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COVID-19 Political, Economic & Social Ramifications

All-In podcast.

March 15

In their new podcast, All-In, Jason Calacanis and Chamath Palihapitiya are joined by their scientist friend David Friedberg, to talk about political, economic & social ramifications of the coronavirus. It's a great episode. Enjoy!

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Hey, everybody, Welcome to the first episode

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of the all in

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pot and Jason called Cat is that calculator

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was where we're trying to save ourselves from the end

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of the world. It is literally, you know, we thought we'd start this podcast on April 1st Tomato and everybody thinks it's a big joke that it's an April fool's joke. I just happen to be the time with Perfect. We had full intentionality of story in the pockets, but we're sitting here at home quarantine. And how many days have you been home was the last time you went out of

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your eye? Well, I've gone out. Um, but I've basically been self quarantined for two weeks now.

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I haven't left my house since Tuesday in it, and we were showering about 70 I it is, you know, came off. And I decided, since you know, we're gonna talk about obviously the Corona virus today we bring in the smartest person we know in terms of the biotech and health space. And that's David Freeburg, who's a close friend of ours. He founded um, or co founded climate dot com metro mile. Ah, and he now is the CEO of the production board, which is a bio tech incubator accelerator Startup. Um, what do you have your car to A David? Yeah,

we're a foundry. And broadly, life sciences, food, agriculture and human health. Got it. So they actually before before

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we do that, can we actually give a shout out to our sponsor, which is all the incredibly shitty enterprise software that nobody fucking uses? And there are no coupon codes because there are no ads in this podcast, nor will there ever be

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back cuties, which I really appreciate. It gets better battered. Jason. I wanted to a podcast. I want you to put all your resource is into it all your time into it. And here's the best part. The entire business model is we lose money thanks to my fantastic.

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It's like it's like a microcosm

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of the venture industry all in one podcast. So, uh, let's ah, just talk about and start off here with, you know, we're sitting here and today is the 14th of March, this entire corona virus, um, epidemic. And you know, essentially the chaos really has only started here in the United States in the last 72 hours or so that people are actually taking it seriously. They canceled the n b A, and I think that is the definitive tipping point of when it hit public consciousness that this is no joke, and it was really kind of dramatic. And Timothy, obviously,

you're part owner of the Warriors. Um, and so it's, I think it's a good thing for you to discuss. When you saw that announcement that at Tip Off, they found out that one of the players tested positive and they canceled the game and sent people home. What were you thinking? Obviously, there's a financial aspect of this, but the more important one is the unprecedented nature of this.

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What is wrong with our Covid-19 response strategy?

It seems that a response to a massive pandemic should come from the federal level. Instead, we had states, and individual organizations and local governments react first, in an unpredictable and uncoordinated manner, with little strategy.



Um, I I actually had two thoughts. The first thought was It's incredible that all these organizations other than the federal bureaucracy, were taking such swift measures on the room. Um, I mean, typically these things, a reaction to a pandemic should be institutional and very much top down. Um, I think even every libertarian amongst us would sort of say, I mean, this is the kind of thing where the president of the government needs to step in first and kind of like dictate how things should happen. Instead, it was local government, state governments, sports leagues, companies all making decisions in the absence in a vacuum of leadership.

That's the That's the first thing I thought. And then the second thing I thought was these actions are too unpredictable and they're too all over the place. So you have some states and some organizations acting in a really decisive, aggressive way and others not. And so, in the absence of highly coordinated action, this kind of, you know, half in half out approach, um is probably as bad as the, uh, you know, no strategy. Sort of clapping as a strategy in blackjack. Um, and so those are my two thoughts. I don't know. David. What? How did you react?

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I mean, it seems like it's about time, you know, we're kind of a little bit behind the times in terms of the behavior on on reducing social isolation there a lot of people calling for it weeks ago that the US is behind the eight ball on this thing. We really missed it. Missed the mark, but obviously as soon as ah person shows up and tested positive at a game, it's like and, you know your objective is don't put anyone at risk. You gotta shut it all down. So it seemed inevitable. You know, it's unfortunate that this sort of behavior wasn't done earlier, where we could have kind of mitigated. The spread is, as we've seen kind of be successful elsewhere. David,

why didn't we do that? You were tracking this from an early stage. We were talking about it during the poker games and just, you know, when we're chatting in our online group. And you seem to understand that this was very serious. Very early. Ah, Balaji Ah, pronouncing his name correctly from formerly of injuries. And Horowitz was on this like in what? Late January early February. And here we are six weeks later and we're taking it seriously six weeks later. Why do you think there was this crazy failure? Toa anticipate this? I mean,

it was It was right there in front of us. We were washing the streets of Wuhan being blasted with chemical cleaners and we just sat there and just retweeted it and we didn't do anything. I think it's a lot like climate change. If it's not immediate in terms of time and space. You don't take action as soon as it becomes immediate in time and space. You kind of, you know, jumped action. And it may be a little too late at that point. Does the fire's already kind of run down the meadow? So

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you also we also politicized it from day one. I mean, you know, people have to draw a line in the sand. Trump had to draw a line in the sand, which is I'm not gonna threaten my presidency. And so he had to downplay it, and he had to sort of, you know, you know, puff up his chest a little bit. And that kind of rhetoric from the president of the United States, whether you like it or not, flows downhill. It touches the CDC, it touched HHS. It touches Fox News.

And you know, you have behaviors that were dependent and that are pretty correlated. Two sets of attitude. So, for example, I don't know if you guys saw, but there's been this incredible retweeting, um, of open table reservation data. Incredible is incredible. And what it shows on the open table block, and I'm glad that they put the state out. I don't know how long they've been doing it, but it shows reservation volume on a state level and on a city level. And as it trends over time, and what you essentially see isn't places that have taken social isolation Seriously,

Uh, you know, if you use restaurant reservations as a proxy for people's propensity to take this pandemics seriously and socially isolate, it's falling off the cliff. And, you know, reservations are down 50%. And in other places where you would otherwise be, you know, a believer of the rhetoric or a believer of, you know, different versions of the news that painted this thing as anything less than a pandemic. What you saw was, in some cases, I saw Oklahoma City as of yesterday, um,

where traffic to restaurants was up. And so if you have a multi week asymptomatic, you know, uh, super spreader population in any of those states, um, you're going to see some really difficult circumstances, and it will unfortunately in the near term, be drawn on what seems like political lines not dissimilar to climate change. That's David says,

8:31
Should we be worried about the anti-science movement?

Anti-science had happened throughout history, it's nothing new, and in the long run, science will find truth more than the fiction will.



Hey, David, when when you hear trim off sort of breakdown of Trump didn't want to risk his presidency by being alarmist, having the stock market crash and then as somebody who has spent their life in technology and science. Um, the anti science, anti expertise, um, kind of paradigm we've been living with his last couple of years. How frustrating is that for you when it's so obvious, what needs to be done and then in terms of what needs to be done. If you were president and you have seen this in January, what would you have done, David, if you actually had the ability? And it was Jen would say it was February 1st and you had seen you know what happened in Wuhan? What would your line of attack have been?

Well, I think that the anti science rhetoric, by the way, is just nothing new. You know, we view it reasonably widespread. Now there's been anti climate change. You know, I've got a personal history because I sold my last company to Monsanto. So I sat on the side of the anti GMO movement. Um, and you know, we've seen this throughout the course of history, right? Anti copernican, anti Galileo.

I mean, this is not new. There's institutions and systems that benefit from people, not kind of necessarily being, you know, connected to science and what it can prove, Um, and what it demonstrates, you know, the reality is overtime truth, emergence, Right? So science will find truth more than you know, fiction will. And so hopefully we'll realize that over time. The problem is that the interim kind of damage it can cause from a president presidential point of view,

I think the first thing that was missing is just testing. And I just want to talk about testing for a second because, um, it's so critical. We've talked a lot over the last couple of weeks in the media and as a group about, you know, where's all the tests? Where's all the tests? One of the important things to understand is the tests that were doing today on the tests that everyone talks about are called PCR tests and these air tests that basically measure active living viruses in your body. So measures there are in a and so if you, um, do a PCR test and you're positive what it's telling you, there is an active virus that was in your body. If you did a PCR test and you were sick with a virus a few weeks ago, it would show up. It's negative,

but you were still exposed to the virus. And one of the things that we don't really knows how many people have actually been exposed to this particular virus And for how long? So one of the S O the PCR tests are really important about getting an acute case care for as quickly as possible and quarantined as quickly as possible. So that means you're in this kind of active in section state. But what we really have missed the boat on and we're still missing the boat on is knowing who's been infected and to what extent this thing has actually spread already. And you could do that with what's called an I G test or an I G M test, where you're measuring the antibodies that show up in your blood and they'll be there for months for I GM and then for years with G, and you can see if someone's actually been infected. And these tests are super cheap to administer a super easy to make, and I think that would have been the first thing to kind of take off. You know, you should still have the PCR tests, but they're expensive and they take a long time to to run and they require chemical labs and all that stuff and I g i g m test. You could do like a pregnancy kit anywhere on the street. So we should have had 10 million of these things distributed as quickly as possible. We should be putting them in airports.

