All-In with Chamath, Jason, Sacks & Friedberg
Massive jobs revision, Kamala's wealth tax, polls vs prediction markets, end of race-based admissions
Fri, 23 Aug 2024
(0:00) Bestie intros! (1:59) Labor department revises down nonfarm payrolls by 818K (15:02) MIT publishes data from first incoming class post race-based admissions ban (36:16) Decision 2024: State of the race, Polls vs prediction markets (52:33) Tale of two tickets: Private sector vs. Public sector (1:05:19) Kamala Harris supports Biden's tax plans, including a 25% wealth tax on those with more than $100M in assets Follow the besties: https://twitter.com/chamath https://twitter.com/Jason https://twitter.com/DavidSacks https://twitter.com/friedberg Follow on X: https://twitter.com/theallinpod Follow on Instagram: https://www.instagram.com/theallinpod Follow on TikTok: https://www.tiktok.com/@theallinpod Follow on LinkedIn: https://www.linkedin.com/company/allinpod Intro Music Credit: https://rb.gy/tppkzl https://twitter.com/yung_spielburg Intro Video Credit: https://twitter.com/TheZachEffect Referenced in the show: https://www.cnbc.com/2024/08/21/nonfarm-payroll-growth-revised-down-by-818000-labor-department-says.html https://x.com/RealEJAntoni/status/1826290040374243821 https://x.com/DavidSacks/status/1664788807059660800 https://www.statista.com/statistics/269959/employment-in-the-united-states https://fred.stlouisfed.org/series/FEDFUNDS https://polymarket.com/event/fed-interest-rates-september-2024?tid=1724345228774 https://x.com/chamath/status/1826360792351957141 https://www.nytimes.com/2018/06/15/us/harvard-asian-enrollment-applicants.html https://www.natesilver.net/p/nate-silver-2024-president-election-polls-model https://x.com/Polymarket/status/1826469365069271419 https://blockworks.co/news/polymarket-july-all-time-high-trading-volumes https://www.semafor.com/article/08/19/2024/harris-camp-signals-it-backs-biden-bid-to-raise-taxes-on-wealthy-corporations https://www.wsj.com/livecoverage/dnc-election-2024-harris-walz/card/harris-backs-tax-increases-proposed-by-biden-pkuLeYl6f1kXrhN4kWgQ https://www.crfb.org/blogs/kamala-harris-agenda-lower-costs-american-families https://home.treasury.gov/system/files/131/General-Explanations-FY2024.pdf
Do we have Freeburg? Did he drop off? Oh, here he is. Okay. Freeburg's back. Okay.
Three, two. I just had to take a leak. I just, I go outside my office and then I come back. Oh, you like a nature pee? You're a nature pee guy? Me too. I love a great nature. Well, I have this great office at home, which is like a building outside of my house.
So I like to go in the garden and take a breath of fresh air and just, yeah.
You don't sit down to pee? No, I'm serious. I'm not joking around. You guys. So many jokes. I'm not going there. That's a soy estrogen boy joke. No, we can cut this out. But my pediatrician said, HMOP, I think it's really important to teach your boys to pee sitting down. And even for you as you get older. What are you talking about? It's good for the prostate.
And there's like a materially different percentage in terms of prostate cancer rates when you pee sitting down. Because you expel all the pee that just kind of gets caught there. The dribble? Swear to God, bro. I swear to God. What about a good shake?
Wait, wait.
What about a shake? Nick, you can cut all of this. No, the shake doesn't do it.
No, this is great. Sitting while urinating aids in muscle relaxation, benefiting men with tight pelvic floor muscles, or symptoms of an enlarged prostate. Sitting to pee enhances stability, reduces the risk of falls, and minimizes messiness, especially for him.
Sacks has a urinal. Whenever Sacks gets a new home, he puts urinals in. That's how much of a man he is. Sacks, how does your staff hold your body while you pee?
Like, do they hold you?
History of the world, Mel Brooks.
This study is like the vasectomy truck at the DNC. I mean, it's meant to emasculate men. That's the only interpretation of it. It's total nonsense.
All right, Labor Department has revised down the job growth numbers as a number of members of this panel predicted. The BLS updated its non-farm payroll stats, downgrading actual job growth to around 30% versus what was originally reported. This means the U.S. economy created around 818,000 fewer jobs over the 12 months leading up to March 2024.
The number was originally reported as 2.9 million new jobs created, and it's more like 2.1. The Labor Department updates and revises its stats frequently. It gives disclaimers. But this is the largest and most significant revision since 2009, after the Great Depression. recession.
And so the biggest downgrade came in the field, not surprisingly, of professional and business services with 358,000 jobs lost over the last year. We see that in all the stats of different tech companies and businesses, finance companies doing layoffs. Other fields that revise their numbers, leisure, hospitality, manufacturing, retail, makes sense, and a little bit in transportation.
Here's a couple charts for you before we go and get some feedback. Civilian unemployment rate seasonally adjusted. As you can see, since the great financial crisis, we went from 10% all the way down to well below four, and that's where we sit today. USA Today chart here of gains and losses since 1980.
Obviously, that massive drop you see there of minus 9.3 million jobs was COVID with the big quick rebound of 7.3. So overall, the country's in great shape. Sax, your thoughts on the revision? You obviously made note of this when we went through the numbers.
Well, yeah. I mean, I predicted this would happen, and I didn't know exactly how we would get the correction, but now it's come out. By the way, it's not just this 818,000 jobs. If you look at the last 12 months and add up all the restatements, it's been something like 1.2 million. I can share the chart on that. but this is quite remarkable.
About a year ago, I tweeted really fairly casually that there was a hot jobs report. This was around June of 2023, that I didn't know where they're finding all these jobs. I mean, all I see is layoffs. That was my reaction based on not just what I was seeing in tech, and all of us, especially last year, were seeing nothing but layoffs in tech. It was also feedback from
real estate investors that I knew. I mean, all new real estate projects had basically stopped because the cost of borrowing was so high and there was a credit crunch. So new construction projects had stopped. Refis were very hard to get. It's just that everywhere I was looking in the economy and the feedback I was getting from people, things looked... pretty dismal.
And yet the media was continuously putting out stories about hot jobs reports. And we've been getting this now for roughly a year. And then what happens is that there's a revision. And the revisions have always gone in one direction. They're always revision down. I mean, if the revisions were completely sort of neutral and arbitrary, you'd expect it to be like a coin flip.
You might have 10 revisions and five would be up and five would be down, but they've all been down. So what I saw was a pattern of revisions down. And now we've seen the biggest one. So it's not altogether surprising to me. And in hindsight, you know, when I tweeted that a year ago, I got this like hysterical reaction.
I mean, like it was one of these tweets that all of a sudden everyone's like quote tweeting and telling me to stay in my lane. I'm a VC and I don't know the numbers and. It was like I hit some sort of nerve. And, you know, whenever that happens, you're usually over the target in some way.
Yeah. It's generating, it's triggering people is what you're saying. Yeah.
Yeah. So the question is like, why were they so triggered? And I think the reason is that on some level, people were intuiting that the numbers didn't really make sense. It didn't really match up with what we're seeing in the economy. And now a year later, we have the proof of that.
So Chamath, let me go to you next, because you pointed out that these numbers seemed a little fugazi fugazi. But we have 162 million people record employed in the country. This number, if it's 162, you take out 800, it's 161. This is what the Fed has been trying to do to cool off inflation, right? We needed to see a little bit less employment, and that's part of it.
So I guess the silver lining here is if we are revising these numbers down, that would give more of an indication that we've slowed the economy, correct?
Yeah, I mean, I think the economy is a lot slower than what people thought, which, to your point, the silver lining is that it probably now tips the balance of action in September to a cut. And if it was 25 basis points, there's probably going to be a lot of folks lobbying the Fed to cut 50. And I think that they probably have enough numerical justification now to cut 50.
I think the bigger problem, though, is if you don't have an accurate sense of where employment really is, and Sachs did mention this, you will also then have an inaccurate sense of where GDP is. And I think the one-two punch could be very problematic. I think what we're learning more than anything else is we have a very sophisticated economy. We have a very sophisticated capital market system.
We have very sophisticated actors in those markets, all of us included, who can react to real-time data and make the right decisions. The problem is we have bad data. And the bad data, I think, is something that is fixable, but we need to make an effort to do it because it's insane that the largest and most sophisticated economy in the world is this unpredictable.
And I think that's like the big question that I have, which is how is it possible in 2024 that we haven't just made this a priority to fix this? And with all of the systems that exist and all of the SaaS tools that exist and everything that's used to like hire and fire and pay people, we don't have an accurate sense of this number.
