Tariffs, Free Trade, Export Controls, H20 & Rare Earth Ban | BG2 w/ Bill Gurley & Brad Gerstner

Open Source bi-weekly convo w/ Bill Gurley and Brad Gerstner on all things tech, markets, investing & capitalism. This week they revisit arguments about free trade, and discuss updates on tariff negotiations, export controls, the new AI cold war, NVIDIA H20 chip ban, rare earth ban, DeepSeek, Tesla, & more. Enjoy another episode of BG2! Timestamps: (00:00) Intro (02:15) Complex Systems (06:00) Tariff Negotiations & Free Trade (23:19) Export Controls: AI War, H20 & Rare Earth Ban (42:29) New AI Cold War & Zero Sum Game (52:37) $TSLA & Market Check Show Notes: Financial Times - US rare earth champion faces trade war test after tariffs halt China sales https://www.ft.com/content/0ef4a333-245b-4f42-a026-e72dcd9240db CNBC - U. S. chip controls will benefit China’s Nvidia rivals like Huawei: Analysts https://www.cnbc.com/2025/04/21/us-chip-controls-boon-for-china-nvidia-rivals-like-huawei-analysts-.html Project Syndicate - Trump’s $16 Trillion Trade Blind Spot https://www.project-syndicate.org/commentary/trump-tariff-war-misses-the-bigger-battle-by-ricardo-hausmann-2025-03 NYTimes - I Just Saw the Future. It Was Not in America (Thomas L. Friedman) https://www.nytimes.com/2025/04/02/opinion/trump-tariffs-china.html Ezra Klein Podcast feat. Thomas Friedman https://open.spotify.com/episode/1twkfDIGF8gzn64gqAQCCN John Mearsheimer and Jeffrey Sachs | All-In Summit 2024 https://www.youtube.com/watch?v=uvFtyDy_Bt0 Reuters - China hits back at US tariffs with export controls on key rare earths https://www.reuters.com/world/china-hits-back-us-tariffs-with-rare-earth-export-controls-2025-04-04/ NYTimes - Nvidia Says U. S. Will Restrict Sales of More of Its A. I. Chips to China https://www.nytimes.com/2025/04/15/technology/nvidia-h20-chip-china-restrictions.html Produced by Benny Beausoleil Music by Yung Spielberg Available on Apple, Spotify, www.bg2pod.com http://www.bg2pod.com Follow: Brad Gerstner @altcap https://x.com/altcap Bill Gurley @bgurley https://x.com/bgurley⁠ BG2 Pod @bg2pod https://x.com/BG2Pod⁠

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

• 0:00Bill Gurley?

  Almost everyone in the AI space that I see with a microphone in front of them says, "The US has to win the AI war."

• 0:08Brad Gerstner?

  Yeah.

• 0:08Bill Gurley?

  I don't know what that means.

• 0:10Brad Gerstner?

  Yeah.

• 0:10Bill Gurley?

  And if I guess as to what it means, I don't think it's possible.

• 0:14Brad Gerstner?

  Right.

• 0:14Bill Gurley?

  And so.

• 0:15Brad Gerstner?

  Because it's an infinite game.

• 0:16Bill Gurley?

  It's an infinite game and no one that I talked to would argue, "We're gonna somehow prohibit them from moving forward in AI." Let's not forget, it wasn't that long ago that OpenAI, they'll say borrowed or copied the innovation that happened at Google and DeepSeek. Like, this is how innovation works.

• 0:48Brad Gerstner?

  Bill, great to be back in person.

• 0:50Bill Gurley?

  Good to see you, sir.

• 0:51Brad Gerstner?

  That was fun last night. We have to give a little shout out to our friends Vinny and Bill Lee and some others who we got together with in Austin last night for some poker. I think you did alright last night. You had some winnings. And you had some more winnings. In fact, I brought you some flowers. This is for your Florida Gators. Bring you your flowers.

• 1:07Bill Gurley?

  Thank you. I'm sure the listeners are tired of hearing. I started the last two podcasts, one before the Sweet 16 and one before getting into the Final Four. And then, of course, everyone knows the Gators went all the way. We had, I had a bunch of friends out. We spent the whole day, the Monday of the game day on the river walk outside the team hotel. Saw a bunch of old friends. I know fandom is a weird thing because you don't actually do anything. You just go along for the ride. But it creates, it creates a very special experience and I'm super proud of, of what they did in that team and how they won. I had talked about it before. And it was dramatic too. So, but it was a great time, just a great time. What have you been up to?

• 1:46Brad Gerstner?

  Speaking of games, that was an exciting upset by the Warriors in game one over Houston the other night. I hope our guys make a run at it this year. Certainly looks like they're a totally different team with Jimmy Butler on the team.

• 1:58Bill Gurley?

  No doubt.

• 1:58Brad Gerstner?

  I think they're 25 and 4 or something like that since the Jimmy Butler trade.

• 2:02Bill Gurley?

  Completely.

• 2:04Brad Gerstner?

  I tell you, man, I'm thinking a lot. In fact, this is something you you really drilled into me, you know, ages ago about thinking about just complex systems. When I look at all the things this new administration is trying to change, right, simultaneously, you and I talked three months ago, I said, I was worried about the markets, discount rates had to go up, there was more uncertainty in the world. But when I start thinking about what's going on, what this administration is trying to accomplish all at very large scale. So think about this, whatever you think about each one of these individual things, they're trying to totally transform global trade. So that's, you know,

• 2:45Brad Gerstner?

  trade negotiations with 100 countries. We effectively have an embargo between us and China, 140% tariff, export controls, you know, and so we have to renegotiate that deal. Besen said today, it really hasn't even started, that's going to be a slog. On top of that, we have taxes, if we don't, you know, lock in the tax bill, it doubles at the end of the year. We have this reconciliation package. We have Doge and deficit reduction, you know, we have questions around the 10 year and whether or not deficit is going to actually be larger this year. We have the war in Ukraine, right, and lots of back and forth there. We have dealing with the volatile situation in the Middle East. I

• 3:27Brad Gerstner?

  mean, it sounds like we were on the verge, maybe of seeing an Israeli attack on Iran. And all of these things are happening simultaneously. And so, one of the things that's just on my mind, if you look at the discounted rate of dealing with any of them successfully, and then you multiply those discounted rates together, right, the probability that you're going to land this plane and just a really smooth landing, I think is is challenging to see, right? It's, we're going to have some wins, we're going to have some losses. And so today, you know, I know we want to revisit some of these conversations around tariffs and free trade and these export controls and kind of where we are in the market. But I

• 4:11Brad Gerstner?

  would just say, like, we're attempting something very Very high difficulty level. And if, you know, if this administration is able to land the plane on all these, it will be quite an accomplishment.

• 4:20Bill Gurley?

  Yeah, and you bring up complex systems. This is the reason I spend so much time down at Santa Fe Institute because that's all we talk about. But a couple of features of those things that relate to exactly what you said. First, it's very hard to know which variables are dependent in a, in a complex, multi-variable system. And, and, and there may be one you don't know about that it flips and the whole system takes on a different shape. And this makes these things very hard to predict, which is why I don't like talking about macro for that exact very reason. That there are so many variables, it's very hard to be accurate and correct. And even if you are, it might just be by happenstance.

