Do you use RSS readers? Add Smash Notes to your daily!
All-In on Smash Notes

COVID-19 & Impact on Startups, Venture Capital & Public Markets

All-In podcast.

March 19

Jason & Chamath intro David and check in on each other's quarantines and discuss directives & statistics, a potential covid19 treatment & policy changes that we need to have in order not to succumb to the Great Depression. Chamath explains the circumstances of recording a podcast while the Stock Market tanks in real-time and what it means for for startups & venture capital.

0:00
0:00
download episode
0:0

All right, everybody, welcome to another edition of the all in podcast. We'll call this episode one. We did a test, and over 100,000 of you listen to the test podcast that we're the audio's in a few days. In a few days, Trauma is already getting addicted to his statistics. A new podcaster

0:18

high note to focus on something going

0:20

up? Yes, exactly that our portfolios air getting crushed, but the podcast numbers are going up there. A meaningless victory, to be sure. But we got a lot of positive feedback, and we're all sitting at home in quarantine. As you can see, I set up my home office. I got a microphone here, um, and tomatoes in his bedroom and a free burger, I think is in his wine room or something in his, uh, his compound. Are you in the safe room?

Is this the safe room? Day free burgers with us again. He got a lot of great, uh, feedback. And he's now on the Twitter. You can follow him at Friedberg. I don't know. He should have Twitter down because he was getting harassed on Twitter. Welcome to the club. Are you in your safe room, David. Yeah, it's brutal on Twitter. I don't know how you guys do it. You put something up and everyone you know just goes after you harsh out there in the Twitter world,

the twitter of Earth. Basically, you have two mute and block anybody who is under 100 followers and being an absolute jerk because it's likely a Russian baht, you know, being run out of, like, Manila or something like that. They've got all these, like, sophisticated rings of people that they just hire for 10 bucks a day to harass people online. I mean, I know it sounds like a crazy conspiracy theory, but it's actually true this large groups of bots who go after people and try to kick create chaos. But, hey, we're sitting here.

Uh, it's Ah, today's Wednesday. We did our podcast on Saturday. The stock market has gone down another 20% since then. I guess or so and we are looking like this is gonna be, ah, 50% correction or something like that. We're now in a well past a 30 plus percent. And on the good news front, it looks like testing is actually occurring hand that work on a virus. Work on treatments is occurring. I don't know if we can call them cures, but treatments, eyes occurring and a quarantine in place is being taken seriously. And that gets.

The biggest thing is that Trump has basically admitted that this is a crisis and he's taking it seriously. Friedberg What is your assessment of where we are today versus when we taped on Saturday? In terms of the resolution to this, we are we overreacting, reacting just enough. Oh, are not reacting enough those three things to consider the health, the policy and then the markets. On the health front, it seems like we have done a lot in terms of containment and we're ramping up testing. We're still not doing broad general general population testing, which is necessary for us to truly understand the dynamics of this disease and also to understand the contagion of this disease. And we need to fix that problem. There's a task force of 100 people out of D. C being led by Jared Kushner and a number of people from the tech industry that are working on ramping up testing and doing broader general population testing. The policy decisions are what get quite scary.

And that is all of the containment. Shutting down travel, shutting down borders, shutting down bridges and the economic ramifications of doing so are frightening. I think I mentioned the other day that 48% roughly of the U. S. Workforce works in small businesses. Another roughly 10% work in travel. Another roughly 12% work in energy. And you know, you kind of add this up and you can quickly see why Steve Mutiny in the U. S. Treasury secretary was saying that we should expect 20 to 30% of the workforce to be unemployed by this summer if we keep this up. So that is a frustrating and staggering statistic and something worth debating whether that policy decision is appropriate, relevant relative to the potential life and health and health system impact. You know which one is worse and then the market question is just I don't know how to address that,

but, um, things go from bad to worse. I have eight things. One thing at a time here. Everyone say I want to say one more thing, and I think the most important data to come out today, so the markets are fucked. We're all in trouble or you know, you gotta. The most scary thing is Ford and GM to shut down their plants today. And the reason they shut down their plants is because out of fear of Corona virus and auto workers in the U. A. W. Basically forced him to do it. The world lives on a 30 day food supply.

So if you stop food production today, there would only be 30 days of food for the whole world to eat based on our calorie consumption per day and especially with an isolated border. And we import a lot of food in the United States. If that means that we're then gonna shut down other factories, the Ford GM shut down and we're gonna shut down food production, processing and distribution factories. Then we have a food security crisis, and this becomes a real societal problem. So the concern that I have with the factory's being shut down today's the precedent it sets and the potential follow on from there in the food system. And one thing we can't stop doing is making a distributing food to humans in the United States or else we have problems.

5:25

You're you're right. But before we go there, the good news is that these directives don't apply to national critical infrastructure, and the food supply is covered with in that. So unless something cataclysmic happens, those folks are still going to make sure that food supplies there. I do agree with you that the issue that we have to contend with is that, you know, there may not be as much. Um, And in the you know, 30th 2/90 day, that becomes a real issue of this thing becomes a very protracted problem. This sort of brings us back David without being too alarmist about how we started and how you started. Really importantly, at the beginning, which is there is a small but very credible body of evidence that is starting to show.

And this is what you put out on Twitter and part of why you got, you know, attacked probably by the farm. A lobby. Um, but that shows that there is a There's potentially a kn enormously large asymptomatic spreader dynamic in this disease. So can you describe that And what that may mean and why there's a lot of silver lining and good news in that if it's true,

6:41
Are there any good news about SARS-CoV-2 ?

There are several data points that are showing us that there may be an unexpectedly high number of people that get this disease and don't have any symptoms and show it.

A paper published showed that in China, up to 86% of people did not realize that they were sick or they were unreported. They had mild symptoms. If you take that high level, you take that low level.

All that means that the death rate from this virus is much-much lower, which means our policy decisions, based on a rather high death rate, might need to be adjusted.



there are several data points that are showing us that there may be an unexpectedly high number of people that get this disease and don't have any symptoms and show it. The historical data that we've gathered to date has been largely symptomatic patients and in some places, like in Korea, asymptomatic patients that had really close contact with symptomatic patients that were confirmed to be positive. And in Korea in particular, they found a large cohort nearly 40% of the infected population, where people between 20 and 29 years old that did not exhibit any symptoms or had very mild symptoms had a running nose and didn't even know that they were sick on the Princess Cruise ship. It turns out that up to 50% may have been asymptomatic. People were all tested on that cruise ship because there were so many people that were positive, and through that data set that cohort, we found a very large asymptomatic population, 50% roughly the N B A. Players have now been tested and out of seven players on five teams, so out of seven players on those five teams that have tested positive. It seems like none of them are having any symptoms or maybe one person who's having a cough, but generally they seem one of I think it was, Donovan,

Mitchell said. I could go play a seven game series tomorrow, so this data is really important and it hasn't been fully accounted for in the models and the predictions of the pandemic and the predictions of the fatality rate. We're assuming that, let's say, 2% of people that get this disease end up dying, and by the way, that's also based on age instagram. That may not be appropriate for our particular cohort in the United States. If you took that data and then you just did it based on the fact that a large percentage of people actually don't die, but they end up just being asymptomatic. It really changes the denominator and excuse the results. A paper published showed that in China, up to 86% of people did not realize that they were sick or they were unreported. They had mild symptoms. If you take that high level,

you take that low level. Call it somewhere between 25 80%. 86% maybe even as high as 86% of patients are asymptomatic, which means that the actual fatality rate is much, much lower even in a large cohort that gets infected here. So we should be mindful of this new data that's emerging, and we're still racing and acting from a policy basis, as if 2% of people 3% of people, 4% of people that get this, they're going to die. And that may not actually be true. Based on what we're seeing in the

9:3

last week, I have ah comment in a statement. The comment is people will say, David, you can't extrapolated from an n b a player who may just be in peak physical fitness, although I think your answer's gonna be It's not clear that the that the disease is ah correlated necessarily with physical fitness for on physical fitness at all. Just maybe the strain and how your body processes. But then the question is, doesn't this mean that we need tohave broadbased, massive testing, not just of symptomatic population? So not just the PCR test that we've heard a lot about but also these antibody test so that we know that people have had it.

9:44

And what's the status of that? David, What's the status of it? That's exactly right to march? And, by the way, on the healthy n b a player point. It's absolutely true. People that are between 20 and 30 the average age of the NBA's 26 years old. People that are between 20 and 30 years old generally seemed tohave know, too mild symptoms based on what we saw in Korea. The other data sets need to be taken into account. So the NBA's an interesting anecdote. Sure, you could discredit it all you want and say that it's highly correlated classes and so on. But everyone's together all the time. But we could look at the data that came out of China in a paper that was published in the journal Science and a paper that was published in the journal Nature from Korea that showed very large percentages anywhere from 20 to 50 to 80% or 90% of people being completely asymptomatic across an age spectrum,

certainly very heavier, weighted towards the younger age bracket from, you know, Children, all the way up to 30 or 40 years old. You can be completely asymptomatic on dso these air really interesting discoveries that have happened. And so to your point, we need more data, and we need to confirm that hypothesis because that's how science works. So we have a hypothesis. Let's go test it. The problem is, we're not testing it, and we should be as a priority right now because the policy decisions we're making are based upon a denominator. That may be wrong. So the correct action should be to go get those antibody tests,

go out into the population and start testing the uncertainty, asymptomatic general population and see what percentage of people in these high risk zones like Seattle and L. A and New York and SF already have the antibodies to this virus, meaning they've been infected with this virus and have not or are not showing any symptoms. And that gives us a better sense of a how widespread this infection is and be the true dynamics of the fatality rate and the symptomology of this disease and how it may affect people. Those I. D. G tests are being made on mass in China today they're being shipped to countries like Italy, where they are in fact being used on the front line. They involve a blood draw, and then they have this ladder. What's called a lateral flow essay in terms of how other kind of tested the blood runs across a strip and you see a value, and you have a pretty good sense of that point. Those kids cost a couple of pennies to make in China. We could probably get a couple of 1,000,000 of them. I don't understand why we're not.