And it could easily, Chima, that's a real head scratcher to me. This could easily be crowdsourced or we could pull data from a lot of different places. Obviously, they pull some data from employment roles. But I remember you had a startup. I can't remember the name of it. But you had crowdsourced.
People were going around and taking pictures of the price of tomatoes in different places and then putting it into a database and organizing, I think, for hedge funds and other folks, yeah.
Yeah, so what that company did was it was an agent that you would download on your phone and we would task you to go and collect certain kinds of information. And yeah, there was some socioeconomic data that was collected. A lot of it now is... with three-letter agencies and the like. So without getting into details, that company's doing quite well, but it's just moved in a different direction.
If you just created some kind of like a DARPA challenge, like equivalent to this, give it to Stripe, give it to Gusto. give it to a handful of these smart companies to give a guesstimate and see who accurately predicts this number over the course of a year or two. That's more reliable and frankly, more useful to the market than what the BLS is doing.
My first job out of college, by the way, was not in tech, but it was in finance. I was a derivatives trader. And what was so incredible is I remember sitting at my desk in front of my terminal on the trading floor when non-farm payrolls would hit and people would just go crazy.
There would just be literally tens or hundreds of billions of dollars that would start flying back and forth based on what that number was. And now to think about that much velocity in a totally random way, because those numbers aren't reliable, it seems just crazy.
Okay, Freeberg, here's a chart for you to comment on. Maybe we open the aperture here. Total employment and unemployment here in the United States, as you can see, you know, since the 80s, population has grown and the number of people employed has continued to grow. Labor participation, it kind of peaked in the 90s in the Clinton era, and it's come down a bit since then.
But overall, what do you think of the health of the economy and employment?
I mean, I think the Fed target is 4%, which is kind of where we're at. I think we're at 4.2 or 4.3 now. And so the Fed tries to balance inflation, unemployment and rates. That's kind of the three things that they're looking at. So they make adjustments to rates. Obviously, if you take rates too low, too fast, you have an increase in inflation. So they're targeting inflation's 2%.
They're targeting unemployment's 4%. So if you take rates too high, you can certainly reduce inflation, but then the economy can contract or slow down and job cuts start to come through. So now...
With inflation kind of supposedly approaching 2% and unemployment over 4%, the market, if you look at the trading markets, they are now estimating a 100% chance of a three-quarter of a percent rate cut by the end of 2024 and a 70% chance of a one-point rate cut by the end of 2024. So the question is, are they going to do three quarter point cuts by the end of the year?
Are they going to do a 50 basis point cut and then a 25 or a 50 and a 50? The next couple of weeks will determine which direction. And then obviously, Chairman Powell has his big speech happening on Friday.
Freebrook, what does the betting market say specifically for September?
50 or 75% chance of a quarter point cut, 20% chance of a 50 basis point cut. and then 6% chance of no cut, which is kind of strange because the trading markets, this is obviously a prediction market, but the trading markets are showing effectively 100% chance of a three-quarter point cut by the end of 24.
And Sachs, here's the dramatic Fed. We always talked about them kind of getting on this a little bit late. But you can see here, man, what a ramp up in 2022, where we were basically at a quarter point and they just added a quarter point of 50 bps all the way up to 5.33, where we've been flat. Inflation, obviously, we have the two handle now. So now we start the process of going down.
And I think people generally believe 25 bps at a time will be their pattern coming down.
You think that seems wise? Well, I think the Fed isn't sure that inflation is a solved problem. I mean, I think that Powell is a little bit reticent to start the rate cutting cycle because he doesn't know for sure if inflation could tick back up. This first cut is in a way the most important one because it signals a regime change that we're beginning the rate cut cycle.
And what he doesn't want to do is cut any amount and then be proven wrong. And we get a bad inflation report. And then all of a sudden he has to raise it again. So he doesn't want to be caught in that position. But I do think that the economy is obviously showing significant weakness. Inflation is not completely solved, but it's down to 2.9%, at least it has a two handle on it now.
And so, yeah, I think the market is pricing in these rate cuts for a reason.
So either mission accomplished, or we'll see if we have a soft landing, hard landing, or something in between. Most people feel like it's going to be soft with a little bit of bumps. It seems direction correct to me.
I mean, now that we know that the jobs picture was inflated by 1.2 million jobs over the last, call it roughly a year or 14 months, I think we know that this is not like a perfectly soft landing. I mean, I think that... The economy is a little bit shaky and is being propped up by massive amounts of government spending like we talked about on a previous episode.
We're running unsustainably high levels of deficit and debt. We're running, what, $2 trillion a year deficits right now. And what are we getting for that? We're not getting a super robust economy. We're getting an economy that's narrowly staying out of recession. So it's a little bit of a scary picture, I think. that the economy is so shaky and we're spending so much money to prop it up.
We'll just have to see what happens.
Yeah. And it doesn't seem like either of the incoming administrations really cares about spending. Seems like we're going to be in still big money spending mode, independent of who wins. We'll see how long that can last as a country. And then we talked a little bit about the Supreme Court decision last year around affirmative action and It turns out now MIT has released their data.
It's getting a lot of buzz online. Here's a chart. Basically what you can take from this chart, and this is people self-identifying at MIT, and the buzz is that Asian Americans have gone from 41% to 47%, and those gains came on a percentage basis from a decline in the number of Black and Latino students coming in. Here's the chart, as you can see.
So people are wondering about, I guess, the fairness of this. And I guess you could have either one of two positions, Chamath. Asian students were being penalized for a long time. Or now, I guess you could believe that Latin and Black students are being impacted negatively about this.
So I'm not sure what your take is, but it's obviously moving to more of a meritocracy, according to the people at MIT.
It's not even clear how they were making decisions before, nor now. But I tweeted about this yesterday. I think the thing that matters more than anything else is to make sure that the people that they are letting in are in love and obsessed with the things that MIT is supposed to be great at. So if you are a great creative thinker, designer, architect, you should be at RISD. I'm giving an example.
If you are a great musician, you should be at Juilliard. You should not be going to MIT because you think it's a checkmark. You should be going there because you think that there are professors in organic chemistry, in physics, in these disciplines that are really important, who are experts in their fields, that you can learn from and become an expert yourself.
And I think the problem with all of this other stuff is once you make it a credential, there are some folks that are only going to MIT, because they could get in and because it's a great credential in their minds. And they shouldn't go there either. So I think the thing is, you have to get back to what matters, which is, there are all of these industries that have not progressed that much.
And in order for those industries to advance, you need really talented young people who can learn and apprentice and then take over. And I think MIT is one of these rare places that focuses on this part of the physical world that hasn't had as much progress. And so I just want to make sure that the people that go there actually want to be there for that reason.
Gender, race, all that other stuff shouldn't matter.
And that is what the Supreme Court decision did. You cannot take race into account. Harvard had some weird thing, Friedberg, where personality was one of the vectors.
No offense to everybody at Harvard, but Harvard is more of a pure credential. Like MIT, I buy more that you go there for certain kinds of specializations. Caltech, you go there for certain specializations. If you're really into wine, you go to UC Davis. My point is these schools exist for reasons other than just as a collector coin that you put in your pocket.
I'm not sure Harvard is really known for anything other than for being quote unquote elite, but even that's questionable now. But in the technical areas... I really do think that MIT was an important place where people would go to train. And I just want to make sure whoever they're letting in actually cares about the thing they're studying.
Trevor, what's your take on this? You know, moving back to a meritocracy and a colorblind application process. Not being able to use race in admissions.
I don't think that someone's genetics should determine race. whether or not they go to a school. And I think that their socioeconomic background, experience set, values, successes, failures are the things that they could have affected or that I think probably better define whether we want to take a moral stance on giving other people opportunity.
So I think that that's a kind of good and reasonable place for us to end up.
Sax, any thoughts from you on this?
Well, I mean, I support the idea of colorblind meritocracy. I mean, I agree with Chamath and Freeberg that the traits that you're born with are not skills or qualifications. They're just the accidents of your birth.
And what we should be trying to create is a society where those things don't matter and everyone has the same ability and opportunities for advancement based on how hard they work and their skills and this concept of merit. And I think that Supreme Court decision gets us closer to that.
Remember that the reason why that Supreme Court decision happened, or what the plaintiffs were arguing, is that the previous regime on college campuses was unfairly discriminating against Asian Americans. Because whenever you try to engineer the classes to a certain proportion of the population, somebody has to win and somebody has to lose. And the students who were losing were Asian Americans.
And in many cases, these Asian Americans were first generation immigrants or they were coming from disadvantaged backgrounds. And yet their population was engineered to a smaller number than merit would otherwise suggest. And now you're seeing it. In this new class at MIT, the percentage of Asian Americans has increased somewhat. So I think it's good.
