In short · Summary by AI
The All-In hosts discuss Ken Griffin's warning that AI is almost certainly a bubble, with Chamath arguing AI spending is circular among unprofitable VC-backed startups and that enterprises are shifting to open source and their own data centers. They then cover a major PHP security exploit wave found with AI, the risks of AI agents accessing bank accounts, and France's riots and rising debt, which they blame on big government spending, with a debated proposal to raise the US federal minimum wage.
- Ken Griffin said AI is almost certainly a bubble, though bubbles are normal with radical economic transformations, and companies are struggling to turn AI spending into productivity.
- Chamath estimated that about 1% of companies account for roughly 90% of AI token spending, with about 80% of that from unprofitable VC-backed startups, a circular pattern he says must diffuse to become a durable driver of earnings.
- Enterprises are increasingly favoring open-source, open-weight models and building their own data centers for explainability, auditability, and data sovereignty, with one large bank reportedly building six independent data centers.
- AI-discovered PHP exploits, rated 9.2 out of 10 in severity, threatened sites powering about 70% of the web; information leaked before the planned patch, forcing an early release and widespread precautionary shutdowns.
- Nikesh Arora argued that legacy technical debt and older website versions are a core security problem, and that virtual patching at the perimeter is one defense.
- The hosts debated liability when AI agents use a user's bank credentials to access accounts, with consensus that the user who grants agency likely bears responsibility unless the product malfunctions.
- France saw its worst riots in decades, with thousands of businesses damaged and 10-year bond yields above 5%; the hosts blamed excessive government spending, with Freiberg comparing French public spending to communist states.
- The hosts debated a proposal to raise the federal minimum wage by $1 per year for seven years, with Chamath and Freiberg opposing it on market grounds and Jason favoring it.
- 0:00Ken Griffin's AI Bubble Warning
- 2:06Circular AI Spending and Diffusion
- 8:38Nikesh Arora on Enterprise AI
- 17:06PHP Exploit Cyber Panic
- 26:44AI Agents and Bank Liability
- 41:06Obliteration AI and Security Debate
- 44:40France Riots and Debt Crisis
- 50:18Government Spending and Socialism
- 55:52Fixing Education Housing Healthcare
- 1:11:51Immigration and Assimilation Debate
- 1:27:08US Versus Europe Tax Debate
- 1:31:46Federal Minimum Wage Debate
Ken Griffin's AI Bubble Warning
0:00All right, everybody, welcome to the literal number one podcast in the world, 3 weeks running. We got a lot to get to. Sachs is out this week. We've got a special guest coming up. Let's get to our first story. Ken Griffin says AI is almost certainly a bubble, and Chamath has responded. Chamath responding and moving markets almost every week here on the pod.
0:20Look out, France. >> [laughter] >> The Citadel founder made the comments this week at the company's annual future of global markets conference. But he says generally, hey, bubbles are normal. Any radical transformation of our economy is generally intertwined with a bubble. He said he's bullish on AI's long-term potential, but his concern is that companies are struggling to turn AI spending into productivity, something we've talked about here, I guess last year.
0:48And so, companies are, quote, looking at their bills from Anthropic and OpenAI and asking where the productivity is. We we had this discussion over and over again. On Thursday, tech continued to get crushed on the data center and CapEx front. So, people who are either making data centers, like CoreWeave, down 10%, or having a huge AI spend.
1:12Meta, which is an extraordinary one there, it's down 6% after earnings. AMD down 5%. SpaceX was down 5%. But these things have been swinging up and down a bit and generally trending up. Chamath, what's your take here on the market sentiment, October 22nd, 2026? What are your thoughts here on how markets are viewing the AI, quote-unquote, bubble?
1:34And do you have concerns, cuz Jensen from Nvidia thinks money is available and money is going to want this opportunity to finance it, and I think we all think companies are getting a ton of value out of AI technologies. >> My Social Capital research team had a really great call with Ramp's chief economist, Ara The first question that they had was because like I was doing my own math and I tweeted this thing, Nick, maybe you can put it back up there, where I said, "Okay, my back of the envelope math, knowing
Circular AI Spending and Diffusion
2:11everything that I know and everything that I see, is about 1% of all of the companies represent 90% of all the revenue. And >> Revenue for AI spend? >> Yeah, so what I said was 1% of companies represent 90% of AI spending, so that's tokens. And of that 90%, 80% of them are from unprofitable VC-backed companies.
2:38So, the cycle here, just to be very precise, is VCs raise from pension funds and LPs and foundations and family offices. They put money into a startup. That startup takes that money and invests in growth. Part of growing is by consuming other people's AIs. And so, that company then starts to show revenue traction.
3:05Those folks then say, "Hey, look how well we're doing." Raises a bunch of money from the same VCs, and it's just this circularity. Why that's important is what Chamath is pointing out is that for AI to really scale as a predictable driver of long-term earnings, it has to diffuse out of the startup ecosystem.
3:25And so, you can't be in a situation where on the one hand you're talking about breathtaking valuations, but where 75 cents of every dollar is actually just a startup sending it back and forth so that they can mark themselves up. That's I think a a structural problem. Now, we've seen that structural problem in the past.
3:43That happened in the early days of cloud when AWS initially started to expose EC2 and S3, the consumers of an EC2 instance or an S3 bucket were startups. But the difference there is that AWS was abstracted from Amazon retail, which was already then a roughly break-even profitable business, at least on a free cash flow basis.
4:05So what's different here is you have a bunch of money-losing entities just spinning a bunch of money around, and it has to diffuse more broadly. So I think that that's what Ken is observing. Now, when we brought that data to Ramp, the quote is incredible because this is what my researcher told me, "I prepared a list of factors to see if your thesis" This is him texting me.
4:25around VC money being 80 to 90% of the top 1% of AI spend. But he said, "Chamath's actual estimate is pretty much correct." And then the second thing though that he said, he sent us and Ramp hasn't published the chart, so thanks to Ramp and thanks to Arav. He said we could we could be the first ones to publish this.
4:41>> And just to be clear for the audience, Ramp provides financial services, neo bank, credit cards, primarily to startups. So they know startup data. There's a free commercial. >> Yeah. I think they know broad-based data from other data sources as well, and I think Arav has access to all of it. But they're But what he said is Now, look at this chart.
4:56So what this shows is how are the top 1% of spenders in AI spending their money? And uh I think that Ramp is going to publish this soon, as I said, so thanks to them for letting us preview this. What's amazing to me is the blue box in this histogram. What this shows is what percentage of money they are spending on GPU compute.
5:19Now, why does that matter? Well, the rose-colored box is LLM traffic. That's the typical spend you're going to spend on the big frontier labs closed models effectively, either through things like bedrock on AWS or what have you. What's really interesting is that the blue box is ticking up. The blue box is people buying their own GPUs because they're moving to open source.
5:40And so what I think is really interesting is you have this two-pronged thing that's happening. One is the diffusion we need within AI is happening a little bit slower than we would all would like. I see that at 80 90s well. I think the large companies that we work with you can almost pinpoint it on a chart ever since Alex Karp's commentary on CNBC about data sovereignty buying patterns have changed.
6:04And I think people are being a lot more methodical. They are building out their own data centers or at least moving into VPCs virtual private clouds. My team yesterday was at the CIO event of let's say one of the largest banks in America. You know what they said? I'm not going to say the name of the bank.
6:23It was the most incredible thing. They said, "We have decreased our spend on AWS and GCP. We now have six completely independent ground-up data centers that we built from scratch for ourselves." And I was like, "What is going on here?" >> Wow, we're back to the future. People standing up their own data centers, yeah.
6:43>> It's back to the future. So, I think if you look at this I didn't mean to have any commentary other than just observing what I think, but yeah. AI has a diffusion problem. It is too concentrated and ripping around in a small little ecosystem. We need to diffuse out, but as it diffuses out people are picking open source is what I would tell you.
7:00>> And we we we were early on that discussion 2 years ago here on the All-In pod. I will say Ken Griffin, and I didn't hear the full um quotes here um cuz I wasn't in the room where it happened. However, um based on the quote, I think he may um have something slightly wrong. When startups flood to a technology, that is a strong signal.
7:21Why? Startups and I invest in a hundred a year and we evaluate over 10,000 a year at my fund, they look for the cheapest, best, fastest edge they can get. What is the biggest edge they could get 20 15 20 years ago? It was cloud computing. They saved a lot of money. It it WeWork. They saved a lot of money.
7:41It was more efficient. And then it was Facebook ads. Facebook ads were mispriced, they were super cheap. They dumped all their VC money into Facebook ads. Then and now it's become AI. For the last 2 years, yes, they've been dumping into it. So, if you see startups rush to a technology or rush to a trend and start spending all their VC money on it, it means this little colony of two to 200-person companies have determined, and they're the most nimble, that this is the best solution.
8:08So, that's a tell that things are going in the right direction. The big, slow, cumbersome enterprises, they're the slowest to the new technology, and that's why they buy startups all the time. Speaking of buying startups all the time, my guy Nikesh is here from Palo Alto Networks to tell us if this is the end of days and all of our bank accounts and uh if Bitcoin is going to get hacked this weekend and buy more guns and chickens and eggs and drill well.
Nikesh Arora on Enterprise AI
8:38Welcome back to the program, Nikesh Arora. How are you, sir? >> I'm doing great. Thank you for having me, guys. >> And you had a nice event last week, didn't you? A little nice event in Napa. >> I did. We had a bunch of CIOs, not just one bank CIO like Chamath said. But before we jump into the end of days, I I do want to say something to what you guys were talking about earlier.
8:57Yeah, but the open source versus the the sort of the hyperscalers providing info. So, then we had this peculiar problem. So, we'd like to embrace AI as quickly as many of the startups. And we've gone gone through all the understanding, all the analysis, open source versus cloud models, and we preference open source open weight because it allows us to modify the weights and train them.
9:18And something which most people don't talk about is it allows us to interrogate the chain of thought. Cuz over time what's going to happen is all of us enterprises are going to need explainability, auditability, and verify stuff. >> 100%. 100%. >> If I can't validate, it's not going to be okay to go to your boss and say, "I don't know what happened, but the IT guys put an AI model in there and it did it."
9:40That's not explainable to the regulator in financial services and health care. So, they want explainability, verifiability, and and, you know, uh auditability. And we can only get that with open source open weight models. We can interrogate chain of thoughts. That's kind of one reason we're gravitating towards them as opposed to getting caught into the closed uh race.
9:58The challenge though, I think you guys talked about and you I saw Chamath's chart, the challenge we have is is very hard to find a global resilient highly available inference provider outside of the hyperscaler community right now. So, if I'm a startup, great. I can go rent 10 MW in one data center in one part of the US and if it goes down for a few hours, I'm out of luck, but I'm a startup, so I'm okay.
10:23But I'm providing resilient services at 99.9% reliability, it's very hard for me to find a global inference provider who does not want to sell me their model at this point in time at the price that just makes it economically useful to use open source. >> Let me ask you a question though. Do you think that there's a world where Palo Alto Networks says one of two things.
10:46One is, you go to the hyperscalers and say, "Okay, listen guys, you run it for me, but I want the bare metal, I want it totally air-gapped, and it's an AWS facility, but I'll just lease it from you. Otherwise, just get out of the way so that I can have everything inside of it." Or do you do what this one big GSIB bank does and say, "I'm going to build my own inside the United States."
