All right, everybody. Welcome back to

the number one podcast in the world, the

All-In podcast. Today, the original

squad is back. No guests, just Full

Contact Sachs is back. We're going to

break down a number of topics today,

including chaos in the bond market as

Republicans seemingly have abandoned the

Doge agenda. And we're going to debate

the big beautiful bill, which is going

to add trillions to our national debt.

And it's a new era for Google as they

released an AI first search product.

OpenAI has acquired Johnny IV's company

IO to make some sort of gadget. They've

paid over $6 billion. Is this the real

deal or not? You're going to find out

today. And is energy the solution to

every problem we have? One besties got a

very interesting take. All that and more

on the number one podcast in the world.

Stick with us. For the fourth year in a

row, we're going to do the all-in

summit. If you guys remember four years

ago, I decided, hey, let's do a summit.

And then these three besties were like,

"No, we don't want to do a summit." Now,

it's become a big thing, and everybody

loves it. September 7th to 9th in Los

Angeles. I do give you credit for that,

Jal. Yeah, after you gave me hell for a

year. Okay, that sounds like an apology,

but okay, sure. I'm sorry. You're

wonderful, and I appreciate what you

created. Thank you very much. Wow,

finally some credit. Okay, we all know

the goal of the summit is to have the

world's most important conversations and

this year will be no different. yada

yada yada

allin.com/summit if you would like to

apply to come. Why do you say the most

important conversations and then say

yada yada yada as a way to dismiss it?

Do you think that that increases your

salesmanship and effectiveness? I don't

want to make any grand pronouncements

here, but these have been important

conversations we've had. It's been

pretty great, I have to say. yada yada

yada. No, there's just like they put

like 18 things in the plugs now and I

don't want to do too many. Why don't you

do a modeicum of work before you get on

camera and actually edit it. Here we go.

I get one compliment and then that's

exactly it. He doesn't do the homework.

So, he runs out of words. He's like, "We

get the biggest names to come to our

summit. The vice president came. He said

yada yada yada." Elon Musk showed up in

person. yada yada yada. There was an

astronaut. Freeberg lost his yada yada

yada yada yada yada. Uh, but this year

will be no different. We'll have

incredible parties, blah blah blah, and

let's get to work. Okay. President did a

trip to the Middle East, yada yada yada.

Maybe more peace, a whole new framework.

America's going to yada yada yada yada

yada. World's greatest moderator, yada

yada yada. Executive producer for life.

Deal with it, Fredber. Okay. Uh, what's

in the contract?

Let your winners ride.

Rainman David.

We open sourced it to the fans and

they've just gone crazy with it.

All right, let's get to work here. The

bond market is the captain. Apparently,

Treasury Department sold $16 billion

worth of newly issued 20-year bonds on

Wednesday afternoon, and there was weak

demand. This pushed yields higher across

the board. the 10-year, which Beston has

said to focus on because it's the

benchmark rate for most borrowing costs,

you know, mortgages and stuff like that.

It spiked and here it is. It actually

hit a five handle at one point. A lot of

people were hand ringing about this. And

the S&P dropped 1.5% in about 30

minutes. Here's that chart as

well. And the three major indices were

all down between 1.5 and 2% on the day.

Obviously, in related news, the House

passed the big beautiful bill at the

11th hour last night. Uh this makes the

TCG JA tax cuts permanent. Um and it's

estimated to increase longr run GDP by

60 basis points. Uh that's if all the

cuts were

implemented. It's also going to reduce

tax revenue by 4 trillion over 10 years

is the estimate and it's going to add

between 3 and 5 trillion to the national

debt over 10 years. free break. What's

your take on the tripleB and the bond

weak bond market, all of it? I just want

to take a quick primer on Sure. how the

government gets funded. I know we we

assume everyone understands it, but I

think it's important for folks to really

grock it. For the federal government to

make payments to employees and

contractors and buy stuff, they need to

put money in their bank accounts. And

the way they put money in their bank

accounts is they issue bonds. These are

treasury bonds. So they'll sell treasury

bonds to the public and individuals buy

it, companies buy it, banks buy it, and

foreign governments buy US treasuries.

And they transfer or wire cash into the

federal government's bank accounts,

which they can then use to pay for

stuff. And then the Treasury Department

needs to continuously sell treasuries to

raise cash to fund the government. When

folks don't show up to buy

treasuries, that's a bad thing. And that

means that the government needs to

increase the interest rate that they're

paying on those bonds. So what we saw on

Wednesday was a really weak demand

signal for treasuries on this, you know,

modest treasury auction. Selling 16

billion of bonds is not a lot. There's

hundreds of billions being sold each

quarter. And so this was not a big

number, but there was no buyer. The

market was really dry. And so everyone

that participates in financial markets

saw this and freaked out. And the big

motivation, the big understanding of the

relationship here is to your point that

this big tax bill and spending bill is

passing out of the house. And that bill,

as we talked about last week, has a high

deficit and that'll run up US debt over

time, which makes it more difficult for

the US government to pay its bills

because it has to issue more debt.

Interest payments have to be paid every

year and so on. Now, if you just pull up

this one slide, this is something I

thought was really worth sharing. The

CBO estimates, which is what you

referenced, Jason, are estimates of what

the cost is going to be over time. And

this is from Jessica RLE or Ridle out of

the Manhattan Institute put this chart

together.

Budget Office. Yeah. So the

Congressional Budget Office, the CBO

creates an estimate of the budget, the

spending, and the deficit, and

ultimately the incremental debt that the

US government will need to issue to fund

its obligations over time. This is a

chart that was put together that the

expectation on a baseline basis is that

over the next 30 years or so, US debt to

GDP will climb to 203%. But what a lot

of people don't know and don't talk

about is that in the CBO estimates, they

assume in all of their models that

interest rates are at

3.6%. And with the bond selloff

yesterday, what we are now seeing is

30-year Treasury interest rates at over

5%. It's 5.1% this morning. And for

every incremental 1% above 3.6, six,

you're spending an extra 350 billion a

year in interest. 350 billion a year.

So, as we go up by 1.5% interest over

the next 10 years, we're spending

another 5 trillion just on interest

payments. Half a billion dollars after

trillion dollars a year of incremental

interest on the difference between 3.6

and 5.1. That's an incredible recursive

problem. And I say recursive because the

incremental interest that we now have to

pay because interest rates just went up

because the market is demanding more

payments from the government to fund

this means that the government has to

issue more debt and it quickly gets away

from you. There is a nonlinear

relationship between the deficit and

interest rates which drives up the debt

problem in a nonlinear way and it gets

away from you and you can't fix it. And

that's what the market is telling us is

that the current bill that's being

passed out of the house is showing such

an extraordinarily high deficit that the

market does not want to buy the debt

from the government. Rates are now

climbing and that creates a massive

problem for the government. Okay,

Chimath, you've been tweeting about

this. Uh we thought we were going to get

uh an administration and maybe um some

focus from the government that we would

be have more austerity measures, balance

the budget. Now it looks like we're

going to pour gasoline on the fire. What

are your thoughts? I think we have to be

careful here. So Jason, the political

calculus will be for the president to

decide how much credit he actually wants

to take for this bill because even

though it has his name on it, the

contents of the bill are different in

actual

facts than what I think he intended. And

what I mean by that is when you look

inside of what happened in the 11th hour

last night, it's disappointing. This

thing is like anti-D Doge. If Doge was

meant to be a

reflection of the American voting

population's desire for meaningful

reform in government, cost

controls, some form of austerity, and to

get this debt spiral in check. This is

the opposite of that.

