Trump: Send National Guard to SF, China Rare Earths Trade War, AI’s PR Crisis

Summary

This episode of the All-In Podcast covers three major topics. First, the hosts discuss the state of crime in San Francisco following Marc Benioff’s comments about the National Guard at Dreamforce and Trump’s subsequent press conference about sending troops to the city. While Friedberg argues that SF crime statistics show significant improvement under Mayor Daniel Lurie (crime down 30-40%, homicides at 70-year low), Sacks contends that the downtown drug market problem remains intractable and could benefit from targeted federal intervention, citing how Gavin Newsom cleaned up the area overnight for President Xi’s visit.

The second major topic centers on US-China trade relations, particularly around rare earth minerals. China announced new export controls on 12 of 17 critical rare earth minerals, prompting Trump to threaten 100% tariffs. The hosts explore how China’s 30-year strategy to dominate rare earths through state subsidies drove US competitors out of business, and debate whether US price floors and strategic reserves are necessary to rebuild domestic capacity. Chamath explains how China functions as a “reascending power” that controlled the world’s largest GDP for 70% of years since 1500, with Xi Jinping personally involved in drafting five-year plans that cascade down through provinces like a network of venture capitalists.

The final segment addresses what Chamath calls an “AI PR crisis” - Google, Microsoft, and Amazon all cancelled major data center projects in Indianapolis, Wisconsin, and Arizona due to local opposition over electricity prices, water consumption, and noise pollution. The hosts debate whether this represents a legitimate concern that hyperscalers must address by investing in local communities, or an illegitimate fear stoked by media narratives. Sacks argues that AI contributed 40% of Q2’s 3.8% GDP growth and that job loss fears are overblown, while Calacanis points to declining headcounts at major tech companies as evidence of real displacement.

Highlights

”I burned them - those are single use Loro Pianos”

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“I burned them. Those are one use for Chamath. Those are single use Loro Pianos. Once I got in the car, I gave Eugene my shoes and I said, ‘Burn these, Eugene. I never want to see these ever again. They’ve touched the pavement of San Francisco.’” — Chamath Palihapitiya, 4:04

”We don’t have to live this way. This is a choice.”

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“We don’t have to live this way. This is a choice.” — David Sacks, 13:55

”China had the world’s largest GDP 70% of those years”

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“If you go back to 1500 to now, over all of those years, China had the world’s largest GDP 70% of those years… the Chinese think about this as reasserting the dominance that we’ve always had.” — Chamath Palihapitiya, 38:00

”Francis Fukuyama literally bats zero”

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“The thing with Francis Fukuyama is he writes in this beautiful way, but he literally bats zero. You could basically read a Francis Fukuyama book and understand that whatever the opposite of what he wrote is likely going to happen.” — Chamath Palihapitiya, 44:45

”Tokens are not jobs”

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“What they know is that tokens are not jobs. And if AI is going to be embraced by the public, I think what we need to do a better job of is to show the tangible economic benefits.” — Chamath Palihapitiya, 55:30

Key Points

• Dreamforce and SF Politics (0:00) - The hosts discuss attending Marc Benioff’s Dreamforce conference and the SF Standard’s coverage of David Sacks being interviewed there
• Marc Benioff’s National Guard Comments (4:28) - Sacks explains Benioff was describing Dreamforce security when asked about National Guard, not making a political statement
• Trump’s San Francisco Announcement (4:33) - Trump announced plans to send troops to San Francisco in a press conference
• SF Crime Statistics (6:30) - Friedberg cites crime down 30% citywide, 40% downtown, homicides at 70-year low, car break-ins at 25-year low
• Market Street Drug Problem (7:45) - Sacks argues open-air drug markets persist on Market Street despite improvements, citing leftist judges constraining enforcement
• Honduran Fentanyl Dealers (9:15) - Discussion of ICE and DEA deporting drug dealers, many from a single town in South America
• Gavin Newsom’s Xi Visit Cleanup (11:00) - Newsom proved downtown could be cleaned up in 48 hours when President Xi came for a summit
• DC Woman’s Testimony (13:30) - Viral video of DC woman describing how Trump cleaned up her neighborhood in 9 months after 40 years of problems
• Managed Alcohol Program (16:15) - Friedberg criticizes SF’s $5M program that gives free beer to homeless alcoholics as “treatment”
• SF Homeless Spending (17:30) - City spends $52,000 per year per homeless person, with money going to nonprofits who profit from the problem
• JB Pritzker’s Gambling Income (18:00) - Illinois governor disclosed $1.4M in Vegas blackjack winnings from 2024, implying $100K hands
• China Rare Earth Export Controls (20:48) - China announced controls on 12 of 17 critical rare earth minerals effective December 1
• Trump’s 100% Tariff Threat (21:20) - Trump threatened 100% tariffs on all Chinese imports in response, then walked it back
• Scott Bessent’s Role (22:00) - Treasury Secretary managing deescalation, saying tariff doesn’t need to happen and Trump-Xi meeting is on track
• Price Floors Debate (23:00) - Friedberg prefers deregulation over price floors; Sacks argues floors necessary to create investment certainty against Chinese dumping
• Molly Corp and MP Materials (24:30) - History of US rare earth mining, Mountain Pass mine, and Chamath’s investment in MP Materials
• China’s Mercantilism Strategy (26:00) - Started in 2007-08 under Hu Jintao with national champions in rare earths, batteries, EVs, and pharma APIs
• Take or Pay Agreements (27:30) - Chamath explains how Chinese government backing undercuts US private financing models
• Strategic Reserve Proposal (29:00) - Chamath proposes US government act as buyer of record to absorb price shocks, similar to petroleum reserves
• Neodymium Price Volatility (30:30) - Prices ranged from $50K/ton in 2020 to nearly $250K during COVID, making long-term planning impossible
• Robotics Rare Earth Dependency (31:30) - Chamath argues permanent magnets for robot actuation are the critical future market, not cars
• US Rare Earth Deposits (33:00) - Only 7% of deposits discovered; unproven reserves in Texas, Wyoming, Colorado, Missouri
• China as Reascending Power (38:00) - Chamath notes China had world’s largest GDP 70% of years since 1500, viewing this as reclaiming historical position
• Xi’s Five-Year Planning (39:30) - Plans cascade from Politburo to provinces to prefectures, creating 300 VCs working on national priorities
• Lee Kuan Yew’s Prediction (41:00) - Singapore’s founder called China “the biggest player in the history of the world”
• End of History Critique (43:00) - Sacks criticizes Fukuyama’s thesis that liberal democracy won; praises Huntington’s Clash of Civilizations
• CEO Compensation Incentives (45:00) - Chamath argues EPS-focused executive pay accelerated offshoring to China
• Data Center Cancellations (52:59) - Google ($1B Indianapolis), Microsoft (Wisconsin), and Amazon (Tucson) all cancelled projects due to local opposition
• Community Opposition Reasons (54:00) - Residents cited electricity prices, water consumption, and noise pollution
• AI Contributing 40% of GDP Growth (58:00) - Sacks argues Q2 3.8% growth would have been 2.3% without AI boom
• Humans End-to-End, AI Middle-to-Middle (60:00) - Sacks cites “Biology” thesis that AI handles middle tasks while humans do prompting and validation
• Model T Analogy (62:00) - Sacks compares AI job displacement fears to hypothetical media coverage of Ford’s disruption of horse-and-buggy
• Tech Company Headcount Decline (65:00) - Calacanis notes Alphabet peaked at 190K employees (now 187K), Meta from 86K to 75K, Amazon from 1.6M to 1.55M
• AI Industry Spokesperson Crisis (67:00) - Chamath argues the industry needs better communicators who can translate technology into simple product value

Mentions

Companies

• Salesforce/Dreamforce (0:07) - Marc Benioff’s conference in San Francisco, context for National Guard discussion
• SF Standard (0:52) - Published headline about Benioff “fawning” over David Sacks
• Google (53:00) - Cancelled $1B data center in Indianapolis due to local pushback
• Microsoft (53:30) - Cancelled data center in Wisconsin due to local opposition
• Amazon (53:45) - Mothballed data center near Tucson
• MP Materials (24:30) - Operates Mountain Pass rare earth mine, received government deal
• Molly Corp (24:30) - Former operator of Mountain Pass that went out of business
• BYD (40:00) - Example of successful Chinese company from 5-year planning process
• Xiaomi (40:00) - Another example of Chinese national champion
• General Motors (27:30) - Has take-or-pay agreements with US rare earth suppliers
• Tesla (31:30) - Mentioned in context of rare earth strategic reserves
• Meta/Facebook (65:00) - Headcount dropped from 86K to 75K while stock price rose
• Alphabet (65:00) - Peaked at 190K employees in 2022, now at 187K
• Uber (65:00) - Headcount down from 33K to 31K
• OpenAI (67:30) - Mentioned in context of erotica controversy freaking out parents
• Anthropic (67:30) - Mentioned in context of AI doomerism Sacks confronted
• Base Power (69:00) - Zack Dell’s company putting batteries on houses to arbitrage electricity prices