I mean, we're reducing a form of discrimination. That discrimination may have originally started for good reasons to try and create a remedy against a different kind of historical discrimination. Nonetheless, it discriminated against talented Asian students. And I think now that that's been fixed.
What do you guys think about... creating a leg up for people that came from a disadvantaged socioeconomic background. So put race aside.
but an individual that grew up in a difficult circumstance that didn't have the privilege of going to a good school or having a good education, worked hard, tried, but didn't end up with the best test scores or didn't end up with the best GPA because of the conditions they were born into.
Do you think it's appropriate to give those individuals a leg up in the application process, putting race aside, but just call it socioeconomic disadvantages?
To some degree, I do. I mean, look, if you have a student who gets, let's call it a 1450 on the SAT, but they've got tutors and classes. Yep. And they're growing up in an environment.
And they went to school in Atherton.
Right. They're getting the best teachers, the best schools, the best environment. And then you take a kid who grew up in, I don't know, like a dangerous park. of the inner city where there's shootings happening.
Or a rural district with no education. Appalachia. Appalachia. Both are kind of equivalently disadvantaged or differently, but both disadvantaged. Yep.
Right. They don't have access to the best schools or best funded schools, best teachers. And let's say that person gets a 1400 on their SAT, which one is better? I mean, certainly if they got a 1450 and you're comparing two equal scores, it's really clear that the disadvantaged student probably has more raw talent.
Totally. I 100% agree. And I feel like we've used race as a heuristic for that conditional background.
And that's what makes it hard because race is not necessarily, it's certainly there's a correlation, but it's not necessarily indicative of the socioeconomic disadvantage that someone may have faced and had to overcome in order to perform and succeed at the level that they could have given their conditions.
And so I certainly think that the incorporation of one's socioeconomic background should be a critical part of the application process. And it's certainly in the same in the job setting, ultimately.
I think what would be much more valuable than all of this is for companies to hire from a whole bunch of different schools than they do today, and to break the back of this elitist culture we have around certain schools. All of the things that you guys are talking about to me sound kind of crazy.
And the reason is because you could go to Iowa State or you could go to Harvard and you could make a claim, and I would buy it, that in some random social science, maybe there's an advantage in the people that you meet. But there's not necessarily an advantage for studying physics at any of these two schools.
It's not like one's teaching you that gravity goes up and the other teaches you that gravity goes down. So I think the bigger problem is that we don't value enough these fundamentally important skills that we need for humanity to evolve. And then number two, we have fallen to this trap of saying that these schools, these highly credentialed schools that cost 60 and 70 and $80,000 a year,
graduate the best kids. And I don't think that that's true either. So the thing that we could all do, because we're all hirers, we hire thousands of people, is we should be going to all kinds of different schools. Today, I just gave an offer to a guy that went to Virginia Tech. And this kid seems awesome. kick ass.
And when we put out job postings for 8090, we veer towards these schools that are like hardcore technical places where none of all of this random credentialed nonsense gets in the way. And so they're hungrier as a result, they're more earnest, and you can cut through the BS. The other thing I would say is that it's even more...
capable now of getting through the filter of these credentials and knowing the quality of a person. You can look at GitHub repos, if you're a developer, you can look at all of these things that allow you to understand. So I don't know, I disagree with your guys's thing of like, let's go figure out all these other things. How about we stop hiring people
and valuing randomly non-specific degrees just because they come from a good school.
Well, I think that would go a long way. Because we do still have a college application process, Chamath. So there are still going to be a set of criteria used to determine whether or not our kids end up getting into a specific school if we and they all kind of say, hey, it makes sense.
No, but I'm saying if your son or daughter were to go and study computer science at North Carolina State, the biggest thing that you could do is be okay with it. Another example of a school that does a great job of recruiting from non-traditional places. Why would I not be okay with it? No, no, this is my point. I think it's a decision.
I'm saying that I'm not saying that you are, but I'm saying that if you make it a big deal, that North Carolina State is somehow worse than some other credentialed school because our social cohort says that those other schools are better. We're part of the problem.
Well, in my work cohort, North Carolina State's a great school. We hire a ton of people from there. So that's a great school, actually.
To be honest, I think schools like that are better. I mean, I think probably Virginia Tech is better than Harvard. And the reason is because they're less infected with the whole woke DEI ideology that now pervades these like top schools. So the students are more likely to learn something.
Well, you should stop saying top. They're not top schools. They're not top schools anymore. They're not the smartest kids. They're not the hardest working kids. So we should stop saying top schools. These Ivy League schools are not the top schools.
I agree with that.
Yeah, there might be the most notable schools historically, but they're not necessarily the ones that are... They're the biggest brands.
And they're not new brands. They're old brands. And we've seen that these old brands depreciate over time. And people read way too much into them.
I think the structural... Monopoly is that they then get and have the most capital, which they can then use to build facilities and support staff that can come and do core research. And so you then get all these research staff, particularly in technical fields, in science and medical fields and so on, that want to come and be on campus.
And that then creates the network effect of undergrads getting a better education because they're getting exposed to the best talent.
I don't necessarily think that benefits the undergrads. I mean, first of all, these campuses... Well, tell us about your experience at Stanford.
I think you're the only Ivy Leaguer here.
Wait, Berkeley's Ivy League? You went to Berkeley?
Stanford technically is not in the Ivy League. The Ivy League is like an East Coast club, whereas Stanford was kind of the West Coast disruptor.
But did you get exposed to it? I mean, I know when I went to Berkeley, I worked at Lawrence Berkeley Labs. I got to be exposed to Nobel laureates. It was actually like... I think particularly in my field, like I majored in astrophysics and physics, like that was a great school to get exposure and you actually had that opportunity. I think that's part of the challenge.
Schools with really great graduate programs and research that goes on on campus actually can give a better educational experience to the undergrads. It's almost like you're getting these internships and these fellowships and these TAs and professors.
Well, that's a different thing. I actually think what America needs is what I benefited from at the University of Waterloo, which is an active and vibrant co-op program.
Yeah, that's right.
I really disagree with you. I don't think that there is an incredibly better way to teach thermodynamics. I think that's a bit of a joke. Okay.
I think that that's a lie we tell ourselves. I'm talking about applied work too much. So I'm talking about you go up to Lawrence Berkeley Lab and you work in an actual lab that does really interesting research. Okay, so my point is, if we both agree that these fundamental sciences is the key. Definitely, yeah, yeah. That's what I'm pointing out, yeah.
So then like the universities in America that have these co-op programs, I think are incredible institutions. Again, they're not the typical ones. There are places like Drexel and other places. But now you allow these kids to be in the trenches with people building things. And I just think that that's an incredible gift for them.
But it's also an incredible opportunity for these organizations to understand the quality of the person beyond some credential. Totally.
Well, I do think in a digital era, core education has commoditized. And I think most people can get most of the way there without necessarily paying 60 to $80,000 a year, and then being partnered in some way with that on the ground internship or integrated kind of program where you get actual hands on experience.
So I don't know, like, I mean, the university model, maybe does not make sense for most fields. J. Cal, what do you think?
Yeah, it's very interesting.
Where did you go to school, Jake?
I went to Fordham University at night. I got in three weeks before. Did you get an undergrad degree from Fordham? Yeah, Fordham. I was going to either, I had taken the New York. What was your degree in? Psychology. I was going to go into the NYPD. I was about to get accepted at 18 years old, 17 years old, 18 years old. And then I decided at the last minute to go to Fordham at night.
I had to work in order to pay for it. So it took me four and a half years, but I did like almost a full credit load at night. And then I was going to go into John Jay for criminal justice and get my forensic degree and then join the FBI.
So I was in the process of applying to the FBI and then the internet happened and I started a magazine about the internet and it went in a totally different direction. But the co-op stuff, I remember when we went to Waterloo, we did a speaking gig there years ago, Chamath, and I was very taken with the students there and their drive. And so I think that's the key piece.
And what I did in venture capital, because I needed to have a team of about eight people screening all the companies we get and the applications. So I just made my own training program and I hire a lot of people in Canada. to do it and basically they do five meetings a day. They write up coverage.
I made an entire framework and I'm doing professional development because I found a lot of the top people from these brand name schools were entitled. They didn't want to do 25, 35 meetings a week with founders. And I just found these other students from Waterloo and other colleges like that.
And I've trained them in my framework for these are the 13 qualities we look for in investing in a startup. And these are the 25 red flags. And I've now got seven people. We did 110, 120 meetings one week recently. And so it's just much better to train them ourselves and make your own training program, I believe.
Didn't Malcolm Gladwell write something which is roughly the equivalent of like, you're better off getting the top 10 student at a non-Ivy versus like the 50th student at an Ivy or something? I don't know, there was like something, like maybe it was like a chapter.