I don't understand why someone in the federal government isn't begging China apologizing and appeasing to them to send us those kits. There are a lot of people I know that have bought them on the Internet. I have a bunch of people that I know have bought them. They have been shipped in through brokers, and they're not FDA approved. They cannot be used for diagnostic purposes because of FDA guidelines and how the F. D A regulates these things. They can be used for research purposes, but they may not be very sensitive and very specific, and they don't have great testing on them. So we don't they estimate the sensitivity of the specificity to be 90%? Roughly 10% false? Positive? Roughly 10% false? Negative. But for what?

We're carnal accomplished. That's good enough. We're not trying to give people a diagnosis of disease. We're trying to run an epidemiological study, and we should on the general population to figure out how many people out there are asymptomatic and have been infected. That is an important statistic that's missing.

12:43

And to your point, if we find out that there is a large population of people that have actually felt this disease passed through them, it's faster that we can sort of get people back to work out in the streets, which is now probably going to be the most important thing we can do to just prevent a complete economic calamity. Yeah. Yep. There are There are Jason, uh,

13:11

sorry. Treatments. Jamaat. Sorry. Interrupt you but treatments or the other thing. I think you're gonna talk about

13:15

that. Treatments are interesting. Let's talk about that right now. Because to me, what's incredible is again now what is emerging? Um, and and it's small and scale relative to how amplified it may may should or should not be is, uh, you know, rendez severe is very different, but it just seems like prophylactically even there's some data that showing out of France that Clara Quinn seems to be effective. These are these are solutions that are pennies to make. And some of the some of the feedback that I've heard is that part of why the FDA, the CDC, the federal apparatus is reluctant to embrace these things is in part because of pressure from those lobbies. But that seems to me, uh, unfathomable in a moment like this. So why do you think the government hasn't put out the CDC has zero directive right now on the management and efficacious management of this disease? Why

14:11
Why aren't we using experimental drugs to cure this coronavirus?

We have not done proper medical studies to validate if these drugs actually work and what we have is anecdotal evidence collected by doctors on the front-lines. We don't know what the short and long-term side effects are.



is that okay? What faith UCI and others have said and doctors around the country echo is that these treatments have not been clinically tested through a blinded controlled study, and that is a very fair research and generally speaking for doing good medicine. But we're in a crisis state, and in a crisis state, you have to triage, and you also have to triage policy, and we should be considering creating policy and changing the way that we do policy under these extenuating circumstances. If doing treatment can reduce fatality rates by up to four X, as Korean doctors have claimed, it is worth taking the risk. Or perhaps it is worth letting the FDA say rendez severe Kaletra, Claure, Quinn and others are being widely produced, widely distributed. The government is mandating it, and doctors and their patients can decide if and when they want to use it and let them take the risk without clinical trials and without data and the typical process of the FDA.

What's the downside of taking these drugs? Are they particularly dangerous? I mean, I've heard the colloquy Democrats and correctly Cola Quint Claure Quinn. I've heard that this could be a little bit nasty in terms of side effects. So is there some major downside that it's kind of like an off use of a drug right? Like this is an off use of a drug as opposed to It's an office of a drug, and some of the antivirals aren't even fully tested in humans, so we don't yet know what the side effects may be. And also remember, side effects can change based upon your health condition, so someone that's in respiratory distress may have different side effects that someone who's taking it in a healthy, controlled clinical trial. So we're not really sure that's the argument that doctors would make is, you know, our first mandate is to do no harm,

and so they don't want to apply medicine that might do harm on DSO. That is the standard protocol in practice, in process, however again in a crisis state, China and Korea said, Guys were trying this thing and it's working and we're adopting it. Let's go for it and they race forward. It could be that this is a good time for the United States to consider an emergency policy action where we make a lot of this stuff make it available and simply like doctors, use their best judgment. Rather than have the FDA be the paternal state that makes a decision for the doctors or makes a recommendation to the doctors. What do we think the fatality rate actually is? Like David, If you were looking at this and you had to place a bat and put 100% of your net worth on it, Ah, and be all in and have massive skin in the game. Where do you think the fatality rate here in the United States winds up being overall?

Because that data that came out of Wuhan has been market Lee going down as they get the numbers corrected. Who knows? Chinese numbers, uh, you know, censored by the government and maybe perhaps massaged. It's gonna be hard to tell. What do you think the real fatality rate is? The first fatality rate heard was 5.8% out of China the way based on the paper that came out in science over the weekend, The Wu Han data was estimated to be 1.4% and Wu Han was the worst data out of China. The quote unquote rest of China is still estimated at about 0.15% of 0.16% of 0.14%. Something like that. Where's the versus, like the flu every year or something, where the normal flu, 1.1% roughly.

And so you know, if you're looking at somewhere between 0.2 and 1.5% now in Italy, I think there are over 7%. We talked about this on the last show. But Italy is a much older population, and their health system is completely overwhelmed. Eso There's some confounding data that's confounding variables there that may be making Italy a very unique out wire on a distribution of what's gonna happen here. The United States has a population that's a little bit older than China, but much younger than Italy. So our health system is, and our health system is generally more. I see you beds per capita than Italy, so we should be in a better place. The thing we don't know that does concern me about the health system. United States and the population of United States is, it seems that there may be a high correlation with severity of disease and a one sea Levels and Onda.

As a result, the U. S has one of the highest obesity rates of any country in the world and highest diabetes rates. And so we may have a population that has a very high percentage of people with a high, a onesie that may be at higher risk then say people in other countries. I don't know that for sure, but that is those air to kind of confounding statistics that may kind of make a little bit worse if I were to put my money on this. Look, I'm a betting guy. I would be a little bit nervous at this point. But I'd say it's probably somewhere between 10.0.15 and, um, call it 1.8%. You know, call. That's That's an order of magnitude.

I don't so you know. But you could do the math. That's probably somewhere between one and 10 times as fat as the flu on DSO. That again leads to the big policy question about. Are the actions warranted? And is it a Let the health system crash? So that's a perfect then flip to you to Moth, you've heard his basically his line at no 100.1 to 10 times the flu 1.8 or something. You know, if we split the difference of those to its 0.5 point 6.7 fatality rate is the reaction of sheltering in place and the economic turmoil it's causing worth it yes or no.

19:25

Right now you guys need to keep talking. I need to jump off for two seconds

19:30

and I'm no problem right back okay. And so what do you What do you think? Now, if we were to look at your estimate, David, is it actually worth what's happening? Would we if you and I were making the policy or you and your mouth were you know, the Cabinet members, as it were making this decision is this decision and the economy crashing in a potentiality of 10 15 20% unemployment and all the downstream effects would be better to do what the UK was originally doing, which is just let's get the herd mentality going. And let's get the herd immunity, immunity go. I know this is like the most difficult question in the world, but we're here, so let's that's suspected of options. It's not binary, right?

It may not be. Lock everyone up and let everyone out the door. It may be that you have, ah, more nuanced policy where you say, let's keep people over 65 years old. Give them a strong recommendation to stay home and make sure that you distribute chlorate Quinn to doctors around the country. So soon as elderly people start having symptoms, they maybe get some treatment. But, you know, that's kind of an option. You keep 65 year olds at home, you do random general population of antibody testing. And once you hit a certain percentage of the population having been exposed to this thing, it may be that at that point you say Okay,

you know, the over 65 limit is lifted, or it may be that you know you do something similar to that of different age brackets have different containment recommendations you also do it with with random Gen pop screening. You also do it with medicine being distributed. So there's a nuanced answer to that where the policy should be a little bit more directed. It should be a little bit more involved in terms of treatment, testing and containment strategy. And it doesn't need to be so binary, right? It doesn't have to be. Everybody stay at home. If we get to the point where a population has very few people have had it, then more people should stay home so it doesn't spread, or and then if more people have it. So if 50% of young people in San Francisco having already we've got herd immunity, then maybe we could start saying,

Hey, if you're over 65 you go out. But just stay out of restaurants or something. Is that what you're saying? Yeah, once you hit like 50 to 60% of the population having antibodies to a particular virus, you, you know, like a flu, for example, you'll see that are not number, drop well below one and then explain are not to everybody again. Just so it's basically like the viral coefficient like for every one person that's infected are not tells you how many other people will get infected after them. And so if it's 2.5, which is what some estimates say it is for Corona virus right now than for every one person that gets infected. Roughly two and 1/2 people get infected,

and that number goes down as more people get infected because there's more people get infected, there's less people to infect, and the rate at which you can then infect other people also drops Your are not collapses on DSO. At a certain point, you have this kind of basis for saying Hey guys, let's get now I gotta step off. Sorry, guys. Uniform. Do you think David is incredible.