Products & Technologies

• Rare Earth Minerals (20:48) - 12 of 17 critical minerals subject to new Chinese export controls
• Neodymium (30:30) - Key input for permanent magnets, prices extremely volatile
• Permanent Magnets (31:00) - Made from rare earth, critical for EVs and especially robotics actuation
• LFP Cathode (27:30) - One of Chamath’s businesses makes this for batteries
• AirPods (31:00) - Rare earths are 1-2% of cost
• Fentanyl (9:15) - Drug driving SF addiction crisis, dealers being deported
• Bastnite (33:30) - Rare earth ore at Mountain Pass mine

People

• Marc Benioff (0:07) - Salesforce CEO, hosted Dreamforce, made National Guard comments
• Donald Trump (4:33) - Announced plans to send troops to San Francisco
• Daniel Lurie (5:45) - SF Mayor, praised as best mayor in decades
• Brooke Jenkins (5:50) - SF DA who replaced Chesa Boudin
• Chesa Boudin (9:20) - Former DA recalled, called Honduran fentanyl dealers “victims”
• Gavin Newsom (11:00) - Cleaned up SF in 48 hours for Xi’s visit, proving it can be done
• Xi Jinping (11:00) - Chinese President, summit visit prompted SF cleanup
• Scott Bessent (22:00) - Treasury Secretary managing China negotiations, praised by hosts
• JB Pritzker (18:00) - Illinois governor disclosed $1.4M blackjack winnings, opposed federal crime intervention
• Muriel Bowser (12:45) - DC Mayor who cooperated with National Guard despite public objections
• Hu Jintao (26:00) - Former Chinese leader who started national champions strategy in 2007-08
• Lee Kuan Yew (41:00) - Singapore founder who predicted China as biggest player in history
• Francis Fukuyama (43:00) - Author of “End of History” thesis, criticized as wrong
• Samuel Huntington (44:00) - Author of “Clash of Civilizations,” praised as prescient
• John Mearsheimer (42:30) - Political scientist who predicted China couldn’t rise peacefully in 2002
• Thomas Friedman (44:30) - Author of “The World Is Flat,” mentioned as providing cover for offshoring
• Zack Dell (69:00) - Founder of Base Power, residential battery company
• Dana White (18:30) - UFC CEO, compared to Pritzker’s gambling levels
• Matthew McConaughey (0:16) - Was at Benioff’s dinner table
• Brian Johnson (0:13) - Was at Benioff’s CEO dinner
• Sam Altman (67:45) - Implied to not be the best spokesperson for AI industry

Organizations & Institutions

• WTO (25:00) - Rules allowed China to subsidize as “developing nation”
• ICE (9:30) - Deporting fentanyl dealers from SF
• DEA (9:30) - Working with ICE on drug enforcement
• National Guard (4:28) - Central topic for SF crime discussion
• USGS (34:00) - Geological survey doing Earth MRI mapping for new deposits
• Shanghai Cooperation Organization (37:30) - China’s security-focused alternative to NATO
• BRICS (37:30) - China main sponsor of alternative international order
• Belt and Road Initiative (37:00) - China’s infrastructure investment program
• Polymarket (46:30) - Showing 85% chance 100% tariff won’t happen, 73% chance of trade deal by Nov 10

Surprising Quotes

“I burned them. Those are one use for Chamath. Those are single use Loro Pianos. Once I got in the car, I gave Eugene my shoes and I said, ‘Burn these, Eugene. I never want to see these ever again. They’ve touched the pavement of San Francisco.’” — Chamath, 4:04

“We don’t have to live this way. This is a choice.” — David Sacks, 13:55

“If you go back to 1500 to now, over all of those years, China had the world’s largest GDP 70% of those years.” — Chamath, 38:00

“The thing with Francis Fukuyama is he writes in this beautiful way, but he literally bats zero. You could basically read a Francis Fukuyama book and understand that whatever the opposite of what he wrote is likely going to happen.” — Chamath, 44:45

“What they know is that tokens are not jobs. And if AI is going to be embraced by the public, I think what we need to do a better job of is to show the tangible economic benefits.” — Chamath, 55:30

Transcript

0:00 All right. You guys were talking about the fun shenanigans you were having in San Francisco and at Marc Benioff’s Dreamforce. Did you see Brian Johnson was at Benioff’s CEO dinner? Oh, I didn’t see him. Yeah. Matthew McConaughey was at our table at dinner. All right. All right. All right. McConaughey is fabulous. He is funny.

0:24 Did you see where I was sitting at that dinner? Yeah. Table one. Right next to the king himself. The king himself. Exactly. The king who? The king and I. Benioff is a king. Well, he’s the king of San Francisco at his party. He’s the king of San Francisco. Yeah. I mean, obviously he has to bend the knee to the king of kings, which is I was sitting next to Benioff there. It got weird. It got a little weird.

0:48 No. Well, what happened was did you see that SF Standard? Yeah. I don’t even know how they can write a headline like this. So, well, it’s a San Francisco standard. Yeah. So Benioff interviewed me at Dreamforce and somehow this was like headline worthy for SF Standard and they said that Marc Benioff dodges political questions then fawns over David Sacks on Dreamforce day one. That was just referring to the interview we did. So we trolled them by taking that photo.

1:17 That’s um Yeah, it’s a little weird. I thought the fireside chat you guys did was great. It was great. Yeah, it was just an interview. It was really good actually. He’s a very good interviewer. Mhm. Yeah, totally. But apparently to SF Standard, it’s like some sort of transgression that I was even interviewed. They didn’t get the memo that cancel culture is over. Yeah. They can’t. I know. That’s what it feels like, right? Where they’re like trying to jin up some sort of brouhaha over the fact that I was speaking.

1:44 Yeah. Oh, you can’t talk to David Sacks. He’s in the Trump administration. Not allowed to talk to him. About 100 people a week who say that. Literally the AI guy and the AI CEO shouldn’t talk to him. It’s like, you know, like what the AI company, I should not talk to the government’s AI person, right? By the way, did you see that there was one other very important conference in town at the same time as Dreamforce? Okay. I discovered this on my X feed.

2:09 Feel like a cold open about time. What? The Young Socialists or was it the Republicans? It was called SlutCon. Oh, SlutCon? Really? Oh my lord. Look at this website. Oh, this is the agenda. How to be good at sex with Aaliyah. Let’s see. You cannot do this. Cut this out. Women venting. Oh, Sachs, that one’s for you.

2:32 I would have planned an or Friedberg here. Friedberg’s giving a talk. A fluffer’s guide to jobs by David Friedberg. Is that a panel or is it a fireside Friedberg? Which one? Reinforcement learning. Ho feedback small groups. Oh, you could rewrite your positions. I see that. Reunderwriting your sexual positions by Chamath’s the last one. The VIP room. Oh, VIP room. Yeah, that’s Chamath. That’s for sure.

2:57 Sacks, how did you hear about this? Don’t tell us that you ran out of bed. You went over to the East Bay. Sacks, are you on the mailing list? No, my invite you to speak. My X feed just, you know, it’s the new AI algorithm is just trying to find things you might be interested in. Sacks also keynoting this. My X feed showed me SlutCon. So I clicked on it and now it’s been nothing but SlutCon for a couple of days.

3:35 Let your winners ride. We open sourced it to the fans and they’ve just gone crazy with it. Chamath, what did you think about walking around San Francisco? So, we went on a walk around downtown San Francisco. Well, we were trying to find a place to get a drink in between the Benioff dinner and Sacks’s talk. We ended up at the W Hotel, but I was worried for Chamath because it was his first time on the streets of San Francisco walking around with his own two legs. How was it, Chamath?

3:58 Did you throw out those shoes? The Loro Piana shoes. I burned them. The soles I’m sure were sullied beyond repair. I burned them. Those are one use for Chamath. Those are single use Loro Pianos. Once I got in the car, I gave Eugene my shoes and I said, “Burn these, Eugene. I never want to see these ever again. They’ve touched the pavement of San Francisco.” And all I said was, “Yuck.” Why don’t you just have your domestic staff carry you on their shoulders? I don’t understand. Why the crowd? It makes no sense.

