All-In with Chamath, Jason, Sacks & Friedberg

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E0: COVID-19 Political, Economic & Social Ramifications featuring The Production Board's David Friedberg (frmly Founder/CEO, The Climate Corporation)

by Jason Calacanis
March 15th 2020
Hey, everybody, welcome to the first episode of the all in podcast with Tamaki College, Appalachia and Jason Call Cat is that calculate where we're trying to save ourselves from the end of the world. It is literally, you know, we thought we'd start this podcast on April 1st. Shimada and everybody thinks it's like a big joke that it's an April fool's joke. It just happened to be the time was perfectly. We had full intentionality of starting the podcast, but we're sitting here at home. Quarantine. How many days have you been home? When's the last time you went out of your eye? Well, I've gone out, but I've basically been self quarantined for two weeks now. I haven't left my house since Tuesday night, and this is her showering about 72 hours. I think it is, you know, And then Chamot and I decided, since you know, we're gonna talk about obviously the coronavirus

today we bring in the smartest person we know in terms of the biotech and health space. And that's David Freedberg, who's a close friend of ours. He founded um, or co founded climate dot com metro mile on, and he now is the CEO of the production board, which is a biotech incubator. Accelerator Startup. Um, what do you How do you required to it, David? Yeah, we're a foundry. And broadly, life sciences, food, agriculture and human health. So, Jay, actually, before, before we do that, can we actually give a shout out to our sponsor, which is all the incredibly shitty enterprise software that nobody fucking uses? And there are no coupon codes because there are no ads in this podcast, nor will there ever be back to you, Jason, which I really appreciate it. Like this deal gets better and better tomorrow. Hey, Jason, I want to do a podcast

. E want you to put all your resource is into it all your time into it. And here's the best part. The entire business model is we lose money thanks to my fantastic. It's like it's like a microcosm of the venture industry all in one podcast. So, uh, let's, uh, just talk about and and start off here with, you know, we're sitting here and today is the 14th of March, this entire coronavirus, um, epidemic. And, you know, essentially the chaos really has only started here in the United States in the last 72 hours or so that people are actually taking it seriously. They canceled the n b A, and I think that is the definitive tipping point of when it hit public consciousness that this is no joke, and it was really kind of dramatic. And Jamaat, obviously you're a part owner of the Warriors on DSO. It's I think it's a good thing for you to discuss

. When you saw that announcement that at tip Off, they found out that one of the players tested positive and they canceled the game and sent people home. What were you thinking? Obviously, there's a financial aspect to this, but the more important one is the unprecedented nature of this. Um, I actually had two thoughts. The first thought was it's incredible that all these organizations other than the federal bureaucracy, were taking such swift measures on their own. I mean, typically these things, a reaction to a pandemic should be institutional and very much top down. I think even every libertarian amongst us would sort of say, I mean, this is the kind of thing where the president of the government needs to step in first and kind of like dictate how things should happen. Instead, it was local government, state governments, sports leagues, companies all making decisions in the absence in in a vacuum of leadership. That's the That's the first

thing I thought. And then the second thing I thought was these actions are too unpredictable and there to all over the place. So you have some states and some organizations acting in a really decisive, aggressive way and others not. And so, in the absence of highly coordinated action, this kind of, you know, half in half out approach, um is probably as bad as the, you know, no strategy, sort of clapping as a strategy in blackjack on DSO Those were my two thoughts. I don't know, David. What? How did you react? I mean, it seems like it's about time, you know, we're kind of a little bit behind the times in terms of the behavior on on reducing social isolation there a lot of people calling for it weeks ago that the U. S. Is behind the eight ball on this thing and we really missed it, Mr Mark. But obviously, as soon as ah person shows up and test positive at a game. It's like and you

know, your objective is don't put anyone at risk. You got to shut it all down. So it seemed inevitable. You know, it's unfortunate that this sort of behavior wasn't done earlier, where we could have kind of mitigated. The spread is Aziz. We've seen kind of be successful elsewhere. David, why didn't we do that? You were tracking this from early stage. We were talking about it during the poker games and just, you know, when we were chatting in our online group. And you seem toe understand that this was very serious. Very early, uh, algae of pronouncing his name correctly from formerly of Andreessen. Horowitz was on this, like in what? Late January early February. And here we are, six weeks later and we're taking it seriously six weeks later. Why do you think there was this crazy failure? Thio Thio anticipate this? I mean, it was it was right there in front of us. We were watching the streets of Wuhan being blasted with chemical cleaners and we just sat there and just retweeted it and we didn't do anything. I

think it's a lot like climate change. If it's not immediate in terms of time and space, you don't take action as soon as it becomes immediate in time and space. You kind of, you know, jump to action. And it may be a little too late at that point because the fire is already kind of run down the meadow. So we also we also politicized it from day one. I mean, you know, people have to draw a line in the sand. Trump had to draw a line in the sand, which is I'm not going to threaten my presidency. And so he had to downplay it. And he had to sort of, you know, you know, puff up his chest a little bit. And that kind of rhetoric from the president of the United States, whether you like it or not, flows downhill. It touches the C. D. C. It touched HHS. It touches Fox News, and you know you have behaviors that were dependent and that are pretty correlated. Two sets of attitudes. So, for example, I don't know if you guys saw, but there's been this incredible retweeting, um, of open table reservation

data. Incredible. It's incredible. And what it shows on the open table block, and I'm glad that they put the state out. I don't know how long they've been doing it, Um, but it shows reservation volume on a state level and on a city level, and as it trends over time, and what you essentially see is in places that have taken social isolation Seriously, you know, um, if you use restaurant reservations as a proxy for people's propensity to take this pandemic seriously and socially isolated, it's fallen off a cliff and, you know, reservations air down 50% and in other places where you would otherwise be, you know, a believer of the rhetoric or a believer of, you know, different versions of the news that painted this thing as anything less than a pandemic. What you saw was, in some cases, I saw Oklahoma City as of yesterday

, um, where traffic to restaurants was up. And so if you have a multi week asymptomatic, you know, super spreader population in any of those states, you're going to see some really difficult circumstances. And it will unfortunately in the near term, be drawn on what seems like, uh, political lines not dissimilar to climate change. That's David says Hey, David, When when you hear Tomasz sort of breakdown of Trump didn't want to risk his presidency by being alarmist, having the stock market crash, and then as somebody who has spent their life in technology and science, um, the anti science, anti expertise, um, kind of paradigm we've been living with these last couple of years. How frustrating is that for you when it's so obvious, what needs to be done and

then in terms of what needs to be done. If you were president and you had seen this in January, what would you have done, David, if you actually had the ability? And it was Jan, let's say it was February 1st and you had seen you know what happened in Wuhan. What would your line of attack have been? Well, I think that the anti science rhetoric, by the way, is just nothing new. You know, we we view it reasonably widespread. Now there's been anti climate change. You know, I've got a personal history because I sold my last company to Monsanto. So I sat on the side of the anti GMO movement on Do you know we've seen this throughout the course of history, right? Anti Copernican, anti Galileo. I mean, this is not new. There's institutions and systems that benefit from people not kind of necessarily being, you know, connected to science and what it can prove on. But it demonstrates, you know, the reality is overtime truth, emergence, Right? So science will find truth mawr than you know, fiction will. And so hopefully we'll realize that over time. The problem is

that the interim kind of damage it can cause from a president presidential point of view, I think the first thing that was missing is just testing. And I just want to talk about testing for a second because, um, it's so critical. We've talked a lot over the last couple of weeks in the media and as a group about, you know, where's all the tests? Where's all the tests? One of the important things to understand is the tests that we're doing today and the tests that everyone talks about are called PCR tests and these air tests that basically measure active living viruses in your body. So measures there are in a and so if you do a PCR test and you're positive what it's telling you. There is an active virus that was in your body. If you did a PCR test and you were sick with the virus a few weeks ago, it would show up is negative, but you were still exposed to that virus. And one of the things that we don't really know is how many people have actually been exposed to this particular virus and for how long. So one of the and so the PCR tests are really important about getting an acute case care for as quickly as possible and quarantined