What happened was in the 11th hour, you

had a handful of people abstain. You had

one person that passed away in the last

few days. You had one person that fell

asleep on the floor of the house, so he

wasn't even woken up for the vote. And

in the middle of all of that

chaos, what happened was all kinds of

things were added and attached and

cancelled at the last minute because

what happens is you have to have these

puts and takes as Freeberg described. If

you want to spend over here, you have to

find a cut over there. But I think what

happened was there was really not a lot

of financial literacy used to decide

what to actually put in and what to cut.

And that lack of

discipline is going to create I think a

negative set of consequences. So what

are those

consequences? Today the tenure is around

4.5%. At the rate in which it's

escalating since liberation day, by the

end of this year, we're going to be past

5%. The 30 year is on a rate now to get

past 6 and a quarter, maybe even reach 6

1/2%. Those

are way

beyond what most people thought was a

reasonable place to be for the United

States economy. And so what will the

implications be as rates go to those

levels? You'll delever from the United

States. You'll sell US debt. You'll own

things like gold and Bitcoin. If you're

curious about what's happening to gold

and Bitcoin, they started to spike in

the last few

days. You'll have ratings organizations

that add to this cascade by downgrading

the United States. That happened on

Friday. you'll have very smart people

starting

to signal that this is a much harder

problem than they initially thought.

That's how I personally interpreted

Elon's comments over the last few days.

So, what was the House supposed to do? I

think what they were supposed to do was

implement some form of austerity. They

were supposed to by the will of the

people pass a recision bill. They were

given that recision bill. It was just $9

billion. They couldn't even pass a $9

billion recision. And instead, they

passed a $4 trillion inflation to our

debt. Now, you hand this to the Senate.

The Senate is in a very difficult place

as well. Do they want to quote unquote

claim victory and say, "Here you go,

President Trump. Here's your bill." But

they'll further bastardize this thing

and it will be even further away from

what I think benefits MAGA and benefits

Main Street. So who does it benefit?

Current course and speed right now. This

bill is about traditional Republicans

and traditional Democrats circling the

wagon and putting on a platter a set of

things that I think will be hurtful to

average Americans. You're going to see

energy prices spike. You're gutting the

number of electrons that will be

available for things like AI. You're

going to increase Medicare prices and

the math is wrong. So when you sensitize

this thing to a 4 and a half or five or

five and a quarter rate, so meaning not

what the CBO used but the real

conditions on the

ground, this thing is an albatross. And

I think unfortunately for President

Trump's agenda and for a MAGA movement,

this is the worst of all conditions. The

financial markets will punish this. And

then the last thing I'll say is now to

top it all off, I think that Jerome

Powell will see the writing on the wall.

Many aspects of this thing are

inflationary and if they're not handled

well by the

Senate, he has a lot of room to actually

increase interest rates.

So, I would just say that the Senate has

an incredibly difficult job. I think the

president has an even more difficult job

about what to do right now. But the

House did nobody favors. They did not do

anybody a favor yesterday. Here's the uh

prediction from Poly Market on what will

happen to Fed rate cuts in 2025. It's

across the board. It seems like nobody

can tell if it's going to be zero, 1, 2,

or three. 20 22 25 and 15% respectfully

respectively for those four options.

Sax, you don't speak for President

Trump. You're the zar of AI and crypto

specifically. So, let's put that out

there. But I'm curious your thoughts on

what happened with Doge. Why are we

continuing to spend ourselves into

oblivion? And what will the

downstream issues be here? Because this

sounds like it's going to be

inflationary. This sounds like it's

going to be hard for people to buy

homes. It's going to create more

austerity in the future. How bad is

this? Do you feel it's as bad as Dave

and Chimath are framing it? Well, look,

I mean, I wish we had 435 members of the

House who thought like Freeberg about

spending and deficits. Um, we don't. The

Democrats all want a lot more spending

and a lot more taxes. Remember, if it

wasn't for Mansion Cinema, we would have

had that $4.5 trillion build back

better. And among the Republicans in the

House, unfortunately, we have a bunch of

Republicans who are pretty soft on

spending. I mean, you can call them

rhinos if you want. And we only have

what, like a three vote margin in the

House, and the Democrats are not

cooperating in any way. So, you don't

have that many votes to spare. So, what

I'm saying here is you can't make the

perfect the enemy of the good. I think

you have to be realistic about how much

we can get done here. And I do think

that this bill does contain a lot of

good things in it. There are a lot of

priorities for the administration in

here. Do I wish it cut spending more?

Yes. I mean, do I wish that it made all

the Doge cuts permanent through

recisions? Yeah, absolutely. I think

it's outrageous that there were enough

House Republicans who didn't want to

back up Doge that that wasn't enacted.

But there are a lot of good things in

the bill and I should just highlight

them for balance here. So, the number

one thing here is that this bill will

permanently extend the 2017 tax cuts.

And if we don't pass this bill, let's

just assume that we do nothing. Okay, if

we do nothing, you're going to get the

largest tax increase in decades, and it

won't just affect the rich. This affects

the middle class as well. The 2017 tax

cuts increase the standard deduction,

which is important for the middle class.

It raised the child tax credit. So

again, if you do nothing, you get a huge

tax increase as soon as the 2017 tax

cuts, which Trump passed back in his

first term when they

sunset. So that's number one. In

addition, there are promises here that

were made during the campaign to

eliminate taxes on tips and overtime

that have been enacted, and the

president promised to do those things,

and he is accomplishing those things. So

I think that's important. There's

funding for the border wall here, 10,000

new ICE officers, more detention beds,

and so on. On energy, it repeals a

methane tax and unlocks new oil and gas

on federal lands. And there's a bunch of

other things as well. So, there are a

lot of good things in here. Now, to

point, will this bill be bad for the

Republicans prospects in the midterms? I

guess what I would say to that is I

don't understand how you expect to do

well in midterms if Republicans preside

over the largest tax increase in

decades. A tax increase that Joe Biden

tried to get during his administration.

Biden tried to raise taxes and couldn't

get the votes for it. But if we don't

make those tax cuts permanent, if we

allow the sunset to happen, then you

will accomplish what Joe Biden could

not, which is to raise taxes on the

American people. So, look, no bill like

this that's passed by a one vote margin

on straight party lines when you only

have a three vote margin in the entire

house is going to satisfy everyone here.

Let me Well, let me ask you a question

there. You have Trump at his peak power.

You have all these threats of, hey,

we're going to primary anybody if they

don't do like what we're saying here.

Why isn't Trump just coming in and using

his power and just saying, hey, not good

enough. Get back to work. we need to cut

spending. Period. Full stop. And he's

got that power. I don't hear him saying

that. I do think that there are ways to

enact the tax cuts and make them

permanent. And I think that that is a

good part of what this bill

did. The problem was what happened from

11:00 p.m. to 6:00

a.m. And that's all of the nonsense

where I'll just be honest. I think the

people in the House are not nearly as

financially literate as they need to be

and I think what they wanted to do was

pass something and throw it over the

wall and say mission

accomplished. Now it's up to the Senate

and the good news is look, the Senate

has these six-year election cycles for a

reason. It allows them to think

strategically and see past what's right

in front of them. So, I still think that

there's a chance for the president to

have his cake and eat it, too. But I

just want to highlight that as a

supporter of his and a supporter of that

MAGA agenda, which I think a lot of

people voted for, I just want to be

honest and say this is not it. And there

has to be some meaningful reforms in the

Senate version of this thing that gets

sent back to the House. So, I'll give

you an example of one. 81% of the

incremental energy that's generated in

the United States last year came from

private enterprises that were investing

in short-term forms of power that have a

credit and a transfer market tied to it.

This is just the financial machinery.