Are, you know, in local hospitals, local community centers To really understand Wendice thing hits us. That's the best way to know taking someone's temperature. All that that tells you is, Hey, this person has a fever. By the way, only 80% of people that get this thing end up with a fever, you know, when they kind of get checked in. And so that's kind of a crazy stat, right? 1/5 of the people don't even have a fever that are actively infected with this virus. So we're missing a huge percentage of infections if we're just taking temperatures and then doing a PCR test and we're missing all the people that just were infected,

something that would've been the first thing is like figure out where this thing is infecting people. To what extent? And getting in front of it. Um, yeah. What is the state of testing right now? Do we keep, you know, having these press conferences hitting Trump on Friday or yesterday? Today, Saturday, the 14th of March on the 13th. On Friday, their teeth. He had what most people thought was, you know,

his best performance. He had his best leadership yet, obviously way too late. Um, and he said, Hey, we're gonna have millions of these half. We're gonna do them at Walgreens, and we're gonna tap the private sector. This seem like a really smart move to tap the private sector. Trim off. Do you think that this is going to be effective?

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Will coronavirus be the end of Trump's presidency?

According to Chamath, now that Trump tapped into the private sector to help combat this virus, their success and failure is intertwined. Provided we are able to put the virus behind us without further complications, and Trum is able to secure an economic stimulus package to restart the economy, this will only aid Trump's re-election, showcasing him as a strong leader who got the job done.



Well, I think, um, the only way that will know whether this was effective is if we can actually figure out, um, how to get enough throughput so that we can manage the number of beds and the and the hospital facilities we have. So, you know, at this point, I think everybody admits that this thing is gonna roll through the population of the United States What we're basically betting on now is how long that takes and how well that's managed and in part of that has to do with how we can differentiate, as David said, people who are, you know, symptomatic from the people that are asymptomatic but still positive. Um, and then we can sort of enforcing more strict code on quarantining if all of those things can happen will be in a reasonable place that at least managed the onslaught. Um,

the thing with tapping the private sector in many ways is it's a brilliant strategy politically, because it now sort of embraces ah whole bunch of companies that are in the consciousness of America as part of the solution, which, actually, by implication, means that if this thing gets worse, they are also then part of the problem. And I think that from that perspective, being ableto you know, spread out and smear the blame while preserving the optionality for, you know, leadership. In case it works, I think was the right thing to do.

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Incredible, incredibly cynical. Ah, and probably accurate.

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You're basically saying I'm not being cynical.

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No, I'm incredibly cynical to actually do that. I mean, if that was actually Trump's thinking to say, Let me spread the risk here. I'll make Pence and Walgreens and these companies the fall guys, If it doesn't work

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out well, I mean, look, let's be fair. These guys were inside the tent for two weeks, So the only reason to bring them outside of the tent and have a presser where you shake their hand used to do exactly that, right? And so they were. They were part of the solution when we thought the solution could be contained, but that but that solution was kept relatively private. And the front facing, you know, person on the front lines. Was the president of United States all reasonable When it looked like this thing was getting out of control, what we needed to do was reestablished some sense that there was a broader team in place and put all of these other people out in front. I mean, in fact,

if you heard the presser, the most interesting part of it was how adamant he was that people asked these other people questions. I don't know if you guys were listening to it. It was this constant refrain. Does anybody want to ask these brilliant geniuses on stage with me any questions. And you know, the press had zero interest because they really wanted to understand his mindset. So, you know, I think that from a from a political game of poker, we've done the right things. He has done the right things, which is he's kept Optionality to say, Look, you needed a steady hand in the till. That was me.

I didn't overreact on the front end. I brought in these people in the middle of it. And if he is able to salvage and enormous economic stimulus package, I think the odds are on his side that history will judge that he will have done a good job. And more than that, his odds of getting reelected are actually higher than in the absence of Corona. While now, if none of those things come to pass or many of the other Pap dependencies tickin and things were much worse, then that's probably not true. But from a from a political kind of poker game, Um, I think he has done the best he could from where he waas, you know, the last three days he's in the best position. He could have bean in all things considered

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unless he had actually done the testing and taking it seriously from the beginning, which is something. Also, the press seemed very weird about David. I want to get your perspective on when biology was tweeting about this and then the information faces. I'm sorry. Hey, I have had it on the pocket. That was LA geology biology, apology, wallets. And it only took me six years to figure out how to say Palihapitiya. And now I'm correcting everybody on how is that your last name? I appreciate that. Um David, when you saw his, I didn't look at the last name.

That's the best D. C. When? When? Uh, the Rico journalist who wrote that ridiculous story about like Silicon Valley is paranoid about handshakes. How much of what the media is doing is just completely inaccurate over these last couple of weeks. And what are you thoughts as an expert who's quoted in the media about this movement in late stage journalism? Where there they seem to be more concerned with dunking and clicks and link bait than the actually accurate transmission transmission of information. When I asked you to just even be on the podcast with tomato money today. You were like, Well, listen, I'm not an expert in here. The smartest person we know in the room about this topic. What do you think?

What do you think's contributing there with the press and their ability to even process something with Like I mean, it's really like talking about science generally is really hard. Science based journalism is really hard. I mean, there's just so much to this, like trying to explain to people the difference between a PCR test and I g test. It's like you got to go do bio one on one and have a conversation and talk about this stuff. There's a learning curve. So it's It's a 30 minute conversation to explain that it's a 30 minute conversation to explain GMO. It's 2 30 minute conversation to explain climate change, but I would argue that the journalists assault or not the journalist. I don't want to kind of put down journalists, but I would argue that consumers consume the media they want to consume, and then that media wins in the marketplace for media, and I think this is just generally true like we wanna have six second sound bites. We wanna have 140 character statements as a consumer class,

and as a result, like the media production that caters to that demand is gonna win, and it's gonna do better. So, you know, if we want to see stuff that shit, talk to other people and blows up companies and, you know, puts down presidents and puts down speakers of the house, we're gonna look for that. We're gonna buy it, it's gonna get more ad dollars. It's gonna And then those journalists are gonna stay employed. And the journalists that are writing long form articles that air science based and require 30 minutes to sit down and read the whole article are not doing as well. And you know, there's no one to blame,

but but the consumer, the same might be said of the presidency and, you know, and other things, like we end up buying what we want to buy. It's not that the president showed up and he's the guy that got elected. He's the product of what we wanted, what the general

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population wanted by the way back to the back to the discussion earlier. The open table reservation data, in my mind, is the single closest thing we're going to get to to a referendum on exactly this issue. Meaning if you listen to MSNBC or CNN or CBS and ABC and you believe that strain of journalism on this pandemic and you took precautionary steps a little bit earlier, then say people who read Breitbart's or you know, I watched Fox News and then it turns out that disproportionately those states were those media consumption patterns are prevalent, arm or affected. Um, it'll be really interesting to see how people, after all of that deal with those choices and the implications and then start to realize that, you know, we've been past the days of journalism for a long time. We're in the business of editorializing, and we've been in that business fence. Basically, Facebook and Google,

you know, kind of destroyed the ability for journalism as it stands to remain intact now. They didn't do it on purpose. Um, but it was the implication of building one and 1/2 trillion of market cap and you know, consumers in many ways, as David said, not only let it happen, but added gasoline to those fires. But those things never resulted in anything meaningful. Until today, the linkages to depression were kind of, you know, relatively brittle. The linkage to other things were relatively brutal, so there weren't necessarily direct health implications to your media consumption patterns. This may be the first time where we can actually show a direct correlation to you consume a specific media and a specific editorial ization of a problem. You end up with one result versus another. If that does end up happening, it'll be really interesting how people internalize that result after this is all said.

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Ah. So if you're watching Fox News and they tell you Corona is a hoax, which the President and Fox were literally saying 10 days ago, this is a hoax. It's part of the Russian conspiracy of the Ukraine conspiracy, and now they're going corona crazy and this is a conspiracy. And then you decided you would go out to eat, which the open table data is showing. They're doing on Mass and you die or your grandparents got for to die. Maybe you gonna reflect on the the actual consumption of this, and it's not just excited because the remote is a left leaning publication. They told us that we were crazy for not wanting to shake hands.

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Well, I think I look, let's be honest. Recode is the you know it's fine, but it's in this situation with what we have to deal with. It's kind of the pimple on the dog's ass that let's not worry about Recode. Yeah, like you have, you know, major media outlets who now have a responsibility to get on the same page and tell one version, which is the truth. They have that responsibility now. I don't think there should be any variability between what. CBS, PBS, NBC, MSNBC,

CNN, Fox. They all need to speak from one set of scientific fax as of yesterday, when the president declared a state of emergency. If they're not, In my opinion, there is some level of culpability in those organizations, because if those people consuming those outlets then behave in a different way, which they otherwise would not have, that they had the different version of the news that's not individuals faults. That's the fault of an organization that's optimizing for positioning narrative and monetization over a moral you know, authority and ethical duty that they have to the United States.