4:26 So Benioff pulls off this awesome convention, this conference, and then Trump does this press conference yesterday saying he’s going to send troops into San Francisco. Did you guys see this? Yeah. Well, yeah. But no, but the Benioff thing happened first, right? So Benioff made news because he said, “Send in the National Guard to clean up San Francisco.” But I actually I talked to him about it and got a little bit of context, which of course misquoted or Well, no, he wasn’t misquoted, but it happened in a more innocuous way.

4:49 He wasn’t trying to weigh in on a political issue. Basically, what happened is I think he was describing the security at Dreamforce and how they bring in a couple hundred extra off-duty cops to provide security. So then the reporter tried to stir the pot by saying, “Well, would you bring in the National Guard?” And Benioff said, “Sure, if they can be cops.” And that was kind of the end of it. And then it turns into this massive story that Benioff is supporting the National Guard coming to San Francisco, which I think he should support it, but it’s not exactly what he said. He was saying for Dreamforce he would hire them.

5:20 Yeah. I mean, who knows exactly what he was trying to say, but the point is that he could have just been talking. Yeah. He wasn’t seeking to make the news that ultimately he made, but it’s not a bad idea. It’s actually a good idea. Do you think Trump teed off on that press cycle when he was doing that press conference and it was kind of off-the-cuff Sacks when he said, “Oh, they should send the National Guard in to San Francisco next.” Well, I don’t know. Yeah, I wasn’t there for that.

5:46 But San Francisco is a pretty obvious city to send in the National Guard because we have this downtown area where, you know, it’s like that zombie city area, the Walking Dead part on Market Street. And everybody understands that it’s because they won’t stop the drug dealing. So you’ve got open air drug markets there on the main business thoroughfare of town, which is Market Street. And by the way, let me just back up and say that we have the best mayor we’ve had in decades now. Dan Lurie. Dan Lurie’s great.

6:14 And I think Brooke Jenkins was the DA that we supported to replace Chesa Boudin after we recalled him. So I think she’s good, too. But they’re still working within the confines of a legal system here which is very left-wing. You’ve got all these leftist judges and I think they’re somewhat constrained or hamstrung in terms of what they can do. Again, the evidence of that is that you’ve got hundreds of these drug dealers who are just operating with impunity in downtown and you’ve got this sort of zombie city of people who are so sick with drug addiction that they’re pretty much living on the street. So, I think it would be a relatively easy thing to clean up if they send in the National Guard.

6:50 I would argue that they’re like, because I’ve been working in San Francisco and I think it’s gotten a lot better this year. So, I looked up after all this Benioff brouhaha and the National Guard thing that Trump said yesterday. And so, the city’s publication shows crime down 30% citywide and down 40% downtown. Homicides on a 70-year low this year. There are record lows of the number of tents left on the street. They’ve cleaned up all the tents. And I’ve seen this because I drive to my place in the city and they’re all gone.

7:18 And for the first time in seven years, they’ve actually got a net gain in total police officers on the force. And now they’ve got convention bookings up 50%. With hotel bookings up 60% because of it. And so here’s what DA Jenkins put out. She said felony convictions in cases this year, narcotics, 88% of cases have resulted in convictions. Robbery, 85% have resulted in convictions. Burglary, 72% in convictions. And gun possession, 70% of cases result. And all the car break-ins are down to a 25-year low.

7:50 And so I’ve noticed it acutely in my experience in the city. So it felt a little shocking to be like, oh, we need the National Guard. This is like a city on the upswing in my opinion. And I think things are getting much better anecdotally. And the statistics represent it too. So, you know, it feels like there’s a little bit of a runaway narrative with San Francisco relative to what I think we those of us who are in the city are experiencing.

8:15 Let me thread these two stories together and hand it to you, Sacks. So, the interesting thing when Sacks and I were ousting Chesa Boudin, one of the things we learned was Chesa Boudin had this famous quote where he was saying, “Oh, well, we can’t get rid of the fentanyl dealers. I’m for drug regulation but not for fentanyl because it’s a super drug that kills people very quickly. And it turned out he said all these Honduran nationals were victims.” Yeah. Which I guess theoretically could be true, but it’s kind of like in that what do they call it? Suicidal empathy category.

8:47 But it turns out this is something where ICE and the DEA have done some work. They actually started deporting these people last year and because the people in San Francisco pre-Dan Lurie refused to do it. So the federal government actually has been taking action on this specific issue. And we’ve also been taking out the boats bringing the drugs here. Pretty, you’re not seeing a city government try to block federal action either, which is different than what you see in other cities.

9:15 By the way, this is a good forewarning of what Morani’s New York is going to look like when Morani’s New York kind of takes off. Imagine what’s going to come into the city because there’s now going to be permissive culture and permissive society to do this sort of stuff. Yeah. So, I mean, this is where we’ll get strong alignment and agreement like deporting Honduran fentanyl dealers. Like, what’s taking so long? I would ask the administration to take a beat on the San Francisco thing because this city is like making major improvements and I feel very good about the direction. It’s not like other cities that are on the downswing and also I think AI companies are setting up in San Francisco. Money’s coming back.

9:55 Yeah. I say the power move by Dan Lurie would be to say to the Trump administration, hey, can we get I don’t know three months of National Guard just to be in every BART station and then on these four corners in the Tenderloin just as a deterrent. You know what people would do if they did that? People would protest and riot because they’re like we don’t want federal policing of our city. Like it’s going to be for sure. I think you would get like 10-20% even in San Francisco rioting. I think the rest of the people would be like okay it’s a short duration. It’s on these corners for this purpose. Okay, bring it. That’s why I think the Democrats are making a stupid decision.

10:30 But if the city’s doing their job and the city’s improving, why do you need that? It’s getting better. You know, like this is not the Yeah, that’s if things are worse and you’re in a spiral. It is a backstop. Sure. Yeah. I mean that maybe the reason it’s getting better is because that backstop is there. What? The National Guard backstop? They’re hiring more police. They haven’t done that in seven years in San Francisco. They’re finally adding to the police force and they’re enforcing and they’re getting convictions. It’s kind of working.

11:00 Well, I’ll partially agree with both of you. So, I agree with Friedberg that we have the best mayor we’ve had in decades with Daniel Lurie and I think he is making progress and the city is bouncing back. I think we probably had the lowest low during COVID and so a lot of that is just the finally the bounce back and then we got the AI boom which is creating a lot of wealth and it’s bringing a lot of people back to the city and it’s starting to absorb all the vacancy we have. So in any event all those are good things.

11:30 Nonetheless, we still have this problem of this blighted area of Main Street where of all people Gavin Newsom proved that we could clean it up. Remember when President Xi came to town from China for that summit and all of a sudden magically that whole area was cleaned up in 48 hours and all the drug addicts and all the drug dealers basically disappeared. I don’t know where they sent them to. So it shows that there is a way to clean this up virtually overnight and I think that somehow the mayor and the DA are constrained in what they can do.

12:00 So you could have a targeted operation here by the federal authorities to go in and clean that up. And I think that’d be a good thing. What do you think would happen in the city if they did that with respect to the population? Are they going to welcome or not welcome federal policing of their streets? Well, again, I don’t think we should be held hostage by lawbreakers who basically threaten violent protests and chaos in response to law enforcement authorities doing their job. I don’t think we should be blackmailed by that or threatened by that or held hostage by that.

12:28 But they’re getting convictions. They’re making arrests. I think that’s awesome. I’m applauding their efforts and I’m not criticizing them. What I’m saying is we still have this intractable problem of this area of downtown where like Chamath said, there’s a network of drug dealers. Just to build on your point, Jason, about the Hondurans, there’s actually an article in the San Francisco Chronicle talking about this where the majority of the drug trade in San Francisco comes from a single town in South America.

12:55 And so, yeah, it’s like why couldn’t you just round up this whole network in a very targeted operation and deport them and that would clean up a huge part of San Francisco. I think there’s an opportunity here. If you look at the cities where it’s been very successful, so Muriel Bowser, who’s the mayor of DC, obviously she wasn’t thrilled about the president sending in the National Guard and she said so publicly. That being said, she also cooperated with it and it redounded to the benefit of all the citizens of Washington DC.

13:25 So I think there’s an opportunity here for the mayor to cooperate with the Trump administration and do a targeted exercise and clean up the streets of San Francisco. I think or he can do it himself. Did you guys see this interview with this woman in DC who was describing what it’s been like in DC over the last 40 years and see the changes? Yeah, she feels safe. Elon retweeted it. Nick, I sent you the link on Signal. Just listen to what she says. It’s really to your point, Sacks, it’s like it’s just such a no-brainer thing to do.