This is how Blackstone and Goldman Sachs

and Brookfield and all of these big

players move tens and hundreds of

billions of dollars

around. They changed those rules at the

11th

hour. What is the impact of that? Elon

foreshadowed it. Nick, maybe you can

show the headline of the article. He

said, "We could be running into a power

capacity issue by mid next year." Now,

if we knew that, why would we take the

short-term incentive away to generate

more electrons? All the great things

that David has done, that the president

has done on AI, I mean, we'll talk about

what happened in the Middle East.

But when the rubber meets the road and

you actually have a shortage of

electrons because these financial

actors, they're not, you know, and in

fairness to them, they're acting

rationally. You take the financial

incentive away and you can't underwrite

this thing. What are they going to do?

They're just going to stop doing it. So

in the absence of electrons, what

happens? Prices go up. It's

inflationary. And now you'll have to

allocate electrons. Does the electrons

go to an AI data center or does it go to

a home? In a different example, actually

on the residential side, places like

Florida, I think there was like an

incentive for like batteries. So if you

are about to get hit by a hurricane, you

can buy these big battery systems from

Tesla as an example, but there are other

ones, Generrack and whatever

train that was cut out. And so in Texas,

all of these impacts will have negative

consequences. My point is, I think you

have to really look at what happened in

the 11th hour and fix those things

because the problem with these plans is

you can't look at gains that are in

years 6 through 10 to justify pain in

years 1 through 5. You can't do that.

Because I understand how that

mathematically makes sense. It doesn't

make sense practically for the average

American. That's just not how life

works. You don't go into a J curve. You

know, we do that as investors, right?

But you don't do that as a normal

American, which is be on the wrong side

of the economy for four or five years in

the hopes that your six and seven are

good. That's the point that has to get

fixed. I asked Chimat the question,

shouldn't Trump use his capital he's

built up here and say not good enough,

make some cuts here? What would you say

to President Trump if he was asking you

for your advice? Freedber. I think the

writing's on the wall that the system is

winning and the rebels came in and they

tried to fix the inefficiencies in

government with Doge under Elon's

leadership and our friend Antonio's

participation and a great group of

individuals who are true patriots who

are spending time trying to help

reassess how the government operates.

And they, as I've said from day one, for

my first visit to DC during inauguration

weekend and every visit I've done since

then, I always leave after meeting with

members of Congress deeply worried that

they won't actually do what they need to

do to make the changes. And the last

line of defense ultimately is the

president with his veto authority and

his ability to tell people to go back,

rethink this, and cut spending. I feel

like we're in a last ditch effort. And

I'll tell you why I say it's last ditch.

I think that there's a relationship

between what's going on in the United

States and what's going on in Japan.

Nick, if you'll pull up the Japanese

government 40-year bond yield chart. So,

just so you guys can kind of observe, in

the last couple of days, we've seen

Japanese bond yields sore from 2.5% to

3.5%. Remember, Japan owns $1.1 trillion

of US treasuries. I'll just read a quote

from a guy uh who's the chief global

strategist named Albert Edwards at

Society General and he said recent

developments in

Japan may signal the end of the

favorable investment cycle that's been

established since the 2008 global

financial crisis potentially reshaping

global financial landscapes in the

coming months. Can I translate that

because it's it's incredibly important

what Freeberg said but I'll translate

that what he is saying. So this is a guy

from Sockgen since

2007208. Every now and then the markets

give you free

money. One of the most obvious free

money trades was the yen carry

trade. And in order to to execute that

trade, you're effectively leveraging

treasuries against the Japanese bond

market. What he is saying is that there

is increasing risk that that trade

unwinds.

When that trade unwinds, what you're

going to have are net sellers of up to,

as Freeberg said, a trillion plus

dollars of US

treasuries. What will that do? It will

further

exacerbate the market's reluctance to

own US treasuries, which means yields go

even higher, which means interest rates

for businesses and individuals go

higher. Correct. And the only way to

keep those interest rates low will be

for the Federal Reserve to try and step

in and buy those bonds, which will

devalue the dollar. And in his

commentary, he went on to say that uh

the 20-year Japanese bond auction that

just took place, similar to the US

Treasury auction that just took place,

was the worst they've seen since

1987. That's how significant this event

was in Japan over the past week. So the

massive climb in bond yields in Japan

indicates a massive selloff in credit.

And remember if you look at the

historical perspective when the global

reserve currency nation sees their debt

sell off it usually is part of a global

selloff that happens. It's not just the

US that gets affected. And any one of

these markets can cause a cataclysmic

follow on to the rest of the global

financial markets. like if Japan sells

off too much, we are going to start to

see a lot of unraveling happening.

That's the consequence I think of this

particular bill because it's it signals

a lack of a reluctance to actually

address. Let me let me say something

here. I called Freeberg today on the way

here. It's very rare that he and I agree

about this kind of stuff because

normally what I say is you're

catastrophizing. Sure, calm down. But

this is where I will say I'll put my

money where my mouth is and I'll put the

chips on the table to say this is the

moment. This is the moment where we

either reunderwite what we voted

for or we mistakenly pass this Christmas

tree concoction. It does have President

Trump's signature on the top of it. It

does have some features that he asked

for, but what I hope he sees and

realizes is the details here matter.

And without some technical maneuvering

in the Senate, this is a bad bill as

constructed. And if it

passes, forget what any of us think, the

bond markets will act decisively and

they are going to go in one direction

and it's away from us. And I just hope

that we figure this out. Seems like a

classic diffusion of responsibility

here, Sax. You have Congress, Senate,

and POTUS not willing to step up and

say, "Let's cut the spending."

Well, I don't I don't think that's fair.

I mean, look, the the president backed

up Elon and Doge. First of all, he

created Doge. He gave it the US digital

service. He backed it up in every

cabinet meeting, in every public

pronouncement. There's a limit though to

what he can do. Congress has the power

of the purse. And we said on a previous

episode that at the end of the day, for

the Doge cuts to become permanent,

Congress has to incorporate that into

the budget. And the reality is there are

still a number of these like old bull

appropriators on the Republican side who

just are not wired to make spending

cuts. Why are we hearing him vocally

saying stop this madness? He is the most

vocal guy in the world who mixes it up

every topic on the planet. Why is Let's

give him the benefit of the doubt. Let's

give him the benefit of the doubt. He's

probably working it all in the back

channel. There are the things that he

wants and he's in the midst of

negotiating as well. But my my point is

just this. The level of financial

illiteracy in this bill will come back

to bite America in the ass. Look, here

here's the problem is that what what you

guys want to sell right now is

austerity. And the reality is that the

politicians in Washington just are not

buying austerity right now. I mean,

that's what you want is austerity. Yep.

And the reality is the only way you get

true austerity, like a painful set of

changes, is when both parties link arms

and jump off the cliff together and and

make those changes. The Democrats right

now have no willingness to do that.

They're opposed to doing this. This is a

straight line party reconciliation vote.

I think you're trying to overload this

vote with way too much stuff. You're

trying to basically say that this vote

has to fix America's fiscal problems.

Just not going to happen. I mean, I

look, I agree with you that the fiscal

situation needs to get fixed. This is

just not the vote where it's going to

happen. You cannot exacerbate it. Well,

I don't know. I mean, look, I understand

that this doesn't have as much stuff as

as we want. I mean, like I said, I want

to see the Doge cuts made permanent, but

the alternative to this bill, let's say

the alternative is just do nothing. That

is actually meaningfully worse because

you will get a massive tax increase.

Massive. I think President Trump

inherited a Biden economy that was

already feeling pretty shaky. I don't

know what the argument is for a massive

tax increase in an economy that's not

doing great. I'd rather see the tax cuts

made permanent. I'd rather see the no

tax on tips and overtime implemented.