11:08Is there a world where do you think other companies go to that limit or do you think that's an extreme case that's probably not representative of the norm? >> So, this is the interesting debate from you know, six, eight years ago when I came to Palo Alto, I shut down all data centers. I said, "We cannot run a global data center sort of footprint at the scale, speed, and reliability as I could probably rent it from hyperscalers."
11:27And life was great and And what's happened is in the current sort of incarnation of where we are, compute is highly dear. It's very hard to find compute in the world, period. So, I don't I'm I'm a I'm a buyer. I'm a taker of terms, not a dictator of terms. It's very hard to go and dictate terms anywhere because yeah, sure, you can make any plans you want, but those plans are you know, you talk to Jensen, he can't give you chips till 2028.
11:51You talk to you know, when you get land power and shares and shells. So, it's very hard to go say yes, I can go build my own data centers, but it's kind of an empty threat. It's very hard to go build it. I would be resilient. And by the way, I don't run 50 data centers around the world. We're only running 10 to 20 megawatts of inference.
12:07So, it's a it's a good conceptual sort of idea that I should go become independent, build my own inference, but most likely the answer is somewhere in the middle. I'm going to have to get bare metal, yes. Most likely I'm going to get from either a hyper scalar or a cousin of a hyper scalar, or somebody's going to be stitching, you know, sleeves of compute from around the world to meet my needs in the hope that I'm going to migrate to something more resilient and more robust over time.
12:33>> All right. So, Nikash, you have a hybrid solution down there. One second. I just want to complete that. You have a hybrid solution down >> stuff before we run out of time, you know. >> [laughter] >> Then you go and you basically get a bunch of open source models so that you can interrogate chain of thought tokens.
12:46Is that a representative solution for most of the Fortune 500 or Global 2000? >> I think we get there. I I expect at some point in time we will start seeing hyper scalars giving bare metal and letting us run open source models. They already do to some extent. So, that's probably what's going to happen because you know, it's a matter of the profit pool, right?
13:02It all depends on where you shift the profit flow. Today they all live in Nvidia and and the memory industry and they're being shifted towards the hyper scalars, people who have large compute available because it's it it at a point it'll become less about the chips, it'll become more about the availability of compute because I think demand is insatiable.
13:16There's enough demand, there's more demand than you and I can imagine. So, yes, >> Right. >> I understand the enterprise diffusion comment, but it's going to get diffused. The question is, even if you try if every company in the world today said, "I'm in. I'm in. I'm ready. I'm embracing AI. Let's go as fast as we can."
13:32There's not enough computer in the world to satisfy us. >> Right. >> We asked you to come on, Nikesh, not just because you're awesome and uh >> [laughter] >> you were you're now a bit uh based >> He's a bestie. >> He's a bestie. He's a bestie. He was very quiet under the radar. >> I think I would Nikesh every 48 hours.
13:50>> I know, David. I keep [laughter] We keep running into each other. >> I mean, every time there's a Knicks Warriors >> game, Nikesh invites me to sit with him. So, it's awesome. >> Um is there one [laughter] >> That's not true. I'm just manifesting. Um Scott Great States, I can manifest. Boy, can I manifest.
14:03Kid from Brooklyn's manifesting. >> As long as you want to go with my 11-year-old, you're welcome anytime. >> Okay. I'm totally fine with that. >> He's always looking He's always looking for somebody to go with. So, you could be next, Jason. >> No, I'm I'm happy to babysit if uh with the courtside seats for a second row.
14:18>> He'll He'll babysit you. >> Exactly. Uh but there's a cyber panic going on. All seriousness, uh the last couple of days, AI found two major exploits that impact most of the internet. Here's what happened. PHP, which is an open source coding language powers about 70% of all websites, think WordPress, Wikipedia, is at risk.
14:37In August, security researchers using AI found two, one, two, critical exploits nicknamed PHP two shell. PHP security team gave this a severity rating of 9.2 out of 10. Basically, DEF CON 1 for these security teams. Since August, developers and companies have been working together on fixes. This is standard operating procedure.
14:58And the plan was to roll these out gracefully in one major patch on October 22nd, which is the day we're recording this very podcast. In the days leading up to the release, information about the exploits leaked. Nobody knows how it leaked. That's going to be part of the postmortem of this cyber attack week.
15:16So, PHP moved the release up just by a day to Wednesday, October 21st. and on Wednesday all hell broke loose. AWS reported a jump in hacking activity while Cloudflare CEO, friend of the pod, said they saw a millions of hacking attempts as well. A bunch of precautionary shutdowns happened. Governments across sites in Europe, France, Germany, Netherlands, Denmark, Finland, etc.
15:40They started taking websites down. Wikipedia took down some of its systems just to get them patched. In the United States, the NSA and the FBI put out a bunch of warnings and now everybody started panicking. People are starting to think that Bitcoin's going to get hacked, their website's going to get hacked, their bank accounts are going to get hacked.
15:57It's a bit of chaos and then there's a second sub-issue around agents accessing banks that dropped at the same time. Now you're in the security business, you've got lots of different products and services here. When did you first learn about this and how severe is it? Is this an acute issue or is this a harbinger of things to come and is this going to happen every 10 days for the next year as these models have gotten incredibly powerful at what we call cyber, which really means cyber
16:26security, not just cyber punk, but cyber security. >> Both Jason, I think 10 days is too long. >> Okay. >> these things going to happen much faster than every 10 days. I think part of the challenge we're seeing is as we've been talking about technology debt that we've all have to go pay sooner than later.
16:42And what's happened is people have not paid attention to the idea that they have to go fix their stuff. And that to customer once they were about And I talked to the CIO this morning, they had a PHP problem. They have a bunch of websites. Some are running the most advanced pieces of software so they can put the patch.
16:57Some are running older versions which they can't patch. They've got to bring them down and go build them up. But you know what? They never did anything about the fact they were running older versions because it wasn't important. So now they have to go to go take those websites down. They're going to go upgrade them, put the patch in, bring them back up.
PHP Exploit Cyber Panic
17:14We found out about this a few days ago. We scanned everything in our infrastructure to make sure that there were no issues. We made sure that our products had patches available for our customers who deploy them. So, there's two ways to solve this problem, right? One, you can go in and patch the vulnerability.
17:29You can go in, find the code, patch what has been given to you by PHP, and make it work. The other is you can actually put it in a perimeter defense product like ours or Cloudflare has one or other firewalls have one. You put the patch there. It's a virtual patch, so any attacker trying to access that vulnerability gets stopped at the perimeter because we know what they're looking for.
17:47There's two ways to solve this. >> to a CDN, content delivery network first, and that acts as a first line of defense cuz they're not getting to the actual servers. But, if they do get to the actual servers, my understanding is they can run code on these servers, and there were some security certificates that were incredibly brittle and easy to hack.
18:07>> The closed models have basically said, "Hey, these things are cyber risks, and so we need to be very thoughtful." I know Anthropic did that with Mythos, where they brought you in and a bunch of other people and like 50 companies in and said, "Okay, now go harden your systems." Were the closed models helpful here?
18:26Were they the ones that helped you find these CVEs? Bring us behind the curtain. >> The closed models are can be helpful because both OpenAI and Anthropic, and most likely Google as well, have very powerful models now, which can go, if you give them enough compute, enough persistence, they're going to go find vulnerabilities.
18:42They're going to even chain vulnerabilities to find an attack bot, right? If they can solve neighbor's stokes, they can chain four vulnerabilities. And if you give them enough immense compute, they will try every way possible to be able to get Actually, the PHP problem was solved by persistent compute.
18:55This problem was identified a few years ago, but nobody thought it could be solved because it required too much of coordination. So, what happened was if you throw computer at the problem, it persisted and it found a way to crack that. Once it found a way way crack that and they published it or got to reverse engineer it.
19:11Every hacker knows now how to go after it because the challenge you have with patches is hackers are smart. They look at a patch, they see what the patch is trying to do, they reverse engineer from there, and say, "Okay, if I follow the reverse engineer path, if somebody's not patched, I can break in."
19:26>> It seems like a bunch of the hullabaloo today that's being drummed up, and this seems like it's going to change every day, is all about these bank accounts getting accessed. Is that Do you think primarily through kind of the front end, through a website using an agent that's logging in on a browser-based system on behalf of its user?
19:43Because it seems like a lot of this may be coming from news or some of these other sort of like personal agents that are logging into your bank account to get information about transactions and what you're doing. And the banks are seeing all this activity and they're like, "Oh my gosh, is this authorized?
19:57Is it not authorized?" The traditional way that banks have provided access to account data has been through APIs using verified applications, where I as a user, as a consumer, would log in to my, you know, mint.com account, and it had a a legal access point to uh to Amex or to Bank of America. It can do that.
20:19>> there. >> Yeah. Plaid is an intermediary. >> Yes. >> And so, there's a bunch of these sort of intermediaries that then provide that capability to apps. Is that ultimately going to lead to a world where the banks are all going to just turn off website access and say no one can log into a website because technically agents could do it and they're not able to kind of manage that.
20:37Um how do you think this is going to evolve as it relates to consumer financial services? Cuz I actually think this is going to be a big part of the press cycle over the next week or two. If you have an answer. >> Yeah, I think two different things, David. I think the reason banks have found uh that in sort of unauthorized access to their accounts is possibly because of PHP problem.
20:56Because their websites are hackable and they've been able to get through them and get to credentials. I don't think there are two different problems. One is unauthorized access happening because people have not been able these sites have become hackable. I think the second problem you're mentioning is the personal agent problem.
21:12So far, most personal agents are using your credentials to log in. So it becomes hard for a bank to decide whether it's actually you logging in or is it your Muse agent who has your credentials logging on your behalf. They cannot distinguish between your traffic or agent traffic. They're both logging in from the website.
21:30They're basically logging in as you and your browser and trying to conduct a transaction. Now, as you know, there's this technological capture which tries to see that it's not a tech it's not like an agent that's sort of or a it's a sort of a bot or an agent accessing the account instead of you. Naturally, there are ways to you know, validate capture with the eye so you don't even actually have to have the human on the other end.
21:52So that's also >> good at it. >> It's pretty good at it. It's actually sometimes I have to squint to see what the hell is it I want to type. >> Yeah, get click all the bicycles in this picture. [laughter] Like it takes you three times at our age with our eyesight. But the interesting thing here is that there is a hybrid as well Freeburg, which is your um your Muse agent, your Grock bot is running a virtual browser.
22:12It will pop up the virtual browser and say, "Hey, do this captcha." and then take over. So Nikesh, is this fear, uncertainty, and doubt, the old FUD by the banks to try to neuter or sandbag these agents from getting the the front door to banking cuz then they could just route to a bank that's cheaper, better, has better rates on behalf of the agent.
22:36>> I mean cuz there's I think that would be giving them a lot of credit. >> Okay. >> I think I think I think right now they're very diplomatic. The fundamental challenge they have is the liability problem. Look, it's kind of like if you call customer support at your favorite bank and say, "I don't know how $50,000 vanished from my account.
22:53I never did this." >> Yes. >> Right? >> What's the Spirit of the Rhino? I don't know what this is. >> [laughter] >> And and the challenge they have is they keep keep >> Keep going, Nikesh. Don't be distracted. Don't be distracted. >> The challenge is we're number one for a reason. >> The challenge is you you've given your credentials to an agent.
23:13You didn't even realize that it got your credential. It's living on your browser, living on your laptop. It's going to get innumerable amount of credentials. And I think the biggest problem we're going to have is who owns the liability and who has accountability. >> Banks say, "Do not I do not allow you to interact with me with your agent, period."