And what was his reason? Because of motivation?
Yeah, it's like these kids are excellent. When they're achieving and they're excelling in things that are not subjective. You want to go get those kids. Yeah. You know?
They've performed. I mean, I think one of the problems with the whole DEI policy, whether you want to do it based on race or socioeconomics or whatever it is that you're doing, is it keeps happening at every layer of the stack. And at some point, you just need to say, look, we've made up for whatever came before. And now it just has to be about that person's performance.
We need to stop putting our thumb in the scale and just hire the best person. My view is you could probably do that after undergrad. Like there's no need to keep artificially adjusting the weights of how you hire people after undergrad, but yet you have all these programs that keep trying to make the decision based on something other than merit. And I think that's the part that needs to stop.
I mean, we had Coleman Hughes on, and I think he had a very good perspective on it, which is like maybe starting with earlier education is where you could probably solve some of these problems a little bit more effectively.
I will say, I feel like my experience in the workplace is that One's college or university is completely decoupled from one's performance or ability to succeed in the workplace in an meritocratic workplace. And when I say meritocratic, I mean excluding nepotistic workplace settings and excluding demographically biased workplace settings. 100%.
And if you exclude those two, it honestly does not matter what school someone went to. They could be brilliant. They could be hardworking. They could be passionate. They could be a leader. The school doesn't matter.
And in fact, perhaps the corollary is true, which is the people that went to the schools that determine success generally have a very hard time succeeding in the workplace because anytime they face failure, it is a challenging circumstance for them that they are unable to overcome.
And that's particularly true in entrepreneurship, that's been my experience, perhaps in the broader workplace setting, they could work well, where they're told all the time, if you do this, then you get that they do this, they get that they feel good, they succeed in that model. But in the in the real world, that's not the model.
And I think that that's a really important fact that's colored my point of view on how the higher education system actually does perform with respect to improving the quality of our workforce in the US. Separate of that, I will say that in technical fields, the research environment on certain college campuses can be incredibly, to Chamath's point,
opportunistic for getting exposure to hands-on work that you might not otherwise get in technical field.
A lot of this comes down to motivation. At a certain point, a person has to be motivated to put in a lot of hours and become excellent at whatever their chosen profession is. I think I talked about it previously. When we started talking about macroeconomics here, I took a macroeconomics course at MIT. on their website or on YouTube rather.
Like there's incredible that this stuff is all out there and anybody can take any of these courses for free.
That's what I mean by like the basic, the base education has been commoditized. You know, it's the hands-on experience that one gets that makes a huge difference.
MIT 1401 principles in microeconomics, supply and demand. I mean, it was like incredible. And you know, this is stuff I just didn't ever get exposed to. And I was able to do it for free. I listened to the course actually twice and I took notes on it. I really got a lot out of it. All right. Listen, more stuff on the docket.
Anybody else have final thoughts here before we go into the election stuff and taxes?
Let's all commit to hiring as many people as possible from non-traditional schools. Absolutely. I mean, that's what I do already. I mean, it's working.
All right. Decision 2024. Get ready for a bit of chaos here, folks. The DNC is underway as we tape. We tape on Thursdays, as you know. I think Kamala will give her acceptance speech tonight. DNC pulled out all of their all-stars, Michelle Obama, Barack, Hillary, Bill Clinton, Oprah, and Tim Walz spoke last night. Most people felt he had a pretty strong showing.
Our guy Nate Silver, friend of the pod, has the election as essentially neck and neck. We're in coin toss territory here. I think it's going to come down to the debates. I'm interested to hear what my besties think. Here is the Silver Bulletin, his new publication. He's not at 538 anymore, just Kamala at 47, Trump at almost 45. And this all will come down to the swing states.
I think, as we all know, he's got a really great interactive chart over there. He's got Harris with clear leads in Pennsylvania, Michigan, Wisconsin, Arizona, and Virginia. I think those were about 68 electoral college votes. Trump with clear leads in Georgia and Florida. My Lord, Florida is 29 or 30 electoral college votes. That's a lot.
The toss-up states, Nevada with the tipping and no tax there, but that's only six. North Carolina. has been flip-flopping back and forth from Harris to Trump. Those two are worth 24. So we swung from many pats to victory, basically a certain victory for Trump with versus Biden to now a toss-up. This is an interesting chart here, Sachs. I want to get your
take on which is the polling averages, I think you said last week or the week before that we would see the Harris bump reverse. And that's exactly what's happened. The month over month change is dramatic, as you see in this table. But the week over week change, so in the month change, you have Democrats running the table in all the swing states.
And then you look at the weekly change, the opposite. In the last week, the Republicans have not caught up, but made significant gains all between a half A percentage point and a point, with the exception of North Carolina, which, as I stated earlier, is a toss-up. Your thoughts on the election right now, Sachs, before we get into the issues, just on the numbers here.
Well, the election's going to be a nail-biter, and it's going to really come down to a few thousand votes or a few tens of thousands of votes in swing states. I think we've known that now for a while, I would say since Biden abdicated and they did the hot swap.
I think the most interesting poll numbers over the past week is, if you look at polymarket, that it has swung back to Trump being in the lead over the past week as opposed to Harris. Last week, I think Harris... was favored to win by quite a bit.
And you have to ask the question, well, how does this happen during her own Democratic convention, which is supposed to be nothing but a four-day infomercial for the Democrat candidate? It's a coronation. So she should be getting nothing but a bump, and instead it seems to be the opposite.
And I think the reason is, is because the more substance her campaign puts out, the more policies it reveals, the worse she does. First, they had her give that economic speech last Friday on price gouging and price controls. And we spent a lot of time last week talking about why price controls would be a disastrous economic policy. Subsequent to that, there were stories that came out about
her campaign supporting these huge tax hikes that were in the original Biden-Harris budget, including a 25% unrealized gains tax, which we can talk more about. But I think just to boil it down, I think the more the public learns, the more we learn about what she would do as president, the worse she does.
And they've now got to run out the clock for another, I don't know what, 70, 80 days in terms of running a campaign that's substance-free, that's just completely on vibes, that's about joy without answering any questions, without doing any press interviews.
And I think we predicted some time ago that that just was not going to be sustainable, that at some point they're going to have to tell us what they think. And as they do that, the more they do that, I think the more her polls will correct.
What do you think, Chamath? Do you trust these betting markets? Because there's so much at stake at this election, right? I mean, people are pouring money into both campaigns. It's really contentious. People see it as existential on both sides. And then you have these prediction markets that have low tens of millions or hundreds of millions of dollars being bet.
Could these not be, you know, influenced? Do you trust them? Because we are seeing this is the first time these prediction markets have become a major discussion point because they're businesses, obviously. But people are really getting into them.
And I wonder if they could be manipulated, or if you think you trust them, I guess is the way I'm asking you, because we've had this discussion a bit offline.
I mean, I think these are really good businesses, but they are some combination of entertainment and gambling. I don't think that these things are as useful as directional indicators as they are just really interesting businesses that allow people to bet and wager on all kinds of random things. So I would not look to these sites for that necessarily. Okay.
I think that people like Nate Silver do a pretty reasonable job. In his specific case, I think he does a very good job of threading together and doing this meta-analysis of polls. But I think we've learned that this polling is pretty brittle and not super reliable. So the betting markets are exactly that. It's like sports betting, but just on different things.
Wasn't the betting market, we talked about this two weeks ago, Shapiro was like 80% or something. So yeah, it's fairly obvious, Freiburg, that may be... these betting markets are a little bit entertainment, but maybe directionally correct, because they also did start to predict the hot swap. So what do you think, Freeberg, about these betting markets, prediction markets?
Well, I think you and we keep... Everyone keeps trying to reduce this down to some deterministic binary system, which is like it works or it doesn't. And the truth is... that the conditions of the world are changing all the time. The news is changing all the time. People are taking action all the time. There's a shift in current events all the time.
As a result, the forecast is changing all the time. And so what a betting market or a poll does is provide a probabilistic forecast of the future. There is a probability of something happening. It is not trying to say I as a poll or I as a market am right 100% of the time or not. It is saying here's the estimated distribution of outcomes in the future.
So there is a 20% chance or an 80% chance of Shapiro, 20% chance of him not being the case. Turns out that that 20% is where Harris ended up going based on some meeting she had in some room with some group of people that we aren't privy to and that the market in that case was not privy to. What Nate Silver does, and I think people need to understand this a little bit,
When you gather polling data, that poll has some predictive power based on how the pollsters conduct their poll, who they call, how they screen candidates for the poll, et cetera, et cetera. So different polling companies, it turns out, are better or worse at making that directional probability bet than others.