22:28

I mean, what you're seeing in real time as we're doing this is literally like I've never seen this before. Uh uh. We should probably explain what, uh what is going on? So what is going on in the background is, um the markets are just completely toward now. Why are the markets important? Many people aren't invested it all in the stock market, I get. But it is where liquidity and capital markets function and derived out of those capital markets is the money that then kids start ups. It hits the banks, which then lend to small businesses. It is the functional machine, the undergirding of the U. S. And the world economy.

And we are in a moment that I have really not seen since. Oh, wait. Where? Ah, there are seizures in this market in extremely violent ways. Ah, And so when I had to jump off the phone, it was b ah, trying to do my part to kind of help, but also trying to make sure that, you know, we maintain full liquidity in times like this. It's incredible. Now, Jason,

uh, on the assumption that, uh, you know Friedberg mayor may not come back. I mean, what dramatic podcasting

23:53

revealing. I know. Well, you know, I mean, people also have their kids at home, so, you know, I might have to jump out and take care of the twins or 10 year old eso. It is definitely having a psychological impact on everybody being home. You've been home for over two weeks. I've been home for a week. I went out, wants to do a podcast at my office with just one person there.

24:11

What I said I wanted to do was start, um, at sort of the 10 foot level, and I'd like to build up to the 100,000 foot level. And I think that'll be a good way of talking about what we teased and talked about a little bit in episode zero, which is sort of these second and third order dynamic.

24:33

Before we go to that, let me just want to wrap up with David saying about, um, what the change in policy should or could be. So right now we have a we're having, um, you know, this basically quarantine. In some cases, it's a hard quarantine, some cases a little bit softer. It's a recommendation and, you know, people are being told Thio, you know, stay at home. Should this change And if under what conditions do we start going back to normalcy? Because I think that's what people want to know is when is this gonna end? And under what circumstances? I'm just talking about you staying

25:9

home. Well, look, if it if it were me, um I think what we would do is adopt some of the mitigation strategies of China and Korea and Singapore. All of these countries have kind of showed us a way to deal with it. Now we have to decide that a short term suspension of typical civil liberties is worth the trade off. Now, it's not worth it under the normal course, under any any, any imaginable way. But if we have to trade off some of those civil liberties in the short course so that we could get back to normalcy, I think most of us at this point and definitely all of us after another week or two of home isolation will do it. And what I think it would entail is setting up zones that we would understand to be uninfected. Ah, And what That means our people that don't have it or people that have antibodies and eventually allowing those owns to reopen so that we can actually have some amount of economic activity. And what that will require is massive testing of the entire population.

Testing, testing, testing. I mean, there should be lines and lines and lines. It should be, you know how we would have. And we know by the way, how to mobilize this. It is no different than when we would go to vote right. And we know we could all be told based on birth year, right? Everybody go based on birth year to your local voting facility. There are flow bottom is there. They can run these, Al.

If I A's, they can and they can. They can allow you to be in a safe zone or not a safe zone. If you're found to be an asymptomatic carrier than you can self quarantine and socially distance. And we can really, you know, nip this thing in the bud in a you know, 456 week time frame. And because these tests are available at such large scale and because these tests are so insignificantly cheap. Um, if it were up to me, I would mobilize the military in the National Guard. I would mobilize their voting infrastructure.

27:17

I mean, another way to do it with me. Why don't we just have the National Guard or doctors or whatever? Just go to everybody's mailbox, put in the kits and then say, You know, we have your kit in here on this date and we'll go pick

27:28

up the kids. The problem with these Aleph eyes is that the amount of blood that you need you cannot draw

27:33

by yourself. It's not a thing. What about the swab stuff? I mean, we just did the swap testing. We just said, Hey, we're coming by your house.

27:39

The swab is a PCR test that's looking for or in a and the problem with that is that it's effective in a window. It's uncomfortable to administer and has to be done right away for those that are in the process of viral shedding. God, if you are not in the process of viral shedding than that, PCR test is effectively ineffective, and what I'm advocating for is move past the PCR testing that should be done in acute situation. If you come into a hospital where you're exhibiting symptoms, the more important thing right now is to find people that don't have it or people who are a symptomatically spreading or those people that are immune, because if we can re baseline the denominator as free, Brooke said. We may find some good news in that. It's, uh very much like the flu in terms of numerical distribution, in which case we can make some policy changes and re establish economic activity. If it turns out that it's not, at least we know that too. But right now we're in the worst place,

which is that we are in a situation of isolation, confinement in the absence of data. And ah, this is I think, what's so What's so infuriating to folks is that we, uh you know, it's like Winston, Churchill said. A miracle will do the right thing. It's just that they'll try everything else first, and I think that we are clearly on that path to trying everything until we do the right thing. Everything okay and I think it's political. I think it's political poker as the reason

29:3

why Freeburg, everything okay? Just market trades. Really? Literally. You're trying to cover stuff and just pretend it's a great time. Tow tax tax harvest losses, man. Yeah. If you've got companies that you're really religious about, that you would love to own for a long time and you're underwater on them, it's a great time to sell them, take the loss, harvest it and then buying back in the next 30 days.

29:30

So, David, I have I have a list of eight things. And what I told Jason is I wanted to start at the 10 foot level and ended the 100,000 foot level. Okay? And so I'm gonna tee up the first question for both of you guys, and I have a view, but all I'll save it to the end. So question number one of these eight lists of interesting things to talk about. Ah, which may be relevant for the folks listening. What does this mean for startups? And what should you do if you are a unprofitable? Well, I mean, by definition, these these companies are default dead. What if What do you do if your startup CEO today?

30:9
Are startups doomed to fail amid the coronavirus turmoil?

Some advice to startup founders on what to do, in order to remain alive.

@Jason: If you've got a deal on the table, take the money. Assume no money will get raised for 3-6 months. Take salary cuts and extend your runaway. Get everybody to safety. Make sure your company is alive. "Take the medicine."

@Friedberg: Figure out where your customers are heading, and adjust your strategy. Stop focusing on growth and focus on sustainability.

@Chamath: Venture capitalists and their limited partners are currently over-leveraged in their other investments. As they are trying to stay afloat, they will force venture investments to a lower capitalisation, to preserve their overall portfolio thesis. As a result, startups need 36-months of runaway, in order to stay alive. Don't take the risk, if you don't have to.



You might also like
My startups has a lot of competitors, how do I survive
Startups.com came out of a failed equity crowdfunding p ...

Yeah, I think it's a great question. I'm dealing with it like with about a dozen companies a day who are in this very acute situation. You have to figure out how you have to look at the instrument panel and then try to like a pilot. Used the analogy, understand exactly how much altitude you have, where the nearest airport is, how much fuel you've got on board. So I've literally told folks, Listen, if you can close this money because a lot of people were in the middle of doing deals, close it immediately. So that's number one. If you If you got a deal on the table, take the money number and some people. D'oh! But most people don't.

And I'm already seeing people re trading deal terms based and backing out. So I had one person back out of a deal on the syndicate dot com, An angel investor said, because of market conditions I'm backing out on they had made the commitment there backing up, you see commitments broken. So assume it's gonna that no money is gonna get raised for the next three or six months at a minimum, and that you have to ask yourself, Well, how do I keep this company alive? Um I have people who are founders taking 80% salary cuts and then giving their staff 50% salary cuts. And then that takes her six months of runway. Makes it nine. So that's number one. You have to just make the cuts. And if you've chosen to be the founder of the company, that that's that's your job is to get everybody to safety.

And better to have 4 to 5 or three out of five employees lose their job and the company be alive to come back and maybe get some stimulus later, then to have the company go out of business because you wouldn't make the cuts. So you got to just take the medicine. And that's really with first time entrepreneurs. They don't understand that on def they have. Ah, every business is different. We have some companies that are subscription based business or delivery based businesses. They're actually seeing an increase in utilization increase of people trialing their software so that one company that's a consumer subscription, they had more trials this week than ever because people have free time s O. That company is gonna be fine, but you got to make the cuts David. I'm not sure what your advice is or what you're doing in your portfolio. Um, yeah. I mean,

look, I'm on 12 boards. Four companies have been or are in the middle of term cheat or closing a deal. So it's been an unfortunate timing for all this stuff. What happens to those four companies differently is the term sheets? Yeah, very different things. I mean, we've got one that I hope we close on Friday. We signed on Friday last Friday that the final docks and money's not in the bank account yet. I've got another one that had a bunch of offers that got rescinded, but they weren't like signed yet. It's just all over the place, Um, and and I think you know, one thing that's that's worth kind of paying attention to,

for every company is you've gotta ask yourself, firstly, the hard question of going into this and coming out of this era that we're kind of now entering that is a very bleak and dark era. Economically, where's your customer gonna be? And what is your customer gonna be doing? Um, the customer model is changing overnight. If you're a company that sold You know, software into restaurants and restaurants are about toe potentially go bankrupt or suffer absolutely loss of revenue and get, you know, debt payments restructured. They're not gonna necessarily be rushing to spend more money each month unless you can help them immediately save money. If you're a company selling to consumers and you're selling to consumers that are gonna lose their jobs in the next three months or lending to consumers, they're gonna be losing their jobs in the next three months. You've got to be asking yourself the question.