Important campaign promises. I'd rather

see funding for the border wall. I mean,

these are all important things that we

need to have happen. And I just don't

think that this bill is how you're going

to start. Good. But what I'm saying is

why do you pay for that with electron

supply for homes and AI? I don't know. I

mean, you're talking about a pretty

esoteric issue, Chimoth. This is not the

same as solving the US budget situation.

Why do it by doing Medicaid cuts? Why?

Well, let's talk about the Medicaid cuts

first of all. I mean, you're being a

little bit schizophrenic about this. I

mean, you guys are saying that you want

to see more cuts, but then you also

believe that the Medicaid cuts are a bad

idea. So, you got to kind of choose. I'm

not saying that. I think all cuts are

great. Cuts across the board. Yeah, cuts

across the board. Spread it out. You got

to decide what you're opposed to. Are

you opposed to cuts or you want more of

them? I want more cuts. And given the

fiscal situation, I'm actually if if

someone showed up and said, "Hey, we're

going to increase taxes." I'd say,

"That's what we got to do right now.

Everyone's got to take a hit on this."

But hey, I know I'm going to be alone in

that. So, I'm not going to try and make

that argument. I guess the question for

you, you're not alone in that. I agree

with you. Well, let me ask a question,

Sax. What do you think is the moment

when the two parties lock arms and do

jump together? What is the conditions

that need to be kind of prevalent for us

to take, you know, draconian austerity

measures? probably the bond market

forces it on the politicians force it on

Washington. Yeah, I think you're right.

You're an economist by background. Do do

you see that happening right now? Like

do you see this the sell-off that's

happening not just in the US, but

everyone that's linked to the US with

Japan and so on. Don't you think that

the markets telling us that this might

be the moment? It could be the moment,

but you know, I remember the first week

of April when Larry Summers came on the

pod and said that the markets were

melting down and that was a different

moment that he was trying to sell in

favor of his policy. So my point is just

there's market volatility and we won't

know for a while whether this means

anything. It could just be a blip,

right? So look, you ask me what are the

conditions for getting austerity. I

think that austerity will have to be

imposed on Washington from the outside.

Washington's not going to find the will

internally. We had a wonderful moment

here where you have Elon come in with

Doge, which the president made possible.

Okay. No other president would have even

have done this. Agreed. Agreed. Big

credit for that.

where you get a total outsider to come

in and bring a team of like young big

bald geniuses and you let them go

through these departments line by line

and start deleting things. Okay. And

they made I think great progress. I

think they found a 160 billion a year of

cuts that can be made administratively.

Beyond that they need Congress to

approve it. And I will acknowledge that

there are still a number of soft

onspending Rhino Republicans and there's

just not a majority for the types of

austerity and cuts that you guys would

like to see. I mean, that's just the

reality. Yeah. But I still think that

the question with this bill is just how

pure you want to be. My point is just

are you going to make the perfect the

enemy of the good? I don't think you're

going to get austerity out of Washington

right now. It's just not in the cards.

The question is whether this bill is

basically better than the status quo.

And I and I think it is because of the

tax cuts. To your point, without opining

on it, I think what's going to happen is

the bond market will sensitize this

budget at real rates. They're not going

to use the 3.6 that Freeb pointed to.

They're just going to rewrite this at 5,

five and a quart, or 5 1/2. That has a

very

different risk exposure, I think. And so

to your point, they'll react. If it

looks like it passes as is, then that's

what they'll do. And to your point,

David, we'll know in the next 60 to 90

days. Let's say that this is just a blip

in the market and it's not some larger

once in a century type event. The

reality is we don't know exactly what's

going to happen. Look, I don't like

America's fiscal picture at all. But

what if the AI and robotics revolution

plays out in the most optimistic way

over the next decade and is massively

deflationary and we get basically AI

powered robots expanding the economy

massively. You need power for that. I

get that and we need to do power

generation for sure. But my point is

just what if the new technology provides

an answer to the fiscal situation that's

not currently on the table. I think

again. So, this is my point is is

Washington's not going to embrace I

understand, but you're going to have

brownouts and blackouts of average human

homes to do that. No, you shouldn't have

to make these decisions. Those are dumb

trade-offs. You're not going to be able

to solve the power generation problem in

a reconciliation bill. And I want to

just add my two cents at the end here.

Leadership starts at the top. This

president acts unilaterally all the

time. Whether it's immigration, DEI, he

has no problem. And this is what he is

doing. He's endorsing this bill. He's

saying it's big. It's beautiful. He is

saying this is historic. I think this is

bad leadership. I'll just say it

straight out. He was elected to balance

this budget and to have austerity. He's

going to put more onto the debt. And we

sat here on this very podcast, the four

of us, and said this was the most

important issue on the world. And Trump

is putting gasoline on the fire. I think

it's bad leadership. Let's continue on

the docket. I suggest you look at the

Constitution because the power of the

purse rests with Congress. He's

endorsing this. He's endorsing it. He's

not even putting up a fight. When it

comes to immigration, these other areas,

the president has far more unilateral

power and he's used that every chance he

gets. But when it comes to spending, you

have to get Congress on board. This is a

bill that passed with a one vote margin.

I don't know where you think the

opportunity is to squeeze out more

concessions from Congress. I don't think

he could speak up. He could speak up and

say do better. He's doing the opposite.

He's doing the opposite. This bill

passed by a one vote margin. It was

hanging on by a thread. And if it

failed, you get basically hundreds of

billions of tax increases, which we

don't need right now. And you know, in

terms of in terms of I think he's trying

in terms of Republican prospects. Look,

people vote for Republicans to do two

things. Cut taxes and cut spending. I

wish that this bill did two out of two.

It does one out of two with some of the

second one like with the Medicaid stuff.

If we didn't at least cut taxes, there'd

be no reason to vote for Republicans.

None. You all are much closer to him

than I am. You all should be challenging

him to not endorse this and to do the

opposite. That would be the profile and

courage. Then we get the biggest

increase in decades. Great. No, he

should just go to everybody and say do

better. I don't agree with that tactic.

I think the better tactic is to do what

he did, but then work behind the scenes

and help the Senate implement the

technical guard rails that make the bill

better than it as is. Look, nobody

thinks that this bill is going to pass

as is. It's going to go through its own

set of changes in the Senate. Now, I

think the opportunity is to understand

these puts and takes with a little bit

more detail and a little bit more

mathematical precision and fix it. So, I

still hold out hope that we're going to

get to a better place. But he's going to

have much more influence, Jason, by

actually taking the positive path than

throwing everybody under the bus. The

real question will be in 30 days or 45

days, what is the final version of this

thing? And whatever gets passed and

signed by him, there will have been

enough time to understand it. And you'll

see the real-time reactions. All I'm

trying to indicate is I think that this

was a moment where people were very

pensively optimistic that the approach

of Doge would really be embraced and

that we'd see some broadscale attempts

to at least and you know Freebrook said

this just to go back to 2019 even if we

don't do anything else just go back to

2019 pretend COVID didn't happen. Yeah.

And we would be, by the way, if we did

that, we would have a budget surplus and

the bonds would be trading down to 2%

yields again. I mean, we would be in

such an incredible condition. We've got

2% inflation right now. Anyway, we don't

need to beat the dead horse. Let's move

on. I I wish I wish there were 218

members of the House who thought like I

hear you. Oh gosh. Listen, this guy is

saying he's going to primary anybody

who, you know,

doesn't he should be speaking up right

now. I'll tell you what, give him the

line item veto and then let's talk,

right? How about you saying guys spend

less money? He doesn't have to throw him

under the bus, Jimoth. It could be

something very subtle. But you make it

that way. What you the way that you

position it is like you make it such a

black and white thing and it's I speak

up is is black and white. He's there's a

lot going on bill. No, but what I'm

saying is he

is I'm guessing I don't know, but I'm

going to assume working behind the

scenes. And what you're saying is he

should virtue signal and prognosticate

in public. And I'm saying that I I never

said virtue signal. That's what you're

asking him to do. No, I'm not. I'm

asking him to say reduce spending in the

bill because that's good for America.