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Let's ah, David, look forward here at what is gonna happen from March 14 forward. We have every Apple store closed the n b A on hiatus, obviously as we discussed. And, ah, supposedly a bunch of tests are going to be done in the coming weeks. Who knows? But people seem to be in the major cities quarantining in place, obviously stocking up food for a couple of weeks. If everybody in these major cities does what they're supposed to do and basically rides out the next three weeks, four weeks, what do you think the outcome in those cities will be? David, it'll be Ah, you know what we see in China?

A lot of people look at the curve at the beginning and it looks like an exponential curve of growth, and it is exponential. But, you know, exponential curves end up consuming everything so they don't go on forever. So what they resolved to is what's called a sigmoid curve. So they eventually flatten out the second derivative kind of changes, and they flatten out and you end up with this thing coming down here. The side. It's most biological systems can be modeled with this sort of, ah, a function in my function And so, you know, a couple of weeks away, hopefully from from that happening, it's everyone kind of stays locked down.

The reality is, we just don't know who's affected, infected, who's been infected. And I I do still believe that we're probably at least one maybe Maur orders of magnitude off in our infected population count, especially here in the United States. But that'll thought we'll find that out over the next couple of months. Aziz I g. Tests get produced in China. They're getting shipped over here right now. They're in Italy right now, being used on the front lines, and we'll start to use those to identify how many people actually are infected and things will start to resolve. Um,

25:37

David, what do you think, um, are the best protocols of care and how do you think we're positioned? If people bombard icy use over the next

25:48
Do we have any miracle drugs to treat coronavirus?

There is a trial on the way to verify whether Remdesivir drug might an early intervention solution. Patient given this drug in Seattle recovered within a day.

[Editor's note] Here's an excerpt from the Sciencemag article - "Remdesivir cripples an enzyme called RNA polymerase that is used by many viruses to copy themselves; it does not specifically target SARS-CoV-2, the virus that causes COVID-19. But it worked well in test tube and animal studies of human coronaviruses."



few weeks? Look, there's a bunch of published reports now on what's working and what's not working in China and elsewhere. Italy. I think it's just swamped and overwhelmed. I just want to give you guys the stats. Right? So Italy has about 12 and 1/2 critical care beds per capita per 100,000. Sorry. Um, population. The U. S. Has 35. So we're, you know, three ex,

um, the number of icy. You're critical care beds per person, and then Italy has, um And there are now published reports on, um, on how you can manage symptoms and reduce the ah, uh uh the the duration of the infection and reduce the severity of the symptoms for different populations and these air starting to be employed. And they're showing really great results. There are active clinical trials that will be published in the next two weeks. Sovereign debt Severe. Which is this antiviral compound from Gilly. Odd that anecdotally has had really great efficacy and has really reduce the severity. As long as you catch it early enough and start giving it to patients right away. We're already starting to use it on a compassionate use basis in the United States. The first guy they gave it to in Washington state recovered,

started recovering the next day. That was anecdotal, but we're gonna get more data on that soon I think that we're like we have the pieces now on how to care for people and how to get them to a point of recovery. We just gotta make sure we have enough beds. Enough ventilators. Cities like San Francisco have already taken over hotels like Hilton here, and they're being converted into effectively. I seeyou departments that they could be used for the overflow of the mass crunch as patients show up. Luckily, we haven't gotten to that point yet. Um, but I think that all the tools are there that we should be able to manage down and get the, um you know, the fatality rate hopefully within a range that looks a lot more like what was called rest of China, which was, like,

you know, basically 20 basis points, um, fatality rate of infected patients versus, like Wu han, which is like 4%.

27:42

I thought Ren dez severe David rendez of your house to it has to start like, literally right when your viral load starts to kick in and I read, but tell me if this is true for maximum efficacy used to be administered intravenously.

28:0

Yes, intravenously is the way it's been Gilead just launched a clinical trial. I think now or last week or this week where they're gonna try some aural rendez severe. But, um, yeah, it has been used as an intravenous treatment to date on. And there are there is a public published study now that shone like, you know, earlier treatment with creme de severe had a higher efficacy rate versus later on. And that may explain why it didn't work in Ebola because when death severe failed and Ebola is a very similar virus, tow this Corona virus on death. Severe quote unquote failed in a clinical trial for Ebola, but they didn't have a duration window on, like how long you been infected before you start getting run disappear? For the patients that had only been infected for a short period of time, that got room disappear,

they actually had a much higher recovery rate. Well, Ebola patients And so that is, you know, kind of buttressing that argument.

28:53

And they and these patients also were on Clark went to know. So it's like the combo of the two that seems to be the most efficacious.

29:0

Yeah, it's unclear. I mean, Clark wins. Oh, you know a widely used compound. It's youth for malaria. It's got really nasty side effects. So you know you don't want to overuse it or use it if you don't have to. But it's also shown significant efficacy. And it's being used at some protocols in some countries right now for infected patients of Corona virus. Um, with good results again, like it's so early, we don't have enough data. People haven't actually published enough on these things for it to really be kind of scientifically validated. But but anecdotally,

a lot of folks and the chatter Is that Clara Quinn rendez severe Having really great effects, Um, and people are, you know, something? Some commentary about state considers a known ah antiviral compound. It can stop, aren't a replication and viral compounds. A lot of people supplement was sick for this reason, when they when they have a cold or when they have the flu. Um, and so you know there's there's high doses IQ remedies that are being postulated as having some efficacy. But it's too early to say with great certainty what the best protocol is. But there are different variations of the protocols that are being employed there working and reducing the fatality rate. Where you do have, by the way,

you have to have hospital beds. You have to have availability of staff. Otherwise you have what you got in Italy. Italy, like, has already gone over the this people just can't get treatment because there aren't enough health care workers to the number of patients. So, sir, it's a shit show.

30:19

What? What? Why is it that you know, when we look at sort of, you know, if you look at our G I s a world beater. Where are the cases in India? Yeah. So this is where the case is in Nigeria. Like what the hell is going on in those two countries? Why aren't those countries going off the charts?

30:37

You have just ready to me. Because if you've ever been to India, it is a friggin beehive, right? The population density is crazy. You can't do like as much as they say. They've got social isolation going on in India now, the same was true with stars and murders. So it's ours, and birds did not take off in India either. And so some people have speculated that India's failure Toa have corona virus. Pandemic outbreaks has been a result of the high temperature, but if you look at the temperature in India over the last couple of weeks, it hasn't necessarily been that much higher than yes, there's a tipping point and it's around 77 Fahrenheit. But there's there's there's evenings. There were people that in India that have been six of someone's sick and they're on a bus with 80 people in India. It's evening. It's unlikely that you know something is not going on there.

31:20

No. And by the way, in places like Delhi and places that are even north, it's cold. I mean, it's like it's like a winter in in Milan, for example. I mean, it's roughly the same temperature, So the conditions were rife for this thing to spread. But it hasn't.

31:34
Why is Italy having such a hard time with coronavirus?

Statistically, age of the population, smoking, and access to care seems to be the three key risk factors for this virus.

Italy has a problem with all three: a much older population that smokes a lot, and is now completely out of ICU beds to treat these patients.



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What is the death rate for covid-19
The Wu Han data was estimated to be 1.4% of the infecte ...

It seems like so there's three risk factors I wantto highlight that have been identified as potential risk factor that really risk factors for crow devised. The first is the age of the population, so people over 65 as a percent of population, Italy is the third oldest country in the world. Okay, so about 1/4 of Italians are over 65 that is nearly three x or two X with the U. S s a za percentage of population being over 65. And it looks like if you're over 65 you have a 10 to 15% sorry, 10 to 15. Ex likelihood of having a severe reaction to the, uh, the star's Corona virus that we're experiencing right now. The second is smoking, and there's differences of opinion on smoking. But here's a crazy statistic on smoking for you. So the number of people we find the statistic that actually pulled it up for you guys convention it, um the number of people that smoke.

Ah, who? Okay, here it is. Number off, um, cigarettes consumed her year per person in Italy. Let's guess let's set the under over under your moth per person in Italy. So if for a packet of beach honey, that's 7000 year or so if you smoked a pack a day, If half the people do that, I'm gonna set the line of 3500 per year per person.

33:4

You want to be always take the over. I'll take the over.

33:6

Okay, there you guys are both off its 1500. Okay. Okay, so it's United States. Half of the United States is 1000. So the United States smokes. Yeah, 1003rd less, Um, and India, his 89 look, no one smoked in India. And and the percentage of the population in India that's over 65 is less than, like 9%. So India has this confluence of low smokers, older population,

warm weather, younger population. Sorry, younger population, warm weather. And so this may start to extend. The smoker rate is just like two orders of magnitude off from the rest of these guys. Um, so these things multiply, right? So think about Italy. Italy has a very, very old population, like to X with the U. S indexes. And again,

that multiplies by 10. So now you're talking about 20 x the impact of a Corona virus hitting everyone, um, so 20 x, The impact they they smoke about 50% Maur. So call it 30 x, and they have 1/3 the number of bets. And that's a non linear relationship. Because as soon as you Max out on, I see you beds or critical care beds Boom, You're over the abyss and everyone starts to die. And so the Italy problem, maybe a confluence of this, like elderly population, maybe a smoker and smoking population and the critical care beds per capita and the opposite may kind of explain what's going on in India.