What can I be doing with my business? So you got to start with your strategy question, and you got to make sure that your cuts that you gotta think about what your customers gonna be and how you can adjust your strategy as a result. The second thing I'd say is, um and I sent out a note to my CEOs, and I was like, Guys, you gotta, you know, cut your burn and then you gotta cut your bird and you got to cut your burn. If you got burned, you got to do everything you can to give yourself the greatest chance of survival and I think on the last All in podcast. Jason, you mentioned having a you know, 36 months a cash. That's ideal.

But if you can get your cash back your cash to get you to an 18 month runway 18 my average you should be. You should be doing everything you can to number one kind of. Give yourself that breathing room, even if that means trading milestones, trading features, trading revenue goals, trading all the things that you're expecting to dio. Survival matters more than growth right now. David Sinclair, who wrote the book Life Span and It's Ah, Harvard Biochemists, has highlighted that there's basically a gene. The Cirque E Jean says about seven of them in humans and the Cirque E genes get turned on or off. And it turns out every biological organism on planet Earth has a circuit Jane. The Cirque E gene tells the organism or tells the cell tow either grow or hell, and this is a time for everyone to activate their Sirti genes and stop focusing on growth and focus on healing.

It's really important to optimize your unit economics to make sure you know where your customer is to really reduce the burn to reduce the span, to reduce the push for growth and expansion. And just make sure you've got a core business, that you have a customer, that you can make money from that customer that you've really got. Unit economics right and reduce your burn and give yourself that runway and extend your life. So that's that's my kind of Well, I think we got question one out of the way.

35:15

Um, let me let me give you my, um, my advice, which is building on the back of both of what you said, but I'm gonna take it from a different perspective. So let's look inside of a VC for VC. Firms have limited partners, and those limited partners are the most sophisticated financial institutions in the world. Family offices of well renowned individuals, foundations, university endowments, nonprofits. You name it, and all of them are allowed to invest in this athlete class because they themselves comm prove that their sophisticated and one way in which they do it is they have what's called portfolio allocation theory. They construct a portfolio of every $100 they have, and they say,

Well, I'd liketo have you know 70% of that in liquid instruments and that I'm gonna have 60% in bonds and, you know, 40% inequities, and then that 30% they'll take. And they'll say, you know, I want to have a mixture of all kinds of different stuff some real estate, some hedge funds, some private equity And eventually, when all of those allocations air done, there's an allocation to venture. Now, in the last few years, what happened is all of these folks, you know,

move the dial. They pushed the risk meter so that the allocation into venture was upwards of 789% of their overall portfolio. Now, just to remind you guys, you know basic theory, monetary theory would tell you when you put money in into an e liquid instrument, remember, Venture doesn't return money until 13 years after it's done, and you can't get it up. It's not like a bond where you can go on instantaneously, sell it in a second. You have to get returns that are much better than the market because you need to be rewarded. Paid back for that illiquidity. Now, in the last month, what you've seen our portfolios get completely turned upside down.

If your bonds and equities before were worth $60 where $70 of that 100 it's now worth $56 it could be worth $40. What that means is that that other $30 needs to be worth much, much less otherwise. Your portfolio model is completely upside down, and all of these limited partners become forced sellers as well, so that can't happen.

37:48

So what is the? My understanding is the last time this happened in 2008 LPs kind of winked to the GPS and said, Listen, it would be good if there wasn't a capital call right now and then GPS not wanting to piss off their LPs. The VC firms, not wanting to piss off the endowment's as an example, said, OK, we're just going to not make any capital calls right now while the market recovers so that you're equities go up and the percentage of venture goes back down. Is that is that the likely scenario is LPs? It's

38:21

worse than that. It's worse than that, because right now Aah! These foundations and sovereign wealth funds are trying to just stay above water and as we get to the 110,000 foot view, I'll give you the picture of what's happening in their offices. And again, it's important because it is what make sure we come out of this reasonably well, which is a properly functioning capital market. And right now, Ah, it is the most precarious that I have seen in 20 years. So basically, these LPs are gonna have to portfolio re balance, and they're gonna have to force venture capitalists to mark down their books.

39:0

We're just going to make that decision to say, Hey, my investment in Airbnb Slack or Uber is worth X now. I mean, when they were private companies,

39:8

so not stock and not you, because your public

39:11

but previously private. Yeah,

39:13

but Airbnb can it be marked at 30 or $40 billion? The auditors will probably say no. The LPGA's will say that it's thought the GPS will want to, because it'll allow them to maintain their ire. Ours, the rates of return. And so what you're gonna have is when these when these markdowns air forced toe happen, which will take another six months, Um, venture capitalists returns will look terrible and so their propensity to be ableto add bad dollars after good quote unquote, you know, to defend every company is going to go to zero run. And and as you said, Jason, there's gonna be a pall on on activity. So I don't think 18 months is sufficient. I think you need at least 36 months

40:0

double. You need to have three years of capital in the bank.

40:4

The worst thing that'll happen if you have 36 months, is you think to yourself Wow, I was really conservative. The best thing that happens with 36 months as you survive the distribution of outcomes would tell you there is zero point in taking the risk if you don't have to. And this is why. Unfortunately, it's gonna be a very difficult process of recalibrating all of this stuff. So for folks that are in these startups, we're gonna have to go through unfortunate period of pain. And, you know, as as Buffett said, you know, Rule number one of our business is to not go out of business. Rule number two is not to forget Rule number

40:45

one. Yeah, all right. Uh, I think it's well said and Is there any chance while we're sort of at this, you know, street level on the front lines? Is there any chance that we contain this very quickly? Let's say under 60 days and that it looks like this virus mitigation through the various drugs we talked about actually starts to work. If that happens in the next 16 was what what will happen to the markets? They rebound, But Trump says it's gonna come. There's a chance it could come roaring back. What are the chances of a roar

41:24

back? It cannot come roaring back. So let me explain to you what's happening right now in the capital markets. So let's take a step back. And first look at what what the Fed has announced over the last couple of days. So on dhe, here's why the Federal Reserve is important. So the Fed basically acts as a market making and liquidity function in what's called the overnight repo mark. Now that's an obscure market for the average individual on Main Street. But let me roughly explain why, why it exists and and at the end of it you're probably gonna have the same reaction as me, which is What the fuck? Fucking what the fucking fuck! Okay, but I'll explain it in English. First, you're an LP,

a limited partner, and you give a hedge fund a dollar and very much like last episode how I explained why hedge funds run leopard. The hedge fund says, Well, if I take this dollar, you know the bank will give me some some amount of leverage on it. But it would be much better if I if I was able to basically, you know, give them a instrument like a bond or some sort of short term commercial paper on dhe. Then they'll give me Maura because they'll believe in the quality of the instrument. OK, so they go in the repo market and they basically do a transaction overnight where they basically, you know, buy some short term commercial paper. They use it as collateral, and then they lever it up and then they go put it in the market.

That entire dynamic works as long as the repo function works. Every day, every night, you kind of going you clean up your balance sheet. You look at how much leverage you have. You look at your leverage ratio you make sure that you have enough money and you going, you refinance your short term paper that keeps, you know J. P. Morgan, Goldman Sachs, Morgan Stanley lending to you. But if that market seizes when the repo market seizes and there's no way for you to either buy or sell commercial paper, buy or sell short term money market instruments and on the other side, the market's air whips eyeing up and down. And so you're being margin called not being March and called being margin,

called not being margin called the Markets start to really season capitulate, and everybody is just losing enormous amounts of money and what I mean by everybody. It's everybody. It's hedge funds that sovereign wealth funds, its foundations, its central banks. Everybody is losing money, and if we don't figure out how to bring some calm into the financial markets, it will leave all of these limited partners and all these other people, um, with not just a lack of liquidity and a lot less money than they had before. But this psychological pain off remembering what they just went through, and that will prolong what we have to deal with to get out of it. Right. So, you know,

this is why I think it's really important to understand that if we can nip the, you know, stage zero of this problem, which is the disease itself in the bud. And I don't mean by curing it. And I don't mean with the vaccine, I mean by testing and data. Yeah, if we can understand and bounded than everybody's psychology can move to fixing

44:41

the capital markets. And closer we did that needed to be fixed. How close do you think we are to having that mass testing done? And then I think we all think we're gonna have a low mortality rate and then go back to normalcy. Is that something that's happening in 10 days, 30 days or 60 days? If you had to pick a number, the march back to normality, I don't see any action to get the testing done. It needs to get done right now. My mom got tested yesterday. It seems like there are more tests out there this week than staff opened up the testing. There's definitely PCR testing available now, and you can probably get your results in 3 to 4 days on average, although some labs, they're super backed up. Yeah,

my mom said she's going to take three days before. Yeah, but the stuff that we're talking about, which is the general population testing, I'll keep saying it. It's so critical that we do this to figure out how many people have already been infected and didn't know it. We don't have that data that we don't even have a plan for, and it's not on the radar. The task force in D. C is focused right now on increasing the throughput and the availability of PCR or just in time. You know, PCR test blood testing. That's a go. Yeah, it's all blood testing. It's just a matter of like like let me explain.