This bill cuts 880 billion for Medicaid

over a decade, which is something that

already is politically tough and

controversial. It imposes work

requirements for able-bodied adults.

This is similar to what Bill Clinton did

back in 1996 with welfare reform.

Basically saying that you can't be a

layabout and get welfare. So these are

relatively tough things to do

politically. It's like do I want to see

even more cuts? Yeah, absolutely. But

again, when you have a one vote margin,

whose vote are you going to pick up by

doing more cuts? I guess you get Thomas

Massie maybe. But you probably have to

go all the way to balance the budget to

get his vote. I don't know what it takes

to get a Thomas Massie vote. So, I don't

know what votes you think you're going

to pick up by cutting even more. And we

can't afford to lose even one vote. It's

literally the art of the game. We got to

move on. I will move on. But if you're

going to tell me it's I'm asking virtual

signal, you're going to lie about my

position, I will correct it. It's been

40 minutes. So, my position is not to

virtual signal. It's to go flip a couple

people and say, "Do better." Okay. It

was a huge week for AI again. Google and

the ghost of Steve Jobs took center

stage. Let's start with Google here.

They had their IO conference on Tuesday.

This is where they show a bunch of new

stuff. They get developers to come

together to embrace their products and

the stock ripped 5% on the day which

might be a turning point for Google and

up again today. Search was the big

announcement and we had a discussion

with Sergey about that in Miami and we

had multiple discussions about it here

over the last couple of months. They

demoed something called AI mode. No, not

founder mode, AI mode and they compared

it to regular search. Here it is on the

screen if you're watching us on YouTube

or Spotify. A very elegant app. And so

here you have somebody searching and

what you can see is in AI mode. It looks

like a nice comprehensive search.

Instead of 10 blue links and tons of

advertising. So you can flip over and

see all or you can do a perplexity like

search. Here we're showing you what this

search would have looked like. The AI

summary at the top and then your 10 blue

links. It's distinctly different. It is

exactly Chimath what you talked about.

Somebody has to have the courage to flip

the switch here. And so that's was the

big drop. And I think that in your

interview Dave, didn't Sundar say we're

going to integrate ads into that kind of

result? Yes. The comprehensive search

result. I think there were a couple of

things that Sundar said in the interview

that showed up in a really important way

at IO. The first was exactly this which

is to make AI mode more ubiquitous in

search and effectively over time replace

search with this AI mode experience

which they've been testing in a small

group and now they've expanded very

specifically to kind of Chimath's point

a couple weeks ago they should try and

flip the switch. Well, it appears

they've done that. The key question and

the challenge has always been what's the

revenue per query? How are you going to

make money? And I think one of the other

kind of interesting announcements that

we saw come out of IO which indicates

the business model opportunity here is

not just AI mode and search but some of

the other tools that they launched

bundling them together and they have

this product offering called AI ultra

for $250 a month that includes you know

YouTube premium. It includes 30

terabytes of storage on your Google

account. It includes access to flow

which is their movie creating AI model

where you can use they have V3, Gemini

and imagen below it. Those are the three

models that contribute to this movie

creation studio tool and they've

launched a number of other kind of highv

value Gemini models as standalone

research apps and you can get access to

all of these kind of high-owered tools

for $250. So I do think this sets a new

direction that Google is likely testing

as a business model which is

subscriptions you're saying. Can we make

yeah a very high dollar volume

subscription model for consumers that

over time could create a very meaningful

shift in the revenue mix for Google away

from ads and more towards subscription

revenue that we already see in some of

the consumer services like YouTube and

YouTube TV. This is I think a really

important turning point. I would say if

anyone were to identify the week that

Google really pivoted into the AI

business model it might be this week.

They launched over 15 products at this

thing. And another important one I'll

highlight, Sundar talked about this in

the interview uh I did with him. In the

early days of Google from 2002 till

about 2011, Google had this kind of

playground of products called Google

Labs where they would introduce new

stuff. I don't know if you guys remember

checking out new stuff. So they

relaunched Google Labs like a year ago

or so and as Sundar said they're putting

a lot more stuff in labs. So Labs is now

becoming the new test bed and they

launched a bunch of the announcements in

labs. So that becomes the place where

they'll say what's the business model,

what's the use case, do people like it,

do they love it? If they do, it

graduates out of labs into full

production. And I think that opens up

the opportunity for some of the things

like Chimath was talking about where

they could experiment new ideas, new

modalities, and then productize them if

they work. And they discontinued labs in

2011. They just brought it back last

year. They just brought it back. Yeah.

Saxs, you I think mentioned, hey, they

have the I'm feeling lucky button here.

They put the AI search up in the top

bar. We have images, video, shopping,

etc. news. We're all familiar with that.

What do you think? Just swap out I'm

feeling lucky for Delight Me with AI and

and M or maybe just if you were a

product manager there because you've

done a lot of great product work in your

career before you were in politics,

would you just AB test this and say

anybody who let's say doesn't click on

ads, let's send them to the AI search

and just see how they do because they

don't click on ads anyway and then just

let the ad clickers keep going to the ad

product.

Well, I think you know we were all

calling on previous podcasts for Google

to risk disrupting their dominance in

search by moving to more of an AI based

model. And I think they've taken an

important step in that direction.

They've sort of threaded the needle here

between keeping their old UI and product

and then also incorporating the the new

sort of AI UI. So, this is a compromise.

I mean, they're trying to have their

cake and eat it too. It ultimately feels

a little bit like a transitional move. I

doubt that this will be the end point,

but given their need to protect their

search business while also developing

their AI business, this feels like a

pretty good compromise, I think. I mean,

it certainly shows that they're in the

game and they're not going to get caught

totally flatfooted and let the whole

world disrupt them while they're trying

to figure out AI. I mean, they are

responding now and the market seemed to

like it. I think they were up like 5% on

this news. Yeah. And then up again

today. Chimatha, you talked about having

some uh design sense and maybe some

bravery here. Looks like uh they're

pretty much on the cusp of doing that.

The search alerts results in AI look

elegant. They look uh dare I say

perplexity like when you look at them. I

would

say I would like to have that as my

default. I think when I'm doing search,

what do you think of the product? We're

showing it here again. And what do you

think the road map will be? I gave one

possibility. Sax is totally right. I

think that this is not the destination,

but they've taken a really important

step and now they have to follow

through. We all know what has to happen.

So, I think we're all just going to

debate when it happens and I think what

the market is betting is that it's going

to happen in the next 18 months. So what

is it exactly? It's when AI mode becomes

the default for a large swath of

existing Google users. How will we know

that happens? They're probably running

AB tests right now. They're probably

gauging behavioral patterns of which

kinds of users, what the actual impacts

to search are, and what impacts exist to

CPCs to cost per click, which is one of

the inventory types that they sell. But

I think this is the beginning of a

process. I suspect it'll be done in less

than a year. And for a large swath of

users, they are going to put AI in the

front door. I think that's a feta

compli. I think we're just now debating

the mechanics of getting there per how

Sax alluded to it. That's a really

powerful step. But here's Jason. I think

I go back to what they also have to keep

in mind. What you don't want to have

when you

are going through an innovator's dilemma

is to have the competitor be on to the

next lily pad while you are figuring out

the current lily pad. And the reason I

bring this up, and I'm sure we'll talk

about this, is it's impressive what Sam

Alman is doing right now at OpenAI. I

don't know if it was a troll or not, but

to buy IO, Johnny Ives firm at the end

of Google IO. And I read an article that

said OpenAI has been trying to do this

for a couple years in a row. But what

Sam alluded to in that video was some

nextgen whisbang device that they've

been working on. That was the industrial

logic for the M&A.