34:35

So do you think that India is sort of one or two Sigma to the left and Italy's one or two Sigma to the right and which means that, you know, in a reasonably well managed, But even in a poorly managed situation, you know, we may be a multiple of the flu in terms of its impact plus reminds.

34:54

Yeah, I don't know. And we look one of the things that's crazy is the like, a sip of that. The fact that this to talk about like distributions, Tomas, like some percentage of people have this incredibly bad experience with this virus, and then a huge chunk of the curve have, like mild cold and flu symptoms. And yes, there's anecdotal people saying, Oh my God, it's soft. It was, like, worse than the flu. But there's a large percentage of people who are recovering reasonably quickly and seem to be getting over this thing,

and that's of the people that we've actually tested positively with the PCR. We don't know how many people there are. It's gonna be a symmetric right. It's not like we're gonna have an unusually high number of people that had really bad symptoms that didn't show up. We're likely gonna have ah, much higher percentage of people that didn't have symptoms that didn't show up. And so there is some, like, multiple, probably of people that we aren't accounting for this point that have happened

35:45

of irises. I mean, like, if that's true, then there's There's a lot of logic actually to being out, because then if a lot of people have gone through this, then you're promoting that point where you get to herd immunity faster because then the folks that basically have these anybody's air out in the field absorbing all of the spreaders and actually mitigating,

36:7
What is herd immunity and why is it important?

Once enough people have gotten exposed to the virus and survived, they now have antibodies and are no long able to transmit the virus to other people. At certain point, once enough of a population has been exposed, the other part of the population ends up been safe from new transmissions.



though that's the China the herd immunity. They heard concept. So if you end up being exposed to a virus like this virus, you develop antibodies to it and they stay in your body for 20 years. So when you hit that virus again, whether it's like chicken pox, or measles are very similar. Your body will automatically wipe that virus out of your body. You don't have to develop the antibodies. They're already there. So you know the correct area. Yeah, you're actually, Technically, they call it immune, right? You're immune to the virus now,

and so the more people are immune, think about a network with notes on it. Yeah, uh, there's a note in any notes that it touches get effect infected if one of those nodes gets infected. And now it turns off and it can't infect other nodes. Any virus that gets near that note, it's no longer gonna be a point of transmission. And so the more people have this thing and the more people develop immunity, this is why you have a sigmoid curve. At a certain point, it stops spreading with as high a rate. The current statistical rate that's estimated for this virus is 2.5 infections per person, infected and flew just by kind of comparison is 1.5. Um and so this looks like a very contagious infection today. But after enough people get infected,

the curve flattens out. And for people to understand this drum up. What was the when you were heading growth at Facebook? What was the viral coefficient at the peak? You know, one person joins Facebook. How many people have seven Act with Facebook? Seven. Right. So if you have something like seven at the peak for Facebook, it hits of over a 1,000,000,000 users in some 10 year period. Here we're talking about, you know, a

37:41

fractal. Actually, that's that's an incredible example, because, like, if you we used to call that kay. But in science, we call it or not. But if you are not, is is, uh is seven, then you you actually can see how, uh, you know, in about two and 1/2 years, you touch basically three billion people. Now,

that's that's like, you know, if you consider so in this interesting way, actually, Facebook's growth of not of users but a registered users. So people that may have turned out that's an incredibly interesting model for, ah, highly viral super spreader disease. In many ways, um, and it shows you the window of time you have toe act decisively to get in front of something.

38:24

Yeah, Facebook did to my space, like my face put basically and MySpace that efficient cause. The products were So, uh, I had so much friction

38:34

you have forgiven. But, David, do you think that people, if we if we run enough testing now to figure out that people have these antibodies, they should be out? No. They should be mingling and interacting. And and should we be sending all people out, like, How do you How do you actually have herd mentality become a useful thing? Because what if everybody just isolates? Look through it so successfully that none of us have this immunity?

38:58
Why are we all hiding from the coronavirus?

If the objective is to minimize the number of people that die from this particular virus, the correct decision is to remain isolated. On the other hand, if the objective is to minimize the economic impact relative to the number of people that will die as a result of bad economic impacts, herd immunity might be a better solution. As a nation, we are simply making a decision to save people, despite the economic impact.



Look, this is a general. There's a philosophical question about an Italian FDA operates, and the CDC and you have to ask these philosophical questions first, which is what is your objective when you solving For if your objective is to minimize the number of people that die from this particular virus, you're gonna have one decision. And if your objective is to minimize the economic impact relative to the number of people that will die as a result of bad economic impacts, you're gonna have a different decision. It's really hard to kind of think in the broader context. If you're staying like don't let anyone get sick and don't let anyone die. Everyone should stay home and not take any risk. Right? And that's effectively what we're doing. And given the uncertainty, it certainly seems to make sense from a policy perspective. We should be doing that today, Um,

you know, But the the result of like, Look, we now know that some percentage of people have, um, have the ideas. And let me ask another question. If I knew that 99% of people that got this thing had no lasting effects and got over it as if it were cold, would that rationalizing everyone to go outside because you have a 99% chance if you catch it, where is 1% of people? If they caught, it will still die. So, you know, how do you draw the line, right?

What's the right philosophical decision in that context? And so even if what we're saying is true that 99% of people can get it, they're asymptomatic. They get over it, they develop immunity and weaken, you know, kind of develop herd immunity and very quickly kind of reduced this thing. Um, we're still gonna be putting 1% of people at risk of death by doing that. Um, and so

40:26

you know what's Ah, guys, What's the over under today? Um, the president said he had a Corona virus test administered last night. Hey, did the 13th that He said that, um,

40:39

and finally

40:40

somebody cornered it. We're on a 24 hour shot clock or less. I have my own view. All go last. But what do you got? What's the over under on? Uh, what? The results.

40:51

You know, he shakes a lot of hands, and he had a lot of foreign visitors, and some of them have had it. I'm gonna put it at I think it's got a 20% chance of having it. 30 something in that range. One in 51 and three. Something in that range. Yeah, I don't know. Five, 5%.

41:9

I think that the answer the answer that we will get is that he's negative. I think that the, um the way in which they do this test is incredibly important. And so, uh, if I had to guess, um, I talked. I talked to sacks this morning about this as well. If I had to guess. Here's what they would do, which is They test 50 people in the White House delivering all of the same. You know, they I mean, like, this is what this is what we would do. You test 50 people in the White House,

right? And an incredibly small number of people know which vial is which person. Then you send it to the lab and you get the results. So no lab tech can ever. If there's even one positive result, you quarantine everybody. And that's probably the most risk minimizing thing you could do so that it's not just the president that gets tested, and then we're not waiting with bated breath for a positive test. And then the government could basically manage how they treat, Um, because I think it's highly problematic in the next two or three days if we found out that he was positive, and I think it's much more manageable to say there were 50 people tested. One person was found to kid. Be fair

42:28

or, you know, two or three positive test in record. Everyone's warranted. What are the chances? Anonymous chances not of a snazzier what if the chances that he hasn't already. He's been tested and they're already lying in the sake and that they're telling us, is getting tested

42:42

on all right. I don't I don't don't zero. I think I think that that zero just because I think he's he really is Look, he's, you know, by being the president of United States, the most powerful person in the world, the richest person in the world and the best taken care of person in the world. And inasmuch as those, we all believe in those things which I think everybody around the world probably does, I think it's really important that he is. They're healthy as a sign of strength, quite honestly.

43:9

But what is he sick? And he recovers Jamaat. What happens in markets? Right? So let's say he gets declared, have a Corona virus markets tank is you're saying

43:16

and

43:17

I think that fast forward five days and he comes out of it. He's like, yeah, that stuff But it was

43:21

like I so I think I think I think it's more that we will not be told that he is sick, but that he is quarantined for safety on the presumption that he recovers that's the smartest thing to do. If I were, then I will let me that I would now let me see it the only because the thing is you want him to come out of this 100% and you want him to be healthy and safe guys, much ado about nothing to your point. Because if he can say that, I think that a lot of people will calm down. And then which, by the way, we all need to start talking about which is the second and third order effects of literally shutting the world down for what looks like somewhere between three and nine weeks, if not more. So we can we can get to that task and figure out what's there. The rial corner case scenario is if his situation degrades and you know Mike Pence has to become the president. That's a riel. That's

44:14

it. Yeah, let's let's talk about that. I mean, if this is dark, but I mean, this is the way you have to think about all possibilities if you're making strategic decisions, if he gets on a ventilator, what happens is they're gonna just cause of pure terror and panic the stock market collapses. If he dies, God forbid on some people hate him. And we stopped upon him. I don't I mean, I don't like him. I don't want to see the president or anybody coming.