The PCR test involved. The RT PCR test involves taking blood, and then there's basically six steps that you have to go through with it in a lab. And, um, it's done on like three different machines, and the actual cycle takes 30 to 60 minutes of 30 to 45 minutes. So by the time you have that backlog and you could multiplex it, but meeting you could do multiple at the same time, and you can kind of do different things. But generally these machines are not highly automated. There are new machines that are allowing us to automate more of these steps and making them go a little bit faster and do more multiplexing. But it is still a multistep cycle to take the blood and turn it into a test result. Once you've amplified the viral RNA and tried to measure its available, it's ah, it's content on.

So this takes this takes some time, and so it's a chemistry lab that's doing this work. So until we have a point of care solution, which is like a test strip or something else and any there technically possible, it's just that they're not FDA approved. And so they're not getting made and distributed here. Where is China and Korea and Italy are using them out of there, made in factories in China, even though they're not tested and approved in the normal way, isn't the plan, though, to have these untested test online this week? It's not what they're saying. Yeah, but people are buying them. Yeah,

but, uh, s so I guess the question is, when do you think we will have these, you know, the general population taking tests and we get, like, a large scale testing like South Korea. Did I? They all agree that's the part of the solution. When does that happen? Unfortunately, we're not parallel path ing it. Where we've put all of our resource is into increasing the availability and throughput of the RT PCR tests for acute infection cases. And as a result, we have everyone focused on this.

There was some lab work and some research departments. I won't name them that we're working on doing this general population testing, but they got yanked into the getting the rt PCR scaled up because oh, my God, we're behind the curve. We gotta fix this thing. So we got to get over this first hump. I think once we get over this first hump, then you're going to see people distribute and work on this. Andi, I think getting over the first hump is happening in the next. Call it 7 to 10 days. And so then it's probably another 30 to 45 days before we get these tests for general population testing more broadly distributed to call it 45 days out way. Do this at the same time. I mean, what can we parallel this is makes no sense to me where the country with scientists and so many entrepreneurs in Silicon Valley that banging their head on the wall,

asking this question I've done so many phone calls over the last few days of people being like, What can we do? How can we get these things made? Where can we go? And everyone's just like flustered? It's really frustrating. Um, anyway, we've got a lot of individuals that were tryingto kind of collect together to do this work. Some folks are calling China today. We're trying to see if we can get big bulk orders out of China. We're just gonna pay for it ourselves and then try and get some research labs to run the research universities around the country to run the experiments for us using these untested, unproven, you know, not Have you run one of these on yourself yet? One of these unproven tests yet I haven't I actually a friend of ours.

I did one with video with him this morning on DSO. It's a mutual friend of ours, A mutual friend of ours. Yeah. And so And then I know lots of people that have him and have used them. And I've seen him, and I've gone through, like, you know, I bought a bunch of them. They arrive tomorrow, Um and so I see. Ah, you No way. No how these things work. They're actually from a reliable source.

You know, these air not No. No one's actually done the testing to prove the specificity and sensitivity. We're relying on 1/3 party. You know, we don't really know anything uncomfortable. I keep hearing they're uncomfortable. What's uncomfortable, Then they stick it very far up your nose. Is that what people are you know are you're referring to the rt PCR test What you're trying to do. They're trying to get a sample of living virus on a slob and the best place to get that living virus for this particular viruses in your nose or in your back your throat. So they're taking a long Q tip and they're sticking it up your nose and is taking back your throat. Then they put it in a little solution that will keep the viral are alive. And that's what they're shipping to the lab, and that's what then gets. So it's uncomfortable to have it that far up your nose is what they're saying.

That's what I keep saying. It's uncomfortable. I've had more uncomfortable things up my nose. I'm sure it's fine, you know? Yeah, it's cute. It's a Q tip in your nose. Yeah, yeah, it's a Q tip way up in, you know. So So we actually think that mass testing is a 30 to 60 day.

50:8

I think it met mass testing. If if in the worst cases 30 is 30 to 60 days of what? What I'm imploring anybody with any influence is we need to get this starting to happen in the next 2 to 3 weeks. It needs to start happening in the next 2 to 3 weeks. And you know, this is this is where I would say there are a lot of other people other than David myself. You, Jason, the people on our group chat buying tests for the bass population. You know, I just I just want to say something here, which is it is incredible to see guys like Jack Ma step up and, you know, do what he can to send stuff here. But I would say that thus far there has largely been an inverse correlation of contribution and wealth during all of this. And folks that are in a position to help, I think,

need to be more vocal. You know, we all can't just participate when the times are good. Take advantage of the bully pulpit when the times were good, and then when times are complicated, disappear and become anonymous, it's part and why I think you and I decided to just do these as often as we can, because at least we can think through the problem so that at least people can hear our voices and understand that we're thinking through as much as possible what to Dio. I am literally calling folks in Wall Street all the time because what little I can do to assure them or be a market participant right now to maintain liquidity, I need to do because in the absence of that participation, we're gonna just create Maur and more havoc, and I think it's important for other people who are in a position either monetarily or through influence or both to be out there right now doing something. You know, they should call Friedberg right now. They should give Freeburg $100 million Will go to China, will get the test. And we can do our bro broad based population study right

52:1

now. E would jump on that right now. Looking at the statistics as of today, um, we, uh obviously, the total cases in China hit 80,000 with 3237 deaths. They had only 11 new deaths yesterday, um, and Italy, 35,000 total cases. 4200 new cases. And they added 475 deaths yesterday with a total death count of 2978. So that is just stunning. What's happening in Italy? And it seems I don't know if the trend line is it's getting worse or not, but,

uh, yeah, well, it Z, it's a horrific, an awful situation. They're completely out of beds there, triaging elderly people and letting them die in the hall so that younger people who have a higher chance of surviving can actually get oxygen. It's just awful. And they're having 3500 new cases or they're at 3500. Yeah, they're over 3000 cases, but added yesterday, So there's really it is flattening, but who knows if that's because they're just overwhelmed and they can't do the testing? But the debts are something that seems to Lester.

It is we're looking at different times. Siri's. The number of people that died yesterday are, in fact the number of people that died yesterday. The number of people that tested positive yesterday doesn't tell you as much because the test results maybe four days delayed and they maybe 10 days into their symptoms by the time they get tested and so on and so forth. So the testing data significantly lags the infected population. Count likely and made may not represent much of anything, right? So it's very and it's also hard to know what the average fatality timeline looks like. There are published reports now out of China and Korea that start to try and specify this a little bit, but we are looking at different times. Siri's. When we try and compare these things on DSO, everyone be cognizant of that. As you look at these numbers, it's not simple apples and apples.

54:0

Let's, uh let's move Thio Ah, slightly second and third order. Jason, I think if we see is your disease is just gonna be a fucking mental quagmire. We're gonna jump out the window. Yeah. Um, okay, let's let's talk about something that more Cuban said, which I really agree with, which is that if we're gonna do bailouts, they can't come where we also do things like, you know, allowing these companies to do buybacks for a CEO pay isn't curtailed. You know, it turns out that the airline industry,

which looks like it's gonna be first in line for bailout, spent 96 cents of every single dollar free cash. So they had on buying back stock, which is only used to drive up earnings per share, which is on Lee relevant for CEO pay. So they have. You know, they don't have the cash buffer. They don't have the 36 months of operating, you know, uh, window that, you know, everybody should have their

54:53

eyes on trying to hit. They blew it on trying to have their earnings per share go up by reducing the number of shares in existence. There's exactly just so you understand

55:1

if you can't if you can't earnings per share. You know, you take earnings, you divided by the number of shares. So if earnings can't go up, just divide by the number of shares and earnings per share goes up

55:11

lower the number of shares. If you had a $1,000,000 learnings 1,000,000 shares, it was a dollar, per you get rid of half the shares, It now goes up.

55:18

And and so now you know you have CEO pay go through the roof. But these companies air not any more resilient than they were before on So now they're in line for a bailout. And I think the large caucus of people across both aisles are very clear that these things need to be wipeouts of the equity versus bailouts, where you know, folks who took advantage of the financial system here continue to get rewarded. What do you guys think about that?

55:46

Totally me. If you wipe out the equity, though just pausing for a second taking the other side of the argument. I'm not saying this is the side I would take if you wipe out the equity. Would not some of the people who would hit that pain our shareholders from a retirement home or a retirement plan. CalPERS made the hedge funds pension funds, et cetera. So you know, it does seem like if you wipe out the equity, you could have some unintended consequences exactly holds. But I think what the other side of the argument is we're gonna have tohave there be repercussions for people running companies so close and recklessly to the cliff. And there has to be some pain, not reward for doing that. And a bailout is a reward. Four. Operating irresponsibly. Is that what you're saying?