23:33Right? They're yelling that disclaimer from the top of the roof saying, "It's not going to be my fault." Look, banks had to go Don't forget, it's not even the probably the cost. It's like the liability secondary. Remember, banks We all know this at credit cards below a certain amount of money, they don't want to dispute it.
23:49They pay you because the cost of the customer support call is higher than than they're going to have to deal with. Now, if you start having tons and tons of these agents doing and you start calling your bank for explainability, you're going to create huge amount of cost. I think I think that's where they're going, to be honest.
24:03>> Okay, you have a unique You have a unique seat, Nikesh, because you you talk to the people who are being hacked, have been hacked, and you help them prevent being hacked with with this all these suite of services over Palo Alto Networks. So, I want to take you through a couple of the theories people have about AI's impact on security.
24:20You tell me if you agree with them or not. The first one is this is going to be largely an issue of who has the most compute. And because the white hats have access to the most amount of compute, they will be able to out compute compute the uh black hats, in other words, the hackers. Is that a true statement or is that not yet a true statement and maybe it will be in the future.
24:44In other words, Palo Alto Networks or or or OpenAI, whoever it happens to be, could fire up so much compute to defend systems that a bunch of hackers in North Korea, Russia, China, etc. just don't have the the firepower and they'll be outgunned. True, not true, when will it be true? >> True, not true today because the underlying systems are not are not architected or orchestrated in such a way that we can launch these, let's call it defensive swarms because everything is set up in disparate
25:14situations, right? Like if everything was true, then by definition you could send out a bunch of agents to go patch PHP if you wanted. A company's got 5,000 websites and guess what? Their priority is going to catalog each one of them because they're they're actually aggregating everything, putting it together, understood their so So, I think we need to get our infrastructure to base level of preparedness, which is the tech the technological debt lives.
25:37>> Let me take you to the next thesis and theory people have here, which is persistent computing reviewing code and people taking proactive measures more seriously is going to solve this problem and right now we just have this interim period where people have accumulated technical debt you've talked about, but AI is going to solve that problem cuz you'll have persistent tools from companies like yours and others or in-house ones that are constantly banging on systems to find these before hackers get to
26:08them. Is that going to be the end game here? True, not true, short-term true, long-term true, take us through it. >> True. Today, if you can see almost every large company in the enterprise space is out there busy using Metasploit equivalent to try and penetrate their own defenses to see where the holes are and they're trying to patch them.
26:24The challenge as you'll appreciate is that the next model is going to be more powerful. It's going to find more ways to get into your infrastructure. So, you're going to be playing this cat and mouse game and you're constantly patching. I think there's a slightly different sort of version of this, Jason, where for a second let's assume that you will get breached.
26:40Okay? Cuz there are so many vulnerabilities out there you can spend a lot of money patching everything. The question becomes less about how I got breached and which vulnerability is going to let people through. The question is how quickly can I find them and how quickly can I eject them? >> Mhm. Okay.
AI Agents and Bank Liability
26:56>> our advice to people is build the infrastructure in such a way, which is possible today, where you're aggregating all the signals, all the data in such a way that you can actually look for anomalous behavior with that white hat compute you talked about, right? Because I have more compute. Go ahead.
27:11>> Yeah, and then the third one is the frontier models are causing a lot of this chaos because they are gatekeeping the most powerful solutions to do cyber defense and that the open source community is giving more functionality to the white hats, to the security teams, to the CISOs to actually solve this and that the frontier models need to change how they deploy this technology in some way.
27:40Are they causing part of this problem by gatekeeping this technology and not giving the raw power to the white hats? >> What you said earlier about is a diplomatic answer about giving too much credit. >> Yes. >> I think I think your theory is giving too much credit. Again, I think that they You remember majority of them are researchers to start with.
27:59They're sitting there and saying, "Wow, this is extremely powerful. What do I do with it?" And they're talking to us and saying, "What do I do with it?" Now, remember these models that are so far ahead, they're still trying to figure out how to release them, how to package them, how much computer these guys going to take.
28:13And they're all computer constrained, right? So, they're all rate limiting all of us, even though I have access to the most recent model, which is available publicly, I'm still rate limited. Right? So, there's tons of issues that are going on. So, I think they're not causing the problem. They're just trying to grapple with the fact that these things are extremely powerful.
28:29What they would like they would like to figure out how to monetize it. >> Mhm. Because they want [clears throat] to compete with you? >> No, they they just need money to grow. They're like they're all listening to your conversations about compute needs and where the money's going to come from. They're like they're not trying to compete.
28:43They're just trying to go after profit pools because they want a lot of money cuz they got to go give it back to, you know, Jensen. >> So, that's their main issue. Yeah. >> Let me ask you a a hypothetical question. I'll ask all of you. I use one of these agentic services. I'm a consumer. I give it my credentials to my bank account.
29:01Let's use your example. $50,000 goes missing. I don't know what happened. Maybe I escalate it to the agent I use, you know, Instinct, Muse, dot or I copy of A. Everybody's finger pointing at the other one. Maybe there is a prompt injection. Who knows? Maybe the agent just went rogue and transferred the 50K.
29:23Let's just assume that that's possible. 5K, you know, cuz it's under some threshold. Who is responsible? Okay, Friedberg, who is responsible? And who should be responsible? Who is responsible? Who should be responsible? >> Well, the the terms of service of the bank say you can't use an agent to access the bank account through the website, right?
29:45>> Does it say that now? >> Yes. >> Yeah. >> So, given that that's the terms of service, if the agent hasn't built in a capacity to recognize that and stop that access, then it is a software liability issue with the provider of the agent, I believe. Unless it alerts you and says this violates the terms of service, do you want to override my block, and do you want to do it?
30:07Now the liability shifted to you as a user. >> And we have evidence of this, Chamath. Um not in banking, but in e-commerce. Amazon has blocked these, and subsequently Grok now will tell you in my Amazon shopping bot says, "I can no longer check out for you, but I can put it into your shopping cart. Tell me which address, which card you want, and I'll tee it all up for you, but I won't hit the buy button."
30:30So, it's being adjudicated in real time right now, and I think that's probably where we wind up. >> Nikesh, what do you think? >> You are. >> Yeah. >> I think I think come on, we all have to take responsibility to empowering agents and giving them our credentials. You can't say I gave my credit >> It's the only solution.
30:52>> I gave my credit card to Chamath. He went and burnt $20,000 on it. Who's responsible? The bank? No way. Is it Chamath? Yeah, he is, but I gave it to him. >> Yeah. But what if the agent Chamath uh says, "I have been programmed to be maximally helpful." You know, these sycophantic agents, and it goes and says, "I found a way.
31:09You know, I found a way. Actually, if I fire up this type of browser and I simulate a human behavior, I think I can get this done." That's what a lot of these agents will do is they'll try to please you, and they find that then that to me would lean towards the platform providing the agent No, Jason, Jason, no, that's you.
31:28It's your responsibility. >> Yes. There's a word in agent, it's called agency. Somebody has to give the agent agency. >> Okay. >> Who's giving the agent agency? You or Facebook? I think you're giving agency to act on your behalf. And if you're the one who's giving agency, you have the liability. >> Yeah, I think as a practical matter, it's the only scalable solution because what will happen when these lawsuits happen is everybody's incentive, everybody meaning the corporate incentive.
31:56B of A will point to Facebook, Facebook will point to the user. It's the only way that this thing continues to scale like this. >> but Chamath, there's an exception case. And I think Jason said it in his words, you said it, but we didn't dwell on it. It's called the rogue agent. Now, that's a product liability issue.
32:13If a product does not If a product does not behave like it's intended to behave, right, then there is a platform liability. In my mind, it says, "Wait, you said this is what it does." And today, you buy any product in the world, if the product doesn't do what it's supposed as advertised, uh it goes rogue on you, then it's the person who built the product, it's their fault.
32:30And this is where the problem is. >> dangerous territory, which is, "Hey, it can do 140 It's capable of doing 140 tasks. You know, just maybe not really. Let me ask you a in in the weeds question. We incubated a company Obliteration AI and what this company is doing >> Nice name. >> Yeah, and obliterated models maybe people don't know about but they're going to understand what these are.
32:54This company a little bit controversially provides models that have no constraints, no guardrails and it's your responsibility when you have a red team, a team that's going out and banging on different vulnerabilities to build up those. What are your thoughts on this new somewhat controversial Wait, before you go.
33:17>> Let me just say I before you go. I find Obliteration unbelievably scary. That is a vector of risk that is so unbelievably underappreciated right now because to your point Jason, it is a very long tail thing. Not enough people understand what it is but I find this probably the thing more than alignment that I think people should really understand and think about.
33:38Sorry Nikesh, over to you. >> Yeah, go ahead Nikesh, tell us what you think of these services. >> So, I think this is where this is the dark side of AI. And what I mean by that is, you know, we've had all these debates at the White House, many of you were present. We talked about responsibility and alignment and making sure we tested them before.
33:53The problem is you're you're dependent on the weakest link. If this there's a company which is going to give you the raw power of AI without any guardrails, without any controls that are either built in or can't be built in, then you're basically handling a nuclear sort of bomb to the hands of anybody who wants it because they're going to afford it.
34:12That's the problem because at one level we're saying we need global treaties to manage the debasing of AI or development of AI and just for good. On the other hand, you're saying we can have a company which can allow you to have this most powerful thing with no control, no guardrails and no governance.
34:28It's like saying, "Hey, there's a here's a DIY aspirin kit. Have a good time. You can build your own medication. Have a good time. Sometimes I get it wrong, but don't worry about it. >> Or just giving somebody some really powerful power tools to build things that make things more secure, like build a wall.
34:47>> I don't understand what the business model of your company is. Like your your company's like basically like inducing product liability as a service. >> it to white hats under very constrained No, it's providing this to white hats and corporations. They they share the same logo list as the cash and Palo Alto networks.
35:05There are people who want access to these in order to do proper testing and make things more rigid. So you do have a higher authority of like not providing this for free like Cloud was doing. >> But Jason, are you telling me that they they they underwrite that these law that when you put these things in infrastructure and do testing, they're not going to go rogue on you?
35:24>> Well, it's your responsibility to to manage the model as opposed to giving it to in this Yeah, if you were the NSA or if you were >> How is that How is that How is that different How is that different from me going and taking open rate model and training it to my needs? >> You could do that. This is just a a place that has the infrastructure to do it.
35:42So providing that infrastructure you talked about earlier like who's going to serve it and that kind of thing. And and and making, you know, just essentially making it more efficient for you to do this with more constraints. But you know, and letting you take the liability, but it's a very interesting place.
35:56Why does technical debt build up in historically have we just under and a lot of these causes of these cyber scares is this just all because corporations deprioritize security and technical debt and that we just need to change that in this new world and that will essentially solve the problem if we prioritize safety first?
36:18>> Nobody wants to work on this stuff. I mean, the problem is when you ship something into prod, everybody wants to work on like the next greatest thing. Nobody really thinks about like maintenance as like a sexy idea. That's one thing. Second thing is if you actually deploy it inside of your own virtual private cloud, the problem is the software vendors don't have this one version that's constantly updated.