as quickly as possible. So that means you're in this kind of active infectious state. But what we really have missed the boat on and we're still missing the boat on is knowing who's been infected and to what extent this thing has actually spread already. And you could do that with what's called an I G test on I G M test, where you're measuring the antibodies that show up in your blood and they'll be there for months for a GM and then for years with I G and you can see if someone's actually been infected and these tests are super cheap to administer is super easy to make. And I think that would have been the first thing to kind of kick off. You know, you should still have the PCR tests, but they're expensive and they take a long time to to run and they require chemical labs and all this stuff and I g i g m test. You could do like a pregnancy kit anywhere on the street. So we should have had 10 million of these things distributed as quickly as possible. We should be putting them in airports or, you know, in local hospitals, local community centers to really understand when this thing hits us, that's the best way to know taking someone's temperature. All that that tells you is, Hey, this person has a fever. By the way, only 80% of people that get this thing end up with a fever, you know, when they kind of

get checked in. And so that's kind of a crazy stat, right? 1/5 of the people don't even have a fever that are actively infected with this virus. Eso We're missing a huge percentage of infections if we're just taking temperatures and then doing a PCR test, and we're missing all the people that just were infected. So I think that would have been the first thing is like, figure out where this thing is infecting people. To what extent and getting in front of it. Um, on we're sticking out. What is the state of testing right now? Do we? They keep, you know, having these press conferences getting Trump on Friday or yesterday, Today, Saturday, the 14th of March on the 13th, on Friday 13th, he had what most people thought was, you know, his best performance. He had his best leadership yet, obviously way too late. Um, and he said, Hey, we're gonna have millions of these tests were gonna do them at Walgreens, and we're gonna tap the private sector. This seemed like a really smart move to tap the private sector came off. Do you think that this is gonna be effective? Well, I think, um

, the only way that will know whether this was effective is if we can actually figure out, um, how to get enough throughput so that we can manage the number of beds and the and the hospital facilities we have. So, you know, at this point, I think everybody admits that this thing is gonna roll through the population of the United States. What we're basically betting on now is how long that takes and how well that's managed and in part of that has to do with how we can differentiate. As David said, people who are, you know, symptomatic from the people that are asymptomatic but still positive aan den, weaken, sort of enforce, um, or strict code on quarantining. If all of those things can happen, we'll be in a reasonable place to at least manage the onslaught. Um, the thing with tapping the private sector in many ways is it's a brilliant strategy politically, because it now sort of embraces ah whole bunch of companies that are in the consciousness of America

as part of the solution. Um, which actually by implication means that if this thing gets worse, they're also than part of the problem. And I think that from that perspective, being ableto you know, spread out and smear the blame while preserving the optionality for, you know, leadership. In case it works, I think was the right thing to do. Uh, incredibly, incredibly cynical on probably accurate you're basically saying I'm not being, you know, I'm saying incredibly cynical, toe actually do that. I mean, if that was actually Trump's thinking to say, let me spread the risk here. I'll make Pence and Walgreens and these companies the fall guys, if it doesn't work out well, I mean, look, uh, these guys were inside the tent for two weeks, so the only reason to bring them outside of the tent and have a presser where you shake their hand is to do exactly that, right? And so they were They were part of the solution when we thought the solution could be contained

, but that but that solution was kept relatively private. And the front facing, uh, you know, person on the front lines Was the president of the United States all reasonable when it looked like this thing was getting out of control? What we needed to do was reestablished some sense that there was a broader team in place, Um, and put all of these other people out in front. I mean, in fact, if you heard the presser, the most interesting part of it was how adamant he was that people asked these other people questions. I don't know if you guys were listening to it, but it was this constant refrain of. Does anybody wanna ask these brilliant geniuses on stage with me? Any questions? And, you know, the press had zero interest because they really wanted to understand his mindset. So, you know, I think that from a from a political game of poker, we've done the right things. He has done the right things, which is he's kept Optionality to say, Look, you needed a steady hand in the till. That was me. I didn't overreact on the front end. I brought in these people in the middle

of it. Andi, If he is able to salvage a Nen enormous economic stimulus package, I think the odds air on this side that history will judge that he will have done a good job. And more than that, his odds of getting reelected are actually higher than in the absence of Corona. Wow. Now, if none of those things come to pass or many of the other path dependencies kick in and things are much worse, then that's probably not true. But from a from a political kind of poker game, I think he has done the best he could from where he waas. You know, the last three days, he's in the best position. He could have bean in all things considered unless he had actually done the testing and taking it seriously from the beginning, which is something. Also, the press seemed very weird about David. I want to get your perspective on when biology was tweeting about this and then

the information. I'm sorry, I e a geology, biology, apology, apology. It only took me six years to figure out how to say Palihapitiya, and now I'm correcting everybody on your last name. Uh, appreciate that, uh, David, when you saw his, I don't know a 60 sec. When? When? Uh, the Rico journalist who wrote that ridiculous story about like Silicon Valley is paranoid about handshakes. How much of what the media is doing is just completely inaccurate over these last couple of weeks. And what do your thoughts as an expert who's quoted in the media about this moment in late stage journalism? Where there They seem to be more concerned with dunking and clicks and link bait than the actually accurate

transmission transmission of information when I asked you to just even be on the podcast with Jemaah tonight. Today you were like, Well, listen, I'm not an expert and you're the smartest person we know in the room about this topic. What do you think? What do you think's contributing there with the press and and their ability to even process something like this? Like I mean, it's really like talking about science generally is really hard. Science based journalism is really hard. I mean, there's just so much to this, like, kind of explain to people the difference between a PCR test and I g test. It's like you got to go do bio one on one and have a conversation and talk about this stuff. There's a there's a learning curve. So it's It's a 30 minute conversation to explain that it's a 30 minute conversation to explain GMOs to 30 minute conversation to explain climate change. But I would argue that the journalists salt or not the journalist I don't want to kind of put down journalists, but I would argue that consumers consume the media they want to consume, and then that media wins in the marketplace for media and I think this is just generally true. Like we wanna have six second sound bites. We wanna have 140

character statements Azaz, a consumer class, and as a result, like the media production that that caters to that demand is gonna win, and it's gonna do better. So, you know, if we want to see stuff that shit talks other people and blows up companies and, you know, puts down presidents and puts down speakers of the house, we're gonna look for that. We're gonna buy it, it's gonna get more ad dollars. It's gonna And then those journalists are gonna stay employed. And the journalists that are writing long form articles that are science based and required 30 minutes to sit down and read the whole article are not doing as well. And you know, there's no one to blame, but but the consumer, the same might be said of the presidency and, you know, and other things, like we end up buying what we wanna buy. It's not that the president showed up and he's the guy that got elected. He is the product of what we wanted of what the general population wanted by the way back to the back to the discussion earlier. The open table reservation data, in my mind, is the single closest thing we're going to

get to to a referendum on exactly this issue, meaning if you listen to MSNBC or CNN or CBS and ABC and you believe that strain of journalism on this pandemic and you took precautionary steps a little bit earlier, then say people who read Breitbart's or, you know, watch Fox News and then it turns out that disproportionately those states where those media consumption patterns, air prevalent, arm or affected, Um, it'll be really interesting to see how people, after all of that deal with those choices and the implications and then start to realize that, you know, we've been past the days of journalism for a long time. We're in the business of editorializing, and we've been in that business since. Basically, Facebook and Google, you know, kind of destroyed the ability for journalism

as it stands to remain intact now. They didn't do it on purpose. Um, but it was the implication of building 1.5 trillion a market cap and you know, consumers in many ways, as David said. Not only let it happen, but added gasoline to those fires. But those things never resulted in anything meaningful. Until today, the linkages to depression were kind of, you know, relatively brittle. The linkage to other things were relatively brittle, so there weren't necessarily direct health implications to your media consumption patterns. This'll maybe the first time where we can actually show a direct correlation to you consume a specific media and a specific editorial ization of a problem. You end up with one result versus another. If that does end up happening, it'll be really interesting how people internalize that result after this is all said and done. Uh, so if you're watching Fox News and they tell you Corona

is a hoax, which the president and Fox were literally saying 10 days ago, this is a hoax. It's part of the Russian conspiracy, the Ukraine conspiracy, and now they're going corona crazy and this is a conspiracy. And then you decide you would go out to eat, which the open table data showing they're doing on Mass and you die or your grandparent's God forbid die. Maybe you're gonna reflect on the actual consumption. This and it's not just because we code is a left leaning publication, and they told us that we were crazy for not wanting to shake hands. So I look, let's be honest. We code is the you know it's fine, but it's in this situation with what we have to deal with. It's kind of the pimple on the dog's ass that let's not worry about Recode. Yeah, like you have, you know, major media outlets who now have a responsibility to get on the same page and tell one version, which is the truth. They have that responsibility now. I don't think there should be any variability