And what Nate's models do is they account for the historical performance of different pollsters and weight them differently to create a basically a multipole prediction. And so that's what his system is set up to do. And remember, he similarly doesn't give you one outcome. He gives you a distribution of outcomes.
I think his simulation model has probably a thousand or 10,000 simulations that come out of it. And those simulations, he says, look, there's a 29% chance of this happening, 70%. He's not trying to say, here's what's going to happen. He's trying to give everyone a point of view on the distribution of things happening in the future, just like weather forecasting is not perfectly predictable.
It's very predictable for tomorrow. It's less predictable for three days from now. And it's very unpredictable 12 days from now. And that's how these polls also work out. And that's also how these massive mega models of polls and it's also how prediction markets work.
And Freeberg, people have a lot of emotion in these models when it comes to politics, whereas if you were looking at gambling or the odds of winning a poker hand, we all would be like, oh, you have a 30% chance of winning, or a 10% or an 8%, you're going to hit two adders. There's emotions both ways, J. Cal.
So basically, when I read those polls... or I read the summary of the polls, I have a bias based on my interest in the outcome that says that thing is BS, that thing is right. Oh, look at this. And everyone points to this stuff for confirmation bias of their opinion and to denounce the other side. And so it all gets caught up as kind of a media angle when people use polling data.
And also fundamentally when people kind of get involved in polls and create polls, there's also the risk of bias. And part of what Nate Silver and others try and do is figure out, does that bias come out in the polling performance historically?
And that's how they kind of weight whether or not this poll is gonna be a better or worse indicator than other polls of the distribution of things that might happen in the future.
And Zach, if people were to lose a poker hand that they were 60% to win or two thirds to win, you know, they would be like, okay, that makes total sense. When Hillary Clinton lost to Trump the first time, people lost their minds. And he was pretty clear, right? He was, I think, 65, 35. And people are like, wait, you said it's 65%. Yeah.
Your thoughts on just the accuracy of polls generally and then what you heard here in terms of the betting markets. How do you look at these two things that are taking up a lot of space right now?
Well, I would consider prediction markets to be an additional tool that we should consider side by side with polls. And they both have their pluses and minuses. The advantage of polls is that you're actually talking to real people as opposed to bettors. However... They're very dependent on sampling and getting the sampling correct. I mean, most of these polls talk to maybe 1,000 respondents.
These are people who are willing to pick up the phone from an unknown number. That right there is probably a huge source of bias because I don't do that. And then based on that sample, they're going to predict how millions and millions of people are going to vote. Well, everything depends on the composition of that sample. Which thousand voters do you talk to?
Do you weight them based on likelihood of voting or demographic characteristics and so on? So the polls can be notoriously inaccurate. We've seen that many times. And that's why there's a margin of error. Sometimes the margin of error is even wrong. So in any event, it's a tool, but it's a tool that almost by definition is going to be wrong because of sampling problems.
You look at prediction markets, and it's a totally different type of voting mechanism where bettors are willing to put their money where their mouth is, and they've got real skin in the game, and they're able to make a prediction based on their willingness to lose money. Now, there can be problems with that too. Number one, the betting market can be very thin.
Sometimes there's just not a lot of money that's trading hands. So I think with a lot of those VP picks, you can move the VP market by putting just a very small amount of money because the market wasn't very liquid. So you have to kind of look at how deep and liquid the prediction market is.
And then I'd say second, the issue with prediction markets is they, and this could be an advantage, is they move a lot based on small things because people are just constantly updating their forecast. I would argue that maybe that's an advantage is that you could see the trend more easily in a prediction market.
So, for example... Yeah, I have some numbers here, too, if you want to hear them. $653 million in political bets are currently being placed across the top 10 betting markets. And all of the markets on PolyMarket, which includes things outside of politics, are $320 million. So they are the big fish in this, I think.
They're the leader, but it's still a very thin amount of money, to your point, Sachs.
Yeah, I would mostly use the betting markets as a measure of how sentiment is shifting. So, for example, on election night, the betting market is going to convert to 100% in favor of one candidate or another, whereas the actual votes are not going to convert to 100%. You could have an election in, say, Pennsylvania, where one candidate gets 50.1% of the vote, the other candidate gets 49.9%.
The betting market's going to converge to 100-0 because it's predicting who's going to win. It's a binary yes or no as opposed to where the actual vote tolls come out. The polling is trying to approximate where the vote tolls are going to come out, right, with a huge margin of error.
So the polls are never going to give you as crisp and decisive an answer as the prediction markets, but the prediction markets can also be wrong, as we've seen. They're only as good as the people making the bets.
Chamath, where do you put the third category here, which would be the oddsmakers in Vegas? Because they're looking at everything. What do you think about the oddsmakers in Vegas? Would you give them any credence?
I don't even know why any of this matters. Why are we talking about this?
Well, I mean, because people are looking at the tea leaves. There are reasons it matters. These markets do have an impact on the voting public because... The media covers them. Donors cover them. Voter turnout is impacted by the polls. And then there's these like... you know, various psychological phenomenon like the underdog impacts or bandwagon.
So you could have, if people perceive at one point Trump is the underdog, maybe more people turn out and then people who, you know, if Trump was winning versus Biden so much, they might become complacent and you get some sort of surprise there. So they do have actual impact on the voting public.
I suspect, though, that I suspect that a lot of that is really at the edges. I read an article recently that just talked about the enormity of the investment that both the Democrats and the Republicans are making to get to these critical areas in these five critical states.
And if you live in one of these zip codes that really matter, I think that there is just no room for anything but what each side is saying. I don't think you're looking at a betting market or a poll or any of this stuff. And I think the reason why these places have become so critical is that they are very balanced.
They are people that have a good way of making sense of the world and they change their minds a lot, right?
Because otherwise-
They're people that underwrite and re-underwrite their decisions. And to me, that's actually a really wonderful thing to know that there are these, call it million people in these zip codes in five states that are actually quite thoughtful. And I'm actually okay that in the end that those folks will decide.
I would be much more worried if it was hyper-partisan and set up in a way where none of these lies, whoever tells them, are uncovered. The way that it's set up today, all of the crazy ideas get run to the ground. All of the lies get uncovered. And I think that that's a really... healthy place. And I think it's a much better place.
So I'm generally like, really glad that things look like quote, unquote, a question mark, because I think it creates much more pressure for the candidates to be precise. And I think that that's very important. So I'd love to talk about some of these crazy policy things as well.
Yeah, I want to talk about that policy. Sacks, I wanted to get your take on this Trump's VP pick JD Vance is now the least popular VP pick in modern history. People said the same thing also about walls. And that was a Terrible pick. Here's your chart on JD. And here's the historical chart. John Edwards. Man, I remember him. He was plus two in net rating. Tim Waltz, plus five.
Mike Pence, plus five. Kamala, when she was VP, plus three. But JD Vance is absolutely, he's below Sarah Palin, which I guess takes Everett. What's your take on the VP picks and the impact they're having here? Because it's a major topic of discussion.
I think what history shows, the VP pick doesn't matter that much. People vote for what's happening at the top of the ticket. And I would argue the reason why J.D. has the polling he does is because there's a couple of reasons. Number one is just media bias. And there was an interesting report showing that the
media's coverage of the Harris campaign was 84% positive, whereas the coverage of the Trump campaign was 89% negative. That actually seems to understate the bias that I see out there. But look, this is the number one reason why J.D. has a negative rating is because the media is defining him. I would say furthermore, J.D. is out there talking about ideas, and I give him credit for that.
But because he is an idea man, and he's also a writer, and he's said interesting things in the past, and sometimes occasionally a sarcastic thing or two in the past, the media has been able to take those things out of context and harp on them relentlessly. On the other hand, you take someone like Tim Waltz, and he's out there. He's not really talking about ideas.
I mean, every time he goes up there and speaks, it's like a pep talk. I mean, if I wanted to hire a guy to give the halftime speech to my team, he'd be the guy. You know, if I wanted him out there puffing up a team, talking about how we got to all give 110%, he's the guy for that. But he's not really talking about ideas. He's not going on the Sunday shows. You look at JD.
I mean, I've watched a couple of his campaign stops. I mean, the guy is really sharp. And when he goes on the Sunday show, they are pitching nothing but fastballs at him. And he's hitting it out of the park every time. And Harris and Waltz are just not doing that. They're not even appearing on those shows.
I don't think they could survive 20 minutes of harsh questioning the way that the media pitches at J.D. every time he goes on a campaign stop and takes questions or he goes on a Sunday show.
I love the J.D. pick, you know, venture capitals, business guy, well-written, well-spoken.
You're picking up on something that I think is really important that I think has been underreported. It really is a tale of two different tickets. The Republican ticket, whether you like them or not, are very financially astute actors. And if you look at the Democratic ticket, they are underinvested to not invested at all in anything that would normally resemble the United States economy.