36:35You have a drift problem where you have a version, Nikesh has a version, Free Brick has a version, they're all out of sync. And so now, you know, you as a software vendor are maintaining 19 versions because everybody has their own pace and cadence for upgrades and migrations. Then you have the fact that technologies are constantly changing and the underlying way in which things can happen change so rapidly, but the way in which you've done it represents a sunk cost and you can't just rip and
37:01replace this stuff. And you multiply that by millions of companies and hundreds of trillions of lines of code and this is why it is like it is. >> And to that also add to that the incentive alignment problem. The CIOs are not incentivized to maintain the most modern infrastructure. They're incentivized to keep costs low and they're incentivized to keep everything available all the time.
37:19So, every time you want to upgrade something it introduces risk of blowing up or going down. It's like, I don't want to go I don't want to go change everything all the time because all my users complain because you know what, every time you upgrade something, change something, it causes friction in the system and then it costs money.
37:33When was the last time your your CIO showed up and said, "Yeah, great. Have some more money and have a bigger budget because of the new toy." >> this is a real tragedy and and you'll see this with like say the CIA or the FBI. If there's no terrorist attacks, people are like, "We're spending too much money."
37:49And it's like, "Or we're spending the right amount of money because we haven't had a 9/11 again." And when they come to us and say, "Hey, we need more because based on what we're seeing, you know, there could be another God forbid 9/11." And then Congress or whoever is, you know, got the power of the purse at the given point in time says, "Yeah, you know, we're not going to give you more money because we haven't had one in 20 years."
38:10That that that is really the core of this problem is they only get credit >> to change. Cuz we're going to have a bunch of 9/11s in cyber. Yeah. >> Yes, Scott, the phones keep ringing every day and the conversation always is now, "How do I get out of this?" Because I'm tired of once getting punched in the face every morning when I wake up.
38:26>> [laughter] >> When people really appreciate the the the CISO and and and those groups, uh when these things and the systems come back online and the system's been hacked, it's going to be brutal the next uh year or so, yeah? It's going to be a big transition time. >> Nikesh. >> I think I think, you know, the CISOs could become the next CEOs.
38:43Think about it. If you believe in three years from now, every business function of yours wants to transform themselves with the AI. Let's go to the positive side, right? And my my CFO never wanted AI. He's saying, "Dude, I could do all this and all financial analysis. You just appoint some people to my team.
38:59My marketing people want them. My HR people want them." So, almost every function wants more AI people, which has never happened historically. Everybody's wanted Everybody wants AI people. And that's what's going to happen. Every function is, instead of waiting for AI or technology people, they all want the CISO to come and help them.
39:14Then who's the person running the company? >> What percentage do enterprises spend on security of their total spend, and what should it be ideally? I'm just curious. I mean, we have no insight here. >> The insight is that typically, if your IT budget, the cost is somewhere in the 4 to 10% range for cyber, okay?
39:31And 10% is typically where you'll find financial services, the federal government, because they want to make sure things are secure and robust. Uh 4% can either be cloud people, because that's where the hyperscalers would take care of infrastructure security for you. You just have to worry about application and software security.
39:48So, it ends up at 4 to 5%. That's the range. You can get it 4 to 5% to 8 to 10%. >> Yeah. And that's going to have [clears throat] to go up. And there's uh there's an an issue, I think, as you're pointing out. If there is AI talent in the building, we got to build new products and services for our customers.
40:04Uh YOLO. >> Jason, Jason, there's a whole It's kind of like, you know, I I was joking the other day, but it's it's true. Like, look, there's a whole new category, which we even don't know how to put our arms around, AI. Like nobody knows. Like imagine if I said, "Great. You know what? Go deploy AI in my company and let's make sure AI is secure."
40:22Well, the boss says, "Whatever you do, make sure you can interrogate agents through chain of thought." That's easy to say. That's hard to do. How do [clears throat] I find all the agents that are running it? So, it's like we haven't built the AI security harnesses that are needed. I joke like, "You know, when they invented planes, when the Wright brothers were out there, nobody said, 'Let's go create the TSA.
40:41This is about time. We got to build security now because it's eventually going to happen.'" So, people are busy enthusiastically deploying AI, embracing AI. You saw I don't know if you saw this morning that, you know, if somebody some researcher found that if you send a news conversation to somebody else, you can extract private information out of it.
40:57So, now they got to go back to the drawing board and patch it. So, everybody's experimenting, news is being found out. We need to build all the security harnesses for AI and that's not even started yet. >> Bernie Sanders goes on Twitter today and says, "Look at all the craziness. This is insane. Stop AI now."
Obliteration AI and Security Debate
41:13So, you're in a room with Bernie Sanders. Someone says, "Nikesh, we need you to save America. Go meet Bernie Sanders." [laughter] You get on the plane. You go over there. You get in the room. And the guy And the guy says, "We got to stop AI now. What is your response? How are you going to solve this problem?
41:29Nikesh, [laughter] Aurora, how are you going to solve it?" >> I said, "Sounds like a great idea. Let's go. Why don't you start?" I'm right behind you. It's like I got it. And then you know, with all due respect, I it's interesting. This is the first time we have dwelled so much on the dark side of the technology history and I don't know why it is.
41:48Maybe you guys can explain to me. We spend so much time obsessing with the dark side of technology and my thesis is it started with the godfathers or whatever you want to call them, the the builders of this technology. They've over-indexed and dwelled harder on the dark side of this, causing this narrative.
42:04I think we need a narrative shift. And think about it. Like we we only hear about all the bad stuff that that this technology does. Oh my god, I got missiles. Wait, I got something worse. My guy's jumped over. Wait, mine jumped over 6 months ago. Oh, mine are worse. It's like, dude, this is not a good narrative.
42:19This is a race to the bottom from a narrative perspective. >> [laughter] >> Nikesh, why then do you think Bernie Sanders and others are seizing on the moment? I know we've talked about this before, but like what's going on that's motivating Bernie Sanders to be so vocal about stop AI, stop AI? Is it like a power struggle that they view there to be an emerging system of power that they don't control, that they don't have a hold on, that diminishes their power?
42:44Or is there something kind of more simple than that? >> David, this is what I phone a friend. You guys are much more competent as answering these questions than I am. Jason and Chamath are probably better better equipped to answer these questions than me. >> Yeah. Yeah. >> Yeah. It's a It's a populist issue.
43:02If you if if the people at the labs are going to tell you half of white-collar jobs are going away and all the you know, drivers are going away and it's a 10% of everybody dying. I mean, what a great issue to align yourself with if you're a populist, whether you're America first populist on the right or a liberal on the left.
43:23It's just a great way to get people's attention and get votes and you know, maybe it helps you win another election. Nikesh, we appreciate you you're busy and this is like the busiest time you could possibly have, I think, right? What is your day like? Have you slept? I mean, are you just getting woken up by clients at like 1:00 a.m.
43:40when they're like, "Hey, I need a I need front forward forward deployed engineers from you?" I mean, what's going on in your life? >> Yeah. I I woke up at 3:00. I flew to the East Coast. After this, I'm going to get back on the plane and come back home because I got to make it time for dinner with customers.
43:55>> Crazy. I mean, it is just a crazy time for you, man. You know sleep. I know. Yeah, I love it. Yeah, I mean, this is the time to grind. All right. >> I love that. >> Uh thanks so much for Nikesh for joining us. We got to get you on for a full episode and talk about a range of issues. >> Thanks, Nikesh.
44:07>> You're so based. Follow and follow Nikesh on X. He does it daily. [laughter] He does one tweet per day and it's based in Nikesh. >> All right. Thank you, Jason. >> All right. Next up on the docket. Is this the fall of France, gentlemen? We covered this 2 weeks ago. Situation in France is my god. Well, the place is on fire.
44:25It's gotten worse. Over a half a million people have taken part in the protests. They've now spread to Italy, Spain, Albania, and a couple of other regions. Over the weekend, France saw its worst riots in decades. And they love to riot. So, that's a high water mark. Numbers pretty striking. New York Times data [laughter] by the French guy.
France Riots and Debt Crisis
44:45They're good at it. This is their wheelhouse. >> Pro pro-rioters. Pro-rioters. >> They're professional rioters, exactly. It's kind of their number one pastime. For us, it's like football. For them, it's riot. Over 3,000 businesses, Chamath, have been damaged. You've seen the videos, obviously, trending all over the place.
45:02Hundreds of millions in losses. 4,000 police officers injured. 2,500 people have now been arrested. 70% of them are adult men. Now, you remember this was a high school protest because high schools were dilapidated and underfunded. And that's what the origin of the protest was. Now, it's just become complete civil unrest and looting.
45:24Multiple historic government buildings, tragically, have been burned down. Notably, a 143-year-old city hall in a town 250 miles south of Paris, Limoges. Limoges. Beautiful name. Beautiful building. Absolutely heartbreaking to watch it collapse. For what reason? So, they could upgrade the schools in France.
45:46Seems like there's a lot more going on here. France has finally implemented some curfew some curfews. Which I don't know how you don't do that day one. New York Times quote, "France France's government has accused ultra-left militants and opportunist looters of causing the violence. President Trump and Vice President Vance have called this a third world immigration and welfare state issue.
46:11Here's what France's Justice Minister said. Rioters include, quote, "People from immigrant backgrounds, people who are foreigners, but there are also people who are fully integrated and who are French." Our partner, Polymarket, says 18% chance France declares a state of emergency by the end of the year.
46:29Same time, investors are dumping French debt. Friedberg, France's 10-year has surpassed 5% this week, highest since 2002. On the other hand, and uh this is an ongoing issue here in the United States, 10-year dropped just under 5% for the first time in a month. Wall Street Journal says this might be because people are fleeing EU debt and buying the US debt.
46:53Polymarket, our long-term partner here at All-In, says 91% chance Moody's or S&P downgrades France by October 31st. So, let's stop there. Chamath, when you see this and you spend your time in Italy in the summers, obviously, we talk about that here on the pod. Uh you see it happening in Italy. Uh and what's your what's your takeaway here from what we're seeing?
47:17>> It's heartbreaking to see what happens. Let's just be very clear. I think that these people are absolute criminals. They're all terrorists and they should all be arrested. And I think that this shows sort of like what is at the end of this quote-unquote empathy that all of these governments have been espousing.
47:37It's just a disguised way of promoting urban chaos. And uh I don't know how a police officer thinks it makes any sense for him to be deployed into this melee to do what effectively like protect a Christian Dior store in the 7th arrondissement of Paris. Like it is so stupid. So, these folks have created the tinderbox and the conditions for this to happen.
48:06And they've done it because they won't even acknowledge what this is. Even when Macron went on state television, he tried to talk about this in terms of the suffering that these people must have. When you look at these pictures, these are not people that are suffering. These are people that are uh enacting chaos and violence and terrorism, domestic terrorism.
48:27And I think you need to respond to these people with an incredibly heavy hand. And then you need to fix the much broader problem. And as you said, Jason, I think what's happening now is that France is going to be in an incredibly difficult economic position. We've already talked about this before that the that France is is critical country that's going to set the tone for the rest of continental Europe in terms of how it finances its long-term debts.
48:52It's already proposed 50 billion euros of austerity. That's going to have to go up. I don't understand how in an austerity scheme you actually invest in things like education in a way that would appease these people if that were the true thing that they were rioting and protesting about. The government is in a no-win situation.
49:09I think they are going to lose the upcoming presidential elections. And I think you're going to see a very complicated reset of the French bureaucracy and the French economy. And I think this is the this is the harbinger of of a lot of change to come because the average French citizen should not tolerate what's happening in their country right now.
49:33>> Friedberg, what's your take here when there might have been completely valid peaceful protests. High school students protesting is a beautiful thing. They they they have some gripe. They created a lot of the democratic system that we actually built America off of. They they were great pioneers in democracy and protest.