between what. CBS, PBS, NBC, MSNBC, CNN, Fox. They all need to speak from one set of scientific fax as of yesterday, when the president declared a state of emergency. If they're not. In my opinion, there is some level of culpability in those organizations, because if those people consuming those outlets then behave in a different way, which they otherwise would not have, that they had the different version of the news that's not individuals faults. That's the fault of an organization that's optimizing for positioning, narrative and monetization over a moral you know authority and an ethical duty that they have to the United States. Let's David look forward here at what is gonna happen from March 14th forward. We have every Apple store closed, the N B A on hiatus offices we discussed, and supposedly a bunch of tasks

are going to be done in the coming weeks. Who knows? But people seem to be in the major cities, quarantining in place, obviously stocking up food for a couple of weeks. If everybody in these major cities does what they're supposed to do and basically rides out the next three weeks, four weeks, what do you think the outcome in those cities will be? David. Mhm. It'll be, uh, you know what we see in China? A lot of people look at the curve at the beginning, and it looks like an exponential curve of growth. And it is exponential. And but, you know, exponential curves end up consuming everything so they don't go on forever. So what they resolved to is what's called a sigmoid curve. So they eventually flattened out the second derivative kind of changes, and they flattened out and you end up with this thing coming down the other side is most biological systems can be modeled with this sort of, ah, a function of sigmoid function And so, you know, a couple of weeks away, hopefully from from that happening if everyone kind of stays locked down. The reality is we just don't know who's affected, infected

, who's been infected. And I do still believe that we're probably at least one maybe mawr orders of magnitude off in our infected population count, especially here in the United States. But that'll thought we'll find that out over the next couple of months. Aziz I g. Tests get produced in China. They're getting shipped over here right now. They're in Italy right now, being used on the front lines, and we'll start to use those to identify how many people actually are infected and things will start to resolve. Um, in the meantime, David, what do you think, um, are the best protocols of care and how do you think we're positioned? If people bombard issues over the next few weeks? Look, there's a bunch of published reports now on what's working and what's not working in China. Andi. Elsewhere, Italy, I think, is just swamped and overwhelmed I just want to give you guys the stats. Right? So Italy has about 12.5 critical care beds per capita per 100,000

. Sorry. Um, population. The U. S. Has 35. So we're, you know, three x the number of I C. U or critical care beds per person than Italy has on day are now published reports on on how you can manage symptoms and reduce the, uh, the duration of the infection and reduce the severity of the symptoms for different populations and these air starting to be employed. And they're showing really great results. There are active clinical trials that will be published in the next two weeks on R and D severe, which is this antiviral compound from Gilly. Odd that anecdotally has had really great efficacy and has really reduced the severity. As long as you catch it early enough and start giving it to patients right away, we're already starting to use it on a compassionate use basis in the United States. The first guy that gave it to in Washington State recovered, started recovering the next day. That was anecdotal. What? We're going to get more data on that soon. I think that we're like we have the pieces now on how to care for people and how to get them to a point of recovery. We just got to make sure we have enough beds and enough ventilators

. Cities like San Francisco have already taken over hotels like Hilton here, and they're being converted into effectively. I see you departments that they could be used for the overflow of the mass crunch as patients show up. Luckily, we haven't gotten to that point yet, but I think that all the tools air there that we should be able to manage down and get the, you know, the fatality rate, hopefully within ah range. That looks a lot more like what was called rest of China, which was, like, you know, basically 20 basis points, um, fatality rate of infected patients versus like Wuhan, which is like 4% when I thought rendez severe David Rendez severe has thio. It has to start like, literally right when your viral load starts to kick in and I read, but tell me if this is true for maximum efficacy needs to be administered intravenously. Yes, intravenously is the way it's been Gilead just launched a clinical trial. I think now or last week or this week where they're going to try some aural

Romney severe. But yeah, it has been used as an intravenous treatment to date on, but there are There is a public published study now that shone like, you know, earlier treatment with Romney. Severe had a higher efficacy rate versus later on. That may explain why it didn't work in Ebola because we're in the severe failed and Ebola is a very similar virus. Toe this coronavirus on Grundy Severe quote unquote failed in a clinical trial for Ebola, but they didn't have a duration window on like how long you've been infected before. You start getting around the severe for the patients that had only been infected for a short period of time that got room disappear. They actually had a much higher recovery rate. Ebola patients. And so that that is, you know, kind of buttressing that argument. And they and these patients also were on Clara Quinn to know. So it's like the combo of the two that seems to be the most efficacious. Yeah, it's unclear. I mean, Clara Quincy, you know, a widely used compound. It's used for malaria. It's got really nasty side effect. Um, so you know you don't wanna

overuse it or use it if you don't have to. But it's also shown, um, significant efficacy. And it's being used in some protocols in some countries right now for infected patients of Corona virus with good results again like it's so early, we don't have enough data, and people haven't actually published enough on these things for it to really be kind of scientifically validated. But but but anecdotally, a lot of folks and the chatter is that Clara Quinn Randy Severe having really great effects on by people are, you know, some There's some commentary about state can think is unknown. Uh, antiviral compound. It could stop R N A replication in viral compounds. A lot of people supplement with zinc for this reason, when they when they have a cold or when they have the flu on DSO, you know there's there's high dose zinc remedies that are that are being postulated as having some efficacy. Um, but it's too early to say with great certainty what the best protocol is. But there are different variations of the protocols that are being employed there working and reducing the fatality rate. Where you do have, by the way, you have to have hospital beds. You have to have availability of staff

. Otherwise you have what you got in Italy. Italy, like, has already gone over the abyss. People just can't get treatment because there aren't enough healthcare workers to the number of patients. So it's a it's a shit show. What? What? Why is it that you know, when we look at sort of, you know, if you look at our G I s a world meter? Where are the cases in India? Yeah, this is where the cases in Nigeria, like, What the hell is going on in those two countries? Why aren't those countries going off the charts? You just India just crazy to me. Because if you've ever been to India, it is a friggin beehive, right? Population density is crazy. You can't do like as much as they say. They've got social isolation going on in India now, the same was true with SARS and MERS, so SARS and MERS did not take off in India either. And so some people have speculated that India's um failure toe have coronavirus. Pandemic outbreaks has been a result of the high temperature, but if you look at the temperature in India over the last couple of weeks, it hasn't necessarily been that much higher than. And yes, there's a tipping point. I think it's around 77 F, but

there's there's there's evenings. There are people that in India that have been sick. So if someone's sick and they're on a bus with 80 people in India and its evening, it's unlikely that you know something is not going on there. No. And by the way, in places like Delhi and places that are even north, it's cold. I mean, it's like it's like a winter in Milan, for example. I mean, it's roughly the same temperature, so the conditions are right for this thing to spread, but it hasn't. It seems like so there's three risk factors I wanna highlight that have been identified as potential risk factor that really risk factors for coronavirus. The first is the age of the population. So people over 65 as a percent of population, Italy is the third oldest country in the world. Okay, so about a quarter of Italians are over 65 that is, nearly three x or two x with the U. S. Is a za percentage of population being over 65. And it looks like if you're over 65 you have a 10 to 15% sorry, 10 to 15 x likelihood

of having a severe reaction to the SARS coronavirus that we're experiencing right now. The second is smoking, and there's differences of opinion on smoking. But here's a crazy statistic on smoking for you. Eso the number of people. Let me find the statistic cause I actually pulled it up for you guys to mention it. Um, the number of people that smoke, uh uh huh. Okay, here it is. Number of, um, cigarette consumed her year per person in Italy. Let's guess let's set the under over under Jamaat per person in Italy. So a package it would be 20. That's 7000 year or so if you smoked a pack a day. If half the people do that, I'm going to set the line of 3500 per year per person. You want to take over? You guys are both off its 1500. Okay, United