• 4:59Brad Gerstner?

  Exactly.

• 4:59Bill Gurley?

  You might not know the exact variable that caused it. So it is, it's difficult. And unfortunately, and, and I'll state again, I don't like talking about macro, but we're kind of forced into it because the market and even the destiny of many of the high-tech companies that we would prefer to focus on seem to be caught up in this whole thing.

• 5:20Brad Gerstner?

  For sure, for sure. I mean, I just saw a random tweet before we came in here, you know, somebody estimating that the revenue hit to Meta this year from reduced advertising by the merchants, Chinese merchants on Meta like Timu is like $7 billion.

• 5:37Bill Gurley?

  Wow.

• 5:37Brad Gerstner?

  Now, think about that. That's pure profit, right? There's no incremental variable costs against serving those advertisers. So if that just disappears, you know, it's very, very high margin business. And so again, just the, the downstream consequences of small changes.

• 5:53Bill Gurley?

  Something else that may not pay as much.

• 5:54Brad Gerstner?

  Yeah, you know, perhaps, but, but I think, you know, what it reminds me is, you know, it, it feels like there's news every hour. It's pretty exhausting, but we got to lock in. You know, there's a super busy calendar ahead. So why don't we start with just maybe updating where we are on, on, on tariff negotiations? And revisiting, I think, some important arguments about free trade. So last time we were together, we really framed this by saying on the one, it seemed there were two different. You know, kind of sides in this administration. On the one side, we had kind of a more tactical, narrow view of tariffs, maybe the Bessent consensus, I called it, which was a fully loaded gun, rarely discharged, you know,

• 6:38Brad Gerstner?

  and have targeted tariffs to re-onshore critical national industries. And on the other side of this, we had what I described as more the nuclear Navarro approach. This is that we generate trillions in tariff revenue, that we tariff everybody, high structural tariffs. We replace the Internal Revenue Service with the External Revenue Service. And this is much more structurally different, not tactical at all. Well, where are we now? Markets are now down 15% during this period since, quote unquote, Liberation Day on April 2nd. The markets are clearly worried about a global trade war. We now have export bans. So China implemented an export ban on rare earths on April 5th.

• 7:23Brad Gerstner?

  We retaliated, or at least implemented an export ban of our own last week on Nvidia chips we'll get into. And all of these bans and tariffs are quite controversial, even among Republicans. Remember, the Republican Party on Capitol Hill has historically been against tariffs. And so I think there's an increasing concern on Capitol Hill about where all of this is headed and what it means for the economy. And so many people are saying this is feeling quite chaotic. They're nervous about the tenure, they're nervous about the impact on the dollar. Bessent saying it's going to be a slog and this is going to take a while. But the president says on Friday, he thinks it'll all, you know, we'll have it resolved in the next three to four weeks. So what is your reaction to all of this?

• 8:08Brad Gerstner?

  What I want to do is take it up a level. Because I think there's an important conversation. Republicans have historically been a party of free trade and lower taxes, right? I think of Reagan or Milton Friedman. And yet today, there seems to be this growing consensus around tariffs. So let's just go back, make the case for us, steel man the case for why this may be a misadventure in the first place, Bill.

• 8:31Bill Gurley?

  When we were talking at the beginning of this podcast journey about skilled immigration, we played a short clip from Ronald Reagan, which was one of his last speeches that he gave in office. And this week, with all this tariff discussion, there was another Reagan clip floating around that I think does just as great a job of kind of summarizing something in a very efficient way. So if you don't mind, let's play that clip real quick.

• 8:58Speaker 02

  And today, many economic analysts and historians argue that high tariff legislation passed back in that period called the Smoot-Hawley Tariff greatly deepened the Depression and prevented economic recovery. You see, at first, when someone says, "Let's impose tariffs on foreign imports," it looks like they're doing the patriotic thing by protecting American products and jobs. And sometimes for a short while it works, but only for a short time. What eventually occurs is first, homegrown industries start relying on government protection in the form of high tariffs. They stop competing and stop making the innovative management and technological changes they need to succeed in world markets.

• 9:43Speaker 02

  And then, while all this is going on, something even worse occurs. High tariffs inevitably lead to retaliation by foreign countries and the triggering of fierce trade wars. The result is more and more tariffs, higher and higher trade barriers, and less and less competition. So soon, because of the prices made artificially high by tariffs that subsidize inefficiency and poor management, people stop buying. Then the worst happens. Markets shrink and collapse, businesses and industries shut down, and millions of people lose their jobs. The memory of all this occurring back in the 30s made me determined, when I came to Washington, to spare the American people the protectionist legislation that destroys prosperity.

• 10:26Bill Gurley?

  So, I mean, for me, you know, everything I learned up until this point in time is congruent with what Reagan said. You know, tariffs lead to increased inflation, they lead to reduced innovation, putting a protective blanket over our companies in our country lead to them being less globally competitive. And then fourth, which he mentions, you know, it leads to retaliation. And, you know, I've just been kind of revisiting a lot of my priors. One of my favorite economists who spends time down at Santa Fe, Ricardo Hausmann, put out a great piece who said, we're not adding up everything the right way. We're only looking at physical goods, there are services and intellectual property and net

• 11:10Bill Gurley?

  income that comes from companies like Meta operating around the globe. You know, Neil Ferguson did an incredible hour with Barry Weiss that I would just tell everyone to go listen to. And every one of these things takes me back to what I learned over 20 or 30 years, that these things aren't going to work out in the long run. And so I'm skeptical. I mean, I'm always open minded to revisiting my priors. And if someone wants to put out an argument, wow, this is all going to work. But I, and you and I were talking earlier, but I find there's a lot of conflation going on, you know, about different, different

• 11:51Bill Gurley?

  reasons arguing for why different actions are happening, you know, the tactical, you know, we need to have these specific technologies, you know, be resilient. So we're not overly dependent on one country to this bigger thing where we're going to replace all of tax income.

• 12:07Brad Gerstner?

  Right.

• 12:08Bill Gurley?

  And I think you could do a little bit of the first. The latter is just, just violates all my priors.

• 12:14Brad Gerstner?

  Right.

• 12:14Bill Gurley?

  So I'd have to, I'd have to start fresh and I'd have to be convinced that all these great thinkers that came before us were wrong.

• 12:22Brad Gerstner?

  Right. You know, so if our friend David Sacks were here, and I think he brought you up on the All In Pod last week, if he were here, he would say, okay, free trade is all well and good, very Jeffrey Sachs, but he Bring up John Mearsheimer and he would say, you know, the reality is we're in a great power struggle. We have a peer rival in China, you know, today, and that national security must take priority over free trade and might make the argument, I think, that in particular, creating resilience in these industries, rare earths, you know, chip fabs in the United States, auto manufacturing, steel, aluminum, et cetera, are essential

• 13:05Brad Gerstner?

  to our national security. And so therefore, it's not inconsistent with free trade. What would you say to that?

• 13:11Bill Gurley?

