#38 Mike Lorenz - Bitcoin, Business and Society

Chatting with guest Mike Lorenz about Bitcoin, how CFOs sped up smartphone adoption, the urban doom loop in San Francisco,  'zombie companies', the abuses of private equity investing, and the implications of eradicating morality from social and business relationships.

Episode Transcript

Speaker 1 (00:01):
All right, I am here once again with the inimitable
Mike Lorenz, friend of thepodcast, snappy dresser, and the
man who is sort of an oracle inhis own special sort of way.
Never profit in your own landor household, I suppose in our
case, but your profit in myhousehold.

(00:21):
There you go.
Excellent, how's life treatingyou, buddy.

Speaker 2 (00:26):
It's good Summer's ending, so all the kids are back
in various schools and life issettling down into a routine
again, which is kind of nice.

Speaker 1 (00:35):
Yeah, I know what that's all about.
I don't think I wrote more thanhalf a book during the summer
and I had intended to take onlyone month off and it was finally
like you know what.
I've spent a month and more onthis and I didn't get my month
off.
And I'm feeling it because whenI came back last August, I went
and I plowed through an entirebook 100 plus thousand words in

(00:58):
four weeks and it was like thatCame back this time and I'm at
like 54,000 words.
I'm like you know what I'mgoing to take a long weekend.
It feels like a good idea rightnow.
Thanks, yeah, we were talkingabout Bitcoin briefly before I
activated the recording deviceand it's a little bit of a
trough right now.

(01:18):
I guess it had gone up to28,000 or so.
In the last few days.
It went up to 22,000, and I'mlike, oh wow.

Speaker 2 (01:26):
Yeah, it's been bouncing around.

Speaker 1 (01:29):
It's volatile still at this stage.

Speaker 2 (01:30):
Yeah, but it was in kind of a very stable quote on
quote range for maybe eight, 10weeks or something.
It was just kind of bumpingalong at exactly the same.
Then it got volatile both ways.
But it is what it is.
Anytime I see assets thataren't volatile when the actual

(01:50):
economy is volatile, I getworried about how true the
market is.

Speaker 1 (01:55):
Well, since the last time, I think, we spoke on
microphone, at least I finishedreading the book that you had
given me last Christmas theBitcoin standard and I might
have talked about it with Carlos.
I feel like I've been talkingabout it with everyone lately
because it really changed theway I have thought about money
and markets and everything Ifeel like for the last 10 years

(02:16):
or more, ever since thefinancial crisis of 08, I have
not understood the markets, andit's not just a directional
thing.
I feel like I have a CharlieMunger type situation where I'm
like none of these valuationsfor any of these stock prices
make sense to me and readingthat book, it suddenly was like
someone held up a flashing neonsign of revelation.

(02:38):
This is it when you don't havemoney that is sound, when it can
be manipulated and it forms itsown complex system that doesn't
use actual pricing and marketsas a symbol.
It's basically I mean, centralbanking is kind of a socialist

(03:00):
model.
The government controls moneyand it controls pricing.
If it controls money and itplays around with it in every
which way it can and the USspecifically is, and there's
going to be a lot to unpack here.
I know the US government,specifically, has used it to tax
the people without theirconsent by devaluing their

(03:24):
currency holdings, and so bythat method, anytime they feel
like it, they basically pass atax on us where, all of a sudden
, our money's worth 10% lessDuring COVID, our money was
suddenly worth 50% less, orsomething ridiculous like that
and we're seeing it and payingfor it in inflation.

Speaker 2 (03:38):
For sure, and it's a hidden form of taxation and so
it's easier to pull off.

Speaker 1 (03:47):
Yeah, no legislature necessary.

Speaker 2 (03:50):
Yeah, you just think of 2010 through 2020, and I
think we've talked about thisbefore very low theoretical
inflation.
People weren't paying attentionto it.
Even though there was inflationin assets houses got way more
expensive, stocks got way moreexpensive, et cetera no one was
really paying attention to thegovernment just printing
boatloads of money in devaluingthe currency.

(04:12):
So it sneaks up on you.
Then it gets out of control andyou do notice it.
Everyone noticed it in 21 and22, when all of a sudden the
price of eggs went to $45million or whatever it capped
out at.

Speaker 1 (04:25):
Some of that was.
I mean there was a chickenissue.
Avian flew at the same time, sothat one was particularly
accentuated, I guess byadditional factors.
I mean all the other food stuffwas inflated as well.

Speaker 2 (04:37):
Yeah, so when it gets bad enough, people notice is
the bunch line.
I'm surprised, but, like yousaid, a lot to unpack there.
Almost every sentence has aparagraph of response, so go
ahead.
The Bitcoin Standard book isreally interesting because I
give it to all of our friendsfor Christmas last year, a year

(05:01):
before or something like that.

Speaker 1 (05:02):
I think it was last year, because the year before
was the live not by lies.
That quote, the origin of thatquote, is big in my next book,
live not by lies is almost thetheme of it.
That's awesome.

Speaker 2 (05:13):
Great book as well.
So Bitcoin Standard.
There are some folks who justswear by it.
You've been effusive in yourpraise of the book that, hey, it
changed the way they thinkabout things, et cetera.
I like the book, but it reallydidn't change much of how I
thought I was like, oh, yeah, itsolidified it, right yeah yeah,
it was a lot of a opener to meand just reading that wouldn't

(05:33):
have clicked all the buttons forme, but some of the podcasts I
listened to people havedifferent ways that they pick up
on things like, some of thepodcasts I've listened to were
more along the philosophicalmeanings or underpinnings of
Bitcoin or what it could mean,et cetera.
That really punched my buttonsa lot more to get me more
interested.
Dig deeper.

(05:53):
Some folks say economics, somefolks it's the technology,
whatever it is.
But yeah, some folks just raveabout that book and for me I
like the book but it never hitthat level for me.

Speaker 1 (06:07):
For me it was just a Rosetta Stone, where it's like
all of a sudden I have a newprimer for understanding this
previously unfathomable sectionof the world.
It just opened up my eyes tojust this one area where I was
like I don't understand any ofwhy this is happening, and so it
provided that explanation ofthe reason why none of the

(06:31):
pricing makes sense is becausethe government is literally
tugging on the pricing anytimethey change rates, anytime in
fractional reserve banking, somebank issues alone, anytime euro
dollars are issued.
That's why your pricing doesn'tmake sense.
That's why people are payingthis much for a stock that has
no valuation, because your moneyis actually not worth very much
at all, less than you realize,and it almost is a gut thing for

(06:54):
most people is that?
The line that was in there thatyou and I have talked about
before is that money is burninga hole in a lot of people's
pockets.
The savings rate is incrediblylow because it's like people can
perceive my money is notactually worth that much and it
might be worth less in the nearfuture.

Speaker 2 (07:07):
Yeah, it's an interesting philosophical
exercise.
You could say, hey, let's playthis game.
Your money is worth 10%tomorrow of what it is today.
What are you going to do?
Everyone say I'm going to spendit.
Yes, okay, it's going to beworth 50%.
What are you going to do?
Okay, it's going to be worth 2%less.

(07:29):
But you're not going to know it.
It's like, okay, well, maybeyou're not directly going to
think I'm going to go out andspend it, but somewhere on that
spectrum you're tweaking to thefact that this money is losing
value over time and, whetherit's consciously or
subconsciously, it's affectingyour actions.
And so I think we've talkedabout this before.
I don't know if it's on one ofthe podcasts, but I've said it a

(07:50):
million times money is inprices or information.
Yes, money is informationthat's flowing around.
So if you think about bad money, bad money is disinformation.
Yes, it's like, hey, you'regetting bad information.
Like you see the price ofsomething go up.
Oh, hey, in a normalmarket-driven economic system

(08:12):
where you've got good money,that would mean, hey, there's
higher demand for this.
Yes, right, for some reasonthere's a key supply that's not
available.
More people want it Furnish,blue, whatever.
You can use it for more stuff,yeah, whatever.
So that's information hey, thisis more valuable.
But if the price is going upjust because there's more money,
this isn't more valuable, andso the signals that go to the

(08:33):
market would be telling them hey, go make more of this stuff.
It's like no, no, no, there'sactually plenty of this stuff.
So money becomes disinformationwhen it's bad money.
And it's interesting.
I listened to a podcastrecently and I went back and
listened to an interview withSam Bakman Fried, who was this

(08:54):
28-year-old or 30-year-old,whatever.

Speaker 1 (08:57):
Never heard of him.
I wonder what he did.

Speaker 2 (08:59):
Youngster who founded this crypto exchange that
played all kinds of shenanigansended up being either a Ponzi or
a facilitator of Ponzi, or justa total fraud or all of the
above, and they lost billions ofdollars for customers doing a
bunch of shady deals in theBahamas while pounding his chest

(09:22):
about all the good things hewas doing to save the world.

Speaker 1 (09:24):
And living in a polycule.
Let's not forget that, withsome of the most interesting
poly roommates.
I don't know, man, If you're abillionaire, I just feel like
you could.
I don't know.

Speaker 2 (09:37):
So his decision-making was bad on so
many fronts.
So anyway, listening to thispodcast, it was recorded six
months before the collapse ofhis empire, so he's still seeing
is this wonderkin genius cat?
And it was really interesting.
Some of the things were like,okay, this guy just is a
complete idiot and, frankly, I'dnever heard of him until all

(09:59):
his stuff blew up, because I wasnever into crypto.

Speaker 1 (10:02):
Neither at all yeah.

Speaker 2 (10:05):
I kind of believed in Bitcoin and I just bought
Bitcoin and stayed in that laneand didn't pay attention to a
lot of this other stuff.
So if he was a surprise playerto me, I went back and I
listened to some of his stuffand, holy cow, in retrospect
it's easy to say how do you notsee that this guy's kind of a
loon Like Elizabeth Holmes verymuch?
Yeah, yeah, it's like who istrusting this person.
But I went back and I listenedto this podcast and he actually

(10:29):
made some interesting pointsthat were like okay, I get where
you're coming from.
One of his points was aboutpricing of equities, because
he's a former trader ofsecurities for some hedge fund
or something and he was like,hey, the prices of equities
don't make sense.
Why do the prices of cryptotokens have to make sense?

Speaker 1 (10:48):
Yes.