States. Three United States is 1000. So the United States smoke 1003rd less, Um, and India is 89 like no one smoked in India and and the percentage of the population in India that's over 65 is less than like 9%. So India has this confluence of low smokers, older population, warm weather, younger population, SRE, younger population, warm weather. And so this may start to X and and and and the smoker rate is just like two orders of magnitude off from the rest of these guys eso these things multiply right? So think about Italy. Italy has a very, very old population, like two X with the U. S indexes and again that multiplies by 10. So now you're talking about 20 x the impact of the coronavirus hitting everyone. Eso 20 x the impact they smoke about 50% mawr. So call it

30 x, and they have a third the number of beds. And that's a non linear relationship because as soon as you Max out on, I see you beds or critical care beds boom, you're over the abyss and everyone starts to die. And so the Italy problem. Maybe a confluence of this, like elderly population, maybe a smoking smoking population and the critical care beds per capita and the opposite may kind of explain what's going on in India. So do you think that India is sort of one or two Sigma to the left and Italy's one or two Sigma to the right and which means that, you know, in a reasonably well managed but even in a poorly managed situation, you know, we may be a multiple of the flu in terms of its impact plus reminders. Yeah, I don't know. We look one of the things that's crazy is like, uh, that the fact that this to talk about like distributions Jamaat, like some percentage of people, have this incredibly bad experience with this virus and then a huge chunk of the curve have, like mild cold and flu symptoms. And

yes, there's anecdotal people saying, Oh my God, it's suck! It was, like, worse than the flu. But there's a large percentage of people who are recovering reasonably quickly and seem to be getting over this thing, and that's of the people that we've actually tested positively with a PCR. We don't know how many people there are. It's gonna be asymmetric, right? It's not like we're gonna have an unusually high number of people that had really bad symptoms that didn't show up. We're likely gonna have Ah, a much higher percentage of people that didn't have symptoms that didn't show up. And so there is some, like, multiple, probably of people that we aren't accounting for this point that have happened of Iris E. I mean, like, if that's true, then there's There's a lot of logic actually to being out, because then if a lot of people have gone through this, then you're promoting that point where you get to herd immunity faster because then the folks that basically have these anybody's air out in the field absorbing all of the spreaders and actually mitigating the hurt the herd concept. So

if you end up being exposed to a virus like this virus, you develop antibodies to it, and they stay in your body for 20 years. So when you hit that virus again, whether it's like chicken pox or measles or very similar, your body will automatically wipe that virus out of your body. You don't have to develop the antibodies. They're already there is no longer a carrier. Yeah, you're You're actually, Technically, they call it immune, right? Your immune to that virus now and so the more people are immune think about a network with nodes on it. Yeah, there's a note and any notes that it touches get infected if one of those nodes gets infected and now it turns off and it can't infect other nodes. Any virus that gets near that note is no longer going to be a point of transmission. And so the more people have this thing and the more people develop immunity, this is why you have a sigmoid curve. At a certain point, it stops spreading with as higher rate. The current statistical rate that's estimated for this virus is 2.5 infections per person, infected and flew just by kind of comparison is 1.5

on DSO. This looks like a very contagious infection today, but after enough people get infected, the curve flattens out. And for people to understand this Jamaat what was the when you were heading growth at Facebook? What was the viral coefficient at the peak? You know, one person joins Facebook. How many people? Seven. Act with Facebook, right? So if you have something like seven at the peak for Facebook, it hits over a billion users in some 10 year period. Here we're talking about, you know, a fraction. Actually, that's that's an incredible example. Because, like, if you we used to call that k. But in in science, we call it or not. But if if are not is, uh is seven, then you you actually can see how, uh, you know, in about 2.5 years, you touch basically three billion people. Now that Z, that's like, you know, if you consider so in this interesting way, actually, Facebook's growth of not of users but of registered users. So people that may have turned out That's an incredibly interesting model for

, ah, highly viral super spreader disease in many ways on. But it shows you the window of time you have toe act decisively to get in front of something. Yeah, Facebook did to MySpace, like my Facebook basically, and MySpace had that virus efficient cause the products were so, uh, so much friction for David. But David, do you think that people, if we If we run enough testing now to figure out that people have these antibodies, they should be out. No, they should be mingling and interacting. And And should we be sending all people out? Like, how do you How do you actually have herd mentality become a useful thing? Because what if everybody just isolates? What did you do it so successfully that none of us have this immunity? Look, this is a general. There's a philosophical question about and that's how the FDA operates And the CDC and you have to ask these philosophical questions first, which is what is your objective? What do you solving for? If your objective is to minimize the number of people that die from this particular virus

, you're gonna have one decision. And if your objective is to minimize the economic impact relative to the number of people that will die as a result of bad economic impacts, you're gonna have a different decision. And it's really hard to kind of think in the broader context. If you're staying like don't let anyone gets sick and don't let anyone die, everyone should stay home and not take any risk, right, And that's effectively what we're doing. And given the uncertainty, it certainly seems to make sense from a policy perspective. We should be doing that today, um, you know, but the result of like, look, we now know that some percentage of people have have the i g and s. So let me ask the other question. If I knew that 99% of people that got this thing had no lasting effects and got over it as if it were cold, would that rationalizing everyone should go outside because you have a 99% chance if you catch it. Whereas 1% of people, if they caught it, will still die. So, you know, how do you draw the line, right? What's the right philosophical decision in that context? And so even if what we're saying is true that 99% of people can get it, they're asymptomatic

. They get over it, they develop immunity, and we can, you know, kind of develop herd immunity and very quickly kind of reduce this thing. We're still gonna be putting 1% of people at risk of death by doing that. Um, and so you know what, guys? What's the over under today. The President said he had a coronavirus. Tests administered last night. Hey, did the 13th? Yeah, he said that. And finally somebody cornered. We're on a 24 hour shot clock or less. Um, I have my own view. I'll go last. But what do you got? What's the over under? On what? The results. You know, he shakes a lot of hands, and he had a lot of foreign visitors, and some of them have had it. I'm gonna put it at I think he's got a 20% chance of having it. 30 something in that range. One in 51 and three. Something in that range. Yeah, I don't know. Five, 5%. I think that the answer the answer that we will get is that he's negative. I

think that the the way in which they do this test is incredibly important. And so if I had to guess, I talked. I talked to sack this morning about this is Well, if I had to guess, here's what they would do. Which is they test 50 people in the White House. I love all of the same time. You know, they like I mean like this is what this is, what we would do. You test 50 people in the White House, right? And an incredibly small number of people know which vial is which person. Then you send it to the lab and you get the results. So no lap tech can ever know if there's even one positive result. You quarantine everybody, and that's probably the most risk minimizing thing you could do so that it's not just the president that gets tested. And then we're not waiting with bated breath for a positive test. And then the government can basically manage how they treat him because

I think it's highly problematic in the next two or three days if we found out that he was positive, and I think it's much more manageable to say there were 50 people tested. One person was found to keep, you know, two or three positive tests and recorded everyone's warranty. Oh, yeah, what are the chances, Anonymous chances of a passing? What if the chances that he has it already? He's been tested and they're already lying in the sake, and that they're telling us, is getting tested on Friday? I don't do zero I think I think that that zero just because I think he's he really is Look, he's, you know, by being the president of the United States, the most powerful person in the world, the richest person in the world and the best taken care of person in the world. And inasmuch as those, we all believe in those things which I think everybody around the world probably does, I think it's really important that he is there healthy as a sign of strength, quite honestly. But what if he's sick and he recovers Jamaat? What happens in markets? Right? So let's say he gets declared, have a coronavirus markets tank is you're saying

and thats forward five days and he comes out of it. He's like, yeah, that stuff. But it was like s So I think I think I think it's more that we will not be told that he is sick, but that he is quarantined for safety on the presumption that he recovers. That's the smartest thing to do. If I were them, that's what I would do now the only because the thing is you want him to come out of this 100% and you want him to be healthy and say guys much ado about nothing to your point Because if he can say that, I think that a lot of people will calm down. And then which, by the way, we all need to start talking about which is the 2nd and 3rd order effects of literally shutting the world down for what looks like somewhere between three and nine weeks, if not more. So we can we can get to that task and figure out what's there. The rial corner case scenario is if his situation degrades and you know Mike Pence has to become the president, that's a rial. Yeah, let's let's talk about that. I mean, if this