13:55 The question now is I think is a political calculation. Who wants to take credit for it? Because everybody should be doing this. Oh, let’s listen to this. I’m always got to be the person to say it and I don’t want to be the person to say it. But Donald Trump has been president for nine months. Nine months. And I’m seeing videos from Chicago, DC, where people like, “Yo, I feel safe. My kids feel safe. This is the best thing he ever did for us.” So, what was happening all these years that this like literally I’m I’ve known DC and Virginia to have this type going my whole life, and I’m in my 40s. Okay. Almost touching it.

14:28 So what was really truly going on if a man became president 9 months ago and cleared that out with just a flick of a pen. I’m just thinking like did y’all really ever care? Exactly. So I think that the point she’s making there is we don’t have to live this way. This is a choice. Okay. Yeah. And we don’t have to live in San Francisco with our main drag, our main street, Market Street, basically being an open air drug market where you’ve got hundreds of people who are addicted doing drugs in the street, you know, doing other things in the street.

14:58 And again, Gavin Newsom proved that it could all be cleaned up very, very quickly. So, look, I think it’s great that Daniel Lurie and Brooke Jenkins and the new administration are doing a better job, but they’re still constrained and hamstrung by their own by the city’s hold on by the city’s liberal mindset, extreme liberal mindset towards what’s possible. And I think like that person just said in the video, Trump just did it with a stroke of a pen. This is a choice. We don’t have to live this way.

15:28 It’s the biggest unforced error since opening the southern border. These are just the two stupidest decisions the Democrats ever made. And obviously the easiest thing to do to split the two approaches here, Friedberg, is to have Dan Lurie say, “Thank you for offering Trump. We would like to have it for this period of time in this location.” Then you could communicate to the people of San Francisco, it’s just a test. It’s just on these streets. When it comes top down and you don’t have a choice and JB Pritzker does what he did, which is I’m going to ban you from coming in and reducing crime. Like, do you hear yourself, Pritzker? Like, I want to stop you from lowering crime.

16:02 There’s something else we got to do as well, which is we got to stop funding the drug addiction because the city provides something like $2 billion a year to these nonprofits who are supposedly there to quote take care of this homeless/addicted population and they manage them like their flock because for every addicted person they add to the flock, they get paid more money. And so, obviously, this is why we have this problem here. And in fact, the homeless we have in San Francisco are not predominantly from San Francisco. They’re from all over the country, all over the surrounding area. They come here for the benefits. So, we create the magnet for all these people.

16:35 So, part of it is law enforcement, then also part of it is just cut off the flow of money that’s funding their drug addictions. You are 100% correct on that. I completely agree with you on that point. And I think that forced treatment center transitions is needed. Obviously, you know, we have a program, I’ve mentioned this on the show before, but for those who haven’t heard about it, to hear about the absurdity of these programs in San Francisco. There’s a program called the managed alcohol program.

17:00 $5 million per year out of the San Francisco city budget is spent on this program where you can walk into a hotel, they have free beer. You ask for a beer, they give you a beer. What? You drink the beer, you go out, you party, you come back, you get another beer. So they have all these studies that rationalize this program which is oh this is a way to help alcoholics recover from alcoholism when they’re homeless and they need this treatment but here you can see this is from last year being beer.

17:30 Yeah. So the treatment is beer and that works for alcoholism I’ve heard. But it’s one of these absurd things where now it’s kind of a joke because there’s also this close part of downtown where you know it’s a little bit of a kind of do what you want where they kind of keep folks it’s like hey you can use your needles here then folks will get a drink they’ll play music they’ll go after the thing. It’s really sad how these programs obviously well-intentioned initially become the most absurd.

18:00 If you want more of something keep spending money on it. In fact, there is a program for people who are addicted to gambling and they give Chamath free figs and cranberries at the Wynn to help him with his crafts addiction. Yeah, it’s amazing. If you keep going, one’s going to land. You send a private jet and extend a massive credit line. It’s amazing how many gambling addicts you’ll attract to your casino.

18:28 By the way, did you guys see that JB Pritzker disclosed his income from 2024? And oh, let’s guess over under. Give us an over under. Out of the 10.3 million, 1.4 million of it was gambling winnings from Vegas. What? Yum yum. Okay. All new respect. 1.4 million playing blackjack. So, he’s counting cards. Yeah, definitely. Definitely counting cards with Sacks. Yeah. Well, no. I’ll just tell you like look to win $1.4 million in blackjack basically you need to be betting 100K a hand.

19:00 Even I don’t do that. That’s the only way you can win that much, which is a lot of money per hand. Not judging. I’m just saying. I mean, that’s Dana White level. He’s Dana White level that David Sacks at Caesars. No, I’m not at that level. Come on. David plays at the $100 a hand table. He’s great. By the way, speaking of Vegas, aren’t we going next month? Yes. Yes. Yum. Yum. Yum. Yum.

19:25 Just to put some numbers on it, homeless budget, San Francisco, unbelievably high estimate like 800 million, lower estimate 700 million. And low estimate for homeless people is like 8,000. High estimates like 20. If you cut in between these two, they’re spending $52,000 a year per homeless person. $52,000 a year. It is a solved problem. Well, that is an incentive to solve the problem because again, a lot of the money goes to nonprofits and they get paid for every addict they can add to their flock.

19:55 Thomas Sowell had a great line about this. He said that you get as much homelessness as you’re willing to pay for. Well, and your point before is other places don’t give the services. So therefore, the homeless slash junkies converse about this and then they pick the right. We don’t have to live this way. I appreciate the mayor. I appreciate the DA, but we don’t have to live this way and there’s more that can be done. That is exactly it. You do not have to live this way. Yes. Do not stand for it, folks.

20:48 Okay, here we go. Lots of topics. The US-China trade battle is continuing. And this time we have a new wrinkle. Trump and Xi are set to meet in South Korea later this month. They’re going to work out a grand trade deal. And this would be their first in-person meeting since 2019, 6 years ago. But last Thursday, China announced new export controls on 12 of 17 critical rare earth minerals effective December 1st. Obviously, we need these for EVs, batteries, your AirPods, everything.

21:18 And on Friday, Trump threatened 100% tariff on all Chinese imports on top of the existing tariffs as of November 1st and accused the CCP of trying to quote hold the world captive. Stock market tanked, recovered on Monday when Trump told everybody, “Don’t worry about it. It’s going to be all good.” So far this week, things have mostly deescalated. Friend of the pod, Treasury Secretary Scott Bessent said the Trump meeting is still on track and quote, “We have substantially deescalated.” Also, he said the 100% tariff does not have to happen.

21:55 However, on Wednesday, Bessent called the export controls unacceptable and that it’s China versus the free world. Let’s take a pause here. Friedberg, thoughts on price controls generally, and if you want to expand into the overall relationship with China as it relates to rare earth metals, go for it. Bessent’s comments on the price controls speak to what he calls a non-market economy, meaning that the Chinese government is intervening and creating artificial surplus in the market, which drives prices down and effectively eliminates competition.

22:28 And so the Chinese push in the ’90s, supported by the CCP, ultimately eradicated competition and made it non-competitive for US companies. So they exited the market and now the United States finds itself completely dependent on Chinese suppliers. Particularly as it relates to rare earths, there was this company called Molly Corp that ended up going out of business. The asset, the Mountain Pass mine that Molly Corp operated, became MP Materials, which Chamath knows well and did this big deal recently with the US government as they’ve tried to revitalize production at this mine and increase output.

23:00 Friedberg, can you explain price floors for people just in case? So price floors are that the government is going to mandate that things have to cost at least X. So they increase the price of inputs and basically make it more difficult for China to undercut pricing which increases the rationale for capital to invest in starting competitors because now they can have a guarantee of revenue or guarantee of price. But the problem is that I would argue the government’s role maybe shouldn’t be in setting price floors because that creates a very bad effect long term on the market.

23:35 The government should deregulate and create a more free market in the US. A large reason why mining and processing of the ores moved offshore was because of the regulatory environment in the United States which made it difficult to compete with China. We could argue about the environmental laws and how extensive and how relevant they may be today relative to the ’90s, but this created a real challenge for companies to compete because it was so much more expensive to operate in the US.

24:00 So I would argue we should be focusing not so much on setting price floors to create an incentive for folks in the US to get involved in the industry, but rather to deregulate and to provide perhaps tax incentives and other economic incentives. So you don’t inflate the cost of things, but you create a much more kind of liquid market and drive much more volume and interest in building on this side.