Speaker 2 (10:49):
It's like, okay, that's a really good point.
Good point Like if, literally,you have to wait around for 400
years for the dividends fromAmazon stock to pay for one
share of stock, that doesn'tmake sense as an investment,
unless there's something wrongwith the money and you just need
a place that's less bad thancash.

Speaker 1 (11:11):
And that was the thing that I have twigged to a
long time ago.
Where it's like Netflix theearnings don't make sense for
this and people are projectingsome sort of obscene growth and
I never understood it.
And that's the Charlie Mungerthing.
Where it's like I don'tunderstand these equity prices,
None of the stock prices makesense to me at all.

Speaker 2 (11:29):
So yeah, there's two things there.
One is, of course we're talkingabout all the money being
pumped in that just the valuesof everything is going to go up
because there's more money andstuff isn't growing at the same
rate as the money, so the priceof everything goes up, Super
basic.
The other thing is, when you'retalking about growth, growth
rates driving these valuations,you could borrow money for

(11:53):
approximately 0%.
Let's call it half a percent or1%.
As a corporation, you couldborrow money at very low rates.
Call it a half a percent.
Yeah, blackrock bought a lot ofhouses that way.
If you can borrow money at halfa percent and you can make 1% on
that money, you would do it allday long.
So growth rates are reallyimportant.
So even if you're just a weakcompany but you can support a 3%

(12:16):
growth rate and you can borrowmoney at 1%, you're going to
borrow money at the Wazoo and itmakes sense all day long for
you to do it.
So these incentives are layeredin here in such a perverse way.
It's fun.

Speaker 1 (12:32):
Well, that was the other part of the loose monetary
policy we had.
Is that all of a sudden youhave these corporations that are
run generally badly?
If there was an actual freemarket they would not survive or
they would not have survivedthe last 10, 15 years or
whatever.
If you can get that much accessto capital that easy and that
cheap, it's not exactly asurvival of the fittest

(12:54):
situation.
It might be, in fact, in someof the marginal cases where
they're kind of on the bubble.
Even in this easy environmentit might be a wink, wink, nod,
nod.
My friend at the bank can getme a loan and keep them alive a
little longer.
And to your other point youmade on a podcast before about
zombie banks it's like evenbanks in some cases are

(13:17):
surviving in ways that maybethey shouldn't and wouldn't in
better times.

Speaker 2 (13:22):
Yeah, I think one of the stats I saw recently in
multiple places is that overhalf of the small banks out
there are technically insolvent.
Like if you went out there andyou said, hey, okay, sell all
your assets, which are theseloans you've made to companies
or these treasuries that youhave on the books or whatever,
then repay your depositors.
Those things don't line up.

(13:43):
They'd be able to repay most oftheir depositors.
All their investors would loseall their money and not all
their depositors would get alltheir money back.
Half of small banks beinginsolvent is a pretty big deal
and it's one of those where it'seven.
It's probably worse than peoplethink.
From a couple different anglesthat's a rear view mirror kind

(14:08):
of looking metric.
If you look in the look out thewindshield for the next couple
quarters, there's huge headwindscoming down the pike.
The commercial real estatemarket is a disaster zone.
So it's something like 90% ofloans to buy commercial real

(14:30):
estate were interest only andinterest rates have gone from
again half a percent or 1% to 6%, 7%, and so those companies
that were borrowing money andonly paying back the interest to
buy office buildings, yep.

Speaker 1 (14:47):
Inticipating growth in value.

Speaker 2 (14:49):
Growth in rents.
Like, hey, we'll just chargemore for rents every year unless
everyone decides to work fromhome.
Yes, and inner cities turn intohell holes Right At the same
time.
Yeah, downtowns, yeah.
So all of a sudden you'rehaving these massive write offs
in commercial real estate.
So I saw the stat earlier in theweek where there's this one I

(15:11):
think it's Brookfield which is aREIT, owns a bunch of
commercial office space Huge,yeah, huge, player.
And they sent this nice littlenote to the city of San
Francisco saying we're not goingto pay the taxes.
You just assessed us becauseyou're saying these buildings
are over 300 million.
We're saying they're worth 50million.
Yeah, multiple buildings.
So it's something like the cityof San Francisco, which already

(15:33):
has huge problems, all of asudden saying, hey, your tax
base, just for commercial realestate at least, just got cut in
half.
That's bad for San Francisco,but for the banks that are like,
hey, we lent money on thesebuildings, you can't sell the
buildings for what you bought it.
You're not going to even beable to rent them out, possibly
because no one's coming back towork, and definitely not in hell
holes.
So these banks have theseassets on their books and they

(15:54):
haven't been written down yet,and so forward looking.
That's a problem.
Credit card debt is an all timehigh 1.5 trillion or something,
I think.
Student loans are coming backonline.

Speaker 1 (16:02):
Yes, october 2nd, I think, or 1st.

Speaker 2 (16:05):
Yeah, and in that kind of 30 to 39 age range,
student loans are going to be amassive hit to folks.

Speaker 1 (16:12):
Credit card debt.
2, the interest rate on creditcards is higher than it's been
in a decade or two, I think.
I mean I haven't been in thepersonal finance game in a while
, but I mean I remember creditcards were eating people alive
in the mid to late 2000s when Iwas doing this, and I mean, if
it's at an all time high now, Ican't even imagine how bad

(16:36):
people are getting walloped bythese rates.
Yeah.

Speaker 2 (16:40):
And theoretically, we're not in a recession yet,
Except these are all the metricsI was going to say during a
good time.

Speaker 1 (16:45):
Consumer confidence just came back the other day and
it's low enough that we.
You know it's a normal.
It's at a level that wouldnormally be measured during a
recession.
Furthermore, the June jobsreport was revised.
I suck at numbers, so at leastalways is the numbers person,
but I remember the words andit's like they came in

(17:05):
originally reported at like 205.
The next month they revised itdown to like 189.
And the next month they revisedit down now to like 105 for
June.
It's like in the rearviewmirror, hey, that objects keep
getting smaller and smaller, andnot because we're getting
farther away, it's actually justcollapsing in on itself.
Yeah.

Speaker 2 (17:24):
So a lot of different threads we're pulling here
saying the condition of thefinancial economy looks bad and
it's worse than it looks.

Speaker 1 (17:33):
Well, I've been anticipating a commercial real
estate collapse since 2020,frankly, I'm surprised it's
lasted this long.
I was anticipating it earlier.
It feels like our economy islike this rickety scaffolding
that is just sort of bearing theweight.
It's like one of those whenyou're in school did you ever
build one of those liketoothpick models where it's like
you see how much weight you canput on it until it finally

(17:55):
comes crashing down?

Speaker 2 (17:56):
I always wanted to build one of those, but upon
further investigation, it wasalways funner to watch somebody
else fall up and to build my ownExactly.
It's a lot of work, but, yes,the analogy holds and same with
you.
When 2020 happened, I had aflashback to probably 2009, 2010

(18:17):
, somewhere in there where, in2008, 2009, 2010, whenever this
was, I can't remember when, allof a sudden, smartphones just
came online like crazy.
I was working in a bank and weall had blackberries that would
have been purchased for us bythe bank, and the bank paid the

(18:39):
wireless chargers, whatever.
I don't even know how it allworked, but we had all these
devices.
We were emailing each other.
It made the world much faster.
The velocity of information,having email in your pocket, was
amazing.
And then smartphones came alongand for like six months or
eight months I don't know howlong the CTOs and compliance

(18:59):
officers of companies would belike hey, don't allow them to
have work email on theirsecurity, security blah blah,
and then the CFOs found out.
These people are buying theirown phones and paying their own
wireless bills.
Figure out the security.
We're going to stop buying theblackberries and paying for the
blackberries, because this isactually a material line item,
and so, all of a sudden,blackberry died.

(19:20):
Everyone was buying their ownstuff.
The companies weren't buying itfor them.
They weren't buyingblackberries, they're buying
iPhones.
That's when the iPhone came out, so fast forward to 2020, when
I saw everybody go home and workeffectively from home.
I was like oh, I've seen thismovie.
The CFOs are all going to belooking at the rent and say why
the hell are we still payingrent when people come work from

(19:41):
home?
Pretty effectively, it doesn'twork for everybody.
If you're a factory, peopleneed to show up and screw stuff
together, but if you're doingknowledge work.

Speaker 1 (19:48):
Even a 15% decrease in the number of people showing
up at office buildings means amassive shift in commercial real
estate the like of which youcan't really survive.
And when you combine that withthese downtown doom loops in
places like San Francisco thatCarlos and I have talked about
the urban doom loop before onthe podcast and how you know,

(20:08):
the decrease in city servicesSwings down and then less people
want to go into the city andthe restaurants die and then
it's just like a Downward spiraland I mean I don't take any
pleasure in the San Francisco.
I watch movies old movies allthe time that are filmed in San
Francisco and it looks like itmight have been the most
beautiful city in the entire US,like it just looks Amazing in

(20:28):
the late 90s, early 2000s, like,and I would be scared to go
there now, not just because ifyou park in any parking space
your shit's gonna get stolen outof your car, I mean, which has
happened to like five differentCNN crews now in the last three
months Hilariously, I might addmm-hmm.
But like you know it, it's justnot a particularly safe place

(20:50):
in a lot of ways.
I mean, if you don't step onneedles and feces.
You might get yelled at orkicked in the head by a homeless
person.
I you know that's not not agreat situation to be in.
Yeah.

Speaker 2 (21:01):
Yeah, there's a.
There's a giant missing.
Why, yeah, go to San Francisco?
Why, yeah, why would I do that?

Speaker 1 (21:07):
So you can get screamed at and possibly
bludgeoned by a man at homelessman on Fisherman's Wharf.

Speaker 2 (21:11):
He's an addict of God knows what methan, fentanyl
probably yeah, not a romanticspot anymore, no, but yeah, it's
the.
The amount of warning signs outthere is is troubling it for
banks, for Businesses, becausewe talked about zombie banks
before.
But there's a, there's a largecohort of zombie companies, yeah

(21:32):
, and there's kind of adefinition of a zombie company,
and that is a company whoseEarnings doesn't cover Servicing
their debt.
Mm-hmm, right, yeah.
And so if, hey, the amount ofmoney we make doesn't even cover
the interest payments on ourdebt, mm-hmm, we're in trouble.
Less of them at 1% interest,more of them at 5%, right, right

(21:56):
.
Winnowing effect yeah so, andthere was a lot of companies
that were just getting along,yeah, with cheap money and
continuing to borrow, and so Idon't know if you're familiar
with the private equity industry, but I Mean I'm not having
personal dealings with it.