And I find that a very odd distinction, meaning The way that I would think people would want to see their candidates is folks who have a very sophisticated understanding of the parts that they're going to govern. And in this case, if you're going to sit atop the economy, one would hope that you're invested in the economy in some way so that you know how it works.
And it's a little surprising to me that nobody's really questions how underinvested the Democratic ticket is. And it's almost as if the Republican ticket for their financial sophistication is looked down upon.
To unpack what you're saying here, there was a report. Tim Walz has no financial holdings. He has no stocks, no bonds, no mutual funds, no real estate, nothing, no cryptocurrency. This is what you're referring to, Yachima.
Yeah.
The level of like literally owning nothing. And I guess, Freeberg, to your, I'll let you take it from there.
So I think it's actually a step a little bit deeper than that. Kamala Harris and Tim Walz have only ever worked for government. Trump and Vance have worked in private industry. It's not just their perspective being colored by the lack of participation in the private economy, but the lack of employment in the private economy. They've never worked for a private business.
They've never been employees of a private business. They've never built a private business. I'm not trying to be disparaging, but I do think, I'm just trying to underline the point here, Chamath, which is the voters' choice is, do you want candidates that are not typically government operatives? Or do you want candidates that have spent their whole career as government operatives?
And that is effectively what the voters are going to be voting for. And they're going to make a decision, they may want to have someone that's going to lead the biggest government in history, because they've spent their whole careers in government. Or they're going to say, you know what, the biggest government in history needs to be significantly altered.
And we want to bring someone in from the outside that's worked in private industry. And that is the voter's choice. That's one way to view the voter's choice here.
That's an interesting framing. And another framing might be free bird. I love that. Hey, it's an interesting framing. Here's another framing. I don't, you're a young person. I can't own a home. They're too expensive. I don't have any equity. I'm getting ground down. I own, I owe a bunch of student loans.
Tim Walls feels more like the experience I'm having as a millennial where I can't afford a home, where I don't have equity, where I'm constantly trying to pay off my bills. And The finance, what we'll say is like, hey, this guy's not very financially astute. He doesn't even own his own home.
That could be because he's never, it could be because he's never, it's because he's never, maybe it's because he's never had a private sector job.
Well, he's been a teacher, right? So maybe people say, you know what? I feel, I identify more with Tim Walz. And I think that's actually what might be happening here. Public school teacher, right? Yeah. Yeah, right. Yeah. Which is a noble thing to be. And I think there's probably a large percentage of the country who feels like they're not part of the equity economy. They don't own a home.
They don't own equities. And they have been shut out from this. And all these rich people like Trump and JD Vance and venture capitalists are running the table on them. And I think that might be why we're seeing, even if the four of us disagree with it, we might be seeing someone like Tim Walz actually being a feature.
It might be a feature to their ticket. And I think that there's a perception of experience in government that is deemed to make a government leader more appropriately suited to be a government leader. A career politician. Well, not even a politician, just career experience, either being employed by or working within a government, local, state, or federal.
And remember, Kamala started her career at the DA's office in Alameda County before moving over to San Francisco DA's office. And then she was DA of San Francisco and then attorney general and so on and so forth.
Sachs, what do you think of this framing? You have two candidates who are career civil servants who have dedicated their life to that, but who in one case doesn't own his home, doesn't own any equities. In the other case, Kamala does have a bunch of equity and some private wealth versus the capitalists. It looks like this actually is an interesting framing, socialism versus capitalism.
What's your thought on that framing?
Well, I think just because someone has served in government doesn't mean that they truly even understand what the problems are or that they're even the master of government. I mean, you saw this over the past week. We talked about the 818,000 jobs that didn't exist. They asked Gina Raimondo, the Secretary of Commerce, about this, and she just said that's a Trump lie.
And they said, no, actually, it's the Bureau of Labor Statistics report that is under U.S. Secretary of Commerce. She said, I'm not familiar with that. So you have people running the government who don't even know what their own departments are doing. Now, I think it's just a function of the fact that government is so big and out of control that no one even understands what it does.
I think it's more important to have someone who at least has some experience in the private sector who truly understands how jobs are created, how wealth is created, what causes inflation. Okay, we've talked about this before. What causes inflation is the printing of too much money. It's government spending too much. Yeah, shocking. It is not corporate greed because corporate greed is a constant.
It's not price gouging.
And how the free market incentivizes the creation of improved productivity, which over time translates into improved prosperity for the society within which that is taking place. That is so critical. And we saw that happen even in China in the last 30 years when the government allowed entrepreneurship to flourish in certain parts of the country.
As a result, there were significant productivity gains and they brought a billion people out of poverty.
They created a middle class.
I mean, they never had a middle class. I think it's important. to not color this as because you worked in government, you can't be invested or you can't own a home or you can't actually have built a nest egg, right? Because that's also not true.
And we have, there's some extreme examples of people who've been Pelosi, essentially, yeah, career civil servants, essentially, and it built multi hundred million dollar portfolio, we can, we can question in specifically in the case of all house representatives, whether they're getting access to a kind of information that other people don't get access to. But taking that off the table,
And I think that there are people in all kinds of jobs who are able to save and invest and then acquire things that they believe will give them security for themselves and their children in the future. And I don't think that it is because of a kind of job that you do. I think it's a kind of mindset that you have. And I think it's very important to make sure that whoever we pick
we understand the mindset. I really believe that there are a couple of things that are really critical to thinking about the future and wanting to make the future better. I think one obvious one is when you have kids. When you have kids, you're making sacrifices every day.
You're foregoing things today because whether it's saving for college, saving for school, saving for a class, saving for a sports thing that you want your kids to go to, music, whatever it is, you're always... finding ways of thinking about what is better in the future for that other person, not me.
And the second is, I think being an investor actually makes you care about the future in a really productive way. Because you're foregoing, often cases, when we all invest, we're foregoing short-term gains on the hope that we can help shape a much longer-term outcome in the future that makes all of that worthwhile.
And so I like it when I can see people that have those things at play and that they, even in whatever small way they can, are manifesting that. And I always have a question mark, like how is it possible that at no point you have tried to be invested in your own and your children's future that way?
It's just a question mark for me. Yeah. 58% of Americans own equities. And that includes like retirement accounts. So it's not like they're actively day trading. And so, you know, that does actually, Sachs, paint an interesting picture where maybe the Democratic Party now, which they've referred to themselves, Bernie and Elizabeth Warren, as a socialist, as socialist Democrats.
Maybe this is like part of their feature is to appeal to that large swath of people who don't own their homes, who don't have kids. And, you know, to JG's point about cat ladies and to, you know, who don't own homes, don't have kids and don't have equities. What are your thoughts on that, Sax? Is that maybe how these parties are starting to shape up in the modern era?
Yeah, actually, I think I think that's right. I mean, I think that Elizabeth Warren and Bernie Sanders are now the thought leaders and really the beating heart of the Democrat Party.
I think what's happened is the Republican Party has moved to right-wing populism and the Democrats in response to that have concluded that they need to basically move to left-wing populism in order to compete with that. So both parties are becoming fairly populist. Now, what does left-wing populism mean? It basically means soak the rich, right? It's a strong element of class warfare to it.
We're going to make the rich pay for everything and the rich are the problem. It's this fundamental unfairness of the economy that's causing all these problems. And I think you've heard that over and over again at the DNC. I mean, just the clips that I've seen, this has been a recurring theme is the hatred towards billionaires and rich people.
Tax the rich is a recurring theme. And that's actually a great jump off point here because the big news in our circles this week and on social media was and some of the group chats. is that Harris has reportedly backed some of Biden's really out there tax plans, which include a proposed 25% wealth tax on people with over $100 million in assets.
Important to note that this would be very hard to pass because getting these tax increases, you'd have to get through Congress, et cetera. But let's just talk about what the proposal is because it's out there.
in Biden's 2025 tax plan, which the campaign has said to Semifor, which is a niche publication, like a newsletter company, that, and I'll just give the quote, in a little notice portion of its Friday analysis of Harris's new economic plans, the Committee for a Responsible Federal Budget wrote that her campaign said,
it endorsed the suite of revenue options included in President Joe's recent budget. And that's the FRB report said, quote, the campaign has communicated to us that Vice President Harris continues to support all of the revenue raising provisions in the president's 2025 budget. So there is continuity confirmed between Harris and Biden's plans.
I'll just explain as simply as I can what this extreme plan says, and then I'll get Chamath your take on it. Biden's proposed 2025 tax plan includes the following. 25% unrealized cap gain tax on those with over 100 million assets. 28% corporate tax rate. Right now it's 21. Trump had proposed a 15% rate and quadrupling the stock buyback tax to 4%.