  Well, you know, we, we talked in the past, I think, to the extent you were doing something very tactical, it could be proposed as such. The, the tone and the bravado of, of the description of what we're doing isn't consistent with that. There's also, if you're using the word resilient, you know, that can include other countries that are allies. It doesn't have to be on the shores of the US. And I know people who in the first Trump administration were told to, to diversify away from China and they built, you know, supply chains in Vietnam and now they're, you know, worried about tariffs there. And so the, there's, there need, we talked about this, but there needs to be a consistency in order for people to adjust to those things. One more piece I would mention, and we'll put links to all

• 13:56Bill Gurley?

  these things is Thomas Friedman has an op ed in the New York Times that says, I, I just saw the future and it was not in America. You know, he takes it further. He, he believes that in advanced manufacturing, we're not just not doing it here, but we, we're not on the cutting edge of what it would take to do here. If you recall back in a, in a day and age when Japanese manufacturing and, and just in time was this huge thing where, where all of America was convinced Japan was ahead of us in auto manufacturing. And he says, we need to adopt that philosophy about manufacturing in China. And he, he goes to the point of saying, look,

• 14:38Bill Gurley?

  We need to force them to do JVs here so we can learn from them.

• 14:44Brad Gerstner?

  Yes.

• 14:45Bill Gurley?

  Now, no one's talking that way in the administration because there's so much vilification. There's no recognition of where they might be better than us. But but those problems, I guess, the point I'm making is those problems are worth solving. But I I'm still not convinced that we have a, I think we have a huge labor problem trying to be competitive in manufacturing.

• 15:07Brad Gerstner?

  Right.

• 15:07Bill Gurley?

  Neil makes a great point about the argument that, oh, we shouldn't have done this. We we regret global trade. That argument takes, you you're allowing yourself to imagine, you're you're taking where we are today and competing with an imaginary version of how things evolved if we didn't embrace global trade.

• 15:28Brad Gerstner?

  Right.

• 15:29Bill Gurley?

  And and assuming that we would have manufacturing and be in a better place. And I think that's, he he used the word fanciful, which I would agree with.

• 15:38Brad Gerstner?

  I mean, I might also argue, you know, in response to Mearsheimer, it was an incredible debate last year, the all in summit between Mearsheimer and Jeffrey Sachs. You know, that he comes out of the realist school of political, of of of political international relations. And I think there's a lot of truth to it, right? I mean, you can't stick your head in the sand and pretend that we don't operate in an international system. In the middle of the Cold War in the 1970s, right? We had all sorts of embargoes on on Soviet Russia that were probably smart embargoes. A lot of people think that what, you know, the historical telling is that what brought the wall down ultimately against Soviet Russia was that our economy was triumphant.

• 16:19Brad Gerstner?

  And so I look at the situation today, and I think what part of the problem is that it's not clear out of the White House what the goal and objective is. Right? If the goal and objective is Navarro, then I think there's broad opposition within not only, you know, the Democratic Party, but also the Republican Party to the scale of tariffs and disruption that that's going to have on the economy. But I think it's fairly non controversial that we should have tactic tactical narrowly Tailored tariffs and tax subsidies and incentives in order to re ensure some critical capabilities. You know, I mentioned a few chip fabs, some pharma, critical rare earths and production.

• 16:59Brad Gerstner?

  I mean, we don't want to be dependent on the Chinese for whether or not we can produce an automobile or whether or not we can produce a phone, you know, etc. And so I think that I think that some of that makes a lot of sense to me. What doesn't make a lot of sense to me is that we launched what was kind of this nuclear style tariff war against every country on the planet. Right. And so just the sequencing of events here, I think, is a bit confusing. It should not be this McKinley style multi trillion dollar tariffs. If what your objective is principally where the agreement is, is to re ensure some of these critical industries. And what I think is missing from this, all we're talking about is tariffs.

• 17:44Brad Gerstner?

  Right. We need to be talking about what is the accelerationist agenda that we're going to put together in order to get these chip fabs. There's a lot of things we could put together, AI funds. We can put together tax incentives and other packages to get people to build, you know, to build here. I think that gets lost in the conversation. If we think that this alternative path is all about this, this re onshoring bill. Is that consistent, do you think, with the Reagan and Milton Friedman view of free trade? Like if it was, if it was more tactical like that?

• 18:17Bill Gurley?

  I think if it were more tactical, I'm, I'm, I'd probably push back on you and disagree. I don't think our current democracy is set up in a way that's really good for the country to deploy dollars to help industry. And I gave this speech at the original all in summit about regulatory capture. And I just, I can't imagine that if our, well, first of all, the, the AI boom in the US has attracted more capital dollars than I've ever seen accumulated in the history of mankind. So why sprinkling a little more on would be helpful. But also you get into this game of picking winners and losers. Now Friedman highlights, and I, I think this is true, you know, the

• 18:58Bill Gurley?

  The Chinese government is just much more successful at at state involvement in innovation. And if you maybe go back to the space race or the Manhattan Project, we were capable of kind of mustering forces in that way. But I haven't seen it done recently, like the past forty or fifty years.

• 19:21Brad Gerstner?

  In many ways, in many ways, the private sector has done a more efficient job of, you know, of taking on the Manhattan Project, you know, style projects. I mean, you look at what's going on in Abilene, Texas and Denton, Texas, you know, around building out incredible supercomputer clusters, all done really without government involvement. And I think that's, you know, an efficient and preferred mechanism. You know, where a lot of, to your point, there's a lot of capital available.

• 19:48Bill Gurley?

  But there are areas where I don't think we will move forward much without government involvement. A great example would be in energy. So, so as we talked about many episodes ago, you know, Korea and China are delivering fission nuclear at one-fourth the price we are. And I think that Korea example, South Korea, is very important because that is a democracy. So here's one country that's authoritarian, one that's a democracy, and they're both achieving it, and we are four X over that. That's gonna require some type of government involvement to figure out why we can't build that better and faster.

• 20:29Bill Gurley?

  And to be fair, there's a lot of movement around the country, mostly at the state level, about removing red tape as a, as something governors celebrate, which, which is helpful and, and may move us in this direction. So those, I tend to, if we're gonna help something along, I think, I think figuring out why our governments become friction and mud and changing that is probably gonna be more impactful than the government doing the work themselves or picking winners with capital.

• 21:00Brad Gerstner?

  We're, we're, we're quick to blame others around the world for our challenges, right? But I, I, I think we need to spend at least as much time accelerating ourselves. And part of that acceleration is getting rid of needless regulation. It's looking at our own systems and asking that question. Why does it cost four X more to build a fission reactor today in the United States than it does in South Korea?

• 21:23Bill Gurley?

  Hey, yeah, totally. And by the way, one thing you just spurred in my brain, I was listening, Friedman also did a podcast with Ezra Klein. And yeah, I'm just gonna steal his story. I don't know that it's true, but he says that when China attacks a new industry these days, that they encourage a ton of startups. I didn't know this. He said, so when they went after solar powers, they encourage like 100 startups. So rather than pick a winner, they give money to everybody. So in a thousand flower bloom kind of way, and that those 100 compete their way down to five. And he said, there's a lot of fraud and grift and waste for the ones in the losers.

• 22:07Bill Gurley?

  But what you get out of the five are is something that's actually honed by a market force. And I don't think anyone that thinks about authoritarian China thinks about the state using market forces to get to a higher level of efficiency and production. But if if what Thomas said is correct, they're actually using this kind of competitive market force to hone the better players in these industries.