44:37

Nobody should die from this. Unfortunately, people

44:40

will. He did. What happens?

44:42

I think that I think the odds of that are incredibly low. So let's not even kind of deal with that

44:47

with the rip it. What if a celebrity dies? I mean, yeah, We sit here in America with the N B A and Tom Hanks with the things that made people finally pay attention to this. If Tom Hanks or an MBA player dies from this was put on a ventilator and almost eyes there is that Well, let me have a question. Let me ask the question of like, if they die, and then if they recover in the next week. So as you see, because no one's have these recovery stories, there's been zero of them out there. Everything is about you're in the hospital, you're dying. And

45:13

you know there have been zero here, but there there are tons of them on. We chat, and so you know, for example, like when you when you look at how the Chinese have responded, you know, they went from a massive locked down to a partial walk down to what is being a graduated decline and, you know, a ranting backup of of life as they knew it. Now, in terms of the top down control measures, Um, I think if in Western culture we have to deal with a lot of very visible people dealing with this successfully, I think, ah, people will be more lax a daisy ical than not.

I think if people self quarantine and then get better, that's the best result If people get sick. That we all know and unfortunately are really terrible straits. It's really I think it's really bad psychologically for folks to have to deal with. That is the worst path. Uh, not good.

46:12

Yeah, bigger shop. Yeah, the care. The care of the celebrities is gonna obviously be great. And it's very likely that Tom Hanks and these eh NBA players who are in fantastic health are gonna their local morbidity. And they're getting great care. And they're gonna come out of this thing in the next 10 days. And you know what? Tom Hanks goes back on Instagram and says like, Hey, look like I had a bad cold, That's what it felt like. It was just being knocked out for two days. Um, it just seems to, like,

create a different story that I think most people, at least in United States, are assuming, which is visiting is just pure death. And we're all gonna die from it. We were talking before about the, um, about Italy's profile. Iran also had a breakout. Iran is very young, and they seem to be I just pulled up the Wikipedia page about cigarette consumption per year, and they're right behind the United States with 936 per year per capita. But on a demographic basis, they're very young with looks like only 10% of the population 12% of the pop. Yeah, 12 or 13% of the population is over 55. The rest are under 55.

47:20

Well, maybe you're breaking out of it. Well, maybe. I mean, David says it's kind of now we may be We may look back and realize that this is a disease of combinatorics, right? So if you have a bunch of Anne's. That's the worst case scenario. So if you are old and you have co morbidity, ease and you have limited critical Feyerick it sensibilities and you have a high smoking incidents and so you're, you know, pulmonary compromise is what was immuno compromised. And and Dan Dan, you have an exponential, you know, unfortunately,

47:51

decay function here. And ace two receptor. Um, those two receptor exact. So So it turned out. So the ace two receptor is this protein that shows up on cells, and it is the point of entry for this virus into cells. And so they have now identified that Asian men that smoke, um, have a higher production off this ace two receptor than other men that smoke that there may not be a difference between smokers and non smokers and white people. So they're starting to identify that there may actually be both genetic and behavioral underlines that can increase the entry points for this virus on yourselves. Um and so we don't know yet what? As you know, Tomasz calls it the competent oryx are we don't know yet. Like what combination of things is gonna increase the risk factor. There may be something genetically in the Iranian population were in the behavior of the Iranian population. That may increase either the receptors or it may increase the the health of the recovery of the lungs and so on and so forth.

48:52

I have I have one question, and then I want to move to economics because I think it's really important. David, what do we do from here? So that if this type of thing were to happen again and I'm speaking specifically about the science, the rapid prototyping, the figuring out of both the testing, the identification and then a pathway to drugs, what do we need to dio as a as a world, frankly, differently than what we've been doing today to make sure that we're better position?

49:21
What can we do to improve our response to viral diseases of the future?

(1) Implement emergency protocols that removes bureaucratic guidelines and enable widespread testing.

(2) Get test production into US start using new technologies which enable instantaneous testing.



So there's definitely got to be emergency protocols that are more clearly defined for these sorts of circumstances in the U. S. To be able to do testing under CDC guidelines, you have to have a clear lab, and you had to have a test certified, and there was all the certification bureaucracy that made it really hard to be a tester for this thing. So then they had emergency use, authorization or youe where you could kind of say, Hey, this test in this lab can be used to figure out what's going on and that also then turned into a bureaucratic nightmare where you have to go submit a request for doing emergency use, authorization and so on and so forth. We've gotta fix that. So it's not so specific to each test in each lab, and it could be a generalized guideline for this type of test for this type of disease can be very rapidly prototype and launched in production. And so you don't have to go through an approval for every one of the tests under an emergency circumstance I got. The second thing is, we got to get production of these tests in the US,

and we shouldn't be limited to PCR test. Their new technology is called Sherlock at stays that used crisper molecules, and you can print the test on a strip of paper, and it can find DNA or RNA in a segment and light up the strip of paper and tell you right away. If that DNA or RNA is in the sample and you can do that like on a pregnancy test. You don't need to ship it to a lab. And so we've got to get those things approved. We've got to get a standardized, and they could be broadly applied to any viral infection that could start coming after the population. And then we've got to get production for those in the United States. But right now we're dependent on the Chinese Koreans to make the tests for us, and then we're sitting around waiting. Meanwhile, they're on lock down and they want all the tests. And so you know, there's there's a couple of things to fix their.

50:51

What about how the FDA goes through the approval process for candid compounds, including and limited to sort of the time and the cost in the process for double blind studies?

51:2
What's wrong with American drug development?

We have a policy to "do no harm," but instead we should be aiming to "do more good." For example, we could use a drug that might kill 2% of the people that take it, but 80% of the people who were otherwise going to die, would not live. That's a much better outcome, but we can't do it right now due to regulations.

We have the science and the manufacturing capacity to do it, but regulatory hurdles in America are preventing scientists from actually doing it. As a result, people do not have a choice to decide whether they want to use a certain drug or not.

Even Remdesivir, the drug that seems to be helping with Covid-19 and does not have any mortality associated with it, people cannot simply get it at the hospital.



We treat humans. We create citizens like idiots, and I don't think that it's fair and reasonable that people shouldn't have the right to decide what they do and don't want to use. And that's just my personal point of view on this stuff. And we basically act a little bit like a paternal state and the, you know, going back to my earlier point about kind of What's the philosophy here? The philosophy is, do no harm. It's not to do the most good net of harm. And so when you say I do no harm, it's like you cannot put a drug out there that might kill people even if you might kill, let's say 2% of people that take it. But 80% of people now double their life span, or 80% of people that otherwise would have died can now live right. So the framing off, like the regulatory approach to drug development and approval,

is really challenged in the United States. It makes it hard for an expensive for new drugs to get built and launched straight quickly, even though we have the manufacturing and science capacity to do it. And it also makes it really hard because individuals don't have choice. They have to wait for FDA approvals before they can decide whether or not to take the risk themselves on. Whether they want to try this drug run disappears should be broadly and widely available. Right now, people shouldn't have to file for compassionate used to get it. They should be making it printed. It should be in every hospital, and people can decide whether or not they want to take the risk. There doesn't seem to be any mortality associated with taking around death severe. So it seems pretty clear cut that most people would raise their hand and say, Give me that shit like it's crazy that you have reminded it reminds me when you say that of, ah, the same patriarchal approach we have to allowing people to invest in private companies.

Total were trying to protect them. From what? From placing a bat on investing in a private Airbnb or LinkedIn or or something like that. And we have these rules that might be 50 or 100 years old. In the case of accreditation laws and not sure how you know how old is FDA, double blind laws are. But this may be something we need to rethink, And you see with the crypto space to where people can experiment with Cryptocurrency is they have to go to you know, Switzerland or another geography or location to do that. So we start thinking about the economic ramifications, and obviously this is, I think, for some people they might feel distasteful to start talking about money in the face of a global pandemic. But as you said earlier, David people will die because of economic issues

53:12
What are the unintended consequences of coronavirus lockdown?

"More people will die because of the second and third order effects of coronavirus." ~ Chamath.

All kinds of industries; airlines, cruises, hospitality, retail and then the non obvious, like software companies. As some business get impacted, their customers and their supplies will get impacted.

So this is the first time in a very long time where we're really going to see the domino effect of the economic contraction. This combination of a supply side shock and the demand shock.

Supply side shots can be fixed relatively quickly. It's the demand shocks that are much harder to recover from because they're deeply psychological in nature, they drive the leverage.

De-leveraging is going to be an important, probably violent and messy, leaving lot of people unemployed, a lot of businesses out of business closed.

Editor's note: Here's a tweet from Tim Draper, a successful venture capitalist, confirming this case.



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What are the health, policy, and market implication of covid19 lockdown
Health: We need to ramp up testing to get a better idea ...

as well. The remorse. Let's be clear. More people will die because of the second and third order effects of Corona virus than these first order.