Speaker 1 (22:11):
I take an interest in almost every kind of business
unless it's really, reallyboring, and so I'm fascinated by
private equity.

Speaker 2 (22:18):
So private equity is very interesting.
It's think of it as a microcosmof this bigger Issue of hey, a
bunch of zombie companies outthere, because they're, it is
real, the zombie companies.
Just how many there are, whothey are is tougher to
understand.

Speaker 1 (22:33):
I think it's easy to argue, actually at this point,
that Disney might be a zombiecompany.

Speaker 2 (22:37):
Yeah, yeah, well it's .
It's one of those.
There's a huge opportunity outthere for someone like a Michael
Burry From the big short toactually go through everybody's
books.
That's a publicly tradedcompany.
Yeah, and just and just figurethat.
First of all, figure out who'sswimming naked before the tide
goes out, and then figure out,okay, when do I think the tide
is going to go out, yeah, andthen what is a way to make a bet

(22:58):
on that where there willactually be somebody left to pay
me if I win that bet?
So it's tricky, right.
There's some genius out thereis going to figure some of this
stuff out well, and to me itlooks like Shorting the US
dollar might be.

Speaker 1 (23:10):
In fact, if you can find a player who doesn't.
We've already talked about yeah, we have, but I mean not
probably on here.
I'm saying bitcoin.
Yeah, the coin is.

Speaker 2 (23:19):
Yeah, because you're selling one asset and buying
another right.
You're selling us dollars tobuy bitcoin, and it's a long
short right.
You're just saying hey, I'mbetting against this, I'm
betting for that.
You just don't have any counterparty risk.

Speaker 1 (23:32):
Yeah, the only, because right now it kind of
looks like bitcoin is hooked toa certain extent to the market.
Right, the market rises,bitcoin mostly, right, it's sort
of a lockstep thing.
I think that's going todecouple at a certain point and
I'm sort of waiting to see whenthat happens.
Um, but the the biggest thingis like okay, so when does the

(23:52):
day happen when it decouples,and, furthermore, and there's
enough adoption, enough peoplefleeing the current monetary
system, that it's like, oh yeah,this is definitely the thing
everybody's going to run to,because I think they're going to
flop around for the things thatare closest to what they
currently have first, if thatmakes sense, yeah, and then they
might flop to the thing that iseasiest, and if bitcoin is

(24:13):
easiest, then, like, there yougo.

Speaker 2 (24:15):
Yeah, it's.
It's interesting, if either oneof us had a crystal ball again,
we'd be having thisconversation on a private jet or
a jitter at yacht or somethingexciting.
Yeah listen to yacht rock, butthe dynamics understanding what
some of the dynamics are feelsUnderstandable just how they're

(24:35):
all going to play together.
The timing is the tricky part,but so does bitcoin go along
with the market.
Like, I've been watching it foryears and, yes, it's kind of
treated as a risk on asset oflike, hey, when people are
taking risk, bitcoin's one ofthose things that it's going to
kind of outperform, and thenwhen people are taking off risk,
it's going to outperform to thedownside.
It goes down faster and it goesup faster.

(24:56):
Um, it kind of sniffs thosethings out ahead of time.
Yeah, it's like because thatmarketing indicator, yeah, and
it's a really hard market tomanipulate the transparency of
the blockchain, like you can'tfake that you got.
So the, the sales on the upsideand the downside are leading
indicators of what's happening.
But but it's interesting in thatum over the last year where you

(25:20):
would think bitcoin and goldKind of lumping gold in here is
a place that people flee tosafety, you'd think bitcoin and
gold would have done a littleworse Because the Fed taking
rates up to 5%, yeah, you thinkwe'd be draining money out of
all these places in the economy.
Right, I was saying hey, I canget 5% risk-free on a one month.

(25:42):
Yes, t-ville, right likethere's no duration risk,
there's no credit risk.
I'm taking it out of my bitcoinand putting it into that 5% but
, um, it hasn't gone down asmuch as I would have thought.
Right, and I've heard otherpeople say the same thing.
But you have bitcoin and gold,that like, why haven't they gone
down more, with rates going to5%?
Because I think people areStarting to worry more and more

(26:03):
about the the credit worthiness,yeah, of the us Government and
wanting to be ahead of when itdoes kind of go back to the
upside Right and at some pointyou would think it would have to
decouple for our hypothesis tobe true, yes, about it, but it's
still pretty young.
Asset class 500 billion inassets versus gold, 10 trillion
equities, I think 100 trillion,and that hundreds of trillion.

Speaker 1 (26:25):
That's kind of.
The thing is that it's stillviewed as an asset class rather
than as a currency.
When it's viewed as a currencyrather than an asset class,
that's when you'll see thedecoupling, because suddenly
it'll make sense.
It's like the.
I really think the Chinese yuangoes down before the us Dollar
does.
I mean, it's neck and neck.
They're both terriblymanipulated currencies.
They're both ripe fordestruction.

(26:47):
Um, you know the, the russiancurrency.
Uh, it's probably a little morestable because they've actually
sold a lot of a lot of lpn andor They've got basically a
commodity back currency.
Yes, they do, and people arebuying it, like I think their.
Their lpn sales are up 40percent since the ukraine war
started.
Yeah, so it's like.

Speaker 2 (27:08):
LPN, lng.
What are?

Speaker 1 (27:09):
you Sorry.
Yeah, I was thinking of liquidpropane or whatever, but I would
use yeah, it's LNG liquidnatural gas, I believe.
Yes, liquid natural gas, yeah,yeah, I don't know why.

Speaker 2 (27:20):
I knew it, but other people are listening.
Yes, thank you for informing myaudience.
At least two listeners my mom,will listen.

Speaker 1 (27:26):
They're not sitting there my mom too but yes, I had
heard that their liquid naturalgas sales were up 40% since
before the Ukraine war, so allof our sanctions did not really
hurt them.
It basically just hurt us.
And whoever in Europe decidedto participate, they've got
natural gas they've got.

Speaker 2 (27:41):
Oil, they've got minerals, so yeah, their
currency like.
I wouldn't bet on it in thelong term, but it's got some
strength.
Because of that and I do agree,the US dollars should be the
tallest midget right, it shouldbe the last one standing, but
there's something like 150currencies out there, it makes
no sense right.

Speaker 1 (27:57):
Well, and none of them are run, as far as I know.
I guess I've not done a deepdive into all 150 currencies to
see if any of them are solid,linked to a gold standard or
something like that, but I don'tthink.
I think Switzerland is kind ofmentioned as like the last major
one to fall when they went offthe gold standard in the late
90s to early 2000s or somethinglike that.

Speaker 2 (28:17):
Yeah, they had some kind of deep pegging event
sometime in the last decade.
I can't remember the exact.
Sorry, you said deep peggingyeah it's a currency term.
It might mean something elsebased on your reaction, but they
had some kind of event in thelast decade, I want to say, but
it didn't pay close attention toit.

Speaker 1 (28:35):
Swiss franc is not widely used.
Yeah.

Speaker 2 (28:39):
And so kind of got off track here a little bit.
We was going to talk aboutzombie companies.
Yeah, sorry, go to zombiecompanies, please, private
equity.
So private equity is an examplehere, but if you kind of walk
through this example, you'll seewhere it is possible in other
parts of the economy as aproblem.
So private equity started out.
If you think about thisbusiness model, it's hey, we've
got a bunch of smart businessguys that are going to go out

(29:00):
there and find companies thatare underperforming and they're
going to buy them and they'regoing to make them perform
better and then they're going tosell them for more money than
they bought it.
So great, okay, that makessense.
We've all worked at companiesthat could perform better.
I'm sure if you're over 35years old maybe if you're over
25 years old you've almostguaranteed to have worked at a

(29:21):
company that should do better.
So some smart guys go out there.
Super, that's private equityand it actually easy.
Money starts coming around andthere's a new wrinkle to the
private equity game and it'slike, hey, we're going to go buy
a company that maybe run okayor well or poorly yeah, it'd be

(29:42):
nice if it ran better, butreally we just don't want it to
have a ton of debt, because whatwe're going to do, we're going
to load it up with debt, we'reimmediately going to borrow
almost the entire amount that wejust used to pay for it and pay
ourselves back.
So we just got a free company.
We're going to borrow, we'regoing to load all this debt onto
this company and hopefully itcontinues to grow, and if it

(30:04):
just grows 3% again, I justborrow money at 1%.
If it grows at 3%, five yearslater, I've made back that money
.
I can sell it for more.
I made my money back instantlybecause I borrowed that money.
Now I made another, got anotherbite at the apple and I'll sell
it to another private equitycompany.
It's going to do the same damnthing.
And so they've been doing thisfor a decade plus, trading
companies back and forth andbringing new companies into this

(30:25):
little game.
But now it's like hey, you wantto borrow money.
It's 8%.
Yeah, it's 7%, and so you'vegot to be growing at 10%, 12%,
that's a good company.
Yeah, you've got to be growingat double digits for this game
to make sense.
And all the people that used tohave the muscle of like hey, we
go in and we fix companies andwe make them better, that's hard

(30:46):
work, hey we go to the bank andsign loan papers.

Speaker 1 (30:49):
That's easy.
That's easy work.
So that was what happened, as Iunderstand it, and this is like
I heard the story.
It was very from someone'spoint of view.
I don't know how accurate I'mgetting the particulars, but
that's what happened to Bass ProShops.
Slash Cabela's Is a venturecapitalist or in this case I
think they called them a vulturecapitalist came in, bought the

(31:12):
one they were both perfectlyperforming on their own, just
fine.
They put a company up with that, merged them together,
eliminated a ton of jobs,eliminated in order to do the
redundancy, but really just sothey could load them up with
that and make it look moreattractive and then sell it off
for additional money and afterhaving paid themselves back for
buying the company for free.

(31:33):
And I look at something likethat and I'm like, yeah, this is
exactly what you're talkingabout, where it's like bad
pricing information and itallows for this sort of ugly
practice.
I guess it wouldn't havehappened if we didn't have
central banking, where they'vemanipulated the currency and had
to drive down the interestrates this far.