• 22:35Brad Gerstner?

  Let's talk a little bit about, you know, I think a lot of things get conflated when we talk about terrorists. And one of the most important is export controls. You know, so an export control is effectively a license requirement that acts almost as an embargo on all trade in a particular good. So on April 5, China implemented this rare earth ban. And then we reciprocated last week with the ban on all Nvidia H20 chips going to China. So when you look at the rare earth ban, and I have a list here of the materials that were banned on April 5, and you have things, you know, that go in critical elements into magnets, samarium, terbium,

• 23:16Brad Gerstner?

  and so these are about 60% of these materials are mined in China. Okay, so you do have other places on the planet that are that are mining these rare earths. The problem is 90% of them are refined in China. When they And those rare earths, these are the magnets that go into EVs, phones, computers, machines of all sorts. This was called by some in and around the White House as a kill shot, a kill shot against the US economy. That causes massive problems in industrial production. You know, when I think about, again, the destabilization that comes from over-dependency.

• 24:01Brad Gerstner?

  On something like if every magnet that goes into every machine in the United States is coming from, from China. And now we've effectively banned it, even though the ban was in response to the tariffs by the United States, right? What is the off-ramp to this? You know, I now see just this afternoon while we started recording the pod. Trump has said that, you know, he doesn't expect the tariffs to stay anywhere close to where they are in China. He doesn't think they're going to be zero, but they won't be anywhere close to where they are. You know, he's, and we see kind of a unilateral walking down of these tariffs. But these export bans are really dangerous, Bill. So what are your thoughts about an export ban perhaps just compared to the tariff itself?

• 24:44Bill Gurley?

  Well, I mean, I go back to the Reagan video, right? He says this will eventually lead to retaliation and escalation. And, and the fact that this video was recorded, whatever eighties, what is that, 45 years ago?

• 24:59Brad Gerstner?

  Yes.

• 25:00Bill Gurley?

  Like, like this isn't a new perspective.

• 25:03Brad Gerstner?

  Right.

• 25:03Bill Gurley?

  So you could argue, oh my God, I can't believe this happened. Or you could say, well, if you studied history, you should have expected this to happen.

• 25:10Brad Gerstner?

  Right. In fact, there's this Milton Friedman video going around and he talks about retaliatory tariffs. And he says, okay, let's say that somebody shoots a hole in the bottom of your boat, right? And so, you know, it's taking on water. A retaliatory tariff would be like you shooting another hole in the bottom of the boat. And then they shoot a hole in the bottom boat, just sinks faster.

• 25:30Bill Gurley?

  Yeah.

• 25:30Brad Gerstner?

  Right? And he's saying, you know, but in fact, what we did last week is the US did ban H20s going to China. And this was a pretty controversial move. And in fact, I was, you know, looking. Looking at some of the analysis that was done this week. And the newly launched Huawei Cluster Matrix 384 is China's competitor to the GB200. So semi-analysis is out with, you know, an assessment of this and many others. And basically what they concluded is that Huawei is already on the frontier or near the frontier with respect to chips. In fact, one of the analysts on CNBC this week said, to be honest, we basically just handed the China AR market to Huawei anyway.

• 26:15Brad Gerstner?

  Right. And what is Bernstein analyst? Because they said what it effectively does is clears the decks for Huawei to have monopoly profits in China. They no longer have to compete with CUDA and Nvidia in China. Even though we were sending them, the H20 was a nerfed chip, right? It was a chip that was two or three generations behind what we have in this country. But it was, you know, some people think in retaliation to the rare earths. Other people think it's just part of, you know, the AI strategy to try to win the AI war against China.

• 26:49Bill Gurley?

  Well, and let's just take the the argument that it was a retaliatory move. How good must it feel to be Nvidia and Jensen and the executive team there? That you become a pawn in these games that you had nothing to do with creating.

• 27:04Brad Gerstner?

  Right.

• 27:04Bill Gurley?

  You know, and in fact, you designed this product specifically to meet the expert control rule that was in place before this one.

• 27:13Brad Gerstner?

  Right.

• 27:14Bill Gurley?

  Which is very similar to this Vietnam thing that we were just talking about. So you can't be happy with that. I reposted when this all happened, a great video that Deirdre did over at CNBC about how this will be good for Huawei. And I think if you ask Jensen, he would say, yeah, this is great for Huawei. And it's not just that you get an isolated market where everyone, but but every participant in the AI market in China may have been working with Nvidia. Now they start working with this and they all collectively help improve it over time. You know, I read one article that said that China is, you know, getting some of their

• 27:55Bill Gurley?

  very first commercial planes off the ground. One of the reasons is they became reliant on Boeing and Airbus. And so by denying your exports to a market, you increase the incentive they have to develop their own technology.

• 28:10Brad Gerstner?

  Particularly when they have the capability of China. I mean, the fact of the matter is if they had no capability to develop it, it would be one thing, right? I think more like the the race around nuclear arsenals, if you will. There are some countries that will never have the capacity to build said nuclear arsenal. But the fact of the matter is China is so close in this regard with respect to the H20s. From my perspective, it's a very close call. I don't think we should be sending GB200s or cutting edge chips to China. I think that there's a legitimate national interest in, you know, quote unquote, staying out in front on AI. I think there's a debate to be had about that. That's where I come down on that side of the issue. But the H20s, it seemed to me, was a very self-defeating

• 28:53Brad Gerstner?

  way. I think that the competition with Cuda in China distracted the competition, denied the monopoly profits within China for these Chinese internet companies. There was some insinuation last week that Jensen was intentionally, right, skirting all of this, you know, these rules around China and that there was, you know, maybe 30 or 40% of all their sales were going into China. You know, as I look at this, I think we have to be really careful. You know, I think that these tariffs all of a sudden, right, can find us in a place where we're demonizing. I think Nvidia and Jensen are national heroes for the work that

• 29:37Brad Gerstner?

  they've done and the leadership they've given us in global AI, right? American success stories.

• 29:43Bill Gurley?

  Totally agree.

• 29:43Brad Gerstner?

  And this idea that somehow they comply with the exact attributes of the H20 prescribed by the US government.

• 29:53Bill Gurley?

  And I want to go back.

• 29:54Brad Gerstner?

  You know, and then they sell those in China. And then after the fact, we go back and somehow start demonizing them. I think it's a very dangerous thing.

• 30:00Bill Gurley?

  So when I gave that speech a while back on regulatory capture, I made the argument that when

• 30:07Bill Gurley?