24:25 All right, price floors. When we were talking about Kamala Harris running for president, she was asking for price floors and price fixing and making sure the government got involved in this. How is this different, Sacks? Well, look, as a general matter, I agree that the federal government shouldn’t be setting the prices of goods and it shouldn’t be picking winners and losers in the economy. But I think this is a different situation because over the past 30 years, we haven’t really had a free market in rare earth.

24:55 What’s basically happened like Friedberg was saying, China has been allowed to dominate this industry. And specifically what they did is starting 30 years ago, they identified rare earths and rare earth magnets, the rare earth processing as a very strategic element in the supply chain. And they set out to dominate it. And they did that by massively subsidizing their businesses and driving all of the US competitors and the global competitors out of business.

25:25 And they were partially allowed to do that by stupid WTO rules that allowed quote unquote developing nations to subsidize their own industries even though China is not developing. I mean their economy is comparable to ours. And yet these WTO rules allowed them to effectively cheat by subsidizing their industries at the expense of our industries. And the result of this is that they do now have coercive leverage over the supply chain.

25:55 And over the last few weeks, they just used that imposing this vast new export control regime on rare earth. And their idea is to tighten the screws when they feel like it and to use rare earth as a form of leverage in the relationship with the United States. So, we’re well past economics here and we’re into international relations. We’re into the balance of power. We’re into international security.

26:20 And I don’t think that the price floors here are designed to make the government the mediator of what prices should be in the free market. They’re designed to create enough certainty for US investors that they can reinvest in rare earths and reshore the processing and the casting of rare earth magnets. And I just don’t see another way to be able to create the incentives for investors because they know that if they invest a lot of money in rare earth processing that all China has to do is slash the prices and drive them out of business. And China continually uses that tactic. So I think you have to address that if you want to alleviate the American dependency on this critical resource which China currently has control over.

27:00 This started in 2007 or 2008 with Hu Jintao and what he basically said is we’re going to create six or seven national champions and he wanted to create them in the critical areas that they needed to dominate over the next 20 years and one of those was rare earths. Another one was batteries and EVs and yet another one was around the active principal ingredients or APIs that are the core inputs for pharmaceuticals.

27:28 So what do they do? And when Xi came into power, Xi Jinping continued that Hu Jintao strategy. What did they do? It’s exactly what Sacks said, which is they have this very aggressive form of mercantilism. How do they effect that? They are willing through provincial balance sheets, through federal balance sheets, through loan guarantees, through organizations that are quasi public private partnerships. They step into markets and they can effectively change the spot price on demand.

27:58 Now, why is that problematic in America? I’ll tell you the example of one of our businesses. You do these deals that are called take or pay agreements. So, MP has a deal with General Motors, one of my businesses that makes LFP cathode. Same deal with GM. You do what’s called a take or pay, which means that General Motors steps up and says, “Great, I will buy X amount of volume from you at Y price.” And so you go and you take that deal to Wall Street and you say, “I need financing to build a factory or a capability.”

28:30 Contrast that to the Chinese company who just goes to the government and the government says, “Here’s a bunch of incentives and money and price breaks. Just go build it.” So already we’re a little bit behind, but it’s much more free market and it’s more transparent. So you take a deal, you go to Wall Street, they give you money, you start building it, you start to produce it, and then you expect General Motors or Ford or Tesla to start buying this stuff.

29:00 But as Sacks said, if all of a sudden China sees it, what they do is they enter the market and they will dump an enormous volume of that product into the spot market. What happens? The price craters. Now all of these end buyers are in a really tough position because their competitors can buy at a much bigger discount than they can. They have to flow that price through their products. Their prices are more expensive. They have less demand. And that’s the huge negative cycle that China has complete control of.

29:30 So why is the federal government stepping in to create what is essentially a last resort buyer of record? It is so critical in these markets because the US balance sheet is the only one that can create a strategic reserve around these inputs. Not dissimilar to how we do with petroleum. We can nominate now things that are all of these things that can now absorb the price shocks that China may otherwise be able to effect.

30:00 So I think this structure where we now have these public private partnerships frankly is the only practical antidote to dealing with this issue. Otherwise we’re always going to be prone to this very clever and accurate and smart mercantilism from the Chinese. So I’m a big fan of this general market structure. It’s the only way that you cannot be theoretical and actually respond to the conditions on the ground.

30:30 Yeah, we’ve been doing a little research on this and here is neodymium. This is one of the two inputs for permanent magnets. And you can see here $50,000 for a ton back in 2020 during COVID it spiked almost up to a quarter million dollars and then it came back down. So look, you can imagine like it’s incredibly difficult when there’s that much volatility to try to buy capex, to try to plant opex, to try to extract from the ground, go through all of the regulatory rigamarole that western countries have to go through and then all of a sudden have a sale price that you can’t control.

31:05 And if you look at the cost, we were just doing some research on it. You know, if you get your AirPods, it’s one or two percent of the cost of that. Medical devices, it’s a lot more. But even in a Tesla Model Y, it’s less than I think this is an inaccurate way of looking at it. You have to look at the actual mass. And so the real problem is in cars, in engines, you’re talking about tens of kilos ultimately, and that’s where the real costs build up.

31:30 And then separately, the permanent magnets that go into cars, you can work your way around. The real future market that really matters is in robotics because these permanent magnets are the key input to the actuation mechanism of the robots. Meaning how do the robots move? How do the joints move? Through actuation that happens because of rare earths and permanent magnets. And as Elon said at the summit, he’s building all those himself.

32:00 Right now, only 7% of the known deposits of it have been found. There’s plenty of it out there. But to your point, I came to the same conclusion as you, Chamath, which is we should be building a strategic reserve of these. And if you look, we could be buying them when these things are down and deploying them when we need to do something different.

32:25 I think instead of trying to like time the market, I think what the United States can be much better at is having a broad forecast of demand, knowing how many million tons of this stuff we will need and just thoughtfully and methodically being a purchaser of record to create these strategic reserves. And then the worst case that can happen is you can do a swap with these customers. So Tesla all of a sudden can’t go into the spot market. They should be able to come to the strategic reserve and be able to buy lithium. You know, General Motors needs something, whomever, right? Figure robots need something. I think that mechanism is the only way we can compete effectively on a day-to-day basis with the Chinese.

33:00 I mean, I would argue I think we actually if we let the market work and we create the necessary kind of structure to allow the market to operate, meaning the regulatory barriers are diminished to develop mines and to conduct the processing of the ores. So there’s two sides of the equation when it comes to this kind of industry of rare earths. The one is mining the ore. You know this Mountain Pass site which is kind of on the border of California and Nevada which is now MP Materials. They’ve got this rare earth ore called bastnite. That’s the ore that you get out of the ground. And then you have to process that ore to get the elements out of the ore that you want to use in manufacturing.

33:35 The processing steps. I kind of went a little bit deep on this over the last week because I got really interested in why we don’t do this anymore in the United States. And there is so much nasty output from this process. You’re using very strong acids to do leaching. You do processing, you do extraction, refinement. All of the material kind of gets separated out from the rock and it’s dirty. And as a result, there’s byproducts and waste and environmental exposure, but also human personnel exposure.

34:00 But the technology hasn’t been deeply developed in 40 years. It’s still kind of 40-year-old chemical engineering technology. And we stopped developing it about 40 years ago in the United States. It’s not even technology. It’s no. Yeah, it’s not. It’s just metallurgy and chemistry. But there are techniques now that can be applied that can do this in a kind of scalable safer way without any of the environmental hazards.

34:25 But this is largely why this shifted over to China is they didn’t have the sort of regulatory burdens that we have in the United States which made it much cheaper and the labor cost was much lower. But with automation and certain systems we can actually process this ore. It’s not super complicated. It’s a series of well understood steps of chemistry and mechanical separation. So we could process ores.

34:50 The other kind of important point is there could be well over a thousand times the proven reserves of rare earths in the existing proven reserve catalog using new discovery techniques. So USGS, the geological survey in the United States has this kind of Earth MRI system where they’re trying to do new mapping. But there’s also several private companies that can use radar and microwave imaging and then you can use the system of interferometry where you actually put multiple beams down underground and you can get a better read or a better understanding of where these ores might lie.

35:20 And there are unproven reserves in Texas, in Wyoming, in Colorado, in Missouri, all over the continental United States. So if we did decide, hey, this is strategic to us, I do think one of the important points is that we could unlock both new kind of discoveries and new refinement systems in the United States and actually be truly competitive with China if we put the will behind it.

