants the state doing it on their behalf, so now the towns negotiate. Yeah. So, like, I think that there are a lot of things that can be done. Again, on insurance, is there something that, I've been thinking about, is there something the federal government could do for California? Yeah.

• 1:07:21Scott Bessent?

  Where we come in, everyone's paying homeowner's insurance, then there's reinsurance on top of that, then I think the California reinsurance company is called Fair. Yeah. On top of that, so... Well, it's a separate plan, but, yeah. Yeah, but it's... It's a... You're stacking it. So, is there something we could do where you put another layer of private money in there, and then the federal government is the fifth risk tranche? Right. But if the federal government comes in, can we mandate down here, proper hygiene? Changes in the building code. Well, changes in the building code, changes in brush cutting. Right. Material choices, yeah.

• 1:08:06Scott Bessent?

  Right, right. Yeah, makes sense.

• 1:08:08David Friedberg?

  Great.

• 1:08:08Scott Bessent?

  So I think there's a lot.

• 1:08:10David Friedberg?

  And obviously, energy, I mean, just getting back to affordability, right? Energy costs come down.

• 1:08:15Scott Bessent?

  You took the words out of my mouth. No, no, no, but I mean, energy costs are energy costs. But then there's also that for food, the transportation cost of getting it to the grocery store, everything that's made out of petroleum products. So I think we can do that. And I think there's a lot to do.

• 1:08:38David Friedberg?

  Yeah.

• 1:08:38Scott Bessent?

  And it shouldn't be too hard. So we're actually, we should probably be announcing it in about 10 days. We're going to have an affordability czar. But it's going to be someone with a lot of experience in supply chains figuring out what are a lot of the quick fixes we can do.

• 1:08:57David Friedberg?

  Oh, that's awesome.

• 1:08:58Scott Bessent?

  Because, back to the question, what really has people anxious? Inflation, for now, is actually pretty close in. And, but the affordability has gotten so away from everyone.

• 1:09:18David Friedberg?

  Sure.

• 1:09:18Scott Bessent?

  That how can we bring that down?

• 1:09:20David Friedberg?

  Yeah.

• 1:09:21Chamath Palihapitiya?

  Yeah.

• 1:09:21David Friedberg?

  Good. For all our friends at home who talk a lot about the conversation about climate change and carbon free, I think one of the things that I always point out to people is the cheapest way of driving energy production in this country is there's a low carbon or carbon free alternative that's out there that's actually cheaper than standing up new plants. And there's an acceleration. I don't know how much this administration thinks about that relationship, but it seems to me like if we can unlock energy production, costs come down, and this economy transitions.

• 1:09:55Scott Bessent?

  Well, transitions, and I think it's also not being dogmatic.

• 1:09:59David Friedberg?

  Totally.

• 1:09:59Scott Bessent?

  Like, I saw what the Biden administration did with EVs. I have an EV. I can't wait for it to come off lease. And, but, also have a hybrid, and I think I fill it up maybe three times a year.

• 1:10:12David Friedberg?

  Totally.

• 1:10:12Scott Bessent?

  But this administration had a jihad on hybrids because they didn't pass the purity test.

• 1:10:20David Friedberg?

  Yeah, totally.

• 1:10:20Scott Bessent?

  So.

• 1:10:21Chamath Palihapitiya?

  They were picking winners and losers in a way that a lot of us were left scratching our heads.

• 1:10:24David Friedberg?

  Yeah.

• 1:10:25Scott Bessent?

  Yep. And.

• 1:10:26David Friedberg?

  I think cheap energy solves a lot of problems, personally.

• 1:10:29Scott Bessent?

  I think it'll, and cheap energy.

• 1:10:34Scott Bessent?

  Is energy security too?

• 1:10:35David Friedberg?

  Hundred percent.

• 1:10:36Scott Bessent?

  Because that's why Europe's kind of over a barrel, literally. And it's why the Russian war machine hasn't, again, literally run out of gas.

• 1:10:48Chamath Palihapitiya?

  And to the extent that we believe we're in an existential arms race for technical supremacy, it's really on one dimension, which is AI. And that is so needy of energy. So if we don't pull all of these issues together and realize that we need to basically take the incremental cost to zero, whatever we do, we need to create the incentives and package it all together.

• 1:11:08David Friedberg?

  I mean, we can't compete manufacturing.

• 1:11:11Chamath Palihapitiya?

  Without energy.

• 1:11:11David Friedberg?

  But we certainly can't compete without energy.

• 1:11:13Scott Bessent?

  Yep, yeah, I mean, we're not going to crush labor like China and some other countries have done, so we got to crush the energy price.

• 1:11:22Chamath Palihapitiya?

  Exactly right. And when you're in the Oval, what are the truths and misconceptions of the president? Maybe meaning the outside and what people know or don't know?

• 1:11:30Scott Bessent?

  Oh, how about this? We had a lot of foreign leaders come in. And I knew someone in one of their entourages, I won't tell you which one, but afterwards he comes up to me and goes, "Holy crap," because he's really smart. President Trump has perfect recollection because he was talking about something that had happened in that country 30 years ago. And he said, and he really, so President Trump listens, he is judicious, he is just taking it all in, he likes to see how people react.

• 1:12:09Scott Bessent?

  It's just incredible executive skills. Yeah. And the other thing too, that he's tough. But I went in and I showed him, we were talking about something the other day, and I said, "Well, this is going to cause some layoffs." And he goes, "Well, let's try to fix it."

• 1:12:30Chamath Palihapitiya?

  Yeah, yeah.

• 1:12:31Scott Bessent?

  "Let's try to fix it." So I always say, he really regards himself as the mayor of America.

• 1:12:38Chamath Palihapitiya?

  Right, yeah.

• 1:12:38Scott Bessent?

  Of 330 million people.

• 1:12:40David Friedberg?

  He wants to be personable to everyone.

• 1:12:41Scott Bessent?

  And he cares deeply about all of them. And he doesn't care whether you're Elon Musk or the guy cutting the rose garden, but you're his constituent.

• 1:12:54David Friedberg?

  Great, well Scott, thank you so much for taking the time. This has been a Wonderful. A pleasure and we really appreciate the insight. We wish you the best. And thanks for the service and thanks for doing the role. Good, thanks. We really appreciate it, thanks.