Speaker 2 (31:51):
And where this comes in is like how does this silly
game even work?
Where it comes in is becausethe price of money is so low.
And why is the price of moneyso low?
It's because it's beingmanipulated by the Fed, the
central bank, because there'ssomething immoral in this model.
It's like, hey, we're going toborrow money against the assets

(32:11):
of this company and put it inour pocket.
Yes, that's the wrong part.
That's the bad part Like hey,we're going to borrow money
against the assets of thiscompany to buy more locations,
to build more stores, to buildmanufacture new products all day
long.

Speaker 1 (32:24):
That feels good yeah.

Speaker 2 (32:26):
And someone should be looking at that plan that you
just present.
Hey, we want to borrow money tomake this new widget.
It's like, oh yeah, it lookslike we've done any research and
customers will buy it and theprice makes sense and the cost
of the goods going into it makessense.
But hey, we're going to borrowmoney and we're just going to
pay it to ourselves and thiscompany will pay you back over
time.
That's so immoral.

Speaker 1 (32:44):
It feels on a visceral level.
When I heard about that I waslike that's disgusting.
That really is vulturecapitalism.
It's feasting on the entrailsof a company that was healthy in
order to fatten yourself up.

Speaker 2 (32:54):
And the only reason it works is because the people
making those loans are gettingfree money.
Yes, because if it was theirmoney, they'd say why do I feel
good about you paying me backhere at half a percent interest
when I'm basically just givingyou money to buy your own boat,
which is going to depreciate?
So that's just one littleexample, but that's the private

(33:15):
equity model.
But just think throughout theeconomy how many companies have
loaded themselves up with that,and maybe not necessarily always
to just put money in theowner's pockets.
But hey, they're struggling andthe bank will loan them money
so they can drag it out a littlelonger and not make tough
decisions to either close downthe business or trim operations
that don't make sense orwhatever.

(33:36):
But hey, just keep adding upthat debt.
And then you get into asituation where the debt is so
big there's no getting out of it, even with good decisions,
which again, I kind ofhypothesized.
That's the US government'scurrent position.
Just the timing on that is lessdefinite, because they print
their own money.
But there are so many companiesout there that have just loaded

(33:56):
up with that that will not beable to pay it back at
reasonable interest rates.

Speaker 1 (34:02):
Back when I was a financial whatever planner
advisor, I sat down with acouple that had a debt to income
ratio that was just over thetop and they had a below market
rate mortgage and it was over120% LTV, which is loan to value
.
It means that they borrowed iftheir house was worth $100,000,
they borrowed $120,000 againsttheir house.
And I'm looking at the loanpapers.
I'm like the appraisal's rightthere.

(34:24):
I'm like how did you managethis?
And the wife's like, oh well,my dad is the vice president of
the bank.
Like okay, well, he did not infact do you any favors here,
because you are paying currently85 cents out of every dollar
you make to the bank and to yourcredit cards and to your car

(34:46):
loans.
I'm like how do you even make iton a monthly basis?
My dad, the vice president ofthe bank.
It's like this is the USgovernment writ large.
The US government is thatdaughter Squeaking special
favors.
It's in order to survive, andthat's actually zombie companies
too.
We managed to get these specialfavors in this special
condition in order to getourselves a little bit longer

(35:09):
financial life, and good for you.
But you have not solved theunderlying problem, which is you
are not able to run yourfinancial life at this rate of
income.

Speaker 2 (35:21):
Yeah, yeah.
So I don't know how far youwant to go down this trail, but
yeah, it's not pleasant.
Hey, you go as far as you want,Because I love saying it's
worse than that which I stealfrom Brett Weinstein from the
dark course because he alwaysloves to throw out.
It's worse than that and heusually is right, I mean it's
got a great great mind, it'sworse than that because hey,

(35:42):
okay, you lend money to thesecompanies that shouldn't be
getting this like.
These loans don't make sense.
You're putting off harddecisions, so you're piling them
up with debt that they cannever at some point not going to
be able to repay, even if theystarted making good decisions,
but also underlying that overthat period of time.
Are you doing this?
All your muscles for executingsmart strategies and actually

(36:06):
improving the business areatrophy.
Yes, right, so it isn't justlike hey, it's becoming harder
to do, you're becoming lesscapable because you're not using
that muscle.

Speaker 1 (36:14):
It's like when someone gets to 650 pounds.
You know you didn't just getthere overnight, it happened
over time, and if someone hadstopped enabling you at 400, you
might have started to makedifferent decisions and not made
it to 650.
Yeah, yeah, no, that's 100%true.
I never really thought about itthat way.
I guess our government is 1,050pounds right now.

Speaker 2 (36:33):
Yeah, Because let's take one of these zombie
companies.
If you went to them right now,like my hypothesis, what I just
laid out there is you go to oneof them right now and you say
okay, we're going to take awayhalf your debt, so your debt
burden is now manageable.
Yeah, they'll be back in thesame situation, because they
don't know how to run theirbusiness without the debt.
They've lost that ability,which is basically the

(36:55):
foundation of capitalism.

Speaker 1 (36:57):
Right and it might not be possible for some of the
companies, and that was thething that always got people mad
at venture capital back in, Iguess, the olden days when
interest rates were a little bitmore reasonable at least not
necessarily correct but peoplewould come in and, like you said
, they would take this companythat's not managed particularly
well and they would figure outhow to manage it properly and

(37:18):
help it make money.
And sometimes that meantcutting in ways that would upset
workers.
And it was an easy sob story togo to, because for the longest
time, I'd argue, the labormovement had very important
things that it accomplished, Iwould argue, like in terms of
worker protection and dangeroussituations like Sinclair.

Speaker 2 (37:39):
The jungle.

Speaker 1 (37:40):
Yeah, the jungle I was going to say up in
Sinclair's the jungle isprobably the most often pointed
to example, even though he was aflat out communist and liar.
Yes, I was about to say.

Speaker 2 (37:52):
I can't let that pass .

Speaker 1 (37:53):
Don't let it pass.

Speaker 2 (37:54):
It's fiction, let's all remember it.
It is fiction.
It's taught in schools asnonfiction.

Speaker 1 (37:59):
Because some of the egregious stuff was based on
actual, maybe directionally true, yeah, right, exactly.

Speaker 2 (38:05):
It's true in the Trumpian sense.

Speaker 1 (38:07):
Yeah, there you go, you know.
I mean it's the same thing withchild labor laws.
Some children were, you know,ended up dead from horrible, you
know, overwork, accidents orputting them in dangerous
situations in coal mines orwhatever.
It was not the normal set ofthings, but it was enough that
you could point to one egregiouscase and you could get child

(38:30):
labor laws put on the books,even though that really put a
lot of poor families evenfurther behind the eight ball,
Whatever.
So the point is the labormovement had certain things to
point to, certain injusticesthat they could point to that
were legitimate and be like wereally should reform this.
By the 1970s they had, like,completely jumped the shark and
they were doing and advocatingfor things that put us in such a

(38:54):
disadvantageous position.
Does that?

Speaker 2 (38:57):
that works.

Speaker 1 (38:58):
That works it works Roll with it.
It put us in a completelyterrible position relative to
global competitors, and so, as aresult, american industry
really started to suffer, andsome of these companies became
zombie companies.
Ford has been a was a zombiecompany for a long time.

Speaker 2 (39:15):
Yeah, Well, in early 1970s is when we want the gold
standard.
So, coincidence or not, whoknows, I want to doubt.
All the way back to youropening paragraph, we haven't
dissected every sentence.
I wish I had a written notes,but there's one thing no, no,
that's one thing that I wantedto call out, which is funny.
You may have done this onpurpose, but you said that
central banking is almostcommunist because it's

(39:38):
centralized control of thisthing, like it's in the
communist manifesto To take overthe money.
Yes, it's like you know.
Sociology, the academic study,comes from socialism.

Speaker 1 (39:52):
Yes, it is.

Speaker 2 (39:52):
It's Mark's founded sociology, mark's invented
sociology, and the communistmanifesto actually said hey, we
need to control the money.
So, like this, your littlethrowaway phrase that there's
actually dead on, this is and alot of people that are opponents
of the central bank will pointthat out yes, yes, this is for
sure a communist thing, notaccidentally, I know they said

(40:15):
you need to do it.

Speaker 1 (40:16):
Yes, the idea is.
I mean and I don't think we'reeven using it necessarily as a
pejority, even though we're notvery much fans of the way it's
gone it's really more of anissue of you have to be clear
about what you're talking about,and I think that's one of the
more obscure things that'shappened is that the move to a
national currency off of a goldstandard one of the more

(40:39):
interesting things in that bookthat's kind of a throwaway is in
the year 1900, Amos points out,you could literally move
between borders and currency wasnot an issue.
There was no necessarilynational currency that mattered
because if you had it allconverted to gold.
Yeah, it was all converted togold, so it didn't matter.
You didn't have an issuetrading across the seas from

(41:01):
Southeast Asia to Europe, toAmerica, because it all
converted to gold.
And so, as a result, the issueswe have, where it's like
there's these massive arbitrageopportunities to convert
currencies where George Soroscan make an absolute fortune.
That didn't exist in the early1900s and it's not necessarily a
great innovation, and again,I've forgotten the number, but

(41:22):
the currency market is somethinglike $75 trillion or something
like that.
It's ridiculous numbers, like25 times larger than the GDP of
the entire planet.

Speaker 2 (41:33):
Yeah, the trading that happens.

Speaker 1 (41:34):
Yeah, is that what you're talking about?
Yeah, yes, the trade volumethat happens.

Speaker 2 (41:40):
So, yeah, it's crazy.
So I'm gonna throw some statsout here that you're not gonna
believe, but you're gonnabelieve them Either, trust me or
just my listeners will probablyshit their pants.
Just trust me short term andthen do a little research to
make sure I'm not crazy.
But I was listening to again.
I was listening to a podcast.
Surprise, surprise.
Do you want to?

Speaker 1 (42:00):
plug your sub stack up into this.
No, it's really good.