I think what you don't want to have

happen if you're Google is to finally

get the search thing right and then now

have to play catchup on some device. So

I would encourage them to just run the

AB tests and shorten the window of

measurement. I think we all know what

has to happen. So, it's probably better

to just do it sooner than later and then

start to allocate the incremental

resources to these new form factors and

other things so that they shorten the

distance between them and open AI. Let

me tee up exactly what happened. OpenAI,

they're the makers of Chat GPT, bought

Johnny IV's startup. The startup is

called IO. They bought it for 6.5

billion in an all stock deal. If you

remember, Johnny IV was Steve Jobs

collaborator and designer. iPhone, iPod,

iPad, all that beautiful stuff. So,

OpenAI is buying IO. IO is not loved

from, if you've heard about that. That's

his design agency. And so, they did a a

really interesting romcom video. I don't

know if you guys saw this. It's

incredibly ridiculous. Let's play it.

Here are two people having a meat cute.

Dude, you're right. It's like a love

story. It literally is like a meat cute.

Here comes Sam. He's walking around San

Francisco and he's a genius according to

this video. Here's what I have said

about Johnny. I was like, I've never met

a man who's so brilliant and so humble.

I mean, it's embarrassing the language.

The responsibility that Sam bears is

actually honestly beyond my

comprehension. He's a co-founder of IO.

Yeah. Open AAI already owns 20% of it.

Yes. No, no, 23%.

As all Sam Alman deals, if you learned

anything, they're conflicted.

But the the copy here I just want to get

your general the gentleman's comment on

what I see you worrying about are other

people or about customers about society

about culture and to me that tells me

everything I want to know about

surprised you guys are such haters on

this I'm excited to see what this thing

is but I just thought this was like

you're falling for

it the

deepest I don't know why we're even

watch but they're going to watch the

9minute video I wanted my 9 minutes back

Nothing happened. I want the device.

They say they have a device. Okay, I'm

giving them the benefit of the doubt.

They've invented something that they say

is world changing. Okay, but they this

is again I'm just using their words and

he's sipping a macchiato there. So

that's important. Oh my god, you are so

falling for the espresso video. This is

your problem. Jam, look at the glasses.

I think the clue is in the video. Look

at Johnny's glasses. The fact that we're

even talking about this such a problem.

Let me let me tell you my 2007 my 2007

Apple iPhone moment. Steve announced the

iPhone. I got one of the I don't know

first like few hundred few thousand. I

was going to Vegas. So I got it on a

Friday and I had it in my hand. The way

that people looked at me for those three

days. I've never been looked like at

that ever or since. They liked you.

People like what you were feeling was

love and admiration. All I had All I had

was music. There was no multiple

screens. You couldn't buy app stores.

Yeah. But it was so mesmerizing. And my

point is, you're right. I may have

fallen for it, which may seem crazy, but

when I saw that video, I thought, hey,

hold on. All I'm saying is if there is a

next generation device that they or

somebody else, my my only comment is I

think Google is so wonderful. I love the

people there. I just want them to be on

the forward foot and I just don't want

them to be reacting for the next five

years. That's all I'm Here's what Sam

said about Johnny. Johnny is the deepest

thinker of anyone I've ever met. I mean,

this was a love story. I'm not

justifying what they said about each

other. Okay, let's handicap it here.

I'll tell you exactly what's happening.

It's the glasses. He's wearing the

glasses in there. They're making smart

glasses. Sachs, what are they making?

What are these two guys up to? You know

these guys. You know both of them for 20

years. Come on now. You know what's

going on. Just spill the beans. Let me

spill it. Let me express a hot take

here. But let me express in the form of

a question cuz I don't want to I don't

want to be too definitive with the

rhetoric. Okay, go which is is Johnny IV

just a media creation?

I mean no seriously just did Steve Jobs

manifest him? Well, I know he did good

work at Apple, okay, don't get me wrong,

but the software was done by someone

else, right? So, he did like the

beautiful Eddie. So, you know, the whole

and Scott industrial design. Yes, the

hardware looks beautiful with a beveled

edge to paint a glass with a beveled

edge. Okay, great. So, he has this

beautiful English accent which everyone

associates with intelligence, right? So

he could describe anything and it's

going to sound amazing and taste and

taste 15% smarter, right? So I don't

know. I mean, maybe he's like parlayed

this incredible reputation that he's

built in the media into 2% of open AI.

Open AI. It's incredible. I mean, what a

trade. What a trade. Do you think it was

done at that $300 billion price? You

think it was done at like a cheaper

price? Yes. Yes. Yeah. I mean, there is

an argument. I'm going to go in Sax's

corner here. I'm going to go into

Conspiracy Corner here. I'm going to say

Dita Rams designed the iPhone, not

Johnny IV. Pull it up, Nick. Well, I'm

going to say Tony Fidel designed the

iPhone. Okay. But if you don't know who

Dita Rams is, I mean, if you look at the

transistor radio, made the iPod. If you

pull up the U Braraw radio, here is the

power Mac. If you look at the iMac,

basically what did Steve Jobs Are you

accusing Johnny IV of ripping off a

German industrial designer? What I'm

saying is immature artists copy,

immature artist steal. I am saying 90%

of what Apple did was steal Dita Rams

design. I will die on that hill. 90%

stolen. Johnny IV has been kned. He's

Sir Johnny. He took Der Rams' nighthood.

That's what he did. Sir Johnny. I mean,

Sir John, he did put the handle on an

iMac, right? I mean, so you got that.

Stop. He did. You can move those iMacs

around. So slanderous. Stop you guys.

This is so brutal. So great, dude. Look

at this one. Pull this one up, Nick.

Everybody knows the iconic iMac. I hate

to break your hearts, folks. Totally

ripped off from deer. It was all

inspired by the Germans. Sorry. So

you're saying deer brawn is like the

Kaiser So of our entire physical world.

Look, here's the speaker on the left.

Look at the iMac on the right. These

guys took every design that deer did in

the 60s and 70s, even the 50s, and they

photocopied it and they put an Apple

logo on it. I couldn't Stop. Stop. Stop.

Stop. Sax, am I wrong? Stop. I didn't

know about the Der Braun angle.

I mean, listen, it is what it is. I

mean, look, everyone at Apple did

amazing work. There's no question about

it. But but I but I'm just saying like I

don't quite get this like design god

reputation that's been created a little

bit. But but I would say that it's

certainly a brilliant idea to parlay

that into 2%. By the way, is that what

San Francisco looks like? Like I never

thought every time I go to San Francisco

it's so disgusting and it's cloudy and

cold. But yes, did they find the one day

where like the sun was shining in that

hellscape? Yeah, there were no homeless

people and there was no fentinel. I

don't know what happened. Yuck. On a

serious note, what I would say is maybe

what this deal indicates is, I mean,

obviously, is that OpenAI is going to do

something with hardware. Sure. It could

be a new kind of phone that is AI first

as opposed to the wall of applications.

Or maybe it's like some sort of like

pendant thing that like tracks what's

going on around you and feeds it into AI

so it can give you more context. You

know, maybe like in the movie Her. Who

knows? But it seems like they'll do

something with devices in the physical

world.

So that would be the play, I guess. I I

guess the question you have to ask is,

will it

make Open AI 1% more valuable? If it's a

$300 billion company, 2% more valuable.