is dark, but I mean, this is the way you have to think about all possibilities if you're making strategic decisions, If he gets on a ventilator, what happens? Is it gonna just cause a pure terror and panic? Stock market collapses if he dies? God forbid. I know some people hate him and would wish death upon him. I don't I mean, I don't like him. E don't want to see the president or anybody. Nobody should die from this. Unfortunately, people will e did what happens. I think that I think that that are incredibly low. So let's not even kind of deal with that. What if a celebrity dies? I mean way sit here in America with the N B A and Tom Hanks with the things that made people finally pay attention to this. If Tom Hanks or an MBA player dies from this or is put on a ventilator and almost dies, what is that? Well, let me ask the question. Let me ask the question of like, if they die and then if they recover in the next week. So as you see, because no one's have these recovery story, there have been zero of them out there. Everything is about your in the hospital. You're dying. Yeah, Well, sorry. No, no. There have been zero here, but there are

tons of them on wechat. Um, and so you know, for example, like when you when you look at how the Chinese have responded, you know, they went from a massive locked down to a partial locked down to what is being a graduated decline. And, you know, a ramping back up of of life as they knew it. Now, in terms of the top down control measures, Um, I think if in Western culture we have to deal with a lot of very visible people dealing with this successfully, I think, uh, people will be more lackadaisical than not. I think if people self quarantine and then get better, that's the best result. If people get sick. That we all know and unfortunately are really terrible straits. It's really I think it's really bad psychologically for folks. Toe have to deal with that is the worst path. Not good. Yeah, yeah, the care. The care of the celebrities is

gonna obviously be great. And it's very likely that Tom Hanks and these NBA players who are in fantastic health are gonna their low co morbidity. And they're getting great care. And they're gonna come out of this thing in the next 10 days. And you know, when Tom Hanks goes back on Instagram and says like, Hey, look like I had a bad cold, that's what it felt like. It was like just being knocked out for two days. Um, it just seems to like, create a different story that I think most people, at least in United States air Assuming which is this thing is just pure death, and we're all gonna die from it. We were talking before about the, um, about Italy's profile. Iran also had a breakout. Iran is very young, and they seem to be I just pulled up the Wikipedia page about cigarette consumption per year, and they're right behind the United States with 936 per year per capita. But on a demographic basis, they're very young with looks like Onley. 10% of the population, 12% of the pop. Yeah, 12 or 13% of the population

is over 55. The rest are under 55. Well, maybe e. Well, maybe. I mean, David says it's kind of now we may be We may look back and realize that this is a disease of combinatorics, right? So if you have a bunch of Anne's, that's the worst case scenario. So if you are old and you have co morbidity, ease and you have limited critical care facilities and you have a high smoking incidents and so you're, you know, pulmonary compromise as well as immuno compromised and and and and you have an exponential, you know, unfortunately, decay function here. And a stew receptor, uh, two receptor. Exactly. So it turns out so the H two receptor is this protein that shows up on cells and it is the point of entry for this virus into cells. And so they have now identified that Asian men that smoke have a higher production off this H two receptor than other men that smoke that there may not be

a difference between smokers and non smokers and white people. So they're starting to identify that there may actually be both genetic and behavioral. Underlying that can increase the entry points for this virus on yourself On DSO we don't know yet what, As you know, Jamaat calls it. The combinatorics are we don't know yet. Like what combination of things is going to increase the risk factor. There may be something genetically in the Iranian population or in the behavior of the Iranian population that may increase either the receptors or it may increase the the health of the recovery of the lungs and and so on and so forth. I e. I have one question, and then I want to move to economics because I think it's really important. David, what do we do from here? So that if this type of thing were to happen again and I'm speaking specifically about the science, the rapid prototyping, the figuring out of both the testing, the identification and then a pathway to drugs, what do we need to dio as a as a world, frankly

, differently than what we've been doing today to make sure that we're better position? So there's definitely got to be emergency protocols that are more clearly defined for these sorts of circumstances in the US To be able to do testing under CDC guidelines, you have to have a clear lab and you have to have a test certified. And then there was all the certification bureaucracy that made it really hard to be a tester for this thing. So then they had emergency use authorization or you a where you could kind of say, Hey, this test in this lab can be used to figure out what's going on and that also then turned into a bureaucratic nightmare, where you have to go submit a request for doing emergency use, authorization and so on so forth. We've got to fix that. So it's not so specific to each test in each lab. And it could be a generalized guideline for this type of test for this type of disease can be very rapidly prototype and launched in production. And so you don't have to go through an approval for every one of the tests under emergency circumstances that the second thing is, we've got to get production of these tests in the US, and we shouldn't be limited to PCR test. Their new technology, it's called Sherlock Ass, is that Use crisper molecules

and you can print the test on a strip of paper and it confined DNA or RNA in a segment and light up the strip of paper and tell you right away. If that DNA or RNA is in the sample and you can do that, like on a pregnancy test, you don't need to ship it to a lab. And so we've got to get those things approved. We've got to get him standardized, and they could be broadly applied to any viral infection that could start coming after the population. And then we've got to get production for those in the United States because right now we're dependent on the Chinese and Koreans to make the test for us. And then we're sitting around waiting. Meanwhile, they're on lock down and they want all the tests. And so you know, there's there's a couple of things to fix here. What about how the FDA goes through the approval process for candidate compounds, including, and not limited to sort of the time and the cost and the process for double blinded studies? And we create humans. We create citizens like idiots, and I don't think that it's fair and reasonable that people shouldn't have the right to decide what they do and don't want to use. And that's just my personal point of view on this stuff. And we we basically act a little bit like a paternal state and the, you know, going back to my earlier

point about kind of what's the philosophy here? The philosophy is, do no harm. It's not to do the most good net of harm. And so when you say a do no harm, it's like you cannot put a drug out there that might kill people. Even if you might kill, let's say, 2% of people that take it. But 80% of people now double their lifespan, or 80% of people that otherwise would have died can now live right? So the framing of, like, the regulatory approach to drug development and approval is really challenged in the United States. It makes it hard and expensive for new drugs to get built and launched very quickly, even though we have the manufacturing and science capacity to do it. And it also makes it really hard because individuals don't have choice. They have to wait for FDA approvals before they could decide whether or not to take the risk themselves on whether they want to try this drug. Rendez Severe should be broadly and widely available right now. People shouldn't have to file for compassionate use to get it. They should be making it printing. It should be in every hospital, and people can decide whether or not they want to take the risk. There doesn't seem to be any mortality associated with taking Randy severe. So it seems pretty clear cut that most people

would raise their hand and say, Give me that shit like it's crazy that you have Yeah, it reminds me when you say that of the same patriarchal approach we have to allowing people to invest in private companies were trying to protect them. From what? From placing a bat on investing in a private Airbnb or linked in or or something like that. And we have these rules that might be 50 or 100 years old in the case of accreditation laws and not sure how you know how old these FDA double blind laws are. But this might be something we need to rethink. And you see, with the crypto space to where people can experiment with cryptocurrencies, they have to go to you know, Switzerland or another geography or location to do that. So when we when we start thinking about the economic ramifications and obviously this is, I think for some people they might feel distasteful to start talking about money in the face of a global pandemic. But as you said earlier, David people will die because of economic issues as well. People. Let's be clear. More people will die because of the 2nd and 3rd

order effects off coronavirus than these first order effects E that give you some examples so that people understand what we're saying here. So, you know, the this is this is the tragedy that's unfolding before our very eyes. Right now it is the slow motion train wreck. Um, you know, if I go back to 2000 and eight for a second, let's just talk Paige a second about that in 2000 and eight, what we really saw was a very, very focused kind of contagion that was very much lost on most people, except for those that had been the victim of predatory lending and sub prime mortgages who lost their houses. That was terrible. Um, but the rial financial impacts were born by institutions and their shareholders. The long term effects, however, did come back and spill over to Main