Speaker 2 (42:03):
I think we'll leave it out.
But so I was listening to apodcast, I think, yesterday, the
day before, where this guy wasgoing through.
This sounds like incredibly drymaterial.
It probably is for most ofhumanity, but he does this
research on money, on just theamount of money that's in the
world, and by currency group,where it is, how much physical

(42:27):
cash is in the world.
So, like a bunch of reallyinteresting stats come out.
So there's like $10 trillionworth of physical cash in the
world.
All converts to dollars.
Everything I'm about to sayconverts to dollars.
So $10 trillion worth ofphysical cash in the world.
Something like 40% of it is USdollars.
And then there's Japanese yenand Chinese Yuan and Euros and

(42:48):
whatnot.
So there's $10 trillion worthof physical cash.
But the monetary base so howmuch money is in bank accounts
and all that stuff is $27trillion.
Right, you're laughing for thecorrect reason, I'm guessing.
So if there's $27 trillion ofall money in the world and we
owe $34 trillion right now as acountry, if we stole all the

(43:13):
money in the world today, wecouldn't pay back our debts,
right?
That's not good.
It's hilarious though.
Yeah, so that's a bad sign.
And when you go back to yourlike.
I've heard these.

Speaker 1 (43:26):
It's through a Bank Heist for America by God.

Speaker 2 (43:28):
Yes, but we're still short.
We need to steal the money fromwho we just paid it to pay them
back.
We're still from literallyeveryone on the planet.
Yeah so, but you talk aboutthese FX things and I've heard
these numbers before and I'venever looked into it, so I don't
know the real numbers or howtrue they are.
But yeah, you hear these FXtrading volumes there's
trillions and trillions ofdollars are traded every day in

(43:49):
foreign currencies.
I'm like how's that possible ifthere's only $27 trillion
Dollars period?
Yes, so again these derivativeson derivatives and bets on bets
on bets kind of back to the bigshort that we talked about.

Speaker 1 (44:02):
Yeah, you figure out Selma West Rim Gomez, Selena
Gomez sitting there making sidebets.

Speaker 2 (44:07):
There was $200 trillion gambled on the US
mortgage market, which was a $40trillion.
Like how does any of this makesense?
So yeah, there's $27 trillionin the world period.
We owe $34 trillion.
Have a nice day Like there'sgood times.

Speaker 1 (44:25):
Yep, Yep.
Going back to one of thoseearlier threads that I just
wanted to mention because I'msuch a history geek, Amos really
lays out the case and Iappreciated this, that he did
this because it appealed to meof all of the times when an
empire has debased theircurrency and what has followed
has been a similar sort ofpattern of decline.

(44:46):
And just for listeners,debasing the currency is just
inflating your way along in youreconomy.
What we're doing right now isdebasing the currency where your
money is worthless, and so inRoman times it was because they
would forge new coins with aless of a volume of gold or
silver in them.
And, by the way, this isn't thefirst time the US has had

(45:07):
currency debasement problems.
I was just reading a biographyon Grover Cleveland and he had
two different terms, and thepanic of 1873 and the panic of
1893, I mean were largely drivenby.
All of a sudden, the US decidedto start buying large
quantities of silver, which isnot as stable as a stable

(45:28):
monetary system is gold, becausethere's way more silver that
can be dug out of the earth thangold.
Yeah, yeah.

Speaker 2 (45:34):
The volume available flesh weights quite a bit.
So one of the things that makegold a great kind of stable 1.0
version of currency.
It grows at 2% a year.
You can't make it.
There's only so much out there.
I kind of know where it all is.
It's for a metal, it was kind ofeasy to figure out if it was

(45:57):
really gold or not.
It has problems.
It's not divisible, it's hardto transport, there's all these
other things that Bitcoinimproves upon, but silver was
worse.
All of a sudden, you justdiscover the silver mountain in
Peru, right, and the amount ofsilver in the world doubles,
right.
That's like 100% monetaryinflation.

Speaker 1 (46:17):
And at the time we were mining incredible amounts
of silver in the Western UnitedStates, which is one of the
reasons why farmers wereincredibly indebted.
And it's actually sort of asimilar situation because I was
reading a couple of differentWestern books.
Tom Clavin wrote a trilogyabout Dodge City, Tombstone and
Wild Bill, and I've read two outof the three and it's just

(46:39):
fascinating stuff.
But Tombstone is a huge silverhit.
But the farmers at the time youknow, I remember, like William
Jennings, Bryan Crossagull, andone of the things that they were
trying to do at that point isthat he was agitating for the
silver because farmers thoughtthey could inflate their way out

(46:59):
of their debt, basicallyBecause all of these farmers had
taken on these debts they hadto.
Farming on marginal land, likethe US government was giving out
at the time, was incrediblydifficult and they would start
out in incredible amounts ofdebt because they needed to
purchase the equipment and theyweren't very good farmers and
the soil was kind of crappy andall of this.
And so they wanted theinflation to happen because

(47:21):
they're like, oh good, mymortgage note is now 10 times
easier to pay off or whatever.
But they didn't realize thatthey were completely tanking
themselves in the process ofdoing it and it's the same thing
, like all of these silverminers and whatnot.
So all the Western voters werehighly in favor of this and all
of the Eastern bankers were likeinflation is bad, Don't do this
.
It's a funny reversal of kindof where we're at at this point,

(47:44):
Interesting to read how historyunfolds, debasing your currency
yeah, no, it's bad news.
It's depressing yeah, it is.
But I did find it interestinglike JPMorgan and all of these
bankers at the time were talkingabout.
They were actually theguardians or the sentinels
saying you can't do this, youshouldn't do this, this is
unwise.
And the populists were likeyou're destroying us, you're

(48:09):
trying to bury us, you're tryingto crucify us on across the
gold.
And now it's like a completereverse, where it's like the
populists, Oliver Anthony, acouple of weeks ago, releases
that single that went viral andhe's talking about how your
dollar ain't shit.
Yeah, I mean, that's inflation.

Speaker 2 (48:24):
Well, and it's where you stand depends on where you
sit.
Right, is the famous saying.
And so the New York bankersJPMorgan being kind of the king
of them, back in the day, whenwe were trying to observe an
international gold standard,these guys were going to get
screwed if the US dollar tanked,because they were dealing with

(48:44):
European counterparts and, likeyou said, asian counterparts.
But I mean, the Europeancounterparts were like, hey, if
our money is worth less, theywere going to get hung out to
dry by the international bankersfrom France and the UK and
Germany, etc.
So we couldn't mess with themoney.
We were not the creator of theworld's money.
Fast forward 100 years andguess what, we are the creator

(49:07):
of the world's money.
We can mess with the money.

Speaker 1 (49:08):
We print it, we get it first, I was just writing
down, like to mention, like yourthing about how the wealthiest
people after 2008 were thepeople who were closest in
proximity to the money printer.

Speaker 2 (49:19):
Yeah, it's called the cantillon effect, cantillon,
cantillon and so they're calledcantillionaires in a clever turn
of phrase is like hey, if youwere closest to the printing
press.
Like these private equity guyslike, hey, we'll go buy a
company and then borrow theexact amount we paid for that
company, pay ourselves back.
We got a free company.
You're very close to theprinting press because you got

(49:39):
free money from a bank.
They got free money from theFed.
You were first in line for themoney.

Speaker 1 (49:42):
I don't want to sound like too much of a conspiracy
theorist, but anyone who's inthe suburbs of Washington DC
seems to be very close to theprinting press, if I may say.

Speaker 2 (49:52):
Well, and why are all these companies moving their
headquarters to Washington DC?
I mean, I grew up in Seattleand when I was a kid, this was
before Microsoft took off andbefore Starbucks got big and
before Costco, and there's abunch of companies out there now
that are Amazon obviously.
But back then it was Boeing.
Boeing was the big localemployer and a lot of kind of

(50:16):
good high blue color, low whitecolor jobs where my dad had a
buddy who was like a drassman orsomething, that no college
degree but he got a good middleclass living out of helping draw
up I don't know what the hellhe drew, but help make planes
fly.
And they made planes and theywere headquartered in Seattle

(50:36):
and the B-17 helped to win WorldWar II in Europe and the B-29
in Asia.
So a lot of legacy there ofbuilding stuff.
And then in the 2000s at somepoint Boeing moved their
headquarters to Chicago.
And why did they do that?
They got some tax breaks fromthe city of Chicago.
One of their biggest customers,united Airlines, was
headquartered there.

(50:57):
They wanted to be close to them.
They moved their headquartersagain and they moved their
headquarters to Washington DC.
It's like why they just movedlast time?
Because of where their biggestcustomer was.
Like, okay, well, they moved itto DC and it's like, hey, their
biggest customer is obviouslythe defense department, but
they've had a bunch ofregulatory problems with their
planes, so they want to getreally close to this bigot.

Speaker 1 (51:18):
That's the same thing that Microsoft did in the
lawsuits or whatever.
All of a sudden, they went fromspending zero money on
lobbyists to spending a ton ofmoney on lobbyists having
offices in Washington DC.
It's like.

Speaker 2 (51:27):
Yeah, and Amazon wanted their second headquarters
or whatever they split in NewYork and they're like, oh, maybe
they protested.

Speaker 1 (51:35):
No, they split two, so they were going to do one in
New York and one in NorthernVirginia.

Speaker 2 (51:40):
And then they did it all, they moved it All in.

Speaker 1 (51:41):
Northern Virginia.
Well, they did put the smallerSOP to Nashville too.
The Logistics.

Speaker 2 (51:46):
Department.
We got a little bit, butbasically their second
headquarters is in DC, so it'snot because all their customers
are in a title swamp Like it's.
Yeah, there's a reason.

Speaker 1 (51:57):
It's not a pleasant place to live, climate-wise.

Speaker 2 (52:03):
But yeah, it's.
How do you expect, if you'rerunning an organization that's
spending $6 trillion a year,you're going to write $100
checks, or you're going to write$1 million checks.
Yeah, just for your arm's goingto get sore if you're writing
$100 checks.

Speaker 1 (52:18):
But the thing is too, they dole it to each department
and each department kind ofsplashes the trough around or
whatever you want to call it.
But I mean the big one for meright now is it's like okay, so
the Ukraine war is going on andyou're watching money flow out
to Ukraine and so much of it isflowing right back to US defense
contractors.
It's like oh, okay, well, sothis is actually sort of a

(52:40):
subsidy, in fact kickback to US.

Speaker 2 (52:44):
Yeah, yeah, and it's funny we mentioned Sam Bankman
Frieder earlier.
I didn't expect to get onUkraine, but there's some mildly
interesting conspiracy theoriesthat he was pretty tied in with
the Ukrainians, that there's abit of money laundering going on
there.
Oh yeah, he was a huge donor tothe Democratic Party, with
stolen funds.