53:22

Some examples of that give us some examples tomorrow so that people understand what we're

53:26

saying here. So you know, the this is this is the tragedy that's unfolding before our very eyes. Right now it is the slow motion train wreck, you know, if I go back to 2008 for a second. No, she's talking. Talk a second about that in 2008 what we really saw was a very, very focused kind of contagion that was very much lost on most people except for those that had been the victim of predatory lending and subprime mortgages who lost their houses. That was terrible, but the rial financial impacts were born by institutions and their shareholders. The long term effects, however, did come back and spill over to Main Street because a lot of people that as a result had a lot of time, hard time getting really back on their feet and that economic Malays spread like a pandemic all over the United States. But the immediate short term pain was felt by a handful of institutions that for most people are nameless,

faceless organizations run by, you know, to quote Bernie Sanders, millionaires and billionaires. It's okay,

54:46

then, of the 1%

54:47

Yeah, this is completely the opposite. This is Main Street, first and foremost and that kind of impact in all of our lifetimes we've never had to deal with. And it's not going to be the 2 to 3 or four months, you know, 8 to 12 weeks social isolating lockdowns that we are in. It's all of the downstream effects, too. Uh, all kinds of industries, you know, obvious, like the obvious ones airlines, cruises, hospitality, retail and then the non obvious.

So, you know, again, let's imagine that your ah startup and you sell software. Um, well, you would say to yourself, I I sell enterprise software, so no big deal. Nothing happens to be not true because some of your customers or some of your customers customers are either in those impacted industries or their customers. Air those impacted industries. So this is the first time in a very long time where we're really going to see the domino effect of, you know, economic contraction. This combination of a supply side shock and the demand shock and supply side shots can be fixed. They could be six,

actually, relatively quickly. It's the demand shocks that are much harder to recover from because they're deeply psychological in nature. They drive the leverage, and de leveraging is going to be an important term that folks will hear over and over over the next nine months and that process of the leverage, this multi trillion dollar credit bubble that we have to hopefully in a reasonable way. But probably not it will be violent and messy. Unwind will leave. I think a lot of people unemployed, a lot of businesses out of business and

56:49

grab or cookers can't they? Can't we have some kind of basic intervention here I saw today? Alamo Drafthouse is an example, you know, which is a smaller business of movie chain that many people love. They were getting sort of dunked on barbecued um and potentially canceled on social media because they furloughed their employees for 30 days, their you know, their hourly employees. So now these are all employees. Basically, furlough means we're not paying you anything. And we're shutting down. Ah, so now can't trump or anybody just give people a stipend or something? And this might buy the u T I T.

57:23

Well, how many? For example, there are millions and millions and millions of small businesses. What are we going to do? We're gonna have them go to a website stiletto form, and all of a sudden what? You get as much money as you want. You somehow prove what your monthly burning

57:41

You basically, you could just say Here's my last three paychecks and we give you four paychecks. You go that paperwork and apply for it. The easiest way is gonna be a tax refund as a percentage of your taxes paid over the last three years, it's gonna be some like rebate. Um,

57:54

but I think I think these kinds of surpluses guys don't do the trick. I think that, for example, if you are a lot of a sudden in receipt of, you know, let's just say a year's worth of your, you know, average three year taxes over the last. I bet you you put it in a savings account and you don't do anything with it. Yeah, you're not. You're not gonna goto Alamo Drafthouse. Now let's look at Alamo Alamo Drafthouse. More than likely, I don't know, but I'm guessing rents their retail footprint, right?

Sure. And there is a reed. There is a reet or there's an MLP, or there's a landlord that owns that retail resident retail real estate footprint. That person has probably bought that building at 80 per cent loan to value at a 4% Catholic. The math doesn't matter except to say that you are not in a position to forgive 4567 months of rent. You're not in a position to banks will foreclose and default, and so you will demand that money available. Alamo will then first deplete their savings. It'll be very difficult for them to tap the debt markets and get alone unless they get it from the government. And hopefully they can. But those of the knock on effects that are going to happen right now we have to see ah, the first of those dominoes fall and follow that trail of bread crumbs, and to me it's in. It's in that devastation where addiction goes up where you know all of this sort of things that we've seen in the last 10 years. We have seen it right in front of our eyes what the impact is when we lack a social safety net where we don't take care of,

you know, the poorest men and women decide us, and then we have a financial shock to the system. We already know how bad it is we saw when Sorry, one million copies were just with a few companies. And now

59:55

you know what Industry by industry? No, I totally agree. I mean, we saw it in the rural markets in the thirties and we saw in the Rust Belt in the last 20 years. The statistic today is that 48% of all U. S employees work for a business. It's got 10 or fewer employees now. These businesses, they're not only retail, it's also the plumber, the gardener, the housekeeper, the, um you know, the, uh,

any local service provider at any one of these markets. And like in this market, we're not having folks come out and do local service is We're not going to the local hair salon. We're not going to the local coffee shop. All of those people are typically living on 2 to 4 weeks of cash flow. 63% of Americans have less than $500 of savings and a huge percentage of them. And another 10% of Americans work in either the energy sector or as retail workers, in addition to that small business market. So we're talking about nearly 60% of American employees being exposed to the fallout from shutting down business for for anywhere from 2 to 6 weeks to 29 weeks, whatever the number is. And most of them only have 2 to 3 weeks maximum of cash flow or bills owed in their bank accounts.

61:5

You know, travel travel is an 8.8 trillion $9 trillion part of the economy of the world. Right. So, uh, 10% of world GDP, or actually more and you know, to quarter shock is basically, uh, you know, 4 to $5 trillion right? Um, the implications of that rippling through every economy in every country. Uh, I don't think has been really internalized and this is where we need massive coordination at the federal level across the world. This is where the president's in. The prime ministers of the most important countries need to come together now,

decide on a global stimulus package and make sure that they drowned the markets with confidence that they will be there. Because otherwise, when you see drawdowns like this in the stock market, you know, we've had this conversation in our group chat. The bottom isn't put in 20 days into a drawdown like this, right? It doesn't happen. On day 20 we are in day 20. Monday will be day 21 or 22 right? So the bottom comes in somewhere between day 200 day 2 50 What that means is that september to October and what typically happens is we react in a partisan wait. Okay, so check the box. So far, we do half measures, check the box so far,

then we correct on the, you know, first order problem. Let's just say we've done that now and now we have to start the economic rationalization of these impacts, trace them all, and then start to fix them. And if it's anything like 2008. It's gonna dribble out in stays is which means that the rial damage won't really be understood for another quarter or two after people print the quarter and after people Guide. And when these public companies do that, the stock market and investors, by and large will realize while this is a much bigger problem than 2008 then if

63:23

that place I think it is the bigger problem than 2000 I agree. I'm look, by the way, punch him off point. I pulled up the stats and I put him in your document, Jason, But 1987 peak to trough. Took 14 weights. Uh, you know, the bubble dotcom bubble bursting took 25 months. 2008 took five months, and we're only of tomato said less than a month into this one 1987 we saw 33% retracement. 2000 we saw 47% 2008 we saw 56% and we're only 20% into this one. Um, and by the way, another way to think about retracement is not a percentage loss,

because we've had a massive bull market here for the last couple of years. But it's how many months did you retrace back in terms of the S and P in 87 we traced back 23 months in 2000. We traced back five and 1/4 years. In 2008 we traced back 12 and 1/2 years, and so far we've only traced back 13 months to the S and P, where

64:22
Why is the stock market crashing due to the virus?

As Chamath explains, most of the stock market participates today are playing with borrowed money, and everyone is happy to do it, as long as there is little volatility in the market. However, as the market becomes unpredictable, banks pull their credit and ask the hedge funds to show more cash. As a result, funds are forced to sell some of their assets, and the cycle perpetuates.

To make it even worse, most trades today are algorithmic, done by computers, and even if humans trying to intervene with decisions based on the understanding of current situations, the computers overpower and continue their course.



it was 13 months ago. The other. The other thing you guys have to keep in mind is the thing that is very different. So it's not as if everything is going to be the same. It's not gonna be a repeat of the dot com bubble or 2000 but they're similar and they rhyme. But the differences are important. The difference this time around is that we have gone through a multiyear period of incredibly low volatility. And in that period of low volatility, two things have happened. The first is that we have had public market financial capital market participants get absolutely leveled up, so I'll explain what that is in a minute. And the second is the emergence of computers and quant funds and algorithmic trading. So on the first side, You know, Let's just say David and I ran a hedge fund, Jason, and we took money from you,

okay? And we say, Jason, we're gonna give you 10% and you're like, that sounds like a good deal, You know, Bonds or it. Zero. Here's my money. Now David and I would look at ourselves and say, Well, we would love to stay in business forever, and we want to collect 2% off of Jason's money. So let's try to do this in the most conservative way possible. We're gonna try to get 1% a year. Can we make 1% a year?