56:32

Yeah, I think that actually, you have to wipe out the equity. And I think the reason why wiping out the equity is important is that it overwhelmingly does not punish the retiree in there who owns, You know, Boeing stock in there for one k. Boeing has not been held by retirees in their full run case for years. As a cohort of impactful investors, massive large institutional pools of money owned these companies. These are the balance sheets of governments thes air, the balance sheets of foundations thes the balance sheets of a very few very, very wealthy people. And, uh, the reality is that for the broad based population for the 350 odd 1,000,000 Americans in the United States. How many of them do you think are really active market participants, meaning for every dollar value,

creation or destruction? How much do they actually see? I would guess it's less than 10% meaning 90 cents of every dollar are nameless, faces organizations in a financial infrastructure. I think the lesson we have to we have to, we have to tell, and the place we have to move to is one of compassion of capitalism, which is that we have been so hell bent on the use of leverage on the use of these financial gimmicks on the use of accounting tricks to enrich a few at the sake of the many. And this is the right time where you should nationalize some of these businesses and when they eventually do get taken back out and floated publicly, all of those proceeds should go back to the United States treasury, who should then use it to reinforce Social Security and Medicare on everything else, because we are going to run a multi multi trillion dollar budget deficit to get out

58:23

of this and to just give people some context here that the US national debt is at $23 trillion which is $72,000 per citizen in $109,000 for each citizen who pays taxes. And we run, um, are are are spending our the budget deficit. Is it? Visibility is a trillion dollars a year. We're gonna talk about here, I think a 2 to $3 trillion stimulus package which will increase the national debt load by only 10%. So it does seem like we can manage that. But boy, was this a strategic mistake for us to run up a day during good times, was it not?

59:2

It's even simpler than this. Like Andi. I hate to say this so bluntly, but this eurozone is gonna collapse. Okay, Japan is finished. So there are two economies that matter. There's China and the United States. As of today, um, and the great thing about that is, in a set of two, there's only one instrument of safety, which is the United States dollar. Thank God in that world, the United States has exceptional leverage, exceptional,

exceptional leverage. It is, and it has always been, you know, the beacon, delight on the hill, et cetera. Now, in a moment like this, the United States has the most ability to reset how we think about things. It could run $5 trillion deficits tomorrow it could run $10 trillion deficits because it is still the backstop. I'm not advocating for that, but this is where I think you need bold, decisive action and not piecemeal strategies. I don't think a trillion dollars is enough. I really think that if you think about what the Eurozone will have to do and what's gonna happen to the U.

S. Dollar, we should be basically saying right off the bat at a minimum, anyone who makes lesson and, you know, pick your number of $1,000,000 a year. Every man, woman and child, every or every 18 year old American man and woman should immediately get $5000. Forget 1000 2000 5000 and next month, there for still out of business. 5000. And all of that does is just it's a trillion dollars. It's $2 trillion over two months, and then you add another trillion dollars in all this. You know small business loans and all the other things.

That's $3 trillion that you can deal with because where the United States and I think it's really important to keep it in mind. I know that sounds crazy. Well, I mean, people don't go, you know, blah, blah, blah, you know, budgets and deficits. But it's not because everybody else is just this fucked, if

60:57

not more. Fuck. Well, let me give you, let me give you a another perspective. The GDP of the United States is $20 trillion roughly every month. Let's assume the whole economy shuts down every month. That were shut down costs us $1.5 trillion. So if we're gonna have the country shut down for, say, three months, we're losing four and 1/2 trillion dollars right there. The problem is, economic growth in the economy is actually a first order function, right? So the the movement of cash drives the future economy. Um and so if we were just needing to fill that hole,

you would need to come up with a couple of trillion dollars and you would have the government going out and buying ice cream cones and paying hair salons and paying for dog walkers and paying for construction workers and paying for oil rig workers. And basically basically employing and buying all of those goods. And service is for that functional equivalent of $20 trillion GDP. That's what it would take to just fill the hole. Well, that's if you're assuming no economic activity. I mean, we don't think there's gonna There's gonna be no economic activity with Maybe, let's say it's third less economic

62:7

activity in the shoe guys. The shoe that hasn't dropped is this idea that everybody is at home working. Nobody's at home working. That's a joke. That's a lie. Okay, because, as David said, company's heir not, you know, self contained units, very few are many of them, and most of them operate in a very interconnected, socially dependent way with other companies. They're your customers, you are their customers. Nobody is doing anything right now. There's nobody. There's nobody evaluating the next great SAS tool. Guys, come

62:41

on. And the other issue is just just leverage, Jason, Right? So we've also got to remember that a big chunk of the economy is leverage, meaning that there is debt and debt payments that need to be paid. And so those income streams air now gonna be absent. And so there's there's a there's a multiplier effect. When revenue goes down, the economic impact is actually multiplied, and so you can't just fill the hole. So it becomes a very complicated, nonlinear kind of system that you have to try and fill the holes and you gotta find the places where cash is missing. And it's not moving the fastest. And that's why you gotta throw the money in the first, like these repo markets and so on. Well,

there's no doubt that we all agree Bottom up is the way to do this. So if we have 330 million Americans, if you just have the bottom half, get $1000 a month, that's quality $160 billion a month. That's only over the year. $2 trillion. So if we just did that, it gave everybody $1000 a month. That's $12,000 for the bottom half. They're not saving that money. They're gonna use it to spend it in the market, correcting pay their rat. We're gonna go get dinner. I don't think So you think that four people are gonna who are laid off right now are gonna save the money?

63:43

Well, if you gave me $1000 or you know somebody $1000 when they're in their house on the sixth week of their home confinement What,

63:52

you think I'm assuming that we're in week 10 and we're not in self confinement anymore? We agreed in the 1st 3rd of the program that we're gonna get there in whatever it is. 60 days, 90 days, and we'll be back.

64:4

You know what I realized after wearing the same pair of jeans? Um, four days in a row. I have too many genes. That's what I've realized. And you know what? I've also realized that the the cotton shirts that I buy from H and M r fucking perfect. And, uh, I've complicated my life with all kinds of bullshit that I've been buying because I thought it meant something. And right now it means absolutely

64:27

Jack shit. Yeah, I agree. I agree with that perspective. That's what's really interesting when you see your entire portfolio collapse when you see this belt tightening its happening even amongst and we have you know what? Listen, all three of us are lucky enough to be at the, you know, in the top of our careers and top of our income at this point in our lives. But we all came from humble beginnings as well. And if if the people at the top of belt tightening and saying you know what, I don't need to buy a $60 T shirt. I'm gonna buy a $16 T shirt boy, Does that have ramifications across the entire economy? And this reminds me very much of the recession. They said luxury goods would never rebound. And sure enough, the last 10 years luxury rebound luxury has rebounded massively

65:9

because it was not a psychological, broad based impact to people's philosophy and framing of how they viewed the world.

65:17
Is this virus going to change our outlook on life?

Chamath think this is a great time to reset your view of the world.

Chamath: "I think conspicuous consumption is unimportant, helping each other is important taking unnecessary vacations because it drives your instagram follower feed is fucking stupid, making sure that we can contribute the incremental dollar we have so that other people could get tested and get back to work, that's a good use of money."



You think so? I don't. After the economic crisis last time, people did say there would never be. People specifically said there would never be luxury goods again, and that was the end of people buying that shit.

65:26
Is this virus going to change our outlook on life?

Chamath think this is a great time to reset your view of the world.

Chamath: "I think conspicuous consumption is unimportant, helping each other is important taking unnecessary vacations because it drives your instagram follower feed is fucking stupid, making sure that we can contribute the incremental dollar we have so that other people could get tested and get back to work, that's a good use of money."



I'm not talking about some prognosticating analysts. You know, the analyst is only is, you know, good as their own bias is. What I'm saying is the average person. I didn't really have to internalize a broad based impact to their way in which they view what's important in their life. This touches everybody, and I think that there is a new opportunity for us to really recalibrate what's important. I think conspicuous consumption is unimportant, you know, helping each other is important taking, you know, unnecessary vacations because it drives your instagram follower feed is fucking stupid, making sure that we can contribute the incremental dollar we have so that other people could get tested and get back to work. That seems like a better use of your

66:18

money in time. Yeah, so, no, go ahead, David, get in there. I think that there, yeah, there's just great perspective setting that that's that's happening that is gonna happen broadly. Cross economy. We've been fat and happy for a long time, and at least a sub segment of the population has been. But we also have it really, really well, really, really good Here in the United States,

there's a website I just recommend everyone check out and spend some time on. It's called Dollar Street. Ah, and you could go to Gap minder dot or GE slash dollar Death Street and check out the website. It is unbelievable and it is probably my favorite website on the Internet and Dollar Street is a project of Ola roast slings Wife All is the son of Hans Roasting, the great visual economist who told people stories with visuals, unlike the world in income and population growth and so on. And she went around and she photographed families all over the world and showed how much money they make each month and then showed all these common household activities and goods brushing your teeth, the oven. How do you what kind of clothes you have one of your closet look like What do you sleep on? And it's pretty striking that half of the people don't have a toothbrush. 1/4 of people use mud off the floor to brush their teeth. Most people don't have a bed on planet Earth, right? Only the top 1% have a kitchen, right?