(53:04):
It's nice to steal all yourcustomers' money and donate to
politicians I'll just saypoliticians probably, even
though it was 90%, he said hedonated to both sides.
Who knows, they've disclosedwhere it went.
So there were a couple ofRepublicans for sure, but you
call it 85% Democrats justbecause of yeah, which is I mean
ideologically not shockinggiven and they were in control
of certain areas.

(53:24):
That helped, right, but he wasreally in tight with the
Ukrainians.
The Americans send a bunch ofmoney to Ukraine, Ukraine sends
it to FDX, FDX sends it back tothe politicians.
That's one of the theories out.
There is like, hey, this isjust a money laundering
organization.

Speaker 1 (53:46):
I was reading something not that long ago
talking about how in third worldcountries the bribery is very
obvious.
It's like oh, I pay you adirect bribe, no problem, we've
done business, it's good.
And in the US it's like JoeManchin's wife gets a contract
from someone else who istangentially related and then

(54:06):
Joe is like well, I mean, Ialready kind of believed in this
anyway.
So this is not exactly adifficult vote for me.
And people argue that the NRAowns politicians in this way.
I'd argue that most of thecases it's kind of in their
interest anyway.
But if their spouse picks up ajob or something, it's almost
reputation laundering version ofmoney laundering.

Speaker 2 (54:28):
Oh, for sure.
It's easy to pick on Joe Biden.
He makes it so easy.
I mean, he's corrupt, senile,all the things that I'm not
going to sugarcoat because Ithink these things are true, but
it's easy to pick on him.
Don't tell Philip Bump thathe's a son.
That is obviously a troubledindividual and we all have kids

(54:51):
and I can see standing up foryour kids.
But the politicians in DC haveto be so pissed at Joe because
like, hey, you can do most ofthis legally.

Speaker 1 (54:58):
Yeah, you made it really obvious Like you're doing
it wrong.

Speaker 2 (55:02):
We're doing all the same stuff.
Joe, You're screwing it up.
Just color inside the lines.
There will be plenty of moneyfor you.
But no, don't let yourcrackhead son run around with a
camcorder Doing all the stuffhe's doing.
We're all doing the same thing,it's just you've got to be a
little more subtle.

Speaker 1 (55:19):
I mean seriously, look how much Mitch McConnell's
family has made from, I think,his wife's Taiwanese business
holdings like their whole family, and it's stuff that would
synergize probably pretty wellwith how Mitch maybe feels to
begin with.
But like yikes.

Speaker 2 (55:33):
And all this stuff Nancy Pelosi's worth $100
million yeah.

Speaker 1 (55:36):
Someone in, I think, columnists for the Daily Beast
or one of these sort of centerleftish outlets, wrote a book
that was fairly nonpartisantakedown of all of the ways that
politicians on both sides ofthe aisle are bulking the
American people and gettingwealthy while they're in office.
And Nancy Pelosi is probablyone of the most egregious just
because she's so front andcenter.

(55:57):
But the amount of money she andher husband have made while in
office was like oh my goodness.

Speaker 2 (56:04):
Nine figures.
It's unbelievable.

Speaker 1 (56:05):
And to your point.
I wish I could have investedfollowing.
There's a Nancy Pelosi stocktracker and I'm like I wish
there had been that like 30years ago, and you could just
follow along, because I'd be sowealthy now.

Speaker 2 (56:15):
And I hate the thing where, hey, one of the parties
is doing something really badand one of the parties is kind
of doing something a little badand they say oh hey, both
parties do it Like.
To me that's lame.
This is one where, hey, they'reboth doing it?

Speaker 1 (56:25):
They both do it.
Yeah, they absolutely do.

Speaker 2 (56:28):
This is totally, 100% terrible and it's I just go
back to incentives and systemsRight, so $10 sitting there to
be spent.
Yeah, okay, that's the onesentence that explains what's
going to happen.
Yeah, the pork bucket isawfully big Okay, the choff.
Make that $500 billion.
And you know, hey, people aregoing to notice when the parks

(56:50):
are closed and all that stuff.
So make that really severelylimit that amount of money.
Because, going back to thefiscal situation et cetera,
what's unique about the timethat we're in and actually I'm
going to kind of ramble here fora couple of minutes, but
hopefully I get somewhereinteresting- so one thing before
you do because I've called thisthe rating, the Treasury

(57:11):
portion of the Republic.
First agreed and we're probablygoing to land there.
It's just you know, what's thecognizance of what's being done?
So I've got this.
You know it's easy.
Like I said, hey, looking backat the SBF thing, hey, this
guy's obviously a clown.
How did anyone ever post him?
Looking back to 1971, when wewent off the gold standard easy

(57:33):
for me to back fit stories thatmake sense.
It doesn't mean they're true orthis is why it happened.
But here's my story Lookingbackwards, how I've pieced some
of this stuff together from akind of narrative standpoint.
1971, we go off the goldstandard.
Anyone that's called it 40years old in 1971, before either

(57:54):
one of us were born it probablyrealizes this feels shifty,
right, like this Rickety'sscaffolding.
Yeah, this is rickety.
So for I don't know what, thenext 20 years, 30 years, 40
years while those people havesome kind of sway they're like,
hey, we're kind of getting awaywith it.

Speaker 1 (58:14):
Right.

Speaker 2 (58:14):
But small moves, ellie, yeah, yeah, yeah, but 40
years later is 2010.
Right, so those people all outof power?
Yes, except for Joe Bidensomehow, because he was a
senator then or very close tothen, yeah, in the late 70s.
Yeah so those people.
So my narrative is like thosepeople were all kind of like hey
, we're getting away with it, becareful, yep.

(58:36):
Like don't get reckless.
Right Back to my.
You know, joe's just blatantabout the corruption.
Like be more clever about yourcorruption.
Yeah.
All of a sudden you get into2010,.
You're like your politicianswho are in their 60s kind of
grew up this way, yes, or in the50s, grew up this way.
And it's like hey, we can dowhatever we want, there's no
consequences.
We've been, there's been nogold standard.

(58:57):
We've been printing money for40 years.
It's the Bellagio point.
Yeah, it's, we can do whateverthe hell we want.
And so is it rating thetreasury intentionally?
Or is it just like, hey, therules don't apply to us, because
what?
And hey, we can do whatever wewant.
And so you get the, the Joe'sof the world.
They're like, hey, we can printmoney, why not?
We've been doing it for 50years.
Like, let's, let's get after it.
And it doesn't work.

(59:19):
And so it turns into rating thetreasury.
Yeah, I'm sure there are somepeople out there that really
just have a tap right into itand like, hey, we know the
music's going to stop, let'sgive them a bunch of the game
right now.
But there's some true believersout there.

Speaker 1 (59:30):
Yeah, mmt accolades Bellagio.
Srinivasan made that point,though he's like the farther you
get from a monetary fiat crisis, the closer you get to the next
one, because essentially,people start to believe the game
can be played forever.
They never think the music'sgoing to stop.
Yeah.

Speaker 2 (59:47):
And agree that the point I think kind of makes
sense.
But it's also a tautology thecloser you get away from one
thing, the closer you get to thenext thing on the timeline, of
course, yes, yeah.
The closer you get away frombeing born, the closer you are
to being dead.
Okay, yes, true.

Speaker 1 (01:00:03):
Well, I think not necessarily from their
perspective, though, because theidea for them is we're never
going to see the crisis.
Oh yeah, that's when it happens.

Speaker 2 (01:00:10):
Yeah, like we're immune, and that's my whole.
Point is like for 30 yearsthere's people looking over
their shoulders saying, hey,this is crumbling down if we're
not careful.
I remember being a kid and Ithink I've mentioned this before
like, hey, people were worriedabout the debt.
Like I remember politicianssaying, hey, we're borrowing way
too much money.
This is in the 90s.
We had like a trillion dollarsin debt or less.
Now it's 34 trillion, 34x that,and no one's worried.

Speaker 1 (01:00:32):
Oh well, yeah, no one in no one in power for sure.
I mean there's like I don'tknow.
There's 535 representatives andsenators you could maybe get.
I could maybe think of 10 ofthem, along with another five to
10 that are out of power.
They're almost always on thealmost all of them are on the
Republican side.

(01:00:52):
I would say there's probably afew fiscal responsible Democrats
, I mean I think Tulsi Gabbard'sprobably.
I talked about it at times, butI mean there's not very many.
Rfk maybe RFK has talked aboutit.
Yeah, yeah, he has.
I mean, he's not elected toanything right now, but you know
, running for president.

Speaker 2 (01:01:10):
Yeah, born Democrat.
Yeah, you can't get away fromit, but yeah, so it's that.
That's my theory.
Hey, we're definitely in theleaps of treasuring, but it's
almost like people don't evenrealize they're doing it.
It's just like, hey, we canprint money and there's no
consequence.
Yeah, we can give another 80billion to Ukraine for fireworks
.

Speaker 1 (01:01:27):
Yeah.

Speaker 2 (01:01:28):
Like go blow it up, it's fun and it's that's.
That's not how this works.

Speaker 1 (01:01:33):
It was at least a little funny though, because I
think it was like right goinginto 2021, and Trump was on his
way out of office and he's like,hey, because they were talking
about another stimulus plan forCOVID and I think he had said
like, all right, give the peopleanother $2,600.
It was very much like, you know, directly raided the treasury
kind of thing, and Congress waslike no, it can't give the peons

(01:01:57):
actual money, Like yeah, that'scrazy talk.

Speaker 2 (01:02:00):
Well, if you go back and you look at the COVID
response, it was something likethe the bills to address COVID,
the, the economic stimulus toaddress COVID, equaled out to
something like $46,000 perAmerican.
Yes, and everyone got two grand.
Yes, it wasn't a great.

(01:02:22):
There's something funny there's$44,000 left, yeah.
I went to?
Why did Amazon double?
Why did all these other?
Like it's, the money didn't godirectly to them, but it got
there quick.

Speaker 1 (01:02:33):
Yeah, I had a long conversation with a guy who
works for one of the departmentsof government that's
responsible for hunting down thefraudulent cases of COVID-8.
And he was telling me some ofthe stories and it's like, man,
there was some absolute fraudand there's ones where, like he
mentioned specifically, like itwould go to certain Native

(01:02:55):
American tribes and it's like itwent to the chiefs and it was
just gone.
It's just you, you aren'tfinding a dime of that back and
there's really nothing you cando about it at that point, even
as a federal agent.
And so they had to focus moreon the areas where there was a
clear system in place, whereit's like, okay, this is
definitely fraud, but like thefact that there is a money
spigot and you can turn it onand it just disappears right

(01:03:16):
down and you know the I don'teven know what to describe it as
a giant outhouse black hole.