That's when a company buys their own shares as opposed to putting it to work in the market. The stock buyback tax was created as Biden's Inflation Reduction Act of 2022. It's just 1% if you want to buy back your shares like Apple and some other companies do.
But let's unpack the 25% unrealized cap gains, because that seems to be, you know, the most, let's say, I don't want to say triggering, but the one that's triggered the most number of people. There's 5,000 people who fit into that category. What do you think, Chamath, of this proposal? Fair? Unfair?
Crazy? Socialist?
Anti-American?
It's less about fair or unfair, but I think that we are in the part of the cycle where enough people don't feel the positive aspects of capitalism that they want to push back against it. I just put a little image in here, Nick, if you want to just throw it up in the chat. But when you look from 1913 on to today, the reality is we've had
many different forms of political philosophy that have governed the country. And what you can see is that tax rates have varied wildly at the federal level. And I think it's because that at certain times, there was the political will to go to extremes. And this may be a moment where we are going to explore the extremes that we had in the 40s and the 50s.
And I think the reality is that if that does happen, you're going to see people behave in ways that weren't possible in the 40s and 50s. In the 40s and 50s, everybody was more geopolitically constrained. I don't think that that's the case anymore. And the way that people start companies, where they start companies, the flexibility of citizenship have changed really dramatically.
So if it's the will of the people that they want to explore these mechanisms, I think other people will react in kind and the die will be cast. So I don't have much of an opinion.
And you're referring to removing, I think you're implying people might be able to move to other places and create companies there. Is that what I'm reading into it?
Let's put it this way. We have a small microcosm of this going on within the 50 states, which is, if you said California was the United States, And Texas and Florida were, I'll make up two different countries, Malta and Dubai. Well, what happens when taxation goes beyond the pale? And what happens when budget deficits and spending go beyond the pale?
And when the government plays too large of a hand in the economy? Yeah. People leave with their feet. Companies leave. So we don't need to guess what's going to happen, because if it can happen between California and Texas, it probably stands to reason it can happen between the United States and the UAE, as an example. Yeah.
You already have a bunch of hedge fund manners moving over there, right, Shamath? People are starting to buy apartments in Abu Dhabi.
There's golden visas in some great countries. Portugal has a golden visa. The UAE has a golden visa. Italy has a golden visa. The UK had this great program, what was called non-DOMs for a long time. So the point is that all of these took advantage of countries that went to extremes, and they lost citizens as a result.
And I suspect that if what the US voting population wants to do is explore that extreme, these policies will get enacted, and then people will act in kind. The only thing that I would just, again, reinforce is... Unlike when taxes went to 90% in the 40s and 50s, people are much, much more mobile than they were then.
And that was during World War II and the post-war era. Freeberg, your thoughts on this proposal specifically, which impacts a very small number of people, although maybe a high percentage here.
Yeah, so just to give a little more detail to it, J. Cal, and you can actually see it, I think, Nick, if you want to pull up the page 8283. in the document. So the wealth tax is 25% of your unrealized capital gains if your net worth is above 100 million. And the first time this happens, you can split up the payments over nine years.
You have nine years to kind of pay down the assets or sell the assets or borrow the money you need to make those tax payments. After that, you can actually make those payments over five years. Those payments are ultimately treated as prepayments on taxes that will be due when you realize the capital gains.
Every year you have to report to the IRS, separated by asset class, the cost basis and the estimated value of every asset you have. You then have to determine your tax that you owe because of the difference from last year. You start out with tradable assets of stocks. Those are just valued at the end of year. Illiquid assets like private companies or real estate.
You don't have to get a valuation. If there was a financing event or some other sort of major revaluation, you have to use that value. And if there isn't, the number goes up every year by some nominal rate that will be set by the treasury. So the treasury is basically gonna tell you what they think the value of your company has gone up on an annual basis. And that's the determination evaluation.
You can file an appeal. So for all the entrepreneurs and startup people listening, There's a process that they're proposing that is basically the government saying, if you didn't get a new financing round done, the price goes up. And if you disagree with the price going up, you go back and you appeal it.
Let's pause there for a second, Freeberg, because this is super important, I think, to the audience here. Somebody has a startup company. It becomes worth $10 billion. It has $100 million in revenue. It's doing well. It's losing money. 409 valuation comes in. founder owns 25%, co-founders own 25% each. They own two or $3 billion in stock.
Now you've got an illiquid founder who owns $3 billion in stock. Company's not going public. There's no secondary market. What would happen to that founder? Would
So they've addressed this and that's the final provision. And what they said is that if a taxpayer is treated as what they're calling illiquid, meaning that their tradable assets, the stocks that they own or the cash that they have is less than 20% of their total wealth, then they may elect to include only the unrealized gain in their tradable assets to determine their tax liability.
However, if you do this, you will actually have a deferral charge, which means you'll ultimately pay a higher tax on the capital gains on your illiquid asset when you do have a realized capital gain on it. So they're trying to cover the fact that people might have all their assets tied up in real estate or all their assets tied up in private company stock.
And again, I feel like we're kind of shouting into an abyss here because this is only going to affect such a small number of people. But they've really tried to write this in a way that ultimately covers the kind of pushback that you're highlighting. I'll say one other piece of pushback that's been received and tested in the Supreme Court.
A lot of people have said that the 16th Amendment prohibits this taxation. A ruling from the Supreme Court was published June of this year. And in that particular case, there was a repatriation tax for folks that left the country. It's the Moore versus United States tax case.
And when people left the country, the government under the Tax and Jobs Act, which was passed under the Trump administration, the government had a right to go after people's assets and tax them on their unrealized gains, even after they give up their US citizenry. This was challenged to the Supreme Court, and there was a number of amicus briefs filed
on this case that said the government does not have the authority and Congress doesn't have the authority to actually tax on unrealized capital gains. And at the end of the day, the Supreme Court agreed to hear the case. And they did not overturn on the position that the government actually did not overstep their authority to be able to tax unrealized capital gains.
So there is some Supreme Court case precedents here that indicates that this will not get thrown out on an unconstitutional ground basis. So there is a lot of conversation that this might actually become a real case. I'll pause there. And I actually have a theory I want to talk about in a minute, but it's a little bit of an extension from this point. But that's a summary.
Is this a seizure of assets in your mind? Is it constitutional in your mind? Two questions there.
It's certainly a confiscation. I mean, basically, this tax is directed at centimillionaires and billionaires to basically take 25% of what they have. I mean, that's basically what this is about. There's a good reason why realization is one of the core concepts of our tax code. Realization gives you two really important things. Number one, you have a sale price, right?
Realization means that you sell the asset, so we know exactly how much you made. Number two, you have the liquidity to pay the tax bill because you've just sold the asset. The problem with an unrealized gains tax is both those issues. Number one... We don't know what the asset's really worth.
It's easier to put a value on a publicly traded asset, but a private asset, it's very hard to know exactly how much it's worth. The valuation's bouncing around all the time. What this bill would do is create, I guess, a whole new process and bureaucracy to try and put a value on that. But it's going to be really complicated to comply with.
All of us are going to need to hire a whole new legion of lawyers and accountants. So, I mean, you're talking about a whole new... essentially tax bureaucracy that's going to spring up around this concept. On the liquidity part, you're being taxed a huge amount without having the cash to pay the tax bill.
And yes, they've tried to mitigate that by creating this installment plan, but you're still going to need to go out and sell large chunks of your company every time you get an up round in order to pay the tax bill. And that means that you're losing ownership of your company. All these assets are going to be dumped on the market. And you're basically starving the market of capital, actually, right?
Because all these people who are owners of their company are going to have to go out and sell a big chunk of them.
This is going to put so much cold water on the entrepreneurial market. It's going to make people just have less liquidity to invest in things. I think this is going to be disastrous. It's going to cause a lot of people to retire early because they just don't want to deal with all this. Well, Friedberg, what's your theory?
Okay, I've got a theory.
Oh, theory. Here we go. Good.
I was trying to figure out why we seem to be like embracing socialist principles and why I keep seeing more of this stuff become mainstream and almost become normalized. And I was looking at the total GDP of the United States is $25 trillion. The federal budget for next year is proposed to be 7.2 trillion. And state and local budgets combined is about 4 trillion.
So if you look at government spending, it's about half of GDP now, state, local and federal, which roughly equates to about half of people in the United States are employed directly by government, or indirectly, because the government is the primary revenue source of their business.
And I think that that's why this set of policies, and I'm not talking about the tax on the centimillionaires as much as a simple disregard for the fact that the United States over time, the prosperity that we've realized has been driven by a free market economy. by enterprising individuals going out and saying, there are people that are asking for things.