Street because a lot of people, then as a result, had a lot of time hard time getting really back on their feet. And that economic malaise spread like a pandemic all over the United States. But the immediate short term pain was felt by a handful of institutions that for most people are nameless, faceless organizations run by, you know, to quote Bernie Sanders, millionaires and billionaires, okay, scent of the 1%. Yeah, this is completely the opposite. This is Main Street, first and foremost and that kind of impact in all of our lifetimes we've never had to deal with. And it's not going to be the 2 to 3 or four months, you know, 8 to 12 weeks social isolating lockdowns that we are in. It's all of the downstream effects, too. All kinds

of industries, you know, obvious, like the obvious ones airlines, cruises, hospitality, retail and then the non obvious. So, you know, again, let's imagine that you're a startup and you sell software. Um, well, you would say to yourself, I sell enterprise software, so no big deal. Nothing happens to be not true because some of your customers or some of your customers customers are either in those impacted industries or their customers or those impacted industries. So this is the first time in a very long time where we're really going to see the domino effect off. You know, economic contraction. This combination of a supply side shock and the demand shop and supply side shocks can be fixed. They could be fixed, actually relatively quickly. It's the demand shocks that are much harder to recover from because they're deeply psychological

in nature. They drive de leveraging and de leveraging is going to be an important term that folks will hear over and over over the next nine months. And that process of de leveraging this multi trillion dollar credit bubble that we have Thio hopefully in a in a reasonable way. But probably not. It will be violent and messy. Unwind will leave. I think a lot of people unemployed. A lot of businesses out of business and or could can't they? Can't we have some kind of basic intervention here I saw today. Alamo Drafthouse is an example, you know, which is a smaller business, a movie chain that many people love. They were getting sort of dunked on barbecued Andi and potentially canceled on social media because they furloughed their employees for 30 days. They're you know, they're hourly employees. So now these hourly employees basically furlough means we're not paying you anything and we're shutting down. Uh, so now can't trump

or anybody just give people a stipend or something? And this might be the test anymore? How, for example, there are millions and millions and millions of small businesses. Um, what are we going to do? We're gonna have them go to a website, fill out a form, and all of a sudden what you get as much money as you want. You somehow prove what your monthly burning. You basically you could just say here's my last three paychecks and we give you four paychecks, you paperwork and apply for it. The easiest way is gonna be a tax refund. As a percentage of your taxes paid over the last three years, it's gonna be some like rebate. Um, but I think I think these kinds of surpluses guys don't do the trick. I think that, for example, if you are all of a sudden in receipt of, you know, let's just say a year's worth of your, you know, average three year taxes over the lot. I bet you you put it in a savings account and you don't do anything with it. You're not going out. You're not going to Alamo. You're not gonna goto

Alamo Drafthouse. Now let's look at Alamo, Alamo Drafthouse. More than likely, I don't know, but I'm guessing rents their retail footprint right. And there is a read. There is a REIT or there's an MLP, or there's a landlord that owns that retail resident retail real estate footprint. That person has probably bought that building at 80% loan to value at a 4% cap, Right? The math doesn't matter, except to say that you are not in a position to forgive 4567 months of rent. You're not in a position that banks will foreclose in default, and so you will demand that money available. Alamo will then first deplete their savings. It will be very difficult for them to tap the debt markets and get alone unless they get it from the government. And hopefully they can. But those are the knock on effects that are going to happen right now. We have to see the first of those dominoes

fall and follow that trail of breadcrumbs, and to me, it's in. It's in that devastation where addiction goes up where you know all of this sort of things that we've seen in the last 10 years. We have seen it right in front of our eyes what the impact is when we lack of social safety net, where we don't take care of you know, the poorest men and women decide us, and then we have a financial shock to the system. We already know how bad it is when, Sorry, when the impacts were just with a few companies. And now I'm standing industry by industry. No, I totally agree. I mean, we saw it in in the rural markets in the thirties and we saw in the Rust Belt in the last 20 years. The statistic today is that 48% of all U. S employees work for a business that's got 10 or fewer employees now. These businesses, they're not Onley retail. It's also the plumber, the gardener, the housekeeper, the you know, the

, uh, any local service provider in any one of these markets. And like in this market, we're not having folks come out and do local services were not, you know, going to the local hair salon. We're not going to the local coffee shop. All of those people are typically living on 2 to 4 weeks of cash flow. 63% of Americans have less than $500 of savings and a huge percentage of them and another 10% of Americans work in either the energy sector or as retail workers in addition to that small business market. So we're talking about nearly 60% of American employees being exposed to the fallout from shutting down business for for anywhere from 2 to 6 weeks or 2 to 9 weeks, whatever the number is. And most of them on Lee have 2 to 3 weeks maximum of cash flow or bills owed in their bank accounts. You know, travel travel is an 8.8 trillion $9 trillion part of the economy of the world. Right? So, uh, 10% of world GDP, or actually more and, you know

, two quarters shock is basically, uh, you know, 4 to $5 trillion right? Um, the implications of that rippling through every economy in every country, I don't think has been really, um internalized. And this is where we need massive coordination at the federal level across the world. This is where the President's and the prime ministers of the most important countries need to come together now, decide on a global stimulus package and make sure that they drowned the markets with confidence that they will be there because otherwise when you see drawdowns like this in the stock market, you know, we've had this conversation in our group chat. The bottom isn't put in 20 days into a drawdown like this, right? It doesn't happen. On day 20

we are in day 20. Monday will be day 21 or 22 right? So the bottom comes in somewhere between day 200 day to 50. What that means is that september to October and what typically happens is we react in a partisan way. Okay, So check the box. So far, we do half measures. Check the box. So far, then we correct on the, you know, first order problem. Let's just say we've done that now and now we have to start the economic rationalization of these impacts, trace them all and then start to fix them. And if it's anything like 2000 and eight, it's going to dribble out in phases. Which means that the rial damage won't really be understood for another quarter or two. After people print the quarter and after people guide And when these public companies do that, the stock market and investors, by and large will realize Wow, this is a much

bigger problem in 2000 and eight. And if that plays out, bigger problem in 2000. And absolutely, But I agree. I'm look, by the way Sheymov Point. I pulled up these stats and I put him in your document, Jason, But 1987 peak to trough took 14 weeks. Uh, you know, the bubble dot com bubble bursting took 25 months. 2000 and eight took five months. And we're only as Thomas said, less than a month into this one 1987 we saw 33% retracement. 2000. We saw 47%. 2008, we saw 56% and we're only 20% into this one on, by the way. Another way to think about retracement is not a percentage loss, because we've had a massive bull market here for the last couple of years. But it's how many months did you retrace back in terms of the S and P in 87 we traced back 23 months in 2000. We traced back five and a quarter years in 2000 and eight. We traced back 12.5 years, and so far. We've only traced back 13

months to the S and P, where it was 13 months ago. The other. The other thing you guys have to keep in mind is the thing that is very different. So it's not as if everything is going to be the same. It's not gonna be a repeat of the dot com bubble or 2000, but they're similar in the rhyme. But the differences are important. The difference this time around is that we have gone through a multiyear period of incredibly low volatility. And in that period of low volatility, two things have happened. The first is that we have had public market financial capital market participants get absolutely leveled up, so I'll explain what that is in a minute. And the second is the emergence of computers and quant funds and algorithmic trading. So on the first side, you know, let's just say David and I ran a hedge fund, Jason and we took money from you, okay? And we'd say, Jason, we're going to give you 10% and you're like, that sounds like a good deal, you know, Bonds or zero. Here's my money now. David and I

would look at ourselves and say, Well, we would love to stay in business forever and we want to collect 2% off of Jason's money. So let's try to do this in the most conservative way possible. We're going to try to get 1% a year. Can we make 1% year? David and I looked at each other and we say, Yeah, we could make 1% a year. How do we do it? Well, let's break it down. Divided by 12. Okay. We gotta get 82 83 basis points every month. Okay, we can do that. We could make 80 basis points a month. Um, of course Sorry. Eight basis points a month. Sorry. Whatever. The math is 8.5 basis points a month. And so let's say we figure out a way. Being really conservative, we make 8.5 basis points. 1% a year. Well, eventually, we looked at each other and say Okay, well, we need to multiply this by 10. I got it. I'm gonna go to my prime broker, JP Morgan, Goldman Sachs, Morgan Stanley and say, Guys, I want you to lend me 10 times on my money and

they'll say, Whoa, big boy, hold it up and I'll say, Listen, look at the volatility. There's no volatility. This is a really safe thing to do. For every dollar I put up, you give me 10. And now everything that I was doing is multiplied by 10 by 1% a month becomes the 10% year. Voila. I look like a genius to you. In reality, David and I are making 1% of your multiplied by 10 turns of leverage. Okay, Every hedge fund runs this way. Right now, when volatility goes from zero 2, 50 to 60 to 70 in a matter of days, which is what's happened now, the banks were not stupid. Say, hold on a second. Uh, you owe me money. You need to post Maura money. If you want me to continue to give you this kind of leverage, there's volatility