35:45 So, I think like this is a good moment for the United States to observe what’s going on and not just kind of be focused on China’s production. I think we could outpace them and accelerate through this if we chose to. So, Sacks, where does all of this fit in to the broader agreement? And do you think that they’re going to go to South Korea and come out with a deal? And do you have a sense of like what the contours have to be to make this a success?

36:15 Well, the Treasury Secretary, Scott Bessent, who we know, just said that the Trump meeting is still on track and he also said that we have substantially deescalated and that the 100% tariff does not need to happen. So, he says it’s still on track. By the way, I think he’s doing a phenomenal job here. He really understands the intricacies of this trade relationship and I think he’s capable of both applying pressure but then also finesse. So I think he’s doing a great job on this.

36:45 But in any event, I think the reason why you want to have the leaders meet, President Trump and President Xi, is that I think that this relationship, this bilateral relationship between the US and China will work best when there’s an agreement at the top. And what I mean by that is that when you just let the various bureaucracies deal with each other, you’re more likely to have misunderstandings or food fights.

37:10 So let me give you an example. Over the past few weeks, obviously you’ve had this Chinese Ministry of Commerce passed these export controls on the rare earth which created the possibility of greatly limiting the access of not just American companies but companies all over the world to Chinese rare earths. They’ve sort of backed away from that. Separately in the US, you had movements by our government to greatly expand the export control list.

37:40 And basically, there was a interim final rule that was issued by the Commerce Department on September 29th that said that if a Chinese company is on the export control list, that restriction should also apply to any of its affiliates or subsidiaries that are more than 50% owned by that company, which is kind of obvious, right? You don’t want a Chinese company like Huawei to circumvent the entity list by simply setting up a shell organization.

38:05 And so I think it was a perfectly reasonable rule to issue, but then China reacted to that very strongly. And so there’s just such a high chance of the two sides miscommunicating with each other and over escalating when you just allow the bureaucracies to talk to each other. And I think what’s most needed right now is to have a grand bargain between President Trump and President Xi. And that will then calm down the relationship.

38:35 And obviously this is going to be a very competitive relationship for as far as the eye can see because there’s both security and economic competition going on. But I do think that when you have an understanding at the top, it creates conditions for more stability.

38:55 All right. Traders on Polymarket think or know depending on the situation that we are going to see cooler heads prevail. 15% chance of the 100% tariff on China going into effect by November 1st. In other words, 85% chance it’s not going to happen. 73% chance of US-China trade agreement by November 10th.

39:20 Who do you think has the greatest incentive to decouple? The US or China? I think both sides understand that they can no longer be dependent on the other for things that they consider to be critical. So, I mean, the US has realized, wait a second, we can’t allow China to have a monopoly on rare earths. And by the way, it’s not just the rare earth, the processing, it’s also the casting of the rare earth into magnets.

39:50 So there’s this long tail of I don’t know 20,000 different kinds of magnets that are made from rare earth that are used in the industrial supply chain. And if China were to cut those off, then it would greatly impede manufacturing of pretty much every different kind of electric motors from cars to other goods. So in any event, my point is just the US clearly cannot be dependent.

40:15 I’m sure that China is reaching a similar conclusion. That doesn’t mean that trade can’t happen between the two countries. I’m sure it will continue. But I don’t think either side wants to be in a position where the other side can use its leverage beyond just economic terms into geopolitics.

40:40 But with respect to the Belt and Road initiative, like don’t you think China’s been planning for the decoupling in kind of a very long viewed way relative to the United States and they’re more I would say prepared and active to execute the decoupling whereas the US still is waking up to the fact that there are certain kind of critical supply chain dependencies that we have with China and maybe we shouldn’t be decoupling as quickly as we stated our intention to. Like it feels like they’re in a pretty advantaged position, Sacks, on both the buy side and the sell side.

41:10 They have 20% youth unemployment. They have a demographic time bomb that’s gone off. They have a pretty moribund real estate market. They have very little to none foreign direct investment. So I don’t agree with you. Okay. Well, I would just say that I think what China has been doing meaning they’re just as challenged as we are. They have different challenges. Yeah. No, it’s a good point. Yeah.

41:35 I would just say that I think that China is a rising great power. I think that over the last decade their economy grew to the point where it’s roughly the size of the US’s economy. Certainly on a PPP basis, it might even be bigger, right? But on an international currency basis, it’s still smaller. But anyway, the point being that as China has risen as a great power, it sought to create its own international institutions.

42:00 And so if you think about what the US has, the US has NATO obviously and the G7 and the World Bank and the IMF and all that kind of stuff. And what China has sought to do is create, you know, they created the Shanghai Cooperation Organization, which is a security focused organization. I wouldn’t call it quite the equivalent to NATO, but it’s trending in that direction. They’ve been probably the main sponsor behind BRICS and Belt and Road, I think, is part of that. They’re creating their own network of relationships.

42:30 They are creating their own international order and it is a challenge to the US order. I mean during the unipolar moment from say 1991 to I don’t know 2017 the US was the only great power in the system and we basically defined all the key international institutions and China as it’s risen has done what all great powers seek to do which is to create their own order.

42:55 And so yeah I think they do want to be somewhat independent of the US they don’t want to be dependent on us and I think we’re realizing that we have to act the same way and the shame of it is that when we were running all the key institutions during the unipolar moment like the WTO. We engaged in so many foolish policies that allowed China to dominate rare earths. I mean we should never have let that happen.

43:25 Can I clarify one thing which is I think that a lot of people don’t know this historical artifact which I think is so fascinating which is I don’t think China is a rising power. I think China is a reascending power. And the reason I say that is if you go back to 1500 to now, over all of those years, China had the world’s largest GDP 70% of those years. 70%.

43:55 So if you think about it in that context, especially as a Confucian society, I think the Chinese think about this as hold on, this is reasserting the dominance that we’ve always had. And I think if you start to look at it through that lens, that’s why they view the blending of public private partnerships, the organizations that go and help backstop private companies in China.

44:20 The other interesting thing which I learned studying China is how they allocate capital. The capital allocation system is both rigid, but it’s incredibly flexible. What do I mean? The way that China allocates money is the following. You have Xi Jinping and his close circle of people. They dictate the priorities, right? I think there was an article, Nick, you can find it. But Xi is personally right now helping to draft the five-year business plan of China.

44:50 But what happens is it goes from that central group of like 7 8 9 people to the Politburo. And when it gets approved by the Politburo, it gets sent to all the provinces and then it gets sent to the prefectures. So an example was in 2006 and 2007 when they decided to prioritize EVs. What you effectively have is a cascading set of venture capitalists who are operating against a national priority and then they are rewarded for it.

45:20 And so you essentially have 300 VCs running around organizing human capital in all of these different provinces against all of these different priorities. And at the end of that you get a BYD or you get a Xiaomi or you get these great companies. And I think that that is what’s so daunting if you think about it.

45:45 So that’s another thing that we have to factor as well. And they have one of those plans, Chamath, for every industry not just so they have like an agriculture five-year plan. They have an energy 5-year plan and in each one it details out their forecast of not just like how to catch up but what’s possible and that’s why they’re charting new avenues of innovation in nuclear power.

46:10 Yeah. It’s about them, I think, getting back to where they have been as opposed to them realizing that they could potentially be the world’s largest economy. It’s more them saying, “We were the largest for so long. We took our eye off the ball and now we need to get refocused.” I think that’s more of a national pride kind of motivation here. But it’s obviously different people, different country, different governing structure, etc. Isn’t that incredible though? 70% of the years since 1500 they had the largest GDP in the world. It is incredible. It’s stunning.

46:45 Yeah. I mean, there were these innovations that drove some of these ships. The technology of ships and fleets of ships drove the Dutch Empire to its prowess and then the British Empire to its prowess. And there were these moments of technological innovation. But you’re right, always on the heels was China. And this may be China’s moment of resurgence across the board.

47:10 The person who really saw this ahead of the curve was Lee Kuan Yew from Singapore. Basically the founder of Singapore and Graham Allison wrote a book about Lee Kuan Yew where he talks about his insights and there’s a couple of quotes here that I think are really good on this. What Lee Kuan Yew said is that it’s not possible to pretend that this China is just another big player. This is the biggest player in the history of the world.

47:40 And he also said that the size of China’s displacement of the world balance is such that the world must find a new balance. So Chamath, like you’re saying, China was the biggest power in the world for hundreds of years and then it was kind of overtaken by the western powers and now it’s kind of reasserting itself. But in any event, this is why I think that during the unipolar moment, the US should have been a lot more careful about facilitating China’s rise because we created a monster.