I mean, there's like, these amazing statistics with photos that really helped kind of illustrate this point. And I think that, um I'm not saying that the extreme demonstration of humanity and the distribution of wealth, income and prosperity and humanity is as relevant here. But in all these photos, everyone's very happy and they live a happy life. And there's a great reset happen that's that's happening that's underway. Happiness eventually finds itself when the Delta goes from being negative to being positive again. When the Delta is flat or the Delta is negative, people are getting into a worse condition. Things are bad. So we're gonna bottom out here and then we're gonna you know, no matter what state we find ourselves in, will very quickly find ourselves back in a state of happiness and will all reset with respect to time outs.

Point on. Hey, maybe I don't need all these jeans. Maybe I don't need all this and this and this, but there's certainly, like critical, you know, needs that people have, and it's gonna be pretty apparent pretty quickly. You know how the economy and people are gonna adjust to this this new world. But

68:35

there's gonna be a adjustment. The part of this that I think is actually constructive, is I do think that we're going to swing the pendulum back towards nationalized economies and, um, and away from global economies because I think this is a way that, um, politicians all around the world, they'll characterize it in different political language. You know, some people will call it, you know, sort of like American exceptionalism. If you're on the right, if you're on the left, you'll describe it in much more social terms. But they all lead to the same outcome, which is that what we have seen is that in the push to globalization,

we have created too much brittle infrastructure that doesn't work and that we're not resilient enough men. We are hyper efficient, and we're just in time, and all of that is great and everything is super cheap. But when we really need infrastructure, toe work, whether it's tests or whether it's the government or what have you, it just doesn't. And I think resiliency will force us to beam or nationally attuned, and I think it'll be the right thing. It'll cause all governments to think about their own food supply differently to think about their own supply change differently. It'll demand companies to be less profitable if it means that they can withstand these kinds of shocks, and it's one thing to say that we could never have modeled, you know, sort of like this two or three Sigma event we're dealing with. But after the fact, it's no longer a two or three Sigma Vent, and governments have to now internalizes and companies have to internalize it. We're not going to act the same. We'll just

70:10

we'll be different. Look, think about the iPhone. And obviously, medicine and respirators we've been talking about these things over the last couple of weeks is this happens if if we do have a breakdown in relations with China, if we let's say we stop importing stuff, what would happen to Apple, the most powerful and valuable company? How would they ever be able to make iPhones again in United States? Are they capable of making them

70:36

now? It depends. It depends on who you're answering A four On behalf of the U. S. Customer, Apple should probably be forced to bring a lot of their production capacity back into the United States. They should find a diversified global supply chain so that you have multiple suppliers in many countries in the world, but they should rely more on America. It will be less profitable, but it'll be okay.

70:57

And it's the right thing. Yeah, it's $100. My what I read in the estimates was an iPhone would cost 100 or 100 change Maur to making United States. But if they did, they wouldn't have way have the suppression issue. They make 5 $600 for iPhone anyway.

71:10

Well, by the way, the real outcome is that, you know, And we were going to do this anyways, after this, which is I don't think people are lining up to buy, you know, uh, kind of irrelevant products anymore. In a way where we're just slave ish. Two things. I mean, I think it's important to ask ourselves like, this is probably the most socially impactful world event the globe has had to deal with since World War two. And it's probably really important to talk to somebody, you know.

And if you don't know, you can document and you can easily find the documents of people who survived the Holocaust or lived through the bombings in London, etcetera. Their mentality was different as a result of it. It changed their behavior in very positive ways, right? It was like the great advances in humanity happened

72:0

after that would be refocused, your less focused on things that are not core or critically important. And free bird. What do you think about that? What This is showing in the health care system and the holes in the health care system. The fact that we couldn't mobilize to deal with this after we did scenario planning about this after SARS, we'd done scenario planning. We've had, You know, I I sent to our group list the link of Bill Gates talking about this for five years ago and how this would be an issue. I sent a couple of links to people writing about closing the wet markets in China after the SARS outbreak. I'm curious, David. What, you think the holes in the health care system are that need to be fixed on what we can learn from this? Was any work now coming into the You know as well as we got through the virus, we got through the economic second order effects,

But let's talk about positively what we're gonna learn, because I think that's what amounts getting at is that there's a personal recalibrating of what matters. Maybe morality, ethics focus in our lives. David. What can we learn from this On a health perspective, What should we do when this ends? Um, there's no easy answer to that right? Nationalized healthcare systems In some countries, you could say they're great. My brother, my family lives in London. I was talking to my brother yesterday and, you know, they tried to go down and get tested for a tooth infection yesterday and like,

it's just brutal dealing with N hs in the UK You know, people aren't telling great stories about N hs and not saying, Oh my God, it's the best health system. I love it. Healthcare is hard. People want personalized care. They want a lot of attention. There's only so many doctors, is only so much beds when you start giving people good care costs a lot solving this stuff and the R and D dollars required to enter markets. It's so you know so extraordinarily high you end up charging a lot for products, and service is on the back end. It's a very complicated system, and there's no simple answer. I do think that we're learning and realizing pretty quickly that the U. S and we're gonna we're gonna do some postmortems on this,

obviously, as a world as, ah society. One thing that's clear is the Chinese response, in part, was driven by a lack of bureaucratic red tape and an ability thio manifest action and an ability to produce and distribute drugs and produce and distribute tests without needing approvals. I think that's something that's gonna change in the United States. It has thio. The regulatory burden on health care companies on pharmaceutical companies on testing and diagnostics companies is extraordinarily high. But the objective in the United States has been do no harm, which means don't let anyone die through the action. But it may be that many people are dying through the inaction on. I think we're gonna maybe see a big shift in policy and allow right to try laws that are going to be federalized. So you know, states can make decisions about right to try laws and doctors, and patients can try drugs on their own discretion without having a federal oversight body.

Perhaps the same will happen with diagnostics and testing, and you know that with respect to what what service is, the government provides and doesn't provide you know, I'm not sure. There's a lot of data on either side here that nationalized healthcare systems do and don't work. So it's It's very hard to say what the right solution is is here, you know, and I don't think that you want to try and take R and D and put it in the government. I think that's a terrible idea. I think that there's a financial at a capitalistic motivation to find discover molecules, get them tested and proved that they have a positive effect on human health. And we need to move this towards personalized medicine, which actually changes the construct and probably increases the cost of doing this. About 10 X. We're already seeing this with stem cell therapies and crisper based gene therapies. Eyes.

They're so much more expensive. In order to get that stuff moving faster, we need to remove the regulatory burden and allow companies the ability to move quickly and make the stuff more affordable. The more the more barriers we put in front of companies, the harder it's gonna be. And if we try to do this with the top down approach with the government deciding what did you R and D on and what not to do r and D on we're gonna be in a fucking mess. So I know that some of my points,

76:7

Yeah, I would say as well, I think that there has to be, um, you know, after the Great Financial Crisis week, we smartened up about what the banks were allowed to do. Unfortunately, we didn't really spartan up about what um, other financial participants were allowed to do. And ah, lot of what we're seeing here is our excesses around leverage and credit. And I think we need thio. Fix those. We need to tell companies that, you know, you can't put out certain amounts of that.

We need to be a little draconian, actually, to reset this properly, we need to tell you know, market participants that you can't run 10 or 13 times, lever it, you can't take ah $100 billion make it act like 1.3 trillion and then blow a 50% hole in it. You just you're just not allowed to do that. I'm just sorry, but nobody should be allowed to do that.

77:0

Okay? So if we look now onto politics, which is the least fun to talk about in many ways, but just on international relations, I think it's worth discussing. There's been a bit of a debate about what we call this virus and the relationship between the United States and China. China went on a little bit of a propaganda campaign the last couple days, saying the U. S that the U. S. Created the virus. Trump is now controlling them actively talking about the Chinese virus I used the other day, the Wu Han virus. I didn't realize that that people consider that racist to, say woman virus because we called it the Spanish flu. We called it the German measles. But I guess people are particularly sensitive to this topic now.

Andi, I think there's a critical issue here that I don't understand why we're not talking about this. But wet markets specifically trade in exotic animals. These viruses are contained in certain animals like bats which are, you know, together and flocks of like thousands, and the virus is on then these animals in wet markets. People don't know what that is. You can you can google it if you've got if you're not squeamish, but essentially in Chinese culture, as I've read it in the Wall Street Journal and in the World Health Organization's advisements to cancel and to shut down what markets. Um, then there's unanimity unanimous agreement on this from the health officials that these have to be shut down. That Chinese culture says We don't want to see meat in a package because we believe it's counterfeit and it's been frozen and it won't be as tasty on it won't have the same nutritional properties, so you must slaughter the animal in front of us asleep for some significant percentage of the population. There is a tradition,

and this is where these viruses have uniformly been generated from, and now we have the president and China going at each other, and we have to have this very delicate conversation. I think David and I'm curious to see your position on this because it's now hitting like a ratio and, you know, in a bias against a certain culture is how this is being framed by the left, which is just maddening because it's actually a culture. It is a cultural issue that has to end just like our cultural tradition of shaking ends obviously needs to end or be deprecating in some severe way. So, David, maybe you could talk a little bit about what you think. The outcome here is on a political basis in relation to those wet markets and China and U. S relationships. Look, I think China suffered heavily. I'm sure they're good.