David and I looked at each other. We say, Yeah, we can make 1% here. How do we do it? Well, let's break it down. Divided by 12. Okay, we've got to get 82 83 basis points every month. Okay, we could do that. We could make 80 basis points a month. Um, course are eight basis points a month. Sorry.

Whatever the math is 8.5 basis points month. And so let's say we figure out a way. Being really conservative, we make eight and 1/2 basis points. 1% a year. Well, eventually, we look at each other and say, OK, What? We need to multiply this by 10. I got it. I'm gonna go to my prime broker, J. P. Morgan,

Goldman Sachs, Morgan Stanley and say, Guys, I want you to lend me 10 times on my money and they'll say, Whoa, whoa, big boy, hold it up and I'll say it. Listen, look at the volatility. There's no volatility. This is a really safe thing to do. For every dollar I put up, you give me 10. And now everything that I was doing is multiplied by 10 by 1% a month becomes the 10% a year. Voila.

I look like a genius to you. In reality, David and I are making 1% to your multiplied by 10 turns of leverage. Okay, Every hedge fund runs this way. Now, when volatility goes from zero 2 52 60 to 70 in a matter of days, which is what's happened now, the banks were not stupid. Say hold on a second. Uh, you owe me money. You need to post Maura money. If you want me to continue to give you this kind of leverage. There's volatility. I cannot,

you know, guarantee that Amazon is worth 50% of what you say. I have to assume Amazon is worth 20% of what you say. So I can't use Amazon stock as collateral. I can't use you know, these 10 year bonds as collateral. I can't use whatever you're giving me as collateral. You need to post more money and then what happens is I have to deliver. I had make margin calls I have to deliver. I saw my safe assets. I saw gold. I saw all these things, which is what's been happening now. So that's number one the second. Which is why you see all of this massive volatility. And it kind of builds.

On top of itself is you have these algorithmic quant funds that just see price signals and then the act. It doesn't matter if it's a good day. Doesn't matter if it's a bad day. They know that the next tip is going to be up. If the last take was up or down. If the last take was down and when you have hundreds of participants putting in billions of dollars multiplied by that leverage. So hundreds of billions you get these tsunami effects where one day you're down 10% and then the next day you snap back 9%. Because even if there are a few individuals making idiosyncratic human lead decisions, all of a sudden it's drowned out by the computers in the leverage. That's a really big difference that exists today that doesn't really exist or didn't exist the last times. And so we're gonna be in a very violent thrashing environment as we

68:47

deliver, huh?

68:49

Right, as we figure out which credit funds air upside down, there's about 75 you know, $1,000,000,000 of debt across the stop. Seven or eight petroleum companies that comes do over the next few years on the average price for a barrel of oil needs to be 50 bucks. For them to not be upside down, it's 30 and falling. Some of these guys, like Oxy Petroleum, needs oil to be $80 a barrel for them to make their debt payments. So we're going to start a very awkward period of de leveraging and a very long period where we're gonna have stresses and shocks that are not industry specific. It's not just gonna be Lehman and Bear. It's gonna be brand name companies that many people that are listening to this know and understand who are put under financial pressure, who cannot make their interest payments, who default on debt, who missed their earnings. And so this is an environment where cash becomes king and an incredibly clean balance sheet becomes the single most important thing that you can have.

70:0

So the Googles apples, Amazon to the world. You're sitting on tons of cash. Microsoft's I mean, they're just going to go on an M and a spree, you think, or are they just gonna sit tight?

70:10

Oh, the anger that will turn onto those five companies is gonna be incredible because you talk about a trillion dollars of cash, a trillion dollars plus, with five companies, they represent 20% of the S and P 500. And you know, the only thing that hasn't really sold off yet are those five big names. They've come off a lot, but not nearly as much as the rest of the market. If and when those things break, Um, not because of their balance sheet or of debt issues. But just because of how risk off everybody is in the broader market, you're gonna look at those companies, and they're going to get in a really difficult situation. You could have forced repatriations where the U. S.

Government says, Sorry, guys, the money has to come back, and I'm gonna tax it. Yeah. And you know, all these things people say will never happen. But there are these moments in time where you just can never see. Never. And I would say to all of us, this is a moment where your Presumptions of normalcy need to get paused.

71:15

Yeah, well, we've We've had these moments before with 9 11 the financial crisis recession on the dot com bust bust. David, what are the chances percentage wise that this results in. Ah, very quick resolution. So quick, resolution being defined as Hey, we quarantine for a month. Turns out America is similar to countries that don't seem to be impacted by it. And, ah, we're back to business as usual in the there are quarter, fourth quarter. Look, I think the chances that this resolves in a month and we're all and you know,

we hit that I'm actually just looking at today's reported numbers, and it looks like hopefully we end up in the same number of new cases as yesterday, but we'll see by midnight. But, um, you know, hopefully that starts to happen. People recover again on pray that we get these I G tests out there so that we can show that they're 10 times their hopefully some large number of people that were asymptomatic that had this thing not from a showing it, that it's gonna cause more contagion, but that you know, the the general case of this or the You know, the average case of this or the 99th percentile case of this is relatively mild and people calm down. Um, but I do think it's nonlinear in terms of that second order and third over a sense that we've been talking about. We even if we got back to business as usual in a month, we don't yet know how losing 2 to 4 weeks of cash flow is gonna affect every salon in every major city,

every local restaurant, every local movie theater, every local plumber. All these businesses that have been had their revenue literally turned to zero in the last 2 to 4 weeks. If they only have two weeks of cash, they're bankrupt. If they have six weeks of cash, they're reducing their investments this year. If they have eight weeks, Akash there probably cutting a couple of people from their from their payroll. So we won't know for a couple of months going back to this point about Hey, we're talking about Q three when this all finally kind of comes to their what? The shutdown that we're in right now and we're gonna continue to be in probably for another 2 to 4 weeks is gonna d'oh! And we're gonna find that out over the next couple of months. But it's gonna be ugly. Um,

and so I'm not feeling like, very confident that in four weeks we're going to say, Hey, guys were out of those woods. Unless the federal government shows up with a $3 trillion loan package that any small business can access in, any unemployed person can access and it really fills the gap. And then you're effectively talking about one year of a Bernie Sanders tax pipe anyway, so, like, hey, you know, it doesn't really make that much of a difference. Look, it's you know, ah, 20% of GDP that were given away for one year to keep the economy from completely collapsing,

and I think that's where we have to end up. But until we get that package and we know how big it is and we really know that it's gonna fill the hole, we don't know for driving off a cliff or not 100% the 100% certainty that Trump will do something like this because he wants to save his presidency. Correct, Gemma. The only chance he

74:4

has. Um, I think the I think the problem is that the Republicans and the Democrats are playing political chicken with each other. And this happened during tarp. It was a trickle, trickle, trickle, trickle, trickle. Um, and I think it's gonna happen here. Um, you

74:23

don't think they're gonna get on the same page and realize Scotch we're all gonna lose in this case? Or do you think the Democrats have well refused until let trump fail and let the economy sale so they have a clear path

74:32

to victory? I mean, I know that no note are no because then because then I think that they then I think Trump should get reelected because they have a bigger responsibility to the people than, you know, blockading the president of the United States. That's ridiculous. Um, I think the reality is that we are woefully underestimating the second and third order effects. And so we will be, You know, we started with an eight $1,000,000,000 package. You know, this last package, I think when we put the numbers together will probably be an order of magnitude. Bigger. Okay, whatever.

You know, we'll wait a few months, and then we'll have a couple $100 billion. It'll be kind of tarp, like it'll probably be a bailout of a couple of specific industries. Um, but, you know, you can't bail out every industry. Um, and ah ah, The ultimate package probably needs to be on the order of a year to a year and 1/2 of world GDP spread across all the major countries of the world. And so, you know, for the developing countries, the mechanism is probably the IMF's in the World Bank.

But we need somebody, really, and they're doing it. Um, you know, not these kind of like a career bureaucrat dipshits that are in there now. So, you know, get somebody like Bloomberg. Maybe he steps in, you know, he can allocate the money on then the G eight or the G 20 basically, then put 75% of the dollars into their economies. You know, Germany has to basically go into deficit big time. They can't kind of run this austerity campaign,

so there's a lot of big decisions station that need to happen. These things can't happen in days nor weeks, and they're precipitated on data and political pressure. And that Tates sort of weeks, Two months to build. Um, so, you know, I kind of think we're in a kind of wait and see mode here where you know, there will be these relief rallies, because people, I mean, look, legitimately. We all don't want to be living through this nightmare. Um,

and so every chance people get to buy has a signal that this is over, they will take like they did it. No way. But eventually, the news just kind of is You can't overlook it. And you can't take the ostrich strategy of managing a business So, you know, like I've had I've had a company already. Um, who did a deal yesterday at two times, uh, forward a r r. Two times. This is a company that will do 35 million of revenue. 35 million in revenues. Now,

you could say, Hey, that's crazy. Like we're a start up, like, you know, we're funded by Siri. You know the best of this, you know, tear 1 to 2, venture capital. And honestly, my reaction is Shut the fuck up and go fuck yourself. You are going out of business. And that was the market clearing price. But that CEO did right by his team.