49:54Completely valid form of protest, peaceful, taking to the streets, and then it tips over into something that's obviously at a minimum just incredible criminal uh and potentially, you know, in Shamas' interpretation, you know, terroristic. And the definition of terrorism, to terrorize people for your political goals, yeah, seems like it fits the definition.
50:16So, for you, what do you think this represents? Is this a harbinger of more to come and something we might see flare up here in the United States again? Remember, we had uh the BLM riots, we had the January 6th riots. We've had our own uh series of riots here, and they had a very similar pattern, you know, people who felt politically like maybe or socially they weren't being represented properly, and then in some cases it tips over to just criminal looting and incredible violence.
Government Spending and Socialism
50:47What's your take here, Freeberg? >> I think it's a little conflating to add some of that other stuff to the mix here. >> How so? >> I think those have very kind of acute political or social political events tied to them. This one seems to be kind of much more broad-based. So, if you watch some of the interviews that were done on the street, there's a very wide range of kind of complaints if you listen to the folks that are rioting.
51:15Everything from schools to free Palestine, to the government's not doing enough for us with healthcare, with support, with jobs, we're underemployed. There's just so much discontent with the objective being to get the government to do more for the people. There's a lot of immigration that happened, and so all these immigrants that come in, they expect the government to provide to them.
51:38The The promise was that the government would provide to them. And over time, the government providing things to the people, as we've talked about countless times, is never ever ever ever ever a sustainable answer. Decentralized government doesn't have accountability. There is no progress. There is no possibility for economic growth.
51:59There is no possibility for creating the right incentive structure. So, the more the government tries to provide to the people, the more the people are let down. We've seen this in the United States, I would argue, with the three things that the government is trying to provide here, which is healthcare, housing, and education.
52:16And the more the government spends to try and provide more of those things, the worse those things get and the more unattainable they become. And the same has happened in France. So, take a look at this chart. This chart is a measure of public spending as a percent of GDP. RAND Group Research published it.
52:34And you can see the comparison of France's public spending as a percent of GDP to the peak public spending as a percent of GDP of major communist nations. Soviet Union during 1989. >> chart for you to look >> Communist Romania, Venezuela under Chavez, and then communist China. >> That's unbelievable.
52:55So, do you think France is a communist state? >> Well, this is This is like it. >> Well, it's certainly been a socialist state, right? Is it working? >> No, well, that's [laughter] that's my point. And I think this is such a a present lesson for the West to look at. We all think that there's some political problem with Macron or whoever it was.
53:14The more the government spends, the worse the conditions get for its people, not the opposite. And then the people riot and revolt and say that the government's not spending enough and the government needs to be doing more. Now, take a guess. Pull that chart back up. Take a guess where the US is today.
53:29>> What percentage of our GDP? >> 20 20% >> Yeah, I was going to I was going to say 25. >> Yeah. >> Federal government spending is 7.4 trillion. State and local government spending is 4.6. You add those two together, it's $12 trillion out of a $33 trillion GDP. US public spending is roughly 36% of GDP.
53:50>> Okay, we're right there. >> France today is um the same as the US. It's about 120% debt to GDP. France today is operating its national government spending deficit is 5.4% of GDP. The US is actually 6.2% of GDP. France is I think it's probably the first to go because they're only growing their economy at half a percent while the US is growing, you know, at 2.3%.
54:14So, we're still kind of hanging on because we have some degree of economic growth that's allowing us to kind of hold things together. But, I would argue that we are facing the same sort of fiscal cliff which leads to this extraordinary social unrest as France. All the economic measures are aligned or at the same rate, we're at the same set of problems, and we're starting to see the cracks in the system.
54:38I think that France is a bellwether for the West. You can load in all the immigration stuff with it because I do think that that's a big part of it where you open the border to let people in to try and grow the economy, you promise them things, they actually add fuel to the fire, things get worse, and it becomes a real problem.
54:55Fundamentally, socialism destroys progress. It limits everyone's upside by giving everyone a floor. And the limiting of the upside is what leads to these sorts of problems where no one feels like they can progress. And as soon as the quality collapse says because you've taken out all the incentives in the system, everyone starts to feel incredible discontent.
55:15France, I think, is one of the first to go, but if we don't right the ship in all these other countries in the West, I think we might find ourselves falling down um the same hole. And I'm very concerned about that. I think we need to observe this for what it is and be really thoughtful about it with our politics becoming, unfortunately, a little more disturbed uh going into this midterm and over the next two years, I worry quite a bit.
55:39>> What do you specifically think should be done? >> Cut spending, cut deficit to GDP, cut programs >> Okay, but hold on. Let me Let me just push back. Yeah. Let me just push back for 1 second. So, you know, what do we think is at the root cause of this? Let's just focus on the young people. Like the young people, they're not optimistic about the future.
Fixing Education Housing Healthcare
55:58>> Yep. >> Right? They have a lot of difficulties financially, career-oriented, as well as social. I mean, like I think their social progression has been stalled relative to other generations. You have these things that are like these swords of Damocles hanging over them, like pensions. I'm sure that they don't understand it completely, but you know, if they took a second to realize that at some point these pension things come due for their parents and their grandparents, that's going to be on them.
56:28So, how do we set it right for them? What do we do? >> I think four things are the primary cause of this that could be directly addressed. It's education, housing, healthcare, and then the retirement system. Every one of them, there's probably a multi-year solution. Education, I think we need to wind down the federal student loan program.
56:49I've said this many times, and I think in the process we've got to eliminate a lot of the student debt that's outstanding. I think it's a necessity. >> So, cancel the underwriting at the federal level, but also cancel the existing debt of the folks that have it. >> There's a complicated mechanism that I think's needed for the deletion of student debt, perhaps in bankruptcy or something like that, to go back on that that law that that made it impossible.
57:11>> I just on this one just to add to this, I'm extremely sympathetic to canceling student debt. I don't think it should be I think it should have always been dischargeable through bankruptcy, but I I'm quite I'm quite supportive of this idea. >> has it has to happen with deleting the federal student loan program.
57:24What will happen then is you'll right-size all the institutions and their tuition costs, because then all the institutions will start to fit to the market. It'll take about 10 years. It won't happen overnight. So, we have to have a firm commitment to seeing it happen over the next decade. In housing, we've got to do something similar with housing loans that keep inflating the cost of homes and deal with the fact that a good chunk of the middle class >> but go go through your list.
57:44Go through your list cuz I have a I have I have one critical question at the end of your list cuz your list makes sense on the surface. >> Then I think that we need to make defined benefit retirement programs, including the Social Security Trust Fund, illegal. I think all defined benefit programs need to be transitioned to defined contribution programs over, call it a decade period.
58:05In the process, everyone gets, like whatever you're owed in Social Security gets deposited in effectively an IRA or a Trump account or whatever they're called for you today. And all of Social Security is deleted, and now everyone owns equity. >> Superannuation funds, like we talked about in Australia.
58:21We just transfer to that. What would the pushback on that be, Freeberg? >> Because people lose a guaranteed income. But rather than do it one time, what you would do is you would transition 10% of all your Social Security amount owed to you per year for the next 10 years. So, you do a 10-year transition where everyone gets their money.
58:37>> out the buying into the market. >> Yeah, great. >> Yeah, and then people can choose a 40/60 plan or an 80% bonds plan or whatever plan they want depending on their age. >> Do health care and kind of do that. >> Health care is the hardest, but I think housing health care is way more complicated, but I think it's fundamentally got to get pushed to corporations that employ people where they've got to go into a market for insurance, and that forces the market for insurance to force prices and
58:59services down. But there's two things that get in the way. >> housing >> Wait, and yeah, so So, HIPAA and housing regulations are the two things that get in the way of price coming down in health care and housing. So, you got to address those, which are much more complicated because in the case of housing, it's it's state and local.
59:15>> So, let me just ask a question. So, when you look at France and Italy and you look at these riots, I think it's important to observe that they have, theoretically, two of the four roughly solved, which is they give you free education and free health care. >> Okay? Do you know how cheap it is to go to college, Chamath, in in France?
59:35>> I don't. I don't. >> 300 euros a year and costs the state like 12,000. So, they are in college and graduate school. When I was in Paris this summer, I had somebody explaining to me the resentment here. They consider it like I'm trying to think of the equivalent we might consider here in terms of entitlements.
59:50They believe they should be able to go to college and graduate school forever. >> I'm asking you, Jason, I'm asking I'm asking both of you is you bring up these four issues. One is a vagary of the United States, meaning the student debt issue is purely an anomalous thing that exists in the US that does not exist in some of those Western countries where we're seeing riots.
1:00:12The second thing that we brought up, which is health care, is roughly free over there. The third thing we brought up, which is education, is roughly free over there. The fourth thing we brought up, which is, you know, defined benefit versus defined contribution, again, the the system there is a problem because it's the same system that we have effectively and you have these pension overhangs.
1:00:29But, I guess what I'm saying is there two of the four are roughly solved. One of the four doesn't exist. And yet, they're still rioting. So, it's not solved. >> No, no, no. I can I can actually Hold on. I can answer this, I think. You know, the the original riots, when it was students, were banal, you know, maybe throwing a couple of bottles here kind of riots.
1:00:50The students weren't looting. The looting occurred by uh illegal immigrants uh from Northern Africa and uh a lot of resentment from Islamic Muslim immigrants in France who have not been allowed to integrate into society and in some cases are second and third generation Parisians who have either not integrated into society or part of this is also on the native French who have not integrated into society.
1:01:18If those people weren't there, Chamath, they weren't there, we wouldn't be having this conversation. We would just be talking about run-of-the-mill uh you know, people who just want a slightly better classroom, slightly better teacher ratio to students. This is because of the uh unmitigated disaster of immigration to Italy, to Spain, and to France.
1:01:38And people have a hard time just saying it like it is, but that's what it is. And that's why, you know, here I think we stopped it by closing the southern border. Uh and there they have a different type of immigration. It's it's people who don't want to integrate. If you take the average Mexican who comes to America, they're more than happy to learn English, they're more than happy to integrate into American society and our customs.
1:02:01It is not the same in the UK, Italy, and obviously France, as we've seen. It's an immigration issue. >> But Chamath, I don't I don't know if it's actually solved, because I think the time to get a doctor's appointment is weeks, the quality of the education is poor, you're you're sitting in a classroom with 60 kids.
1:02:17That's what the kids are complaining about. There's obviously a lot of other kind of motivations in those riots that are happening, but there's a fundamental feeling of oppression that I think weighs heavily on this entire population. And the oppression is there's a higher caste that is doing better than we are, and it is not fair because we were promised that we would do well.
1:02:39Pull up this video, Nick, that I sent. I think this is a view of some of the anger. Watch this. >> The Chinese have become too rich in France. >> Too rich? And that's not fair? >> Well, I think it's not fair. They're now in the category of people with nice clothes and big cars. >> So, this was a response interview to why the rioters were going after Chinese-owned stores and destroying them in Paris.
1:03:09So, they're specifically targeting Chinese-owned stores, breaking the stores, burning them down, because they think that these immigrants have become too successful in France and they don't deserve that success. And I think that that is what this weight of socialism, this weight of a giant government does to everyone, which is if anyone is seen to be ahead of the suffering that we are all dealing with, they must be the problem.