I've heard they're gonna shut down the wet markets, but all I know is what I've read on the Internet. So, you know, I think they're fucking awful and stupid, and they should be shut down. Cultural dependence aside, there's another issue in China. Apparently, there's a huge amount of the impoverished communities in China are encouraged toe actually grow and harvest rats. I don't know if you guys are aware of this, but there's a bamboo rat business where you grow these rats inside of bamboo, and then you kill him and you sell them. And so the poorest people in China make money growing and selling rats rat meat. And the Chinese government, just in the last week,

has told them to stop, which actually is a huge effect on many millions of families who are growing these rats. So there's an economic effect but it's obvious that it's a terrible health effect. But I'm not sure that getting rid of the wet markets truly eliminates eradicates the risk of a new viral outbreak, right? Like I think I mentioned to you guys on our texts during the other day. You know, 40% of the bacteria in the oceans are killed every day by viruses. This is a great stat that Jennifer down I use is in her book. Ah, that on the discovery of crisper. And there's 10 to the 28th bacteria in the oceans, so half of them, they all get killed every other day every two days by viruses. There are viruses everywhere. They're gonna emerge,

they're gonna hit us. The issue isn't necessarily where the source of the virus is coming from. It's just that we have to have better testing and diagnostics and preparedness and treatment plans and ability to motivate and mobilize ourselves to address pandemics like this in the future with respect to the relationship with China. I'm not an economist. I'm not a trade guy. I don't really know the nature of the relationship, so I'll leave. That

81:9

might know my thought. My thought on this is that this is not a question of, you know, wet markets or no wet markets. I think this is a question of if you are a, um an anchor participant of globalization and the global economy. Is there an expectation toe have a common set of behaviors, a lowest common denominator set of behaviors and high jeans that everybody signs up for to be a, you know, fully fledged global market participant. Now, the pros of that is that maybe everybody decides to be a participant in tow, have lacks borders and, you know, free trade agreements that there can be no wet markets and a whole host of other things we all agree on, You know, whether we're okay with shaking hands.

Or maybe it's not must stay from now on. Or maybe it's bowing. Um, the problem with that on the other side is that all of a sudden you create a model culture that strips away the individuality and the richness of every country. And, um, you know, I I kind of think that, like, you know, we could have attacked wet markets when HIV started to spread because it was, you know, as we understand it. It was the emergence of the, you know, Bush meat and raw bush meat and the killing of monkeys that had this virus that was then passed to humans etcetera,

etcetera, that that started the HIV epidemic. Um, so these things have happened before, and it's not as if we shut down. You know, all of those markets in Africa, they still exist in some form or fashion. And as David said, there are huge economic ramifications to to having these cultural edicts. And it's very difficult, I think, for an American to demand China to do it when we're not willing to step up, just like in other ways. You know, countries can demand us to lower our carbon emissions,

and we say we're not gonna do it, so there are implications and very difficult issues all over the place. But I do think in general that if we move towards a more nationalistic economic, ah, dependency interdependency, I think that, um, it's probably the right thing to allow more resilience to exist and for cultural diversity to continue to compound because the world of just in time efficiency, I think we're learning now was the wrong optimization for the world. We need to optimize for resiliency, and that means some amount of inefficiency. It means Maur, mom and pop shops. I think that that's a good thing. It doesn't mean everything. Is Amazon prime now?

And Wal Mart? I think that's okay. It means that the iPhone is a little bit more expensive, which means you upgrade every other year. That's okay. It means that companies like Google and Facebook and others are less profitable in the short term. That's also okay. All of these things air. Okay, we just need to decide. And now we need to move forward.

84:14

When do we? What's our best estimate of when people will be allowed to go to a restaurant? I think it's, you know, again, getting back to what the people listening to this podcast probably care about most as we wrap up here in the second hour on thank you for tuning into the all in podcast David Free burgers with us from, um, what's the name of your incubator again? David. The board. The production board previously Ah, Metro on climate dot com and shove off hoppity of Social Capital Partnership. When do we suspect people will be allowed to go back to work in the Bay Area in New York. When will people be able to go and have a meal in a restaurant? Do you think this is May, June or July or August? When will we be out of quarantine? You. I'm going crazy.

85:0

I'll give you my optimistic and then we can give the final word to David. Here's my optimistic view.

85:8

Please. I'm dying, and

85:10

I think that the emerging evidence ah, will soon be hard to ignore. That we have a denominator problem, which means that we're not testing enough and that these I, g and I GM tests will come online at scale in the next two weeks and that we will establish ah demarte zones within cities and towns. Green zones, if you will, where people who are either negative or who have already gotten have tested positive for the antibodies will be allowed to interact. So I am telling you that it's within six

85:44

weeks from six weeks from now, we'll be in restaurants. Uh, and we may have to show our papers to somebody to get in or have our foreheads tested,

85:54

you know, you just have to show your test results and have your passport or driver's

85:58

license. Yeah, I know this sounds crazy. I would much rather go to a restaurant in the next six weeks where I had to show my papers. Little bit draconian. Sounds a little dystopian. I would much rather go back to tie show. Couldn't have my goddamn Rahman would show my papers and no everybody else did. And then have everybody go to the, you know. Ah, very simple temperature test on their forehead. Like I give to my kids when they're sick. David, you taking the over where the under at six weeks for when we'll all be at Taisho can have in a Roman. I'm taking the under. I'm taken April 7th rate April 7th or eighth on. We're recording this. I think on the 17th of the 18th I think eso you're you're You're saying we're just going to be whatever 20 days out, I to I'm taking the under, but barely I think it's anywhere for five weeks.

86:45

David David, explain the under case just so, and we can end on that. But what's the under case? Because that's a great note Enda.

86:51

Yes. So as we see the number, if you look at the UW Virology website and I've shared this with people on my Twitter account, which I started doing yesterday, which is at freezing Freeburg, I'm not sure I'm gonna stick with it. I don't know if I have the stomach for it like you guys do, but, um, basically, they're showing, you know, steady case loads of positives per day, which again is delayed. And if you look at the I C. U Availability in the emergency room Wait time data, which I think are better leading indicators of where we are in the cycle.

New York is about two weeks behind us. New York is gonna be fucked for a little while. But I do think that the West Coast and with some travel restrictions, is going to be able to reopen for business probably around April 7th or eighth, because we're going to see a dramatic decline at that point. And we're going to see a lower fatality rate that everyone is predicting. And we're gonna start to have measures around washing your hands and masks because you can't teach stay shut down for that long without literally never being able to open again. So I'm kind of balancing the economic need against what? I think. The data is starting to show that hopefully we were seeing the second derivative turning negative Now, um, and so we start to see a slowdown in new cases, and then we see a reduction in cases. Um, and I think that, you know,

there's a huge distribution on what that model could tell you. But I feel really good about April 7th or eighth as getting enough confidence that okay, it's safe to go outside again. And by the way, if we don't open up for fucking business, everyone's done forever, all right, that's what that's what I get the number. And most importantly, when do we feel comfortable playing cards again in person? Because I'm starting to think that I want. And I know this sounds crazy, but at this point, if the three of us were positive and we've gotten through it already, I would like to know that I think the entire poker group needs to get tested, and the best possible scenario is that we're all inoculated.

We're not carriers anymore. We're blockers in the system and we can get back to playing cards because I'm being a little facetious here. But the chances are we might all have it, right. I mean, it's a possibility. E. I am going bonkers being at home. I am not designed for social isolation. I'm going crazy.

88:57

Do you like it? Yeah. I mean, I'm on the pretty isolated person as a matter of course, anyway, So other than work and you know my doing this or TV, I'm always at home. Yeah, and but the one thing that I cannot live without is ah, Monday pokers. And I'll really tell you why. It's like in a moment like this year's. Here's what I've realized. I realize just how much extraneous stuff I have in my life, how much I don't need it, how much I've occupied my time with things that are just not important. And it's really allowed me to clear a fly like,

you know, working on the next deal. Not important thinking about my status in society, not important thinking about what other people think of me. Not important. My health important. Um, my family and their health important. And my friends I love my friends. Yeah, and we're very blessed. I I mean, I I love the both of you. That group, uh, saved me in some really tough moments in my life. And I hate not seeing you guys and being able to, you know, just touch and feel you on once a week. It's

90:11

that, to me, is brutal. Just to be clear, this is a poker group way defied, touching and feeling. We're talking about poker,

90:18

chip, love. It's fine. We make

90:19

man love. You make man love over the poker table. And that's how men commune is by just shifting large amounts of money across the table. I miss you guys too. I'm going crazy.

90:28

I'm not gonna be. I don't think like you're going to see me after this sudden done. I can't take seriously buying things. I just think it's like, What the fuck is the point? I really take seriously that we need to fix the social infrastructure of the United States and in part due or do what we can to help as many people as

90:48

they had folks. Jamaat Friedberg 2024 Heyday Free Barbie both. Thanks a lot for doing this to Ma. Thanks a lot for doing this. Follow at Yarmouth. Follow at Free Bird. If you want to help out the podcast. Well, there's no ads. Thio click on because my mom wants me to go broke on this. No ads. But I will say if you write us a five star review on iTunes I guess that means we'll get indexed and follow Freebird. Follow after Ma follow at Jason. We'll see you all next time. Bye bye.

share this

Suggested Episodes