Yes, thank you. Will it make it more

than 2% more valuable? If it makes it 1%

more valuable, it was worth the the

swing, I guess. Right. I heard an

interesting factoid yesterday which is

by somebody who was looking at OpenAI

equity. All of the rounds before the

$300 billion round from SoftBank had

essentially a feature where there was

like a hard rate of return and the

ability tax or something. No, but the

ability to put the stock back if they

weren't able to do the conversion to a

for-profit company, etc., etc. And in

the $300 billion round, apparently it's

much cleaner and it's essentially like

sub new co that is owned. And I thought

to myself like, wow, at at those

valuations, I would have expected the

terms to ratchet up. And instead, it

seems like the terms have ratcheted

down, which is

I don't It's either it's either

commentary on the negotiating prowess of

OpenAI and their team and or the

riskmanagement philosophy of SoftBank

and the lack

thereof. I do think you know he is a

great designer and he will make it one

or two% better. Design matters. So if he

makes it I mean there's a chance right

Sachs that he could make the product

five or 10% better through design. I

don't think it's going to be one or two%

better. I think it's going to be either

zero or a doubling of the company's

value. Something like that. Right. like

either he develops an iPhone like

amazing hit product no one's seen before

some new consumer device that you know

really could take the company to another

level or probably they do something that

kind of doesn't work. So it's more of

like a 2% option against a strike of

doubling the value of the company. I'm

surprised it hasn't leaked because in

the in Sam's update or whatever he said

that the that the executive team was

shown the device and that he has it.

Who? So what is it? It's it's definitely

going to be a pendant or glasses. It's

got to be those two form factors. He was

the investor in Humane. Remember, wasn't

that the pendant from the Apple people?

Yeah. I will take the field against

that. What are the odds and how much

money do you want to bet? Okay, here we

go. So I think it's a a pendant like a

wearable. We'd have to define that. So

like humane. I'll say it's not a

pendant. Okay. Glasses. I get What are

you going to give me? You give me odds.

I'll give you Give me odds. Well, we'll

just do even money. Let's do even money.

Even money.

I don't know. Whatever you want. How

However many thousands of dollars you

want to bet. Even money. How about you

give me two to one 10

dimes? Cuz you have every option. I have

to pick them. No. No. No. That's a

pretty good bet. This is my You want to

get in on the bet here? All right, let's

move on. All right. We covered Trump's

trip to the Middle East last week, but

our bestie Sachs was there as well. Um

and uh you did uh you got a couple

photos to show and uh you met a lot of

friends there. Tell us about the

experience of did you go first of all

did you go on Air Force One? That's what

everybody wants to know. Or did you go

on Airsacks? I took my own plane. So I

know that sounds a little bit like a

flex but

were you were you in formation with Air

Force One? Were you like you know just

right behind it or on your own travel?

You were on your own travel schedule. I

was I was doing my own my own thing. But

did you have the option to go on Air

Force One? I probably could have if I

wanted to, but I I actually wanted to

get to the region a little bit early cuz

I hadn't been before and I kind of

checked it out and so I was waiting

there when the president arrived. Oh

wow. So it was your first time in the

region. Yeah. Well, tell us about your

impressions generally and uh what were

you trying to accomplish there as the

ZAR? Well, I call it AI diplomacy. First

of all, these countries are obviously

they're very resourcerich. They've got a

lot of capital to deploy and they're

also very interested in diversifying

their economies. They're very interested

in high-tech and they want to do things

in AI. They've got very significant

aspirations there and so I was over

there just to kind of listen and learn

and see what they're interested in doing

and I also got to see some of their tech

scenes and just Oh, you went to Digital

Garage in Riad, right? I've been there.

Oh, you've been there? Okay. Yeah. Yeah.

No, no, it's um they are really pushing

entrepreneurship, trying to generate

more ideas and teach people how to start

companies and co-working spaces, all

kinds of incentives in terms of visas to

come to Riad, to come to UAE, you know,

Dubai, Abu Dhabi specifically. So, yeah.

Right. I'm curious your impression of

the individuals who are leading a lot of

these different groups. I was really

taken back by how much time they had

spent in the West. It seemed like every

single person I had met had taken one of

these scholarships to go to Oxford to

Harvard to you know Caltech whatever it

was they all had spent massive amounts

of time in the west and then come back

to either Saudi or UAE or Oman etc. So

maybe you could talk a little bit about

the people and their knowledge base

motivation etc. I had the same

observation. The elites of all these

countries have all been educated in the

west, usually in the United States, some

in the UK. The leadership tends to be

young, visionary, future oriented,

intensely interested in AI, like I was

saying, and they want to do big things

in AI. The thing that that's been in

their way is that in October 2023, the

Biden administration basically put a a

blanket on the whole region acquiring

semiconductors, GPUs, and it it required

that every export of a GPU or a server

that contains a GPU had to get a

specific license from the commerce

department. And it put a major damper on

their efforts to do things like build

data centers in the region.

or to have their own local AI efforts.

So, they've been kind of in this holding

pattern where the Biden administration

decided to kind of alienate them. And,

you know, it wasn't just AI, there was

other things, too. Remember the fist

bump? And the Biden administration was

very, I'd say, hostile, standoffish,

cool to, and even hostile towards these

states in the region. And I think from a

geopolitical standpoint, it was just

stupid because we're in an intense

competition, a high-tech competition, a

security competition, economic

competition with China. And these states

want to be aligned with the US and we

are pushing them into China's arms. And

if we don't give them the ability to buy

the American tech stack, it's not like

they're going to sit on their hands and

do nothing. They're going to be forced

to buy the Chinese tech stack. They're

going to participate one way or the

other, right? And China still has some

limitations on how many chips it can

produce, but they clearly are building

their own Chinese tech stack. It's a

Huawei plus Deepseek tech stack. There's

actually a story in Malaysia just in the

last couple of days where they were

talking about building a local data

center using the Huawei Ascend GPU plus

Deep Seek. And then they walk back that

story because I think they're afraid of

getting in trouble with with the US

government. But the point is that if we

drive these countries away, if we

alienate them, they will end up

partnering with China instead of the

United States. I don't understand how

that's in the United States's interest.

Now, as part of this trip, we rolled out

a new framework for an AI acceleration

partnership with these countries. And

there's a few very important terms that

I think it's worth going into. So, so

first of all, the the purpose of the

framework is to replace the Biden export

control to the region with a framework

that gives them the ability to buy GPUs

and build data centers. Uh, but there's

a few very important provisions. Number

one is there's a matching investment

provision. So, for every dollar of

investment they make in terms of

building out data centers in the region,

they have to invest a dollar in the

United States and building out our AI

infrastructure. So it's a huge win for

the United States in terms of

accelerating our own infrastructure

buildout. So that's point number one.

Number two is even with respect to the

data centers they're going to build in

the region, at least 80% of the chips

have to be owned and operated by

American cloud service providers or

American hyperscalers. So even with

respect to the data centers they're

building, the vast majority of the

compute is going to be run by American

companies. And so I mean this to me is

just a huge was there critique were

people critiquing it like uh you know

this uh expansion I guess Ro Khan has

said like hey we should build more data

centers here that was sort of a light

critique maybe or a

misunderst that that Ro was making and

Ro is a friend but just you know I

respond to him on on X which is we are

building out data centers in the US. We

want to do as much as we can. It's the

Trump administration's policy towards

energy that's making that possible.