Speaker 2 (01:03:23):
It's just gone Just goes into the financial system
and starts getting passed around.

Speaker 1 (01:03:28):
Well, minnesota had a fantastic example of this.
Actually before I, before I left, there was a case where they
had some sort of nursery program, what's it called, day cares,
and the there's a huge Somalicommunity there and and Somali
community comes from what youwould call a low trust society.

(01:03:49):
It's like it's very much aboutthe family and the immediate
family and the extended familyand like anyone outside of that.
You know, cultural norm is youcan screw them and it's really
not that big of a deal.
So Somalis were setting up daycares and this is all recorded
like there were prosecutions andeverything.
They stole something like $800million in funds for day cares

(01:04:10):
by running fraudulent day caresand saying that they had, they
were, you know, putting thesekids in the day cares and
whatnot, and so they were justcompletely funded by the state
of Minnesota and they were.
They ran out $800 million infraud and it just went into
suitcases and went to Somalia.
His people were getting, thecriminals were getting on planes
with $800 million and just flewback to Somalia and the money

(01:04:31):
just disappeared and theyprosecuted like I don't know
very few of them because theycouldn't catch them.
Yeah, yeah.

Speaker 2 (01:04:38):
No, it's no.
Accountability is kind of thepoint I was going with.
So anytime you've been insideof a system, your views of it
change.
So two examples.
I'll start with that one andthen go backwards to private
activity.

Speaker 1 (01:04:51):
Yeah, and feel free to go back to if you had a
longer point and I cut you offon the previous thing and it's
all good, I can talk forever onany of this stuff.

Speaker 2 (01:05:00):
The first 10 seconds is interesting, so cut me off.
So the fraud thing is reallyinteresting to me because there
was a point in my career where Iwas the CEO of a healthcare
company for several years and Icame in as the CEO.
I didn't work my way up, I wasan outside investor and then
came in as the CEO of thatcompany and just did it for

(01:05:22):
several years and we got auditedreally heavily by several
government agencies I think fourdifferent government agencies
in the first year which made mefeel really good about the
amount of red tape that it takesto deliver healthcare.
But the reason I came in as CEOis because the company was

(01:05:43):
sloppy in its operations.
It took care of patients but itdidn't do a great job of
paperwork and we got audited andhad to pay back the government
on a couple of different things,but never once did they go to
one of our patients and say didyou get an oxygen tank?

(01:06:03):
They looked for a signature on aline on the fourth page of a
document that needs to be handedinto Medicare to bill correctly
.
And hey, do all this stuffright.
You need to do it right, you'resigning up for these rules when
you go into this business, butthey would characterize that as
fraud, like, hey, they're likeno, go ask Mrs Jones.

(01:06:23):
We've been delivering heroxygen tanks every week for the
last three years.
She's getting her stuff andwe've been billing you the
ridiculously small amount thatMedicare pays for this thing,
but we didn't get the rightsignature at the right time on
the right piece of paper.
That's fraud and thus all thatservice was free and it would be
characterized as fraud or waste.

Speaker 1 (01:06:45):
Because you didn't get the signature, you were not
entitled to bill for it.
You billed for it and youreceived the money, and so, as a
result, that's fraud.

Speaker 2 (01:06:52):
Exactly, and so anytime I hear people talking
about oh we found all this fraudand it's like my impression is
usually kind of biased towardsyou're finding people bad at
paperwork the people that arecommitting the real fraud
designed a bunch of crazylegislation that gave them that
money legally Right, Like thereal fraud is so big.

(01:07:15):
The real fraud is so big andit's so covered with lawyers
that people get away with it.
So of course there's alwayssome shady guy in Miami that's
sending a bunch of bills to thegovernment for Medicare that
don't exist behind any patients.
There's a lot of that, yeah,and we crack them down, like
Florida's, the national capitalof Medicare fraud, because it's

(01:07:36):
got all the old people in onenut.
So track them down, put them injail, all that stuff.

Speaker 1 (01:07:41):
Why do Eastern Europeans have Medicare schemes?
I've read about it's like, wow,that must be a.
They kind of just zero in on,like look at all this weakness.
Here there's the thing.

Speaker 2 (01:07:52):
There's the thing.
So that's one thing from insidethe system.
Another that I just wanted toshare because I talked about
private equity earlier and Ijust full disclosure, I've been
inside the belly of that beastup to some degree and worked
with really talented privateequity individual who I saw by

(01:08:14):
multiple companies that I wasinvolved in or tangentially
involved in.
He would tell me like hey, hecould actually make the company
better.
He was coming in and takingdistressed properties and really
cleaning them up.
And he would tell me, hey, youcan't cut enough, like it's
almost impossible to cut enough.
And I'd see him go in and justcut, cut, cut, cut, cut.
And these companies is likeholy cow, the amount of waste

(01:08:37):
and poor processes and whatnot.
Like you almost have to do thatto expose all this stuff.
So, like when Elon went intoTwitter and fired 80% of the
people, there's a lot of thatreal stuff out there in
businesses in the US wheresomebody comes in and says, hey,
we're just going to cut awayall kinds of stuff to find where
the problems are.
But you actually have to doinvasive surgery to find what's
wrong with this patient.
There's a lot of cancer inthere, yeah, and so you know saw

(01:08:58):
this guy going, so there's realvalue to be added by private
equity going in and doing thisstuff.
Finishing this story that I sawhim do recaps, which is, hey,
let's borrow a bunch of moneyfrom the bank and pay ourselves.

Speaker 1 (01:09:12):
And the incentives changed.

Speaker 2 (01:09:14):
In having been a beneficiary of some of that.
You know I've got a fulldisclosure.
I've been on the receiving endof some of that income, but I
don't like that system.
Yeah Right.
And so it's like I'm not justspouting off of things I've read
in the newspaper.
Hey, I think this is the sortof I've seen this firsthand and

(01:09:34):
experienced it.
So, yeah, it's part of it isactually encouraging.
Hey, you can go out and make adifference and make companies
better and, you know, bringindustries back to life or
whatever, but it's if theincentives are bad.
You can also, you know, do thisstuff.

Speaker 1 (01:09:51):
Load them up with yeah debt and cash out
immediately.
And I mean that really does tome.
I mean it's obviously not greatwhat I would consider great
ethical behavior, but like thecheck, cash is the same you got
to feed your family.
And to me the issue is reallythe incentive structure.
It's like money should not bezero percent.
Yeah, like ever, like afunctioning non-socialistic

(01:10:14):
monetary system.
No one ever lends money forfree.
You need to get some sort ofpayback on that.
If money is free, it meansthere's way too much of it in
circulation.

Speaker 2 (01:10:26):
Yeah, basically it's saying there is no risk here.
Yeah, the interest rate is thecost of the risk.
Yes, and the risk is eitherduration or you know execution
right, like, hey, 30 year loanOkay, there's all kinds of stuff
that can happen in 30 years.
I mean a little bit of cushionhere.
Or hey, you're a subprimeborrower, like I'm only lowering
it to you for eight months, butthere's a big risk in this

(01:10:48):
eight months, yeah, so both ofthose things factor in.
But there's no such thing as norisk.
Even the US governmenthistorically used to have to pay
four or five percent interestrates, and the most credit
worthy company or companycountry in the world so yeah,
it's having zero percentinterest.
That is sort of flashing redlight.

(01:11:09):
It reminds me of times I'veworked at companies that you
know back in my past, where Iremember working at a company
and they're like oh yeah, we'venever fired anyone.
Like that is a terrible thingto say out loud.
Like you've never hired someonethat was incompetent or didn't
show up to work on time ordidn't like this was large
companies Like that's.
We're going to need to fix that, because when people don't

(01:11:33):
perform, the ones that will.
Either you get rid of peoplethat don't show up and work hard
for their teammates or the goodteammates will leave because
they're carrying the entire load.

Speaker 1 (01:11:45):
Yeah, so I mean, this is the thing I've never
understood people who get madabout like you know, like you
know, like, oh, they firedwhoever.
These are people who were neverstuck in a group in high school
in a group project where theywere having to do all the work.
Yes, they were the mooch whodidn't contribute anything to
the class project.
Well, you know, others of usworked.

Speaker 2 (01:12:06):
I've been around lineup, I've had to let people
go and I've been let go multipletimes.
And there's always this thinglike oh, can you?
believe that let this person go.
They were so good and I'm like,well, if they're good, they're
going to get a job real quick.
And I've been let go and beendisappointed in it and then
really quickly realized, hey,they don't want me there, I
don't want to be there, right?
And it's like, hey, I canactually stop detach, look at

(01:12:29):
the entire universe and say, hey, where should I be spending my
time?
And really do I think, oh, Ishould go back to the place that
just kicked me out.
That was not a good place tospend my time.

Speaker 1 (01:12:39):
The only caveat I guess I would say to that and I
think you'd probably agree withthis is in cases where a company
has, in the due to incentives,let's say, moved overseas and
taken all of that particularkind of job.
You know, you've got somebodywho's worked at that same place
for 30 years or something.

(01:13:00):
They're not quite ready toretire yet, don't have enough
money to retire, have made badfinancial decisions.
I feel a little bad for them inthat case.
They're good at that.
One thing A great example I canthink of that I think you'll
relate to is when Jaco startedup OriginMain.
He talked about how they hadjust about lost the ability to
manufacture t-shirts in the USand he had to find these people
who were the last ones.

(01:13:21):
I figure someone who had workedin the t-shirt industry forever
and was very good at that.
They might not have been ableto find another job if their
factory moves overseas and I'veheard a few of those cases.
It's not super common, butthere are people who had done
the same job for 20 years andit's like they're maybe not the
most flexible person.
I feel a little bad for them.
Someone like you, you're a highcapacity dude.

(01:13:42):
There's a lot of things youcould do.

Speaker 2 (01:13:44):
Yeah, it's interesting.
I think you make a really goodpoint there.
I always go back to kind ofthinking about contracts and is
there an explicit contract withyou like, hey, I'm going to hire
you for the next 30 years?

Speaker 1 (01:13:55):
Clearly not yeah.