48:10 And this is the point that professor Mearsheimer has made many times and he wrote about this going back to 2002 saying in his article about whether China could rise peacefully and he said the answer is no because if we facilitate their rise we will create a geopolitical competitor and we’ll go from being a unipolar world order to a multipolar world order and that’s basically what’s happened.

48:40 But at the time, just remember like when they were admitted to the WTO and the motivation was really about lowering the cost of goods and services for the American consumer, which was like an intrinsically reasonable motivation. It wasn’t like there was some nefarious intention at the time, but it was shortsighted in that it didn’t do the calculus. Fast forward 20, 30, 40 years to determine, well, if we then kneecap our ability to actually produce anything, where are we going to be if they do start to decouple?

49:10 That’s it was hubris though. It was hubris because we thought that there was only one great power in the system and that’s the way it would always be. We thought great power politics was off the table and we thought that we were at the end of history. It wasn’t hubris, it was greed. The CEOs at the time and the people who were influential in making donations to politicians wanted to make more money. That’s why they did it. They didn’t do it with anything other than a profit motivation, which is greed.

49:40 Part of American like mindset at the time was that we had a monopoly on knowledge work, right? And this was I think very key. This speaks to the hubris of the decision-making was that this knowledge work is where you create a separation of labor from intellect. And that there was this idea that America would move into a services economy fully and not have to be in a labor economy and the labor economy could be outsourced.

50:05 Ultimately, that didn’t yield true. The internet kind of created a rival to knowledge work or a diffusion of knowledge and diffusion of knowledge capacity to societies around the world, which really did create a different structure than we anticipated at the time. I think that’s looking in the rearview mirror, Friedberg. I think the CEOs at that time were like how do we increase the profit margin on an iPhone on a PC on any product being created and the way to do that is find the lowest labor source possible and that was China they just did it out of pure so that was part of it.

50:40 But there was another factor here as well which I do think the ideology was really powerful and remember in the 1990s the leading philosopher or international relations theorist the most celebrated book was the End of History by Francis Fukuyama and what he basically said is that we’re at the end of history because liberal democracy has won and it’s only a matter of time before the whole world becomes liberal democracies.

51:05 And the theory about China was that if they got rich, they would become more like us, that people would rise up and demand a liberal democratic government as they became rich. And so we then justified, and there probably was an element of greed to this as well, we then justified helping China rise on the grounds that somehow this wealth would turn them into a democracy.

51:30 And in fact, all that it did was make them richer and more powerful. It didn’t change their government. It just turned them into a huge geopolitical competitor to the US. The author who actually predicted this and well there’s Mearsheimer who predicted in the early 2000s also Samuel Huntington wrote a book called the Clash of Civilizations in the mid ’90s that was sort of the opposite of end of history. End of history was celebrated. Clash of Civilizations was sort of reviled.

52:00 But what Huntington said is that what these other civilizations want around the world is not westernization. They want modernization. And as they modernize and become richer, they’re not going to basically westernize. They’re going to become competitors to the western order. And that’s basically what happened.

52:25 I thought for sure you were going to say Friedman’s The World Is Flat, which was I think air cover for all this because you would get the peace dividend if everybody had McDonald’s and everybody was watching the same movies. Go ahead, Chamath. You have some thoughts. That Huntington book is actually exceptional. The thing with Francis Fukuyama is he writes in this beautiful way, but he literally bats zero. It’s like you could basically read a Francis Fukuyama book and understand that whatever the opposite of what he wrote is likely going to happen. That anyway, that’s neither here nor there.

52:59 But I just wanted to pick on what Jason said because I agree with him. The thing is you had a lot of this geopolitical tension Sacks which I think you articulated it well like the elites were coming together like we’re going to convert China we’re going to do all of this stuff and I think that was a trend but then what hyperaccelerated it in my opinion was something that was very tactical which Jason mentioned which is the compensation plans of most of the executives and CEOs of these public corporations started to get very tuned to gameable metrics like EPS in and around that same time.

53:30 And so Jason’s right, the direct financial incentives to basically think about this as a monocultural global world where you can just export things to every nook and cranny of the world to optimize for the flow of profits back to you, trap them in any country you want because it doesn’t ultimately matter to your compensation. That perversion also happened at the same time which I think accelerated what otherwise would have given us maybe another decade or two to realize that we weren’t in complete control of our destiny.

54:00 So it gets you can see it also in Taiwan with like how in the world did 90% of the chips come out of one tiny island? It’s just capitalism like it’s the best place to do it at the cheapest price, the most efficiently. And then you have now this dependency on Taiwan because we didn’t think about redundancy and supply chain.

54:25 Friedberg, in related international news, Trump has put up or the Trump administration has put up about $40 billion to help out Argentina. Can you explain what’s going on there? They’re trying to bolster the credit rating of Argentina with the currency swap that’s related to the financial condition the proponents would argue he inherited. The opponents would say he’s making things worse. The US is stepping in to support his free market kind of principles that are ultimately going to drive cross-border cooperation. So, I think that the swap agreement puts in place a bolstering of support.

54:55 I thought this was related directly to rare earths. I’m not sure about rare earth. All right, Chamath. I saw you retweeting some of this and there’s been a little bit of a back channel in the last 48 hours. Kind of breaking news here. Data centers are spiking the cost of energy or people are perceiving it to be doing so in different geographies here in the United States and I guess not wanting to be hated or get into wars with consumers some big tech companies are standing down plans. Explain what’s going on here Chamath and if this is a trend yet.

55:30 I put this out there when I wrote that because I do think that this is the beginning of a trend. Just to be very specific, Google was planning a $1 billion spend on a data center in Indianapolis County or Indianapolis. And essentially what happened was there was enough push back that it looked like if it went to vote in the city council, they would have voted against the approval of the data center, against the necessary zoning and other regulatory approvals.

56:00 And so I think to avoid what would have been an awkward press cycle, Google just pulled it and said, “Don’t worry, we’re not going to do this here.” And so that in and of itself I think is an isolated incident except that in this same week it happened two other times in Wisconsin there was a proposal very similar to Google’s but this time from Microsoft where again those local residents got pretty upset and in the 11th hour Microsoft pulled it and then in the third example there was an attempt by an Amazon data center to get built near Tucson. That I think also was mothballed.

56:35 So why is this happening? When I tweeted this out or when I posted it rather, the comments were pretty instructive. I think that there are three things that I took away from it. Thing number one is that people are seeing their prices of electricity go up in the local areas where the data centers are being built. The second is that people are worried about the water consumption of these data centers and the cost of water and the access to clean water and that the plans to be net-neutral on water consumption may or may not be real. So there’s a concern there.

57:05 And then the third that many of the people commented was about the actual noise pollution that it was creating. But I took a step back from this and my thought is very simple, which is it actually speaks to one of three very important inflection points that we’re dealing with on the AI side, right? So one of them we talked about last week, which is you can’t have 50 state laws, right? It needs to come from the federal government so that there’s one set of regulation and that there’s clarity.

57:35 So effectively what Sacks has been able to execute on the crypto side, I think his intention is to try to do this on the AI side and I think the federal government needs to be given a chance to do that. Otherwise locally in the United States the only winners are going to be lawyers and then we’re going to create an own goal and China’s going to win.

58:00 Okay. Second, we just talked about it is the government needs to be the economic backstop to the US supply chain that powers AI, right? And we talked about all these things, the metals, the minerals, the rare earths, so that the taxes that companies can extract are mostly market driven and not exploitative and doesn’t create air pockets in the funding cycle. Okay, so we talked about that.

58:25 But here’s the thing that nobody talks about. When you look at these data centers, I think what it’s saying bottoms up is that these hyperscalers need to get these communities on their side. I think that there is no understanding of what a token is. What is a token? I don’t think if you ask the average person on the street, they know what it is. What they know is that tokens are not jobs.

58:50 And if AI is going to be embraced by the public, I think what we need to do a better job of is to show the tangible economic benefits, especially in places like Wisconsin and Indiana that may feel like they’re missing out. So, we can’t have this narrative that AI may take your job away while it’s also doubling your electricity price because they’re not feeling and seeing the abundance that we think that it can offer.

59:15 This is exactly right, Chamath. If you think about the average American citizen, you know, they have somebody in their family who drives for Uber or DoorDash, they have truck drivers, they have Amazon factory workers, and all those jobs are going away. It’s just a matter of when. And some people believe we can handle the displacement, others don’t.