1:03:33They are bad. They are the issue. And I think that there's this kind of fundamental rooting on the free Palestine movement, on, you know, the the patriarchy. It's all rooted in the same sort of principle, which is they don't realize that the reason that they're feeling this way is because the government is already trying to do too much and they're not able to do it well because the government is the worst place to provide services to the population.
1:03:58>> Well, and in fact >> see they see any degree of success and it's sort of like what we're seeing with the populist movement in the US, hating tech, hating billionaires, and you know, it's it's very common across the West and it's going to continue to grow, unfortunately. >> Well, and reports where they were specifically targeting Chinese and Jewish businesses and specifically avoiding, this is when it moved into the full-scale riots and terrorism.
1:04:17And avoiding Muslim businesses. >> That's right. >> And I I you know, I I I got to say like thank God for the second amendment. I don't think we would have these type of riots here on a sustained basis. If you remember the LA riots and there was a there's a term called rooftop Koreans. And if you remember, the Koreans just literally went on top of their businesses and defended in uh K-Town in in in LA, they defended their businesses.
1:04:42And when you see these poor business owners not being able to defend their businesses and they're beaten >> Yeah. >> and you just think, my God, that poor small business owner, they put their entire lives into this business. You know it's not easy to run a small business. And then they're being beaten and watching their lives work burn down, that's unacceptable.
1:04:58I I honestly think you got to rethink the first the the second amendment as well. And I know I'll get massive blowback, but you don't you don't see this in Texas and LA. >> Let Let give you how I try to think about what the end game of this looks like. >> Yeah. I mean, basically what you guys are saying is independent of who is in charge, it could be left, it could be right, and independent of what the facts are, you basically showed a chart here that shows that France spends more than
1:05:24every other communist government in the history of the world. These things are a disaster. And there's part of it here where people probably think that this isn't true, and they want to see even more state intervention to make things better. They themselves know that they can't solve the problem, and so the only person to turn to is the government.
1:05:43Because it's not like you're going to turn to the person on your left or your right. >> That's right. >> Okay. So >> you go to the government, but at some point they're going to realize that chart is true. And they're going to see that enough times on their television or on Tik Tok and X and Facebook and Instagram, where they're going to be like, wait a minute, I had no idea we're spending twice as much as communist China.
1:06:04I thought the whole point was that we should be spending more like communist China or like communist Russia because this socialism thing, you know, is the better version of communism. It's not going to work. So then who can really fix this? That's sort of where I go to, because independent of what you think is right, who can fix this?
1:06:24>> You need neo-Nazis. >> and I No, I think that you go I go back to two things. One which is in our control, and one that is in the control of the large pools of money and, you know, what I kind of euphemistically call these bond vigilantes. The bond vigilantes can break the back of the French government.
1:06:45And they can do that economically, and they can do that by essentially making their debt unfinanceable. The knock-on effect of that decision would be where you bring long rates so far up that they can't finance their debt. And it essentially causes an economic reset inside of France. And in that, you have to have a grand bargain where you can try to reset these things.
1:07:09The problem with that is that every time that it's happened in the past, somebody accrues more power and somebody thinks about their own ability to then have influence over the next end number of years after that reset. And it's never about resetting in the right way. The right way would cause you to look at the pension system to your guys' point, you know, enforce a bunch of rules around, you know, the student to teacher ratios in classrooms, enforce a bunch of rules around wait times at hospitals,
1:07:38enforce a bunch of rules around, you know, how fast and or how slow you can get building permits and what you can see in rent adjusted inflation, yada yada. You could do all of these things if you had the political will. Unfortunately, that's not how it's going to go down. It's going to go down by who is in power, who wants to basically pin the blame on somebody else and then have that power for the next five or 10 years coming out of a reset.
1:07:57Because in the middle of a reset, what happens is you just give away all your rights. So, that's not the solution. So, then what's the solution? Then we're only left with, okay, how do we all solve this? And you're back to the whole like is there like a panacea? And the only panacea that nobody wants to believe is, you know, we say it cuz we believe it, like AI abundance and all of this beautiful stuff.
1:08:22It just sounds like meshugas. Like it's like, I don't know, if I were if I was anybody in France, I'd be like, AI? What are you talking about? A bunch of oligarchs from Silicon Valley? No, thank you. So, it's almost this intractable problem. It's like the irresistible force meeting the immovable object.
1:08:36And I am completely at a loss to simulate in my brain an outcome here. I don't see a reasonable end game. And so, I'm completely confused and completely without Yeah, I mean, look, it depends how far the collapse goes. You could have this sort of social collapse that you see in some countries that involve rioting and murder and all these sorts of things or you end up having what is more of like an economic collapse which is sort of like Argentina and Brazil and others have gone through Greece more recently
1:09:16where the ability to service the debt because the government got too big forces this kind of restructuring of the economy and yes there are still massive protests there is a still an incredible loss of net worth there is an incredible inflation effect effectively that wipes out asset values for people and you end up having kind of a resetting economic resetting without the great social resetting.
1:09:38So you know which path does he choose? I think we have to do something. I don't think we can run a higher deficit to GDP than France in the United States with the same debt to GDP as France and only modestly higher GDP growth. I think we are fundamentally going to need to have some degree of reset in the United States.
1:09:58The question is do we want it to be a massive social reset or do the left and the right want to put on their hard caps and say okay we got to go in the mines and do the work and figure out how to cut this from seven and a half a year to four a year and do it in a way that doesn't destroy the economy.
1:10:11And I think that there's a couple of solutions that will allow that to happen like you know you basically can deflate parts of the economy like the education system the higher education system by taking away federal student loans. You can have a hit to housing which will drop the net worth of the middle class by 10 to 20% by taking the federal home loan system and reducing the underwriting that's happening reduce the volume that's pushing through because we've used it largely to keep prices propped up high
1:10:38to keep homes net worth high so that the middle class remains highly solvent and feel wealthy. The problem is it's now inaccessible to the young people so they can't buy a home. So we're now sort of hitting the head here something's got to give. So if you want to have the social unrest you don't move on that.
1:10:52But if you want to allow them to feel like they have access you're going to have to take a hit. Middle class, upper class, wealthy, etc. in the US are going to have to take a hit on asset value and transfer it more kind of carefully to the emerging folks. And then you've got to fix this pension system which is either overloaded or underloaded.
1:11:10In both cases, it's really bad. And this is why when ERISA happened, all of the private companies in the United States got rid of a defined benefit programs. The only defined benefit programs in the United States that still exist are inside of governments because unionized government employees said we want to keep defined benefits.
1:11:27And if they'd moved to defined contribution, this is what's so sad about it. If they had moved to defined contribution programs, including social security, they would have all had so much more money. Everyone would have been wealthier. >> even have to wonder about this. You can literally look at what's happened to Australia and how happy people are that they're forced to be in the market.
1:11:47>> And Norway, yeah. >> And Norway. They're just like, if you're if you're forced to do that. And then we had this incredible thing this week which dovetails with this, which is Elon said he's going to give every American child, which I think is defined as under 18, a share of SpaceX worth 150, 160, 170 dollars it's been trading at, which is a 10 billion dollar gift, which I believe will be amongst the largest gifts in the history of charity ever done.
Immigration and Assimilation Debate
1:12:11And he said he's just getting started with that. There's nothing that says this is not going to become you know, a bit of a contagion amongst the affluent to give a large portion of their wealth to or even a small portion of their overall wealth, but giving it directly to kids who can't touch it for 18 years.
1:12:30And if we made it part of their superannuation fund, maybe we could have invest America up to 18 years old for college, and then we could have an invest America for your retirement. I mean, it would actually if you bifurcated that and you gave one share to each, that could be even more accretive, right?
1:12:47>> Jason, what did you think about your friend Kara Swisher's >> No longer friends. Kara and I have not been friends for a long time. I I think she is one of the >> Can you just describe for the audience what her criticism was of Elon and your reaction to it? >> she had multiple videos. One of them is it's only one share and that they should just give money directly to people.
1:13:08And you know, it's obviously what the reason that's incredibly stupid is you should give any possible gift that people are willing to give and forcing people to hold on to it makes them part of capitalism. And Kara Swisher makes $10 million a year from her podcast. She talks about it all the time. She is of the 0.1 or 0.01% she should give half of her podcasting revenue if she's so virtuous to invest America accounts.
1:13:33And she's also saying they should be putting Elon in jail and that the Democrats are going to do that if they win. So there's like kind of a a doubling there, but she's um you know, she's a Karen and she's a hypocrite. >> Yeah. Can I say something about this? Nick, can you pull up that image of that woman whose store was destroyed in France who's a well-known activist?
1:13:52You guys see this this this image >> I did see this and I don't know that it's true or not, but the story here is >> Yeah, the story is that this woman is a well-known activist in France who for a long time was very vocal about opening the borders and letting the immigrants come in and taking care of the immigrants.
1:14:09And she was angry and upset and yelling at people in the street while they were destroying her store saying, "Do you know who I am? I am an activist who advocated for you all." And they didn't give a They went in and destroyed her store and the look on her face which was like, "What the hell happened?"
1:14:24is meant to be this moment that sort of captures the zeitgeist of what some people call suicidal empathy, but I think it's much more about being call it an armchair do-gooder. An armchair do-gooder is someone who kind of sits at home in a nice home in the suburbs or wherever they live and they say let all the people in, take care of all the people.
1:14:53But as soon as the people show up to their front step and says, "Can I come and stay in your house?" the answer is no, of course not. >> Yeah. >> Someone else has to deal with it. Someone else has to hold you in their home. Someone else has to house you. Someone else has to feed you. Someone else has to give you a job because I can't house you.
1:15:10I can't feed you. I can't give you a job. And I think that this is what has become inherent throughout the West, which is the armchair do-gooder that says we should do all these good things. But when it comes home to roost, when the cost of doing those good things comes home to roost they're shocked.
1:15:29>> Yeah. >> And they're all in the face and they're like, "Holy shit." And this This, by the way, we see it in the US. >> We had a term for it, by the way. >> great videos on Twitter, by the way, where these people go around They go to suburban homes and they're like, "Hey, did you vote for so so-and-so bill to have unrestricted immigration?"
1:15:43They say, "Yes." They're like, "Okay, here's 15 guys that want to come live in your house." She's And the people are like, "No, I I They can't live in my house. What do you What do you mean?" >> This was called In another era, we called this limousine liberals and it was manifested when they used which was quite offensive but quite effective when they used immigrants and bust them to Martha's Vineyard or other places and were like, "Here's your immigrants.
1:16:06You said you wanted them." >> What Rob Henderson called luxury beliefs. >> You know, luxury beliefs, limousine liberals. You know, if you were to look at the problems in France, they're not completely intractable. A lot of the complaints are, I think, you know, wait times at a hospital. Well, you have free health care.
1:16:21Oh, my, you know, the student ratio. Well, you're only paying 300 euros a year for your college. If you want to go from 60 to to one down to 30 to one, okay, you're going to need to charge you 2,000 euros a year. >> you don't. No, you don't. You don't need to charge them more. This is the point. The point is when the bureaucracy inflates and the quality of the service goes down.
1:16:43An intelligent person would look at that inflated bureaucracy and say, this is inversely correlated to what I expected. So, really what should happen is people have the intelligence to say, hold on a second, I'm now spending 57 cents of every gross productive dollar on a government that now has increased my wait times and decreased the student teacher ratio.
1:17:05>> there's something not going to be efficient. So, not a sufficient as >> Exactly right. That's right. >> But, if you the second part of what I was going to say here is, you know, there's austerity measures which have been happening in Europe for a long time. But, if you have an immigration rate where you're importing 1.5% of your population a year and your GDP is not growing, that might be a signal to you that maybe you have to change gears.