. I cannot, you know, guarantee that Amazon is worth 50% of what you say. I have to assume Amazon is worth 20% of what you say. So I can't use Amazon stock as collateral. I can't use you know these 10 year bonds as collateral I can't use whatever you're giving me as collateral. You need to post more money. And then what happens is I have to deliver. I had make margin calls I have to deliver. I sell my safe assets. I saw gold. I saw all these things, which is what's been happening now. So that's number one the second. Which is why you see all of this massive volatility. And it kind of builds. On top of itself is you have these algorithmic quant funds that just see price signals, and then they act. It doesn't matter if it's a good day. Doesn't matter if it's a bad day. They know that the next tip is going to be up if the last IQ was up or down, if the elastic was down and when you have hundreds of participants putting in billions of dollars multiplied by that leverage, So hundreds of billions you get these

tsunami effects were one day you're down 10% and then the next day you snap back 9% because even if there are a few individuals making idiosyncratic human lead decisions, all of a sudden, it's drowned out by the computers and the leverage That's a really big difference that exist today that doesn't really exist or didn't exist these last times. And so we're going to be in a very violent thrashing environment as we deliver mhm right as we figure out which credit funds air upside down, there's about 75 you know billion dollars of debt across the stop. Seven or eight petroleum companies that comes due over the next few years on the average price for a barrel of oil needs to be 50 bucks. For them to not be upside down, it's 30 and falling. Some of these guys, like Oxy Petroleum, needs oil to be $80 a barrel for them to make their debt payments. So we're going to start a very awkward

period of de leveraging and a very long period where we're gonna have stresses and shocks that are not industry specific. It's not just gonna be Lehman and Bear. It's gonna be brand name companies that many people that are listening to this know and understand who are put under financial pressure, who cannot make their interest payments, who default on debt, who missed their earnings. And so this is an environment where cash becomes king, and an incredibly clean balance sheet becomes the single most important thing that you can have. So the Googles Apples, Amazons of the world. They're sitting on tons of cash. Microsoft's I mean, they're just going to go on an M and a spree, you think? Or they're just gonna sit tight while the anger that will turn onto those five companies is gonna be incredible because you you talk about a trillion dollars of cash, A trillion dollars plus, with five companies, they represent

20% of the S and P 500. And you know, the Onley thing that hasn't really sold off yet are those five big names. They've come off a lot, but not nearly as much as the rest of the market. If and when those things break. Um, not because of their balance sheet or of debt issues, but just because of how risk off everybody is in the broader market. You're gonna look at those companies and they're going to get in a really difficult situation. You could have forced repatriations where the US government says, Sorry, guys, the money has to come back and I'm gonna tax it. Yeah, and You know, all these things people say will never happen. But there are these moments in time where you just can never say never. And I would say toe all of us. This is a moment where your Presumptions of normalcy need to get paused. Yeah, well, and we've We've had these moments before 9 11, the financial crisis, great recession on the dot com bust bust

. David, what are the chances percentage wise that this results in. Ah, very quick resolution. So quick resolution being defined as Hey, we quarantine for a month. Turns out America is similar to countries that don't seem to be impacted by it. And, ah, we're back to business as usual in the there are quarter, fourth quarter. Look, I think the chances that this resolves in a month and we're all and you know, we hit that I'm actually just looking at today's reported numbers and it looks like hopefully we end up in the same number of new cases as yesterday, but we'll see by midnight. But, you know, hopefully that starts to happen. People recover again. I pray that we get these I G tests out there so that we can show that there are 10 times or hopefully some large number of people that were asymptomatic, that have this thing not from a showing it, that it's gonna cause more contagion, but that you know, the general case of this or the You know, the average case of this or the 99 percentile case of this is relatively mild

, and people calm down. Um, but I do think it's non linear in terms of that second order and third order effects that we've been talking about. We even if we got back to business as usual in a month, we don't yet know how losing 2 to 4 weeks of cash flow is gonna affect every salon in every major city, every local restaurant, every local movie theater, every local plumber. All these businesses that have been had the revenue literally turned to zero in the last 2 to 4 weeks. If they only have two weeks of cash, they're bankrupt. If they have six weeks of cash, they're reducing their investments this year. If they have eight weeks of cash, they're probably cutting a couple of people from their from their payroll, so we won't know for a couple of months going back to this point about Hey, we're talking about Q three when this all finally kind of comes to their what? The shutdown that we're in right now and we're gonna continue to be in probably for another 2 to 4 weeks is going to do, and we're gonna find that out over the next couple of months. But it's gonna be ugly on DSO. I'm not feeling like very confident that in four weeks we're going to say, Hey, guys were out of the woods

. Unless the federal government shows up with a $3 trillion loan package that any small business can access in, any unemployed person can access and it really fills the gap. And then you're effectively talking about one year of a Bernie Sanders tax hike anyway. So, like, Hey, you know, it doesn't really make that much of a difference. Look, you know, a 20% of GDP that were given away for one year to keep the economy from completely collapsing, and I think that's where we have to end up. But until we get that package and we know how big it is, and we really know that it's gonna fill the hole. We don't know for driving off a cliff or not 100% 100% certainty that Trump will do something like this because he wants to save his presidency. Correct trauma. He only chance he has. I think the I think the problem is that the Republicans and the Democrats are playing political chicken with each other. And this happened during tart. It was a trickle, trickle, trickle, trickle, trickle. Um, and I think it's gonna happen here. Um, you don't think they're

gonna get on the same page and realized, Gosh, we're all gonna lose in this case? Or do you think the Democrats have a reason to let Trump fail and let the economy failed? So they have a clear path to victory? I mean, I know that No, no dark because then because then I think that they then I think Trump should get reelected because they have, ah, bigger responsibility to the people than, um, you know, blockading the president of the United States. That's ridiculous. Um, I think the reality is that we are woefully underestimating the 2nd and 3rd order effects. And so we will be you know, we started with an eight billion dollar package. You know, uh, this last package, I think when we put the numbers together will probably be an order of magnitude. Bigger. Okay, whatever. You know, we'll wait a few months, and then we'll have a couple $100 billion. It'll be kind of tarp, like it'll probably be a bailout of a couple of specific industries. Um, but, you know, you can't bail out every industry. Um, and, uh, the ultimate package probably

needs to be on the order of a year to a year and a half of world GDP spread across all the major countries of the world. And so, you know, for the developing countries, the mechanism is probably the IMF's and the World Bank. But we need somebody, really, And they're doing it. Um, you know, not these kind of like career bureaucrat dipshits. That air in there now. So, you know, get somebody like Bloomberg. Maybe he steps in and, you know, he can allocate the money on then the G eight or the g 20 basically then put 75% of the dollars into their economies. You know, Germany has to basically go into deficit big time. They can't kind of run this austerity campaign. So there's a lot of big decisions, Jason, that need to happen. These things can't happen in days nor weeks, and they're precipitated on data and political pressure. And that takes sort of weeks to months to build s. Oh, you know, I kind of think we're in a kind of wait and see mode here where, you know, there will be these relief rallies, because people