59:40 Go ahead. Friedberg. Jason, my idea, just sorry, my idea, my idea is you have to use the balance sheet of these big companies, use that free cash flow and it can act as a cushion for a lot of what needs to happen. So, they can pay higher tariffs for electricity. They can also just frankly go and pay for some amount of the electricity bill of these local folks. They could pay for solar and storage if they wanted to.

60:05 There’s a plethora of ideas here where they probably are going to need to step into market to get folks on their side and I think they have to do it. It’s interesting you mentioned that because I just had Zack Dell from Base Power on This Week in Startups last week and what they do is they put batteries on the side of your house outside their square ones so they’re not as felt as industrial like industrial ones.

60:30 And then they will fill those batteries when the electricity is cheap. They’ll deploy it when it’s expensive. They get the arbitrage and I said to him on the show like it’s only they only charge consumers I think $500 or $1,000 to install it just so they have some skin in the game. You don’t have to rip your roof apart and put solar on. It’s just batteries.

60:55 And they said, “Well, why don’t you do that and like do an entire neighborhood? Like when they build these 3,000 home infill neighborhoods, why don’t you put them on every single one and then create a network for data centers?” And he said, “Stand by. That’s what exactly what we’re working on.” So it kind of combines your idea.

61:15 Sacks, you’re the czar. What are your thoughts on what Chamath points out is which is the average working American and their perception of AI? You have job loss, you have electric bills going up, and then you have, hey, fake news, the reality, is this real or not? These Sora slop videos I’m seeing, it feels like there’s a little bit of a trend towards a negative framing of the AI innovation and maybe it’s not going to help the bottom half of society. Are you seeing that? Do you believe it? And do you have plans to counter it?

61:45 Well, what I see is that we just came off a quarter of 3.8% economic growth, of which 40% was attributable to AI. So, in other words, if we didn’t have this AI boom going on, by my math, our GDP growth rate in Q2 would have been 2.3% instead of 3.8%. So AI is the difference between having great GDP growth, say around 4%. And modest GDP growth around 2%.

62:15 So it seems to me that everyone who wants to have a great economy should be supportive of this AI boom that’s happening. The job loss narrative is just that. It’s just a narrative. It’s a story. The media loves to tell it. It’s mostly theoretical. It’s mostly anecdotal. You can point to a few jobs here and there, but there’s no evidence of widespread job loss.

62:40 This is just something that people are prognosticating about the future. And in every previous technological revolution that we’ve had, yes, the jobs have shifted, but they’ve shifted from more rote jobs to more sophisticated jobs that create a higher standard of living for everybody.

63:00 The best example being that in the year 1900, 50% of the US economy was involved in agriculture. In other words, one out of every two people were farmers. By the year 2000, that number had dropped to 2%. The difference, the 48% did not become unemployed. They went off and did other things. They worked in factories, for example, and they went into the services part of the economy.

63:30 So I think what’s going to happen here is that AI is going to enable people to shift their work to more gratifying and less rote parts of the economy that will increase productivity and standards of living for everybody.

63:50 Balaji has a really good way of explaining this and I think this goes to the heart of why the job loss narrative is a fallacy is because humans are end-to-end. What makes them really good and irreplaceable is that they can do an entire job end to end and they can pivot their objective and figure out what their objective should be.

64:15 AI is not like that. It has to be told what to do. It has to be prompted and then when it gives you a result, that result has to be validated to make sure it’s not hallucinating. And then frequently you don’t really get the result you’re looking for. So you have to iterate and you have to reprompt and you go through this loop where you do it over and over again until you get something that’s valuable.

64:40 So in other words, humans do the things at the end. They do the prompting and validation. AI does the stuff in the middle. So as Balaji says, humans are end to end. AI is middle to middle. This is why fundamentally I think that AI and humans will be very synergistic. AI will not be a replacement for humans. They’re going to do the stuff in the middle that humans don’t like to do and it’s going to allow humans to be much more productive.

65:05 So right now I’m very optimistic about this boom. And I do think that people who are criticizing it should really think about whether they want the US to have 2% growth rates or 4% growth rates because that’s what we’re really talking about here.

65:25 Friedberg, CEO of Uber and Tesla believe the opposite. They think these driver jobs are gone pretty quickly. The data showing there’s a bit of a serious problem right now with young people getting jobs specifically because of AI. And obviously GDP is not wages. The people we’re talking about who are affected by these job losses don’t own equities. The top 50-55% of the country own equities. So what do you think about this narrative? Do you believe it’s a false narrative, a true narrative somewhere in between?

65:55 Okay, here’s how I would think about what may happen rather than think about someone quote losing their job, which you know is a term you keep using and others keep using and I think would be yeah I don’t what whatever it is you’re acting like they’re passively in a victim state.

66:20 We have the lowest unemployment in history and there’s an extraordinary demand for new capacity of work by humans to do stuff in the United States right now because of the extraordinary manufacturing buildout that is underway driven largely by AI and soon-to-be robotics and several other industries. We just talked about rare earths mining and processing. There are many industries that are taking off in this country that have not existed and there is a demand for labor.

66:50 And when there’s a demand for labor and there’s a shortage of people to do the work, the employer typically says, “Let’s go recruit. Let’s go spend. Let’s go train.” And when you have an innovation cycle like is underway right now, the hiring for the new jobs happens before the loss of the old jobs happens. So you have to have someone that builds all the Model T’s before people stop becoming horse buggy drivers.

67:20 So who’s going to do all the Model T building? They’re going to get paid. They’re going to get offered money to go do those jobs. So what typically happens in these cycles is that there’s a recruitment exercise, a recruiting cycle that happens upfront. And so rather than say all these drivers are going to lose their jobs, another way to frame it is that all of these drivers are going to be offered new, higher paying jobs before there’s lower demand for driving.

67:50 And they’re going to say, I can go make twice as much money per hour by going over to take this new job. And then they’re going to say, “I’d rather do that than drive. I’m getting paid twice as much and I get to work on more interesting stuff. I like that.” That’s how this is likely going to go. That is the more positive view on how what you’re calling job displacement actually plays out in the US economy in the decade ahead.

68:15 A recruiting cycle precedes the elimination of old jobs that aren’t needed anymore. That recruiting cycle is a net positive for people. They say, “Wow, that is an amazing improvement in my income, an improvement in my lifestyle. I get to work on more interesting things. My life is better because of it.” And then years later, the demand for those old jobs starts to die down, but at that point, everyone’s been recruited away anyway.

68:40 So, Friedberg, you mentioned the Model T putting all the horse and buggies out of business. And if we had today’s media environment around back in the days of Henry Ford, that’s exactly what they would have been bemoaning is that all the horse and buggy guys are going to be put out of business.

69:00 And part of the reason why that would have been a very bad take is because it’s easy to see the people who are being displaced in the short term like maybe the Uber drivers or something like that. But it’s hard to see all the new industries and all the new businesses and all the new jobs that don’t even exist yet that are going to be created.

69:25 So for example, what were the downstream effects of the Model T? Well, first of all, it created this new kind of industrial assembly line which applied not just to cars but to all sorts of goods. I mean Henry Ford pioneered that and that had huge ramifications for the US becoming the industrial power that it ultimately became which led it to winning World War II.

69:50 Then just in terms of the car, you had things like the build out of the interstate highway system, the tire industry. Yeah. That just about the highways that led to Holiday Inn and hotels and motels and drive-through windows and McDonald’s and car culture and and the taxi cab industry itself emerged.

70:15 George Lucas got his start as a director by making the film American Graffiti which was all about car culture in the 1950s. So that led to Star Wars. I mean, there’s all these butterfly effects of the Model T being invented, which are absolutely massive. And it would have been impossible to foresee all of that stuff a hundred years ago.

70:40 When you have these new industrial revolutions or these new technological revolutions, it’s going to increase the capacity of humans to design all sorts of new products, create all sorts of new businesses. And what we’ve seen is that this lump of labor fallacy that you have all these humans that we don’t know what to do with so you have to just keep them busy has always proven to be a fallacy throughout human history. And by the way, those buggy drivers did not lose their jobs. They chose to go into one of these new industries where they were offered more money.

71:10 I don’t think this is the issue at all. I would say that when you look at Arizona, Indiana, and Wisconsin, what you are looking at are people whose jobs are not at risk today, tomorrow or the next day because of AI. I don’t think that’s what it is. And I think that they probably on the margins benefit.

71:35 The question is more how are they getting information and how are they processing their point of view so that they show up to these local municipality meetings and essentially cancel