And history will look favorably on that guy because, like, Buffett said in moments like this and in your life, in business anyways. But I guess also in life, the most important thing is to not go out of business. It's to survive.

77:45

Yeah. I mean, it's I was explaining it to my founders in our group slacker room, and I said, Listen, job number one, if you take the seat, is the captain's. You've got to keep the plane in the air, You know, you gotta find a place to land the plane, and you need to know your altitude and that's your runway and you know you. But I think from this late in the bank,

78:2

I think in this way startup CEOs or the greatest canary in the coal mine because you know, they are the ones that are the most resistant to these implications. They love the Halsey on days of the Cinderella ball. They love it. The clock never strikes midnight. They're never running down the stairs, leaving the glass simpler. You know, that's that's that's what makes them great. In many ways, they live beyond what their station in life is, and hopefully they make. But in moments like this, you really have to realize that that the shock clock is on and it has nothing to do with you. And if you are losing money and your op X is high and you don't have 24 to 36 months of cash, you have to really figure out how to get that money because it's it's going to get harder, not easier.

Like give you a simple example. You know, I I was thinking about like all these companies in the next few years that had plans to go public. They have options that have to invest. You know, they have our issues that will inspire. I've read about Airbnb. You know, these air really complicated examples of companies that are great companies with unbelievable employees who deserve the hard to be rewarded for the hard work that they put in. And now you're faced with the situation where your money losing, burning cash, you know, options about to expire. I mean, people

79:31

have to be sure you got public. I mean, this is why Bill Gurley was sounding an alarm, What, Three or four years ago? Saying, Listen, if the window is open to go public, get out and, you know, clean up the balance sheet. Um, yeah. I

79:43

mean, yeah, I feel like I you know, my last year last year, I wrote this in my letter. Like last year. I took a lot of heat from some folks around me because I focused on liquidity. Um, you know, I generated what I put 1.7 billion on the balance sheet last year, and I just remember, like, people like you're an idiot to sell. Why are you selling at these prices, and I said, Honestly, I've been to the dot com bubble.

I went through that. It took me 13 years to get even. From 99 to 2012 13 years, I went through a weight, but it wasn't so bad because I was mostly head down working at Facebook at the time. And I just thought, after 10 years of building something I don't want toe, have all my chips on the table anymore and what I want to be in a position. It used to be a good, steady source of capital in moments like this, you know, call it a white knight. Call it whatever. But now you know what I'm telling everybody is put out the word I have billions of dollars in a balance sheet. I'm willing to put it to work. I want to work with founders who are sober and realizing how important this moment is for their company.

Um, but there's going to be an incredible number of businesses that have to act, and they're not gonna act for the next 2 to 3/4. I get it. But they like the government, like the stock market like everybody else will capitulate. Yeah, and hopefully when they do it, the money is there.

81:18

David, how are you? Approaching the next year when you look at yourself, you know, building startups. I mean, obviously, you know, as I tell people, you know, fortunes were made in the down market, just collected in the upmarket as trim off just pointed out a CZ. Well, how do you look at the next year and then going into this next decade as a founder? So we build businesses, and then we eventually bring in outside investors into those businesses. So we are eventually gonna be looking to capital markets to help fund our project and,

um for And so we put money off our balance sheet into starting these businesses, and we fund them during that initial phase. So the first thing we've kind of talk to folks about is, like, you know, don't optimize for time optimized for survivability. Now, um, I've had one d c text me earlier this week and say we're all leaving the office, and this was a VC who had given us a offer to invest in one of our company's yank the offer this week and said he's gonna go, Um, they're shutting up shop. No one's gonna be in the office. They're not doing any deals and told things kind of comeback, whatever that means. Um And then I've seen another venture firm,

which is a much larger firm stage business as usual. We don't care about up markets down. Markets were soul investing. Evaluations will shift hopefully and you know, the markets are going to shift what we're gonna invest in, but we're still here, and we're still doing business. So, um, I think the first thing is is, you know, for the right business is there's always capital. I built my company. I raised my Siri's and November of 2017 22,007. And then 2008 happened, and I'm really glad I raised more money than I wanted to for my Siri's.

A. We made it through that period. We built a business, and then by 2011 we had such a great business. We raised a nice Sirius B and then a seriously. A year later, we sold, so it was an incredible run, but we went through that period of building on, and it was you know, it was great that we have the cash for the businesses that don't have the cash I'm worried about. Like, you know, Are we gonna have to put money off our balance sheet? They'll fund them because it seems like there's less of these convertible notes and safe's and people interested in bridging stuff. And you know,

all the stuff that was a little bit, you know, like like a Mafia saying earlier. I'll take more volatility right now or I'll take more risk because the ball is low. It's very likely that everything ends up raising their next ground. Now we're talking about probably 60% of things are not gonna make it to the next round, so I'm gonna take less fallen. That has kind of exponential effect in terms of access and capital. So we're telling everyone cut costs, make sure that you manage for survival. Do not manage for optimization on time. Traditionally, we've kind of been aggressive and said, try and get as much done in six months as you can and hit these big milestones as quickly as possible. Now we're saying you know what? Take your time to hit the milestones just make sure you the risk a little bit,

even if it takes two years instead of six months, as long as we have enough cash to survive two years, I assumed it would get out of this. You know, we'll be fine. But that's kind of where I was like was advice Chances to come off as we wrap up here, where 80 minutes into the first episode, zero of the all in podcast emergency pod here talking about Corona virus with David free burgers from off. I hope attea chances right now that this is ah resolved in a couple of months and we get back to business as usual. What? We just set the percentage

84:24

chance of zero. Um, if you I think we deal with the first order effects of the disease in, uh, 8 to 12 weeks so, you know, probably buy may well have a decent handle on the impacts and will be through most of the worst of it. Um, and I think the economic bottom is probably Q three Q four. Um, and I think that, you know, we're like, we're gonna touch 2000 on the S and P. If not lower. I hope we don't, but I think we are.

Um and I would just encourage everybody to start internalizing the second and third order effects. Uh, we are the world, as of now, is shut down for two months. The world. And, you know, much like an old car, you can turn about fast, but sometimes when you turn it off

85:24

sputters stabbing, opening After a while I take a look under There may be clear a

85:30

while it takes a while, you know, travel. By the way. You know, it's an interesting anecdote whenever there's a demand shock and travel. I like travel, by the way, just cause it's a really good another canary in the coal mine. For so many industries that are interconnected and highly dependent on each other. When there's a demand shock, it typically takes 19 months for it to recover 19 months. Yeah. Um,

85:55

so almost years and starting

85:58

now. David's right. I really, really encourage folks. Thio batten down the hatches, keep you know, enough dry powder so that you can withstand what? What can happen in two years and stop worrying about valuation. Um, find good capital partners in moments of distress like this, who can be, you know, fast on decisive on in size. Um, and, um, try to get back to work and keep your keep the people that work for you

86:36

Safe? Yeah. And even worried about civil unrest, riots, breakdown a society. That's something that people have been hypothesizing about No on. They weren't on Theo. Internet people are the ones who are most paranoid about this cause Peter Thiel and whoever bought some New Zealand real estate,

86:55

there's a lot of us Ah, that fucking scratched our whole lives to get to the United States. And, uh, I don't think that's who we are. Yeah, I wouldn't have come if that's

87:10

any chance of, ah, civil unrest that this, like, sort of society breakdown kind of issue. You were an incredible country. I mean, you can read buffets letters, and he talks about with a great perspective of the last. You know what we've built in this country of the last 200 years? Economy, the infrastructure, the food availability, the health availability, the housing availability, governments challenge. But it's not as challenged of elsewhere in the hold.

I don't think in the United States were, uh you know, it's gonna be a shitty time for people with capital. It's gonna be a shitty time for people with retail jobs and hourly jobs and so on. The government's gonna be there to help them. But I don't see this government failing the people, No matter who's in charge. I just don't think we're set up that way. Other countries have different models. I think there's other places where that may happen, but not here. 100% 100%. All right, listen, this has been a great episode. Zero uh,

emergency podcast with the oil in podcast. Thank you to my co host Jamaat Palihapitiya for pushing us to do this podcast. And David Freeburg continued success building companies. Then we'll see you all next time. Bye. Love you boys. Thank you. Free burgers. What do you think? The next poker. When can we all get tested and play

88:22

a game of cards? God, please Friedberg

88:24

give us a test so the rest of us get together here, Man,

88:27

I was so much money in every other part of my life. Why not lose money at the poker table? Todo media

88:34

resume set up like this later, and then I'll get up on the table. I mean, we got Yeah, I think we just have to get something going here because we could do up. We could do a play Poker stars table and just play pillow. And, uh, probably for a dollar. Do it. Let's just let's get on poker stars. All right, everybody See you next time. Bye bye.

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