, I mean, look, legitimately. We all don't wanna be living through this nightmare. Um, and so every chance people get to buy has a signal that this is over, they will take like they did in a way. But eventually, the news just kind of is, um you can't overlook it. And you can't take the ostrich strategy of managing a business. So, you know, like I've had I've had a company already. Um, who did a deal yesterday at two times forward Ahrar. Two times. This is a company that will do 35 million of revenue, 35 million of revenue. Now, you could say, Hey, that's crazy. Like we're a start up like, you know, we're funded by you know the best of this? You know, Tier one, Tier two, venture capital. And honestly, my reaction is Shut the fuck up and go fuck yourself. You are going out of business, and that

was the market clearing price. But that CEO did right by his team. And history will look favorably on that guy because, like Buffett said in moments like this and in your life, in business anyways, But I guess also in life, the most important thing is to not go out of business. It's to survive. Yeah. I mean, e I was explaining it to my founders in our group slack room. And I said, Listen, job number one if you take the scene, is the captain is you got to keep the plane in the air, You know, you gotta find a place to land the plane, and you need to know your altitude, and that's your runway. And you know, e in the bank. I think in this way startup CEOs or the greatest canary in the coal mine because, you know, they are the ones that are the most resistant to these implications. They love the halcyon days of the Cinderella ball they love it. The clock never strikes midnight. They're never running down the stairs, leading the glass. Simpler. You know, that's that's that's what

makes them great. In many ways, they live beyond what their station in life is, and hopefully they make it. But in moments like this, you really have to realize that that the shot clock is on and has nothing to do with you. And if you are losing money and your op X is high and you don't have 24 to 36 months of cash, you have to really figure out how to get that money, because it's it's going to get harder, not easier. Like give you a simple example. You know, I I was thinking about like all these companies in the next few years that had plans to go public. They have options that have to invest, you know, they have our issues that will expire. I've read about Airbnb. You know, these air really complicated examples of companies that are great companies with unbelievable employees who deserve the hard to be rewarded for the hard work that they put in. And now you're faced with the situation

where your money losing, burning cash, you know, options about to expire. I mean, people have should have got public. I mean, this is why Bill Gurley was sounding an alarm went three or four years ago saying, Listen, if the window is open to go public, get out and, you know, clean up the balance sheet. Um, yeah. I mean the you know, my last year last year, I wrote this in my letter. Like last year. I took a lot of heat from some folks around me because I focused on liquidity. Um, you know, I generated what I put 1.7 billion on the balance sheet last year, and I just remember, like, people like, you're an idiot to sell. Why are you selling at these prices? And I said, Honestly, I've been through the dot com bubble. I went through that. It took me 13 years to get even. From 99 to 2012, 13 years, I went through a weight, but it wasn't so bad because I was mostly head down working

at Facebook at the time. And I just thought after 10 years of building something I don't want toe have all my chips on the table anymore. And what I want to be in a position is to be a good, steady source of capital in moments like this, you know, call it a white knight. Call it whatever. But now you know what I'm telling. Everybody has put out the word. I have billions of dollars in a balance sheet. I'm willing to put it to work. I wanna work with founders who are sober and realizing how important this moment is for their company. But there's going to be an incredible number of businesses that have to act. And they're not gonna act for the next 2 to 3 quarters. I get it. But they like the government, like the stock market, like everybody else will capitulate. And hopefully when they do it, the money is there. David, how are you approaching the next year when you look at yourself, you know, building startups. I mean, obviously, you know

, as I tell people you know, fortunes were made in the down market. They just collected in the upmarket as Jim off just pointed out a swell. How do you look at the next year and then going into this next decade as a founder. So yeah, we we build businesses and then we eventually bring in outside investors into those businesses. So we are eventually gonna be looking to capital markets to help fund our project and, um for And so we put money off our balance sheet into starting these businesses, and we fund them during that initial phase. So the first thing we've kind of talked to folks about is, like, you know, don't optimize for time, optimize for survivability. Now, I've had one VC text me earlier this week and say, We're all leaving the office and this was a V C. Who had given us a offer to invest in one of our companies, yanked the offer this week and said, He's going to go there shutting up shop. No one's gonna be in the office. They're not doing any deals until things kind of come back. Whatever that means. On Ben, I've seen another venture firm, which is a much larger firm, say it's business

as usual. We don't care about up markets, down markets. We're still investing. Valuations will shift hopefully and you know the markets are going to shift. What we're gonna invest in, but we're still here and we're still doing business. So I think the first thing is there's, you know, for the right businesses, there's always capital. I mean, I built my company. I raised my Siris in November of 2017. That's alright, 22,007 and then 2008 happened, and I'm really glad I raised more money than I wanted to for my Siri's. A. We made it through that period. We built a business. And then by 2011, we had such a great business. We raised a nice Series B and then a seriously a year later, and then we sold. So it was an incredible run, but we went through that period of building on. It was, you know, it was great that we have the cash for the businesses that don't have the cash I'm worried about. Like, you know, are we gonna have to put money off our balance sheet to help fund them? Because it seems like there's less of these convertible notes and Safe's and people interested in bridging stuff and you know, all the stuff that was a little bit, you know, I'll like like him off was saying earlier, I'll take more volatility right now or I'll take more risk because

the ball is low. It's very likely that everything ends up raising their next round. Now we're talking about probably 60% of things. They're not gonna make it to the next round, so I'm gonna take less fall on. That has kind of exponential effect in terms of accessing capital. So we're telling everyone cut costs. Make sure that you manage for survival. Do not manage for optimization on time. Traditionally, we've kind of been aggressive and said, Try and get as much done in six months as you can and hit these big milestones as quickly as possible. Now we're saying, You know what? Take your time to hit the milestones. Just make sure you d risk a little bit, even if it takes two years instead of six months. As long as we have enough cash to survive two years, a soon as we get out of this, you know we'll be fine. But that's kind of what I was like. Well, I was advice, chances tomato as we wrap up here, where 80 minutes into the first episode, zero of the oil in podcast emergency pod here talking about coronavirus with David Freedberg and Jamal Palihapitiya Chammah chances right now that this is, uh, resolved in a couple of months and we get back to business as usual. What would you set? The percentage chance of zero

. Um, if you I think we deal with the first order effects of the disease in, uh, 8 to 12 weeks. So, you know, probably by May Well, have a decent handle on the impacts and will be through most of the worst of it. Andi, I think the economic bottom is probably Q three Q four. Um and I think that, you know, we're like, we're gonna touch 2000 on the S and P if not lower. I hope we don't, But I think we are. Andi, I would just encourage everybody to start internalizing the 2nd and 3rd order effects We are The world, as of now is shut down for two months. The world And you know much like an old car. You can turn it off fast, but sometimes when you turn it on Yes Butters Spot

Have you take a look under? There may be clear up a while it takes a while. You know, travel. By the way. You know it's an interesting anecdote whenever there is a demand shock and travel. I like travel, by the way, just because it's a really good another canary in the coal mine. For so many industries that are interconnected and highly dependent on each other. When there's a demand shock, it typically takes 19 months for it to recover 19 months. Um, so almost two years eso David's right. I really, really encourage folks to batten down the hatches. Um, keep you know, enough dry powder so that you can withstand what? What can happen in two years and stop worrying about valuation. Um, find good capital partners and moments of distressed like this who can be, you know, fast on

decisive on in size. Um, and, um, try to get back to work and keep your keep the people that work for you safe? Yeah, And if you're worried about civil unrest, riots, breakdown of society, that's something that people have been hypothesizing about on. They always thean er net People are the ones who are most paranoid about this because Peter Thiel and whoever bought some New Zealand Real estate. There's a lot of us, uh, that fucking scratched our whole lives to get to the United States. And I don't think, uh, that's who we are. I wouldn't have come this. That's who we were. Any chance of civil unrest at this, like, sort of society breakdown kind of issue? We're an incredible country. I mean, you can read Buffett's letters and he talks about with a great perspective of the last. You know what we've built in this country of the last 200 years? I mean economy, the infrastructure

, the food availability, the health availability, the housing availability, governments challenge. But it's not as challenged as elsewhere in the world. I don't think in the United States where you know it's gonna be a shitty time for people with capital. It's gonna be a shitty time for people with retail jobs and hourly jobs and so on. The government's gonna be there to help them, But I don't see this government failing the people, No matter who's in charge. I just don't think we're set up that way. Other countries have different models. I think there's other places where that may happen, but not here. 100% 100%. All right, listen. This has been a great episode. Zero emergency podcast for the oil and podcast. Thank you to my co host Chaim off Palihapitiya for pushing us to do this podcast. And David Freedberg continued success building companies. And we'll see you all next time. Love you, boys. Thank you. Free burgers way. Do you think the next poker When can we all get tested and play a game of cards? God, please, Freydberg, give us, um, test. So that way

, I'm losing so much money in every other part of my life. Why not lose money at the poker table? Way Zoom set up like this later and then I'll get on pokerstars table way e Think we just have to get something going here way Could do a play poker stars table and just play P l o. And, uh Let's get on pokerstars. Alright, everybody See you next time. Bye bye.

E0: COVID-19 Political, Economic & Social Ramifications featuring The Production Board's David Friedberg (frmly Founder/CEO, The Climate Corporation)
E0: COVID-19 Political, Economic & Social Ramifications featuring The Production Board's David Friedberg (frmly Founder/CEO, The Climate Corporation)
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