1:17:26And if the people who you're immigrating into the country are not productive or not productive yet, maybe their kids will be productive or their kids' kids will be productive, but right now they're a drain on society, you can only accept so many people and then there's another nuance point under that, which is if you cannot you cannot accept people who do not make a commitment to assimilate into that country's culture.
1:17:49Period. Full stop. You can have a very small number of people, whether it's Japan, the United States, or France, you can only have so many people join the country who don't speak the native language because that becomes an incredible burden. Now, you have to create an entire second education system, health care system where people speak Spanish, where people speak whatever, you know, French, German, and whatever it happens to be.
1:18:07And and that's what's taxing these >> I think it's one in 19 are from northern Africa and like one in nine is an immigrant. And they have un mitigated immigration in Europe. That's the the other piece to this problem. If they didn't have that for the past 20 years and they weren't adding so many low-value immigrants as opposed to high-value immigrants, high-value being people with graduate degrees who are investing in companies versus people who are taking bottom rung jobs, and you
1:18:35started looking at it against the GDP of the country, against the unemployment, against where does this immigrant fit in what jobs we need? So, do we need this type of worker? Construction worker? Yes, okay, we should add more of those cuz we have a deficit, but they're not doing it intelligently, and that speaks to this woman running her small shop.
1:18:52She wants to allow all these people to come there, but she's not looking at the the balance sheet, and the balance sheet doesn't support it. I'll simplify it down. I think it's an economic issue, yeah. >> Just to restate what you said slightly differently, if you're providing social services to an immigrant population, then that's not necessarily a productive immigrant population in terms of being able to contribute to growing the economy and supporting >> Yes.
1:19:19>> civil society. Social services that are requisite for an immigrant population should indicate to you that that's probably not the immigrant population you want to bring in. >> This has nothing to do >> with the countries or the character of the people >> of skin, >> It's simply a statement that if you're paying for social services to support an immigrant population, something's wrong, and it's the wrong population that you want.
1:19:43But, if a population of immigrants come in and they're productive, meaning they can get jobs and they can work, and they can support themselves, that means they're adding something positive to the economy, to the civil society, and that is the sort of selection criteria that needs to take place. So, that's a simple framework for determining whether or not you should do this, and an easy way to solve it is get rid of social services for immigrants.
1:20:05As soon as you get rid of social services for immigrants, then you self-select into the right population that's going to come in. The second thing is Jason, just to put a point on this, it's not about assimilating to society, it's about sharing the values of what makes the United States the United States.
1:20:21>> Well, that's what I mean. >> The value of self-sufficiency, I don't care about your religious beliefs, I don't care about your movie interests, I don't care about your first language, I don't care about your sports interests. The the multiculturalism of the United States actually adds an incredible amount of value.
1:20:35But the values of what do we actually care about? What are the principles that we all share as a civil society of the United States or a civil society of France is a screening criteria that seems to have been thrown out the window as we've allowed the immigrant flocks to kind of take over the West. Yeah.
1:20:51>> freedom of speech? Do you believe in the Second Amendment? Do you believe in the core benefits of America? You pull yourself up by your >> women's rights? Do you believe that women are equal to men? >> Yeah. >> As a simple one, right? Do you believe that you should work for your money as opposed to take it from the government?
1:21:05Do you believe in your individual rights? Do you believe in the legal >> in the legal system versus your church's legal system? >> Is your church paramount to the government and do you in in the laws of the state? And do you believe that other people have rights that you don't get to trample on? Those are the sorts of things that that are in many cases counter to the cultural, religious, and other traditional beliefs of certain populations that end up causing the damage in the West and I think that it's
1:21:31been kind of completely lost in the process. >> You know what I thought when I heard that kid talking about targeting these Chinese people? It's like weirdly reminiscent of like a a more bottoms-up maybe poorly disorganized but a bottoms-up version of Kristallnacht where >> Yes. >> you had obviously the looting of Jewish businesses and synagogues in 1938.
1:21:56>> Cuz they were doing better. >> Which were state-sponsored and you know, they had like some idiotic pretext but ultimately it was because they were jealous of the Jews. And now here you see folks that are essentially like burning and pillaging businesses and at least some narrow percentage of them were doing it effectively to target a cohort of people that they are jealous of and they are jealous of exactly what you said because I don't think the Chinese you know, emigrate to a country and have
1:22:22some of these long-tail views. They're like, "Get me in the game, coach. Tap me in. I'm ready to go. >> They're entrepreneurs and they want to do better. >> They're industrial. They're super hard working. >> Exactly. And so the the contrast is quite stark where you see one immigrant essentially saying "A s'entendre pas juste" is basically his way of saying "It's not fair."
1:22:39Which is like kind of like a petulant child. >> Yeah. >> You know, so on the one hand you have petulant children on the other hand you have hard working immigrants. They're both immigrants. It's the craziest dichotomy. I mean, I just seeing it in real life >> Immigrant on immigrant violence because one is working harder, has a better plan, is applying themself and probably working seven seven days a week, 12 hours a day at that business to make it successful.
1:23:04>> Her her specific story is even more >> I was talking about the Chinese one. Yeah. Not the >> Yeah, the Chinese woman. Cuz they went and they actually told her story and she you know, she had worked there you know, she had worked essentially in restaurants for 34 years to earn the money to open that restaurant.
1:23:18>> Yeah. I grew up in the restaurant business. Let me tell you, it's the hardest thing on a family is to run a business because when somebody doesn't show up for work or you don't have the money, you all just have to work. My family, we all worked at the restaurant. My mom My mom made the desserts at our restaurant because she wanted to save money.
1:23:37And she was a nurse, not a pastry chef. Yeah. And you know, and and my brothers and I, we worked at the restaurant since we were six or seven years old. We set the tables. We polished the silverware. We were working in the kitchen at 10 years old and we were still living week to week. And then you come burn the business down.
1:23:55You come burn my dad's business down? We're going to unload. My dad was packed was packing, you know? Like he was strapped. And you you do this in America? You do this in Texas? You're going to get shot. And I I when I saw those poor Chinese people on the balcony, you know, and their lives are at risk and their whole livelihood, I just like man, I wish these people had guns.
1:24:16I wish these people had guns to could defend their private property. It is just crazy that they could just be run over like this. And they were going to get killed. There's absolutely a non-zero chance that that mob when mobs get into that heightened state, they will murder people. They will beat them to death.
1:24:34And this poor other shop owner was getting kicked and beaten just trying to defend his little tiny business, little tiny store. If you've ever been to Paris, little tiny stores, beautiful bespoke stores trying to make a living in something they're passionate about. It's just absolutely heartbreaking.
1:24:47And you know, it's it's >> And I'll just say this, the bond vigilantes need to show up here and draw a hard line in the sand. I think they need to break the back of the French government. >> Okay, there it is. There's the mandate. >> And you need to do it severely and you need to do it promptly. >> 6-7% would do what?
1:25:026-7% on these bonds? >> I think you need to take France to like 8% and just break them. >> Yeah. And then all of a sudden austerity measures, immigration, all this stuff is going to be taken a lot seriously. >> At least it'll all be on the table and they'll have to sort through. They will have to sort out what they're willing to give up.
1:25:18But right now, if you can skate through this moment, then these things continue to fester and it is a tinderbox that at some point, again, we know, again, just to use the analogy of Kristallnacht, we know what the trail of breadcrumbs can lead to in terms of fomenting the societal rage. You cannot allow that to happen.
1:25:40And so, the government has a responsibility now to nip this in the bud in a structural way. And I think the people have a responsibility to understand the numeric reality in which they are living. They are living in a state that is spending more than any communist utopia that they hoped to achieve. Yet the outcomes are broken, which means the system is broken and you need to reset that.
1:26:06And the government will not reset it on its own and so the bond vigilantes will have to do it for them. This kind of stuff, if it continues to compound, is extremely extremely dangerous. >> Yeah, super dangerous. And but we had our little flashes here. So it's it's we're definitely not immune to it. We're we're a larger group of 50 states.
1:26:26So and they're they're at by the way, I think France is almost at 56% is their top tax rate. Maybe it's 55, 56. The only place that's higher I think in Europe is Denmark, which is like a 60% top tax rate. >> It doesn't matter. Take it to 90%. Nothing will get better, folks. Do whatever you want. >> If the government provides a service, there's going to be no innovation and there's going to be no and there's going to be no efficiency.
1:26:52It's just it is what it is. >> an individual human incentive to do well, nothing gets better. >> All right, capitalism at its core. And you know, the thing is Macron was trying to get capitalism going there as well. It was like a big part of his >> click on this image here or this link. >> What are we looking at here?
US Versus Europe Tax Debate
1:27:11>> I mean, this is sort of another indicator of why GDP growth is staggered. But this is tax revenue as a percentage of GDP. So France also tops the list on tax revenue as a percentage of GDP at 46%. So every dollar of GDP generated by the country is recollected as government tax revenue. >> Obviously two two drivers here.
1:27:35High tax rates or low GDP, high GDP and >> No, it's just the tax cuz the tax rate's always a function of income. So >> point is if you put this in the other one together, you have a confiscatory government that represents the overwhelming amount of the economy where you have incredibly deleterious outcomes.
1:27:52That is the connect the dots and you can't hide. >> This is the question for the United States is which direction do you want to go? Do you want to go up the chart or down the chart on both charts that we looked at? Which way do you want to go? Because the quality of life goes down as you move up the chart for all people and the ability to progress gets destroyed as you move up the chart.
1:28:11And as you move down the chart, each individual's ability to progress in life improves. You have to do it on your own, you have to have more agency, but your capacity to improve your life improves. As tax revenue goes down as a percentage of GDP and as government spending as a percentage of GDP goes down, your opportunity as an individual, the basis of the foundation of this great country, improves.
1:28:36And that is really the North Star that we should all be talking about is how do we get back there? How do we continue to move back in that direction in the chart? And there's very practical things. There's very simple things to do. Like we talked about in the >> Hold on. Hold the chart up again and I'll I'll just give you a little bit of a challenge here.
1:28:50I think most people in America, especially young people, don't believe what you're saying. If you look at the US here, uh ahead of the US, Australia, Argentina, South Korea, Japan, Brazil, Canada, UK, Germany, Italy, France, most people want to live in those countries above us. Most Americans who are complaining now, certainly want to live in one of those countries and have health care and want to have cheaper and affordable college.
1:29:15Now housing is still screwed >> I disagree. >> Oh, you disagree that most Americans don't want universal health care? >> No, no, no. Most Americans don't want to live in a country above us on this list. Absolutely not. >> Well, they certainly don't want to go below us to South Africa, Russia, Turkey, China, Mexico, India, Indonesia, or the rest of them.
1:29:33>> I've been to I've been to every single country on this list above us. I've spent a lot of time there. I've been a citizen of one of them and I would not choose to be in any country above them. >> Yeah. >> Jason, do you know what youth unemployment is in Brazil? >> Uh Brazil, I do not know. I'm going to guess 20%.
1:29:49>> Youth unemployment in Brazil is around 15, 16%. >> Yeah, that's that's right in the street. >> And and it's and it's rising. And it's rising. It's almost at 20%. US is still fortunately below 10%. >> Yeah, 8 9% now. >> And the same is true in many of these other countries. Like there just isn't a growing economy that can support a youthful employment system in many of these countries.