  In America, inside of America, when we want to accomplish something through policy, we gather a bunch of people, we get a bunch of ideas, and then we write some complex piece of legislation. And what I highlighted is that in many cases, it fails, and in some cases, it spectacularly fails. So, what does that mean? You get the exact opposite outcome from which the policy intended to create. Now, the fact that this happens all the time inside of America is an interesting fact, because in some ways, expert control is external regulation. So, we're trying to implement a policy now, not just in a place where we

• 30:49Bill Gurley?

  control most of the pieces, but in a world where we don't control many of the pieces. And then, we expect that policy to work perfectly. And the problem is, you know, borders are porous, money finds a home. Right. You know, I always tell people that try and build internet businesses, internet arbitrage is undefeated. And global markets kind of have the same thing. Like, we're just coming off of a remarkable, I would use the word spectacular again, spectacular failure of Russian sanctions, economic sanctions, right? So, why do we think, oh, that didn't work,

• 31:30Bill Gurley?

  but I'm gonna go do this and make it work? I heard people who said we have to ban the age 20, saying, oh, well, the Biden rules didn't work, they failed. Right. So, oh, so you mean global expert controls didn't work, so we're gonna redouble them and see if they work again? And I just, you know, I think if there were a piece of technology, like say, a fighter jet that you're giving to maybe one other country or two, that's a super deep ally, that's one thing. If you're gonna sell something in 120 countries around the world and try and tell one country they can't have it. Right. There's no, there's no way that's gonna work. Like, and especially these goods have

• 32:11Bill Gurley?

  digital attributes. I mean, you know, it's just, it's gonna, it's gonna work around. And, you know, I think it's gonna get worse before it gets better. I have seen hints that the same people that push the age 20 want to You know, put even more restrictions on ASML, which is a Dutch company, or fine TSMC for building Huawei chips. That's a company that's headquartered in Taiwan.

• 32:37Brad Gerstner?

  Right.

• 32:37Bill Gurley?

  So I'm sure Jensen's myth that his company's become a pawn in this game. How do you, how do you think these companies, we talked about ASML in the, in the past where the management there has already expressed some reluctance to, to be our, you know, whipping, whipping post or whatever. But like, I don't know that we just are allowed to start grabbing pieces of the chessboard that we don't even own and bringing them into this competition. And you said earlier, the, the way we implemented tariffs, we've, we've alienated many of our allies and partners. You know, I, I won't be surprised at all if we wake up one day and one of these companies tells us no.

• 33:16Brad Gerstner?

  Right. Yeah. You know, again, it comes back to defining the objectives narrowly enough that you don't end up in this big retaliatory and escalatory posture. Again, I think it's a reasonably close call around H20s. My sense is that Nvidia understands and is on board with not selling leading edge chips to China. Right? Like they didn't fight the fact that they weren't selling GB200s to China. And the H20 is, if you just looked at the facts on the table, the Huawei SN920s, the number of these that they're now producing, the way that they're interconnecting these things together. Yes, they may be slightly less efficient. It may take two or three

• 34:00Brad Gerstner?

  times the number of chips and amount of power in order to end up at the exact same place. But we just talked about, there are 100 nuclear power plants under construction in China. Power is not their limit.

• 34:11Bill Gurley?

  And they produce those plants at one fourth the price we do. So if it comes down to power and many people in the AI world like to say it's going to come down to power. Well, I guess they're going to win.

• 34:20Brad Gerstner?

  Well, I mean, so there's an interesting question here. If you think about the off ramp on these for President Trump, again, there's a lot of suggestions over the weekend that, you know, if, if you think we're going to land the plane in three to four weeks, Bill, the only way you do that is basically through unilateral concessions. Right that you define as victory. So are are, you know, all of these countries are calling us. They want to do deals. And so we're going to walk the Chinese tariffs back to 30 or 34%. And we're going to suspend maybe for 90 days, the H20 ban in the hopes that they will reciprocate by suspending the rare earth ban or something like that. So I don't think we've seen the end of this.

• 34:59Brad Gerstner?

  When it comes to this Nvidia ban, but you know, the flip side of this is Nvidia just had a big announcement. Right with the White House, about a $500 billion investment. Right in combination with a bunch of other companies, Foxconn, TSMC, etc. Building fabs in the United States. I know the first GB200 is rolled off the assembly line out of those fabs in Arizona. Um, to me, again, we need to rebalance and focus on accelerating. Right and reenshoring these critical industries in the United States. I think the distraction that we can keep China away from frontier level AI. That will be a losing strategy in my mind. I don't think we need to go out of our way to make it easy on them.

• 35:44Brad Gerstner?

  But I think the obsession and the time spent and the distraction for US CEOs to try to how to how they comply with all of this, um, I think is not particularly great. And I'll just, I'll just give you where, you know, maybe the next frontier where this is going. I've heard, you know, increasing chatter that somehow we're going to try to ban deep seek models.

• 36:05Bill Gurley?

  Yeah.

• 36:05Brad Gerstner?

  Right. And and somehow prevent US hyperscalers or cloud companies from integrating deep seek models into their stack.

• 36:13Bill Gurley?

  Same thing.

• 36:14Brad Gerstner?

  So so talk to me about about that and the slippery slope associated with that.

• 36:19Bill Gurley?

  Before before I go deep in on deep seek, which I want to do, I want to mention a couple of things from a very broad level, you know, one is back to this Friedman post. He mentions a quote from a book, how, why, how we do anything means everything. And the quote is, interdependence is no longer our choice. It's our condition. Our only choice is whether we forge healthy interdependencies and rise together or maintain healthy interdependencies and fall together. And.

• 36:48Bill Gurley?

  You know, there's a, there's a book that I've been rereading that the Collisons talked about once called Finite and Infinite Games by James Cars. And there's a reality that, that a lot of our strategy that we think about and how we compete in the world comes from finite games. A finite game is a game that has a beginning and an end and a winner. So a football game, a baseball game, that kind of thing. Infinite games are different. They just go on forever. Stock market, you know, most large companies, they're infinite games. Like, they're not, there's no clock that ends, there's no one that declares a winner. I fear that a lot of the attitude, the vitriol, the, the language, the tone

• 37:31Bill Gurley?

  that's used between us and China is borrowed from, from finite game thinking. Like, that we're some, you know, win the AI war. What does that mean? Like, is it, is there someone that's, is the clock getting in? Like, the Warriors versus the Rockets? And they say, oh, we won. Like, there's no chance of that. And, and, and most of the people that are even the biggest China hawks, I said, I say to them, do you think you're going to prohibit China's long-term AI development? And they said, no. You know, and I, I just think we, we, there's a lot of zero-sum thinking going on, win, lose. I totally believe in this interdependence. I, I think there's zero chance that you're going to stop China, or

• 38:15Bill Gurley?

  somehow, like, I even, I use the phrase, increase the gap. There's, there's a lot of arguments that the AI gap has been shrinking, not, not rising. Eric Schmidt had a big interview today where he said it was shrinking, or this week. We'll put show notes on that. And a lot of people are saying they're catching up. That semi-analysis thing says Huawei's getting there. And so, this argument that, oh, we've got to do everything we can, we have to act now to win the AI war, that's like, almost this belief that we're going to increase the gap, and that it's a finite game that's just going to end one day. And I don't believe in either of those things. And so, I think the tone's wrong. I think you got to get out of this.

• 38:58Bill Gurley?

  Enemy threat, like all those words allow you to hate. You know, the great, great quote from The Godfather, which is, don't hate your enemies. It clouds your judgment. One of my favorite quotes ever. The, the whole piece of this Friedman article, which I think everyone has to read. He just went over there and spent time. It's not what you think. Like, they are way ahead in a lot of different areas. They're super smart. They're not, you know, I think a lot of people thought, oh, we have a democracy and capitalism. And people get confused between those two. And they think we, we've got the perfect American exceptionalism. We're the only place where you can have innovation. And, and because we talk about, oh, they steal, they steal.