We're making it easier to spin up new

power generation and we're making it

easier to permit. Both both those things

were virtually impossible during the

Biden administration. So we are building

more here in the US. In addition to

that, you've got these countries who are

resourcerich and they have their own AI

dreams and aspirations and we can either

partner with them or drive them into the

arms of China. And the deal we've made

is to enable their aspirations while

getting them to fund more AI

infrastructure in the United States and

even the infrastructure they're building

over there. First of all, it's going to

be on an American tech stack, right? We

want it to be Nvidia and AMD and those

types of companies. That improves our

balance of trade. It also ensures that

these data centers across the world are

going to be built on American

technology. We want American technology

to become the standard of course and if

you allow those data centers to be built

on Huawei plus deepseek that will become

the standard. So I think this is

something that people in Silicon Valley

intuitively grasp but people in

Washington don't which is the way that

you win these technology battles is you

create the largest ecosystem right you

want to have the most partners you want

to have the biggest app store you want

to have the API everyone use the most

data power exactly so the point is we

want to involve the whole world on our

tech stack I think export controls on

China that makes sense but we don't want

to reduce our market share in the rest

of the world we want them getting hooked

on our platform platforms, making those

platforms the standard and getting lock

in before China can catch up to us. Sax,

did Jensen just say that he thought

export controls were kind of pointless?

Did he just say that recently? Yeah, he

he's against all export controls. And

you know where I would split the baby

here is that I think that most people in

Washington believe that the export

controls on China make sense because we

simply can't allow our most powerful

semiconductors to be to be used by China

because of the dual use.

Now, where I agree with Jensen is that I

think we should not place undue

restrictions on the rest of the world

using the American tax stack because we

will simply concede the market share to

China. And so I think he's right with

respect to the Middle East. Now the the

other concern that you heard a lot is

around this quote

diversion the idea that somehow the GPUs

or somehow the IP if we allow it to be

used in data centers in the Middle East

will somehow find its way to China and

yeah I mean the expression on your face

Jal shows that makes no sense like these

guys have unlimited resources they have

unlimited ambition that's just a naive

point of view they want these for

themselves they understand the power of

AI they don't want to give it to China

they want it for themselves pounds. They

make trillions of dollars selling oil

and gas. They don't need to smuggle our

GPUs. It doesn't make any sense. The the

other thing is that that people don't

understand, you know, they're called

chips, but really these things are now

the size of mainframes. The NVIDIA data

center product, NVL72, is this giant

server cabinet. It's 8 ft tall. It

weighs 3600 lb. It's not like diamonds

you smuggle in a briefcase, right? All

you have to do is send You're not

putting them up and getting them across

the border. That's definitely not

happening. No, it's not happening. All

you have to do is send an inspector to

the data center to count the servers and

you can see that they're there.

Ridiculous. So this idea that somehow

they're going to get smuggled. It's like

this totally fake concern that's been

created. It's almost like a totally fake

narrative, you know. Then people, well,

they won't physically smuggle the

servers, but the IP will somehow be

transferred to China. Look, there's

nothing in a data center that China

hasn't already seen. They have one of at

least one of everything. The issue is

that they can't reverse the advanced

semiconductors just from the chips,

right? Because it's about the process

technology that it takes to create an

advanced semiconductor. There's hundreds

or even thousands of steps in that

process. And you can't figure out the

recipe just by seeing the end product. I

would like to say that I'm very proud of

my bestie. I got three calls.

I do want to tell you, Sax, you crushed

it. I think you Yeah, it was pretty

impressive. put your best foot forward

and people were really impressed. But I

got calls I got three calls from the

powers at be. They were very psyched to

meet you and spend time with you and

they thought you were super impressive.

So it was awesome. Thank you for doing

that. Well, I appreciate that. Yeah,

it's an incredible region. I think

you're doing like a really patriotic

thing. If you look at that region, like

you said, it could tip one way or the

other. They could be involved with the

West. They we could be building

businesses together. And if we build

businesses together, that's better than

them building

businesses with China. Pretty obvious, I

think. I mean, totally. And this is the

thing is I just don't get the opposition

in Washington to this. And I especially

don't get how the opponents of this can

call themselves China hawks because at

the end of the day, this is a tech

battle between the US and China. And we

can have these countries be aligned with

us and in our orbit, or we could push

them into the arms of the Chinese. The

choice is do we want these countries to

be the piggy bank for American AI or for

Chinese AI? It's like say they have an

investment level that they can do that

dwarfs anybody else in the world with

the exception of Norway and the United

States. I mean they can put a lot of

money to work and here's the thing they

want to. It just hit the wire that

OpenAI is partnering on a 5 gawatt data

center cluster in Abu Dhabi with G42.

Well, let's hold on. Let's just be clear

about so the the 5 gawatt cluster or

it's more of a a campus that's going to

support many American hyperscalers and

cloud service providers and they're

going to be one of the tenants. So, I

think they're saying that they're going

to have 1 gawatt. There's still 4

gawatts to go that they plan on

supporting. Well, well, the the the most

interesting part of the deal it said was

that as part of the deal, G42 plans to

make a reciprocal dollar for-dollar

investment in AI infrastructure in the

US. So to your point, Saxs, it's like

perfect. Cooperating like this, I think

just makes a ton of sense. Absolutely.

And this is not dumb money, by the way.

These are very smart people who are

investing very strategically with a very

crisp, you know, group of individuals,

like you said, who have been educated in

the west. You know, when people explain

to me, oh yeah, just go to Abu Dhabi and

come back with a a suitcase full of

money. No, these are folks who want to

be on the board of companies. They want

to company build. They see themselves as

owners in business, not just investors.

And then they want to do it domestically

and abroad. The amount of investment

that they're going to do in the next 30

years is going to dwarf what we see out

of universities and retirement accounts.

I don't people understand the scale of

what's happening. This is why I just

don't understand the point of the Biden

policy of alienating these countries and

making them feel uneasy about their

place because you you don't know who it

was that made the decision. Yeah, I

mean, let's face it, that guy was

confused. We can have Bernies. I've

actually have a pretty good idea at this

point of who was controlling the auto

pen on AI. There was a group of of very

powerful staffers in the Biden

administration, about half a dozen

people who kind of controlled AI policy.

And the interesting thing is none of

them have ever worked in Silicon Valley.

They're all basically lawyers. And they

don't really have a good understanding

of the idea of a platform or a

technology ecosystem or a stack. And I

don't think they realized that by

alienating these very resourcer-rich

countries that they were creating a huge

opportunity for China to come in and

serve the region. And this is why I

think this, you know, again, what I call

AI diplomacy is so important is it boxes

out China. It's good for America. It's

good for our companies. It's good for

our trade balance. It makes us the

standard and it boxes out China. What's

not to like about this? I really don't

get it. I you know I think they were

living in a world where they put people

into very rigid buckets. If you wanted

to look at human rights as an issue,

which I think is what some people were

doing in that administration, I look at

the progress that's being made and if

you go to these societies and you look

at what's happening in that region, the

pace at which human rights and

individual freedoms is growing and the

rate at which those societies are moving

forward, it's going in the right

direction. So what do we want to do? Do

we want to steer people towards

collaboration and working together to

build the future or do you want to have

it devolve? I mean, it's such a stupid

decision by the Biden administration. I

It was perplexing. Yeah, I I really

don't get it. I I don't understand what

the point of alienating these Gulf

States was. Well, I like Trump's

approach there when he said, "Listen,

you're going to make decisions in your

own time." That's what they want to

hear. They want to be respected as they

respect us. Hey, we're going to make

decisions in our own time what's right

for our people. That's a process that

we'll decide. Now, if you want to

collaborate on building a company, a

data center, a technology platform, hey,

we're here for that, but you can't tell

us how to run our society and just like

we wouldn't want them to come here and

tell us how to run our society, right?

So I agree with what you just said Jal

and I thought the best part of the

president's speech which the whole thing

was excellent but the best part was when

he talked about how the neocons and the

interventionists had come into the

region and lectured people and come in

with this very moralistic point of view

and made all these interventions that

basically wrecked countries and it's it

wasn't the the neoconsi interventionists