1:30:10So, I don't know if I would agree with your statement most people want to go live in those other countries because if they wanted to, they could use a credit card, buy a plane ticket, and go do that. >> I think most people want what those countries deliver. Most people >> They they want what those what those countries say they would be willing to pay more tax for it.
1:30:27>> Or they'd certainly be willing for us to pay more tax to achieve it. >> It's not in full scope. The full scope of what those countries deliver is not just an acute no-fee trip to the doctor's office. It's that people want to have the ability to do that and also have a job and also have the ability to progress.
1:30:44And to have all of these things, fundamentally, the best system is a smaller government system because the more the government grows, the less of that pie of things you will actually get. It gets worse and worse. >> I'm in line with your argument. I'm just saying I'm just saying that chart does not make a great That chart is not a good piece of evidence in this argument.
1:31:03I think most people are not entrepreneurial and most people want to pay more taxes. No, but I mean that I think more freedoms, less tax is what we all want. I think a large percentage of America wants us to pay more taxes and get more services. And they believe those countries right above us want more and will give them more services.
1:31:22Therefore, they don't mind waiting an extra couple of hours or or months to get health care if they get health care cuz they currently get no health care or they get bankrupted by health care. That that's how dysfunctional our health care system is in the United States. So, yeah, I think most Americans would disagree with us looking at that chart.
1:31:39That's just my belief. But we we're we're here to sharp iron sharp iron sharpens iron. I think we have to keep working on this value prop. And I think this is where I don't know if you guys saw my tweet this week about how Trump President Trump could save the second term. And a big part of it I think is he has to talk about housing as much as he's talking about data centers.
Federal Minimum Wage Debate
1:31:59I think raising the minimum wage is a nice gesture since it only impacts 10 15 million people, the federal minimum wage in this country. And there are things we can do to make it apparent to the people in the bottom half of the country that we care about them and that the president is signing executive orders for them as well as for us.
1:32:19And us I mean the tech industry and and large businesses. And I think that's that's the big problem of why the president is just so lowly his his ratings are so low, his approval so low and perhaps we'll see on November 3rd what happens with this election. That's a big part of the the discontent right now is people are frustrated that they're not even President Trump doesn't even talk about them anymore.
1:32:41He doesn't talk about minimum wage, doesn't talk about housing, doesn't talk about inflation. He just says it's all going to be fine. And we're living in the golden age. But then he's more than willing to talk about our issues, data centers, crypto, etc. And the messaging in this country is really far off.
1:32:57It's really far off. And until we get somebody in that office who is willing to talk about the bottom half of the country and 50/50, you know, hey, we're going to talk about big tech, we're going to talk about uh lowering taxes, but we're also going to talk about raising uh the minimum wage. We're going to talk about a a plan to build more affordable housing as opposed to just more data centers.
1:33:17That's the disconnect >> Well, hold on. Hold on. Hold on. Hold on. >> You can break it apart any way you like. >> If you actually read what he tweets, I think he connects the dots on all of these things. I think that he has acted in a way that one should when you realize that the AI buildout is the disproportionate percentage of all GDP.
1:33:41It is basically all of it. And it doesn't just pull through stock performance for seven companies. There's been a bunch of data now. It pulls through massively increased wages for middle class and skilled labor. And then he's been telling people that if you're going to build these data centers, do it in a way where you lower the electricity cost, do it fully behind the meter, invest in the local communities.
1:34:03That also has positive impact. So, you know, he's trying to make sure he lands the plane on the US economy. >> I agree he's doing that. >> Whether you agree with it or not, the US economy is entirely and completely levered to and correlated with the AI trade. >> Yeah. I I agree that he is doing a great job in that.
1:34:23Like better than any president I've ever seen in my lifetime in terms of getting the economy rocking. The public, the overwhelming number of Americans now do not agree with what you just said. They believe that he is not does not care about the issues he care about. That's why he's at his historic low in terms of approval rating.
1:34:41So, there is a messaging problem here. So, I I'm not saying I should be the press secretary here, but somebody's got to be a press secretary here based on communications. First of all, I think sucks out of this administration. >> Let me say something about the press secretary. I think just for one second, just for a small deviation.
1:35:02We have not spent enough time actually acknowledging what more people should acknowledge more often, which is Karoline Leavitt is an absolute goat. She set the bar so high. She's so talented. She's for being so young, it's unbelievably impressive. It's almost an impossible job to follow her. Let me just say that because I don't think people say that enough.
1:35:21Second, I will actually go out on a limb and say this. I think that you are an incredibly dogged bulldog. I think that if you got to know the president, you would be besties with him. I I really legitimately think you would, and I think you would be an incredible press secretary. Now, the problem is the problem is that you have stupid ideas.
1:35:40And as long as and as long as you can avoid representing your stupid ideas. >> You think the minimum wage is a stupid idea? I don't think so. >> No, no, no. No, no, no. You you you It's a terrible idea. I agree with you. The federal minimum wage is not. Look at the studies. >> You are the epitome of an armchair do-gooder.
1:35:56Okay? And and if you could if you could quell that instinct and actually be you know, his vessel, you would be incredibly effective because you are dogged, you're great on your feet, you're super funny. Uh you'd be incredible. >> People are now People are now pitching me to do it. >> I don't think you'll be able to manifest this one, but you are you are incredible at >> I mean, we were number one the last 2 weeks in a row, so I would not underestimate my manifesting powers.
1:36:19I do think Free Bird, if you if you look at the studies, I I think you're dealing with old data and maybe a little bit of dogged libertarian principles, which I too shared. If you look at what's happened >> dogged libertarian principles >> No, I Listen, [laughter] I I'm I'm I I I share some of those libertarian ones where I'm like, the free market will work it out.
1:36:38It's only 15 million people in this country who make under uh $15 an hour and who are impacted by the federal minimum wage, which has not moved in decades. I If the president came out and just said, "Hey, we're going to increase the minimum wage by $1 federal minimum wage, which is basically doesn't count for half the states cuz half the states have their own minimum."
1:36:55And he just says, "It would just be like a good faith thing to do. Hey, we're going to do add a dollar a year for 7 years. We're going to get it to $15." What happens is all that money gets recirculated and it just creates more monetary velocity in the country. It all gets spent at the company. So, it's a tragedy of the commons.
1:37:12You know, one person doesn't want to pay this and another person doesn't. Look at what happened in Australia. Look at the Nordics. When they raised >> Jason Jason Listen, California passed Assembly Bill 1228 2024 and increased the minimum wage in California >> To $20. It was too too fast. I I I'm not advocating from 7 to 20.
1:37:31>> So, when they did that, we lost 18,000 fast food jobs in the state. And the reason is Just think about this. But just just But just think about this. The reason is The reason is that the fast food industry sells food to consumers. Consumers want cheap fast food. So, when you increase the labor rate against the market's demand, >> Yeah.
1:37:54>> then the consumer says, "I'm not paying $8 for a burger. I can't afford it. I could only afford $4." So, there's actually no one to pay the wages of those fast food workers. So, number one, the consumers lose because they've now lost their local fast food joint because they can't afford the new fast food.
1:38:09And number two is the employees who were voluntarily willingly working there for 18 bucks or 16 bucks or 12 bucks, whatever the number is, suddenly lost their job. >> Yeah, so let me >> many ways as you want to slice this, this is not a dogged libertarian principle. This is just a very common sense view on the world.
1:38:28>> yeah, >> Which is if if the buyers are there and the buyers are saying, "Hey, I'm willing to pay more." And the workers are willing to say, "I need to get paid more to work here." The market finds a happy medium. But, when the government intervenes, it blows up the market. It destroys the supply. It destroys the demand.
1:38:44And people lose jobs. And that's what we see time and again when the government intervenes in market dynamics. >> Here's where you're wrong. Number one, I never said go to $20 an hour. I said go at $1 per year for the next seven, which will get us to 15 in seven years, which would would put us out in 2032.
1:38:59So, you're comparing the most radical program, California's, which I don't agree with, to the my common sense one. Put that now going to the second point. It has added essentially 25 cents to each meal at those places when you do this. And it makes them get rid of the jobs that are going to be replaced anyway, like cashiers.
1:39:19But, we still have the same unemployment rate in these places. People went to other productive jobs when those jobs became automated. An argument you and I have made here many times, which is people go find work. So, you can't have it both ways, Mr. Freeberg. >> I still I disagree. >> people will find more productive work.
1:39:37People do find Those people who lost their jobs found better work in statistically here in California or in >> to be market prognosticator where you're trying to determine what is the right price for the market. And the more you do that, the more you are going to destroy the market. Because fundamentally that $1 or whatever the thing that you do to rationalize the government's intervention is going to have some effect on some set of the market that is going to tip over the point where it no longer makes economic
1:40:05sense for the buyers to pay the premium price and some number of those sellers will get out of the market and the thing goes away. >> This would be true. This would be true if you uh applied this in an unconstrained fashion. In a very constrained fashion, um raising the bottom, all it does it practically is those people go spend the money with the same companies they're working for.
1:40:27The Amazon delivery person or the, you know, UPS delivery person, those people already have $20 an hour jobs, but the people who are doing those jobs, they just spend it at the same companies. So in reality, when you force everybody at the same time to hit a minimum labor uh dollar amount, and we already have it by the way for this very reason, it just gets recirculated.
1:40:46It's actually good for uh companies and we saw it in Australia, New Zealand, in uh the Nordics. As they raised it, all the companies did better because their customers had more money to spend and people were happy. And in a society, you don't just want to do things for economic reasons. You also want to do it to make people have a better life.
1:41:05And I think that's what raising the minimum wage does. It makes an esprit de corps. It makes everybody's in it together. And the president of the United States is looking at that lowest paid worker and saying, "You know what? We're going to ask Amazon, we're going to ask McDonald's, whoever it is, to just do a little bit better for but 10 million Americans.
1:41:22It has no effect. It's only 10 million Americans." That's why I think it's a no-brainer. It's a no-brainer. >> We're not going to agree on this. I think an alternative would be to drop taxes for the lower bracket and give people a zero tax rate. >> Okay. Zero tax rate up to That that would solve everything.
1:41:39>> And when you do that, you don't have to raise the minimum wage. You can give those people that money in their pocket because they don't have to pay money out of their their pocket. >> Zero out the taxes. >> And you can do other things like credits for them. So, there's a lot of ways, Jason, to kind of get to the bottom >> Donald J.
1:41:53Trump >> just finish. Let me just finish. There's a bunch of ways to solve that problem of giving people access to capital and allowing them to progress in a meaningful way without forcing your way into the market, which I think always has adverse consequences. And you can do that through tax policy and incentives and other structures.
1:42:09But, let's agree to disagree and move on. >> a minimum wage. So, what we're debating here is what should it be. All right, everybody. We'll see you next time on the literal number one podcast in the world. Bye-bye. >> Bye-bye. >> We'll let your winners ride. >> [music] >> Rain Man David Sacks And as I said, we open sourced [music] it to the fans and they've just gone crazy with it.
1:42:34Love you, Sacks. You're the queen of >> [singing]
1:42:44>> Besties are gone. That is my dog taking a nice [music] near driveway dump. Oh, man. We should [music] all just get a room and just have a one big huge orgy cuz they're all just useless. It's like this like sexual tension that they just need to release somehow. What? You're a deep V. What? You're a pure freak.
1:43:06What? We need to get Mercy out of the pod. I'm going
1:43:15>> [music] >> I'm going all in.
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