• 39:40Bill Gurley?

  We don't ever spend the time to go see if innovation's happening over there. It is happening over there. These, you know, and, and these people are educated in the same schools and universities. Like, the thought that they couldn't, you know, be educated or can't innovate is gonna lead you to a lot of really bad policies.

• 40:00Brad Gerstner?

  And worse yet, and worse yet, right? If you believe they're on the frontier and they're gonna have a frontier compute stack with frontier models, whether we help them or not, which I think even those people who, who are more China hawkish, agree with that statement, right? And if you wanted the rest of the world to run on US compute and US models, what's the, the number one thing you would not do? You would not anger the rest of the world by launching a tariff assault on them simultaneous with your tariff assault on, on, on China. And so it is a mysterious policy. And when you look at all of these headlines that are coming out, the EU now negotiating directly with China, right?

• 40:44Brad Gerstner?

  We now have Japan and South Korea and Vietnam negotiating with China. You have the Middle East, you know, entering into, you know, deals with China. I'm not sure, again, that we're advancing our cause, right? By making it harder on everybody else on, in, in the world and telling them they are the cause for the demise of the US middle class.

• 41:05Bill Gurley?

  What, and I'll go even further, like, the tone they're adopting is more statesmanlike than us. If you read the tone in those in those discussions and they highlight that they haven't invaded anybody in a very long time, the US has been involved in a lot more wars around the globe. So our ability and and I brought this up a few podcasts ago, I you know, I think you're you you mentioned deep sea. So so we all believe that there's a imminent deep sea ban, the level of which I don't think we fully know right now. But, you know, my immediate reaction is, oh, I guess Europe and South America will run on deep sea like because

• 41:45Bill Gurley?

  the minute we start vilifying even that, you know, it it is, I believe, right now, the best performing, most open, you know, if you had a quadrant, the one that's it's on the upper right on performance and openness, you know, and if we ban it, boy, it's just kind of one, you know, even more people working with Huawei chips and deep sea trying to optimize it. But two, you know, in this world we've created where there's so much animosity, I think people will be glad to use it in these other countries.

• 42:20Brad Gerstner?

  Well, the first thing it dawns on me is I ultimately don't think, you know, somebody asked me on CNBC, you know, they I said, your decision as to whether be in the market comes down to whether you think the president is more, you know, kind of tactical free trader in the spirit of the best consensus, fully loaded gun rarely discharged, or whether you really think he wants to reorient the world in the way Navarro discusses it. I I still believe the president is fundamentally a free trader, that this really is about making the US more resilient. And he has to, he has to bring us back there, right? Because if we if we head in the direction of Navarro, it's quite clear to me that we're going to

• 43:01Brad Gerstner?

  so anger the rest of the world that the chance that the rest of the world is going to run on US compute. I think I think what we do in that instance is you move everybody in the direction of China, it backfires. We don't widen the gap with China with respect to AI or global trade or anything else. In fact, we shrink the gap.

• 43:21Bill Gurley?

  By the way, by the way, there's one, I think hilarious irony with the with the Navarro point of view and combined with the with with the export control, which is if we're gonna if we're upset that there is this trade imbalance, you know, the worst thing, the last thing you'd want to do is start. penalizing our best creators, our best manufacturers, our best companies.

• 43:45Brad Gerstner?

  Right.

• 43:45Bill Gurley?

  How are you going to solve the trade imbalance if we tell people they can't buy

• 43:49Brad Gerstner?

  Right.

• 43:49Bill Gurley?

  our best stuff?

• 43:50Brad Gerstner?

  Right.

• 43:50Bill Gurley?

  We're going to make them buy our [BLEEP] stuff?

• 43:52Brad Gerstner?

  Well, just as an example, I, I, I think, I think Nvidia sold, you know, 12 or 15 billion dollars worth of H20s. So if you ban those, then your trade deficit with China goes up by 15 billion dollars.

• 44:04Bill Gurley?

  My very point, and let's not, let's not wash over the, I, I think Nvidia is such a perform, high performing companies worth so much money, such a large market cap, so much cash, no liquidity issues, that this $5 billion write-off they're going to take is kind of NBD move on, you know, it didn't affect the stock that much, but a $5 billion write-off, they're just going to throw a bunch of inventory in the trash can.

• 44:28Brad Gerstner?

  Well, I mean,

• 44:28Bill Gurley?

  That's, that's, that's remarkable.

• 44:30Brad Gerstner?

  Think about that, Bill, right? Some of the people who are arguing, right, including some US AI companies, that they shouldn't be able to sell the H20s to China, right? If Jensen or the team at Nvidia turned around and said, great, you buy them, nobody would buy them because they're so underperforming, right?

• 44:48Bill Gurley?

  Yeah, I understand.

• 44:48Brad Gerstner?

  And yet, it, it, it makes the point for them, but think about this, 15 billion in sales of H20s, right? That probably results in, you know, eight, nine billion dollars of, of earnings, you know, back to Nvidia. You tax that at a corporate rate, that's two or three billion dollars to the US Treasury, right? We are effectively taxing the Chinese on a nerfed product to provide profits to Nvidia to further distance the lead, uh, you know, against Huawei and to put money in the US Treasury, and we just unilaterally disarmed around that in a way that doesn't even advantage us against Huawei because their chips are already surpassing the H20.

• 45:26Bill Gurley?

  And, and that leaves out, and I agree with 100% of that, and there's even more because of escalation.

• 45:33Brad Gerstner?

  Right.

• 45:34Bill Gurley?

  So, so, you know, it's, I, I, once again, I go back to this finite game mindset. I, I think people are evaluating a decision on an export, export control or a tariff or a ban, um, without

• 45:50Bill Gurley?

  Totally in isolation is that one decision and what will its impact be? But any one of these decisions and certainly the combination of them could lead to escalation. It could go as far as leading to a hot war. And so you have to accept responsibility of making any one of these decisions that there are, you know, butterfly effects and escalatory effects that you may wade into by doing that.

• 46:19Brad Gerstner?

  Right. I mean, you can think about it this way. We define, some people define artificial intelligence as existential, right? Like that it's absolutely essential to your national security. It's essential to your national economic security. Now, if you are firing a shot at somebody that says, I'm going to deprive you of being able to build your national security or your national economic security, right? Like it's a serious, it's a serious thing.

• 46:46Bill Gurley?

  I um, I want to go on record as saying like almost everyone in the AI space that I see with a microphone in front of them says, the US has to win the AI war.

• 46:58Brad Gerstner?

  Yeah.

• 46:58Bill Gurley?

  I don't know what that means.

• 47:00Brad Gerstner?

  Yeah.

• 47:00Bill Gurley?

  And if I guess as to what it means, I don't think it's possible.

• 47:04Brad Gerstner?

  Right.

• 47:04Bill Gurley?

  And so.

• 47:05Brad Gerstner?

  Because it's an infinite game.

• 47:06Bill Gurley?

  It's an infinite game and no one that I talked to would argue, we're going to somehow prohibit them from moving forward in AI. Let's not forget, it wasn't that long ago that OpenAI, they'll say borrowed or copied the innovation that happened at Google and DeepSeek. Like this is how innovation works. Ideas spread like the wind, they move fast. People study what other people do. It happens all the time. And when, only when we apply these labels of theft or copy or steal, do we start vilifying. But, but it happens all the time in our own ecosystem.

• 47:41Brad Gerstner?

  Right, right.

• 47:42Bill Gurley?

  It's how these things evolve. And so, yeah, I don't, I don't think there's a finite game to win. You know, it's funny, I was, I did some research on something because I was very curious. I went back and studied, and it's so easy with AI. I went back and studied the space race. And when, when the space. Race was underway. If you go back and look at the quotes from all the senators and and President JFK and everything, one of the reasons, maybe the primary reason they said, we got to win the space race is they all believed that the entire globe would be covered in this mesh of

• 48:19Brad Gerstner?

  Right.

• 48:20Bill Gurley?

  of rockets and satellites that would be used to control the military

• 48:25Brad Gerstner?

  Right.

• 48:25Bill Gurley?

  of the globe. And whoever got to space first was gonna have this control.

• 48:30Brad Gerstner?

  Right.

• 48:30Bill Gurley?

  Now, that never played out. But I see a very similar vein in AI where people, especially people that believe in AGI and ASI and magical AI, think that it's just gonna explode. And then whoever controls this uncontrollable force will control the globe in a zero sum way. And I I I just, I don't buy it. Like, I don't think that's gonna happen. If that does happen, we're gonna have much bigger problem.

• 48:57Brad Gerstner?

  I think you and I would maybe find a point of agreement here. Like, what is the North Star that should guide us? And I think the the point of agreement, if we were giving advice, would be that the re-ensuring of critical national industries through, you know, some tactical means is an important objective. Okay. But I I think you and I would also agree that we need to shift the focus radically on accelerating our own race, right? And and refocus from spending all of our time trying to slow down everybody else. And the objective should be, the KPI should

• 49:36Brad Gerstner?

  be, do we widen the gap, right? Do American companies, are they as successful in AI as they were in the Internet? Like, I think anybody who looks back at the last 20 years would say that the United States has won, both in terms of of free trade and in terms of the global Internet competition, won as defined by improved the standard of living, driven the growth, the the economy in the United States in a way that was successful for the United States.

• 50:07Bill Gurley?

  You know, I I in one argument with someone, I used the the simple metaphor that comes from swimming. Any anyone that becomes a competitive swimmer within A year or two, you know, a coach tells them, don't look to the side, you know, because that's wasted energy and someone might pass you. Just swim as fast as you can.

• 50:26Brad Gerstner?

  Just look ahead.

• 50:27Bill Gurley?

  And I feel like, you know, it's, it's almost worse than just looking to the side. We're trying to intentionally inhibit the other

• 50:35Brad Gerstner?

  Right.

• 50:35Bill Gurley?

  player. Now, going back to fight since, since I mentioned-

• 50:39Brad Gerstner?

  They're trying to deflate the football.

• 50:40Bill Gurley?

  Yeah, yeah, it's exactly. Imagine if you were just watching a finite game

• 50:45Brad Gerstner?

  Yeah.

• 50:45Bill Gurley?

  and one team insisted that the other team have a technical disadvantage. What would, what would your reaction be? How would you think about that player?

• 50:54Brad Gerstner?

  Right.

• 50:54Bill Gurley?

  You, you would probably assume they're scared, that they're unsure

• 50:59Brad Gerstner?

  Right.

• 50:59Bill Gurley?

  of themselves, like, like-

• 51:01Brad Gerstner?

  Well, and also if you told your team at the start of the season, don't worry, you don't have to train very hard because I've handicapped the other team. They don't even know what I've done to them, but I've, you know,

• 51:12Bill Gurley?

  It's not a good look.

• 51:13Brad Gerstner?

  I've tainted their system, so they're not going to be very good. As opposed to just focusing on your own training and winning the game.

• 51:19Bill Gurley?

  But I, I might, I might end by going back to, you know, this argument from the Friedman piece that, that it, it's an interconnected world and there are a lot of very smart, successful, capable, innovative engineers, researchers, founders in China. And if you think you're gonna like keep them down or permanently, you know, prohibit them from playing in AI, I think that mindset is going to lead to some spectacularly problematic policy.

• 51:51Brad Gerstner?

  Yeah, I agree. Well, maybe talk about, we can wrap Tesla reported tonight. And, and the markets are clearly struggling, down one day, 4%, up the next day, 4%.

• 52:03Bill Gurley?

  It ain't easy.

• 52:03Brad Gerstner?

  Clearly struggling, trying to get their hands around,

• 52:06Bill Gurley?

  Yeah.

• 52:06Brad Gerstner?

  uh, you know, where we are. So since we were here last time, you know, the S and P's down 10%, NASDAQ, I think as of yesterday was down 20% peak to trough. And the question people ask me all the time, is this all priced in? How many units of risk do you have in the market? We have Besen doing a talk tomorrow morning on the financial system. VIX is still over thirty. There are fears and rumors out there about is our tenure, you know, do we have demand for it on a global basis? The dollar is is under assault here. So.

• 52:39Bill Gurley?

  And many of these conversations weren't happening.

• 52:42Brad Gerstner?

  Right.

• 52:42Bill Gurley?

  Five months ago.

• 52:43Brad Gerstner?

  Right.

• 52:43Bill Gurley?

  Exactly. We were just talking about AI and Nvidia and.

• 52:46Brad Gerstner?

  I mean, I go back to the Stan Drucken. Right. The Stan Drucken Miller quote where, you know, after, you know, the president's election, he said, this is the most, this is the biggest shift from an anti-business administration to a pro-business administration in my fifty years of being in the business, right? That is how CEOs generally felt at the beginning of January, moving in to this new presidency. And it's really mind boggling to think in nine, you know, in a few short weeks, how quickly we went from that level of optimism to this level of concern. And I was just looking at a chart, you know, Apple's down twenty one percent. Nvidia is down twenty five percent. Google's down twenty percent. Tesla is down forty percent. Right? We have major moves in the market.

• 53:30Bill Gurley?

  Well, and look, I mean, and both Tesla and Apple have a huge amount of revenue in China.

• 53:35Brad Gerstner?

  Right.

• 53:36Bill Gurley?

  And when you sense that this thing may be escalating or that there are ripple effects going back and forth, what one, one plausible thing that could happen is either one of them get kicked out of the country.

• 53:48Brad Gerstner?

  Right, right.

• 53:49Bill Gurley?

  That could happen.

• 53:50Brad Gerstner?

  Yes.

• 53:50Bill Gurley?

  And so of course you have to discount the stock.

• 53:53Brad Gerstner?

  Of course. And and the question now, of course, is, is enough discounted? Given where we are. And so, you know, I said at the end of January, early February, when you and I did the pod, I said, we've taken down our units of risk because there's just more uncertainty in the world. Discount rates need to come up. Multiples are coming down and we did. And I would say over the course of the past several weeks, we've had very little risk on directional risk along the market. You can like Nvidia, but if you wake up one morning and twelve billion of their sales are gone because they can no longer sell, you know, chips in China, that's something again that that is the macro that is hard for you to forecast.

• 54:30Bill Gurley?

  You know, going to Nvidia, I've heard rumors that they, that they want that the government, US government, US government, and I, but not to sound like a victory. But I said a few episodes ago, the biggest risk on Nvidia was the government.

• 54:42Brad Gerstner?

  Right.

• 54:42Bill Gurley?

  That turned out to be true here and they may not be done. I've heard arguments that they want to do a customer audit. I don't know what that is or involves.

• 54:52Brad Gerstner?

  Well, they were suggesting it last week, I think even on even even on our friends pod where, you know, maybe you should look into all these shipments or all these sales that are that are going to Singapore or whatever. And again, I I welcome all of that. Like, I think all companies should have to comply with US rules and regulations. I suspect that they do. But again, if I just step back here, gold's outperforming the S and P so far this year by about 40%. Right. What does that tell you? People are moving into safe havens. They don't know where this is all going to land. Here's one of the things that really concerns me, Bill. If we look at consensus earnings expectations for the S and P so far this year,

• 55:35Brad Gerstner?

  we started the year, we expected 15% growth. We expected the S and P to do $273 a share. Now the consensus is 12% growth, so $265 a share. So consensus earnings expectations for the S and P have barely moved down. And when I think about the chaos of the last eight weeks, every CEO that I talked to says, we're on hold. We're tightening our belts. We're taking a more cautious approach to the year. We can't make decisions. We don't know where tariffs are going to be. We don't know where this is going to be. It's hard for me to think that you can literally wipe two months out of the year in terms of, you know,

• 56:14Brad Gerstner?

  where decision making is going on in these companies and only have a 3% adjustment to S and P earnings. Now, what are we seeing this over the course of the last two weeks? Well, Scott Kirby from United Airlines comes out, he gives two different guides. And he says, you know, if there's a recession, which we may have, you know, then earnings are going to be seven to eight bucks. And if there's not a recession, earnings will be 12 bucks. So you have companies that are doing highly unusual things in terms of saying, we don't know, we don't know the future. So we're either not going to give you a guide at all, or we're going to give you this wide dispersion in. Guide. So I think for most managers, people are looking at this, they're at max caution. I think from an ultimate perspective, we were pretty cautious and now we're looking at,

• 56:58Brad Gerstner?

  again, leaning back into markets on some of these down days where it's big risk off. Because I think ultimately, the president is going to make deals, you know, Besant is going to get deals done. I think we're going to probably land somewhere in this kind of five to 10% tariffs for the rest of the world. Right? If you add that up, that's going to be somewhere order of magnitude, $200 billion of tariffs. And you're not going to end up at 140 on China. We're probably going to get rid of these export bans and embargoes and land the plane somewhere around 25 or 30%. Now, mind you, that's still a three to four X increase over the tariffs from last year. But I think what the world needs is predictability and they need it soon.

• 57:40Brad Gerstner?

  I think if we're still having this conversation in eight, 12, 16 weeks, with this level of uncertainty around tariffs, I think it's going to have a much bigger headwind to those S and P earnings for the year. And as those earnings come down, we know that the market's going to have to come down with it. So the S and P as of end of the day today is only down about 10% for the year. And if you think about all the things that have changed, that feels to me like just the air coming out of the balloon in terms of like the certainty and the uncertainty that we have in the market. I think the next move down, if we have it, is going to be around growth. And I, yeah, we really haven't got a lot of growth earnings. Tesla's out tonight. And even though, you know, earnings came in a lot lower than expected, I think people are looking through that as kind of one time.

• 58:24Brad Gerstner?

  But by the time we get another month or two into, you know, the next earnings season, if we continue to see this level of uncertainty and drifting down, I think we're going to have problems for the problems in the market.

• 58:36Bill Gurley?

  I admire your hopeful optimism and the data points that I see in the past 24 hours about how soon something might come together. I think there was an announcement that India, we had finalized the terms of reference. I don't know what that means, but it doesn't sound like you're very close to. Being done.

• 58:58Brad Gerstner?

  Right. That was JD Vance today in meetings with Modi and came out of the meetings. Said we had a big breakthrough. We came, we came to terms on the, on, on, on terms of reference.

• 59:08Bill Gurley?

  Yes.

• 59:08Brad Gerstner?

  On what the trade deal will be, but it will still take months in order to hammer out the deal.

• 59:13Bill Gurley?

  I think months is too long.

• 59:14Brad Gerstner?

  Yeah.

• 59:15Bill Gurley?

  I think the, you know, the reflexivity already starts to take place, everything you just described.

• 59:20Brad Gerstner?

  Right.

• 59:20Bill Gurley?

  And, and once it does, some of it is certainly self reinforcing. So you start decommitting CapEx. You start decommitting, uh, you know, basic capacity on different manufacturing lines, planes, whatever.

• 59:36Brad Gerstner?

  Right.

• 59:37Bill Gurley?

  And it will become self reinforcing. You raise prices when you decommit because you have less lane. Like that's inflationary. Like everything starts, the, the fear of it starts to become the reality.

• 59:48Brad Gerstner?

  Right. I, I guess, you know, a thought experiment. If I described everything to you, uh, that has happened thus far this year. And I asked you, should the market be higher or lower from the all time highs where we started the year? You would say, of course it should be lower. Right?

• 1:00:05Bill Gurley?

  I would.

• 1:00:06Brad Gerstner?

  I don't think that down 10% on the S and P sounds to me like irrational, given the level of uncertainty that we've injected in a very short period of time. And so to me, if you're, you, you know, i- if you're thinking about units of risk, you know, it still feels to me like you're in that bottom third. Right. Of whatever your normal exposures are, you're in kind of that bottom third, you know? Everybody wants to buy the dip and go all in and, you know, I think we need a lot more certainty as to where this is going. I do think that it would be very helpful and it sounds like the president is starting to make some of these comments just this afternoon. To disavow ourselves of this, you know, Navarro style, replace the Internal Revenue Service.

• 1:00:50Brad Gerstner?

  If we can just get a four year forecast that it's about re onshoring a few industries, land the plane on China or on, on Japan and India and then on China. I think that gives us what we need to plan. You know, but there are a lot of other things that have to come together in order, in order to keep the market moving forward. So, you know, we didn't even get to talk about the impact this is going to have on startups and on, you know, what we're seeing in kind of the startup ecosystem. We'll come back and do that next time. But I think that, listen, I'm kind of tired of talking about tariffs. But, but, but it is the most important thing and it is impacting everything that we're looking at, both on the public and on the venture side of the business today. So you,

• 1:01:34Brad Gerstner?

  you know, it's unavoidable. We have this really important divergence, I think, in terms of points of view. And what's interesting to me is kind of the free trade side of this argument has largely been drowned out. And, you know, so I appreciate you steel manning that side of it.

• 1:01:51Bill Gurley?

  Totally. I mean, look, I, I, I assume most people that have at least had a finance class of study comparative advantage, but it's very mathematical. Like, it's very deterministic. Like, doing stuff you're good at and letting other people do stuff they're good at is a win-win-win-win-win. And you start backing that up and you're going to get lose, lose, lose. I'm certain of it.

• 1:02:17Brad Gerstner?

  Yeah, here, here, here, here. Let's land the plane and get back to building America.

• 1:02:21Bill Gurley?

  Okay. Take care, man.

• 1:02:32Brad Gerstner?

  As a reminder to everybody, just our opinions, not investment advice.