Speaker 2 (01:13:56):
Generally not.
Is there an implicit contractof like hey, if you commit
yourself to learning this veryspecialized physical skill
that's not transportable, I willcommit myself to making a good
deal good decisions to run agood company, so we'll survive
economic downturn, so we'll allhave jobs when those things

(01:14:18):
happen?
Yes, and so you get reallyquickly out of the legal and
economic realm and into themoral realm.
And one of the things that Iwish I remembered where I heard
this first, because I think thisis just genius is that in the
late 1960s and 1970s, the leftand the right both made one huge

(01:14:41):
decision or one huge mistake.
The left made a huge mistake intaking morality out of
relations between men and women,in sexual relations in
particular.
But the birth control billcomes along.
It's like hey, free love, da,da da.
Like taking morality out ofrelationships between men and
women, the downstreamconsequences of that huge family

(01:15:02):
formation, the communities.

Speaker 1 (01:15:04):
Well, and it leads to the consent only framework.
That's the only thing thatmatters in a relationship
between men and women.

Speaker 2 (01:15:12):
It's so many bad things came out of it.
The right made a huge mistakein taking morality out of
business yes, and that, hey, I'mthe business owner here.
I've got a duty to my employeesto not lever up the company,
even though I could get a newboat or do all these things.
Where, hey, this is?
We talked about moralitythrough this whole thing, about

(01:15:34):
taking on debt, and so takingmorality out of the social
relationships between people,and taking morality out of
business just pretty much takesmorality out of society.
What's left, right, and sothat's really interesting.
And tying this even backfurther into economics, I was

(01:15:57):
listening to another podcastrecently I can't remember which
one, but they were talking aboutreligious strictures on lending
.
So there's some, yeah,religious out there where, like
you know, there's strict userlaws You're not allowed to lend
money.
That was Christianity up untilabout 1700 or so, and I've
always, you know, having been aformer banker, I've always kind
of like scoffed at this.

(01:16:19):
Like you know, if this is sillyand you know why are these
restrictions there?
And the point that these folksmade I think it was a
philosopher named Stephen Hicks,who's the guy I was listening
to, and he made the point whereit used to be if there was a
surplus, it was your duty toshare it with your community.

(01:16:41):
The only way you can do lendingis if you have a surplus.
Yes, so if you have surplus andyou're lending it, you haven't
shared it with your community.
Yeah, You're actually chargingfor it.
And so again, you get acommunity greater than 150
people really hard to make thesurplus sharing thing work.
Right, you get past the Dunbarnumber and all of a sudden

(01:17:02):
you're trying communism at scaleand it's a bad idea.
But me squaring the circle ofwhy did religions used to say,
hey, loaning money is a badthing?
That tied it together for me ina way I'd never understood
before.
It's like, hey, your duty is toshare when you have more than
you need at a very local level.
And again, that makes sense inyour family and it makes sense
even in your neighborhood orcommunity.
The Taleb philosophy, yeah,doesn't make sense at scale.

Speaker 1 (01:17:27):
At societal scale.
Yeah, you run into some realproblems.
The Dunbar number is reallyinteresting.
I think it's like 2,000 people,no, it's 150.
It's 150?
Yeah, I was thinking that therewas a it was referring to the
like 2,000 person limit orwhatever that you can't
effectively remember therelationships beyond that scale
of a town or whatever.

Speaker 2 (01:17:48):
You could be right.
My recollection of it is theDunbar number is 150.
And once you have a groupgreater than 150, you can't use
norms and shame and those kindsof things to keep people online
working hard to.
Hey, we're all going to sharethe meat, but some people are
going to go cut firewood andsome people are going to clean
the hut and some people aregoing to actually go kill the

(01:18:09):
mastodon and some people aregoing to do the yeah.
Once you get more than 150people, you can shirk.

Speaker 1 (01:18:13):
Like free riders show up and you can't keep track of
everybody Free rider problems.

Speaker 2 (01:18:18):
So I thought it was 1,000.
It could be 2,000, but it'swhatever it's not 250 million.

Speaker 1 (01:18:23):
Yeah, no, it's not 850 million, yeah.

Speaker 2 (01:18:27):
No, it's not.

Speaker 1 (01:18:29):
That's interesting.
We'll have to look that up.
I'm sure someone will tell uswhether it was.
I could be talking aboutsomething completely different.
When you said Dunbar number,though, I was like that sounds
like the psychological concept Iremember about community
management, basically, yeah, Ithink we're talking about the
same concept.

Speaker 2 (01:18:47):
There's probably no one single number out there but
it's a sort of there'sdefinitely a hard limit
somewhere there's a small numberwhere it gets bigger than that,
you can't tell who's reallypitching in doing their part.
It's hard to have informalrules.
You start needing formal rules.
And back to morality.
You need formal rules that areeasy to understand, that are

(01:19:11):
easy to enforce, that areenforced fairly on everybody.
I was like, oh hey, here's therules of the game.
We're all going to play bythese rules of the game.
They all make sense.
But also, hey, there are somethings where, hey, this just
isn't right.
Yeah, and we're not going to doit.

Speaker 1 (01:19:26):
It's the argument, too, why you get into large
scale cities and all of a suddenthere's just so many people
demanding additional this thatthe other thing.
There's so many squabbles atthat level.
When you get to a certainnumber of people per square mile
, who pays and who gets isreally muddy.
Well, even just this person isblasting music in their backyard
until three o'clock in themorning.

(01:19:46):
Not so much an issue if you'rethe only person on a 200-acre
farm and the nearest neighbor ishalf a mile away.
Starts to become an issue ifyou're in an apartment building
with 300 people.

Speaker 2 (01:19:58):
Well, and getting back to something we were
talking about earlier, where wesaid, hey, maybe we're tipping
into a recession here and itisn't noticed yet.
But the point was we'resupposedly not in a recession
and we're spending like drunkand sailors while we're deep in
debt.
When you're not in a recessionis when you're supposed to be
paying down that debt, and sohow does this tie into what we

(01:20:20):
were just saying?
It's hey who pays and who getsis really interesting.
Right now, everyone gets andnobody pays.
And it's who pays?
Everyone in the future FutureMike, future Robert are paying.
Hopefully we're around longenough that it matters.
I don't know.

Speaker 1 (01:20:39):
Hopefully we're around long enough or something
terrible is what it sounds likeI just said.

Speaker 2 (01:20:43):
So future Americans are paying for the stuff we're
doing right now.
We're spending like drunk andsailors money that we don't have
.
We're adding $5 billion in debtevery day.
Every day, we're adding $5billion in debt, which is insane
and it's going to have to getpaid back sometime.
And whether the payback is, hey, we all print a bunch of money,

(01:21:05):
or society collapses orwhatever, there's a cost the
bill comes to.
Yeah, there's no such thing asa debt jubilee.
People's like oh, what ifthere's a debt jubilee?
It's like debt jubilee.
Have you ever heard of thisterm?
No, so it's an ancient termwhere every I think it might be
in the Bible somewhere, I'm notsure where every seven years,

(01:21:25):
all debts are forgiven orsomething like that.
And I can't remember where Iheard this from.
I did not make this up, butsomebody made this point.
It's really interesting.
There's no such thing as a debtjubilee If you forgive all
those debts.

Speaker 1 (01:21:36):
Yeah, that's the end of lending and monetary systems.

Speaker 2 (01:21:40):
Your debts are someone else's assets.
You're wiping out a bunch ofpeople.
It could be my mom has T-bills,right.
I say, great, I don't have topay back my taxes, I don't have
to pay back the government'sdebt.
I might be wiping out my mom'sretirement fund.
So it's a big deal.
There's no such thing as a debtjubilee, and we're racking up
$5 billion of debt every dayright now, and there's no end in

(01:22:02):
sight.
It's accelerating.

Speaker 1 (01:22:04):
Yeah Well, and the funny thing is, it's like
there's no voting your way outof it, necessarily.
Either you can vote for oneparty that promises they're not
going to, they're going to cutspending, or whatever it never
happens.
It never happens, yeah Likeliars.

(01:22:25):
There's slightly less spendingmaybe, and usually that's in
times of joint control.

Speaker 2 (01:22:30):
It's not slightly less spending.
It's spending isn't growing asfast.

Speaker 1 (01:22:33):
Yes, that's it they call that cutting.

Speaker 2 (01:22:34):
Yeah, when spending doesn't grow as fast, it's
called cutting spending.
Yes, that's not true when youspend 3% more next year instead
of 6% more.
That's not cutting spending,correct.
So, yeah, theoretically.
I think there are much smartpeople out there that would say
we've already passed the pointwhere nothing can be done.
Let's imagine something can bedone.
It's black hole physics.
Yeah, here's the two things thatcan be done Cut spending, raise

(01:22:57):
taxes yeah, and you need to doboth, and you need to do it
really quick and they both needto be big enough to hurt.
Yeah, okay, if something couldbe done.
It's those two things, and youdo it right away.
Like, hey, how do I lose weight?
Diet and exercise?
Yeah, like that's what you needto do right now.
Anything else you try, trust me, it's going to end in tears.
Oh, there's a new pill?
No, thank you.
Right.

(01:23:17):
I keep hearing oh, there's newpills.
Like I'm waiting five years forlawsuits.
Yeah, right, because the pillthat magically solves weight
loss sounds like a disaster tome.
Everyone's like oh, it's goingto solve these problems.
Like, wait till you see theproblems it causes.
Yes, like the problems it solves, may be small compared to the
problems it causes.

Speaker 1 (01:23:34):
Your body does not naturally lose weight unless you
are really truly blessed.

Speaker 2 (01:23:38):
Yeah, here's what we're going to do.
We're going to disrupt yourbody's understanding of how much
food it needs.
Yes, oh, that sounds awesome.

Speaker 1 (01:23:46):
I wonder if there will be any unforeseen
consequences of that Incrediblelosses of muscle mass,
incredible problems with yourstomach.
I'm sure it will all be fine.

Speaker 2 (01:23:55):
Yeah, your body just passing food through without
digesting any of it.
I don't know how any of thisworks.
None of it sounds good.
Diet and exercise that's whatyou need, yep.

Speaker 1 (01:24:05):
At high volume.
Well, I think that's probably agood place to stop.
We've talked about consequences, so many consequences,
absolutely.
Thank you again for coming onthe podcast again yeah, no
problem, thank you, I'm surewe'll talk to you again before
too much longer.
Absolutely.