I'm gonna figure out a way to build those things and make it for them and sell it to them. People will pay for it. They will work hard to do it. And the incentive structure in a free market has enabled productivity improvements and enabled ultimately prosperity. but we've reached a tipping point.
And the tipping point is when half or more of the population begins to be employed by the government, at which point that concept is lost because now it is the government that is the employer, not one's own individual liberties and ability to go out and be enterprising. And so I think that the budget of government tipping to 50% of GDP is the reason why these policies become mainstream.
That's my theory. And so it's a relationship of government spending as a percent of total GDP, which translates into employment. Very reasonable.
Scary, but reasonable.
Well, you know who said something similar? Back when Mitt Romney ran for president, he was caught on tape saying something to the effect that 47% of Americans were net government recipients. And if that number ever got to 51%, then basically the free market system would be finished because it'd be more takers than makers. Tipping point. More takers than makers.
And he was forced to apologize for that. But there is a fundamental logic to it.
I wouldn't use the term taker sacks because there are hardworking people that work for the government. And so it's not necessarily about just taking a free check or there's certainly an aspect of that to some degree. But it is about the government becoming the primary supporter of individuals in this country through employment or through subsidies or through checks or through what have you.
Yeah, I think that's fair. I think that's totally fair. I'm not disparaging the efforts of legitimate government workers because you do need a government.
Or private company workers that just happen to have the government as their only customer.
Right. But the point is that when you become a government employee, you have a vested interest in government. You should have a vested interest in the private sector as well because that's what generates the tax revenue to fund the government. But as a practical matter, government workers vote massively in a block for the Democrat Party.
And in many ways, the Democrat Party is the party of government workers. You look in California, for example, the various – government workers unions are the most powerful players in California politics.
What's the political affiliation of like, has there ever been surveys done of employees at the federal level and what their political affiliations are?
Oh yeah. Vastly, vastly more Democrat. I mean, look, the Democrats are the party of government. Absolutely. I'm surprised by that because I would think that within the ranks of the military... If you look at the enlisted military, there's a lot of Republicans in there. A lot of military families, especially Republican. But you look at just government workers, vastly more Democrat.
I think there's other things happening as well. I mean, look... American capitalism requires a robust middle class. And in many ways, I think globalization has hollowed out the middle class. There used to be a large middle class in this country of blue collar workers who worked with their hands. They were not knowledge workers.
And they worked in factories and they did kind of blue collar work and they could still make a middle class living. And I think that over the last decade, 20 to 30 years as a result of globalization, millions and millions of those jobs went away and millions of factories shut down.
So the middle class of America that's not, again, that's not knowledge workers, were really pressured by basically throwing open American markets to foreign goods. Now, you could argue that that lowered prices and that created consumer surplus and the benefits of trade.
Do you support the Trump tariffs as a solution there, Sachs? Because those are fundamentally going to be inflationary, which is going to make the costs go up for everyone. Well, I don't know.
But I'm just pointing out that there was a real price in terms of having this free trade that led to huge trade deficits, which is this vast American middle class of people who worked with their hands got put out of work. And I think that removes a huge incentive for people to be invested and to have a vested interest in the free market system.
Sachs, let me ask you one more question. Do you think that the Biden administration's bills, the Inflation Reduction Act and the CHIPS Act, both of which were meant to revitalize that middle class kind of industrial economy through government funding of developing new facilities in the US to onshore manufacturing, is that not a good, reasonable solution to that problem?
Well, those are two very different bills. I mean, the Inflation Reduction Act, just the name itself should tell you that it doesn't do little. I was joking.
It should have been renamed the Inflation Maximization Act, the IRA.
Yeah, look, who benefited from that? Our friends who are energy investors, who you know who I'm talking about in our chat room. Easy, easy.
Stray bullets everywhere. No, I'm not going to say his name.
Take it easy over there. I'm not going to say his name.
He's taking a stray.
But his nickname is Deep State, but he's an energy investor. He said that this bill was the biggest bonanza that they've ever seen He said these guys were running around like, you know, it was like the Beverly Hillbillies where they struck a gusher and they're running around with pans trying to collect the oil. That's what he basically said this was.
But it was a bunch of energy investors at Stanford. Like a diamond mine exploding. And the manna was coming down from heaven and they're just going to collect as much of it. That was a huge boondoggle and payoff for these green energy investors. That's who it went to. It did not benefit the middle class at all.
What about the chipsack?
The CHIP Act is more complicated because it does create incentives for manufacturing in America. And moreover, there is a national security element to it because we need these advanced chips. We can't be totally dependent on chip makers who are in foreign places within 100 miles of the Chinese mainland, right? So that one's a little more complicated. Meanwhile, Intel is imploding.
you know, they can't manufacture.
Well, just to finish the thought, I mean, the issue with the CHIPS Act is that there's a lot of good reasons to believe that even if we incentivize this, we're still hopelessly behind. And the CHIPFAPs that we're building are just, they're still years behind what they have in Taiwan, for example. So it's not clear it's going to work is my point, but I think the motivations make a lot more sense.
All right, everybody. This has been another amazing episode of the All In Podcast. Socialism is garbage and it turns into communism. No, I'm exacerbated. I mean, if Kamala doesn't get out there and start doing some interviews and explaining herself, I'm out. I mean, I'm out.
Wow. Making news. Making news. Why are you doing this at the end of the show? I'm just frustrated. I'm literally going to smash this laptop with my tractor. Right when J. Cal was about to become a centimillionaire, she shut the door.
I mean, it may have already happened. Anyway. Anyway. Oh my God, that's so funny.
Uber rally to what's the price now? 80 bucks or something.
Uber over 60, you're going to get a much different answer from me.
We need someone to generate a meme. JCal at $40 a share. JCal at $80 a share. Republican.
No, I mean, I just, we need to get Kamala on this program here. Face the music. Let's go. You want to run for president? Come on all in and let's talk about it. If she's not going to answer basic questions, it's disqualifying for me. Who's trying to get her? Is anyone trying to? She wants on it. I mean, she wants on it. But I mean, we'd love to have her on. We'd love to have JD on.
We'd love to have Waltz on. Let's go. Let's have some real conversations about this stuff.
By the way, can I just make one final point on the whole unrealized gains tax? Absolutely. is that would raise about 400 billion a year for all these tax hikes. That's only 20% of the deficit we're running right now. We don't get anywhere close to closing the deficit with all these tax hikes. What that means is you have to cut spending.
Moreover, she's got a bunch of new programs to increase that deficit. And we know that that $400 billion number is an optimistic scenario because like Chamath was saying, the rich people are going to flee. They're going to try and move their wealth into structures or places where it's hard to tax.
I think it's actually more than that. I think what will happen is funds, governments, et cetera, for the right entrepreneurs with the right assets will help you pay the exit tax more. so that you can just leave the United States.
And that's going to be an investment class that's going to emerge, in my opinion, which is these organizations that will pool capital, sovereign wealth funds specifically, and when an entrepreneur shows up and they have, you know, 50, 100, a billion dollar tax bill to expatriate from the United States, they will pay it for you.
And the reason is they'll bring the jobs and they'll bring the know-how and they'll bring the future capital investment into that country. It's a very easy investment to underwrite actually. So I would just pay a lot of close attention to the fact that capital flows are very fungible in 2024 and they'll only become more fungible over time.
Buenos Aires is a beautiful, beautiful city.
By the way, this happened in France. I mean, they literally did this. They tried it. A lot of French citizens all of a sudden became citizens of Russia.
I think it's important, though, you have to now go to the logic. If this is what people want, I think it's important for people to see the impact of it and then for them to have to change their mind or stay with what they're doing because it's working.
Yeah, it's not going to work. You're right, J. Cal. In France, in Norway, this was tried. Every time wealth taxes get tried, what happens is the wealth flees, and you never raise as much as you think you're going to. And then what happens is in order to raise that money, they have to apply it to more people.
Elizabeth Warren already wants to apply it to Americans with a net worth of $50 million, not $100 million. So this whole idea that, well, this won't affect me because I'm not one of those rich people – The IRS was created and when they created the income tax, it was originally only supposed to apply to less than the top 1%. Okay, I got to go.
Love you guys. So everybody, thanks for coming to the All In Podcast, episode 193. We'll see you next time. Bye-bye.
Take care, boys.
Wet your feet. We need to get merch.
And now, the plugs. The All In Summit is taking place in Los Angeles, September 8th, 9th, and 10th. You can apply for tickets, summit.allinpodcast.co. And you can subscribe to this show on YouTube. Yes, watch all the videos. Our YouTube channel has passed 500,000 subscribers. Shout out to Donnie from Queens. Follow the show, x.com slash the all in pod. TikTok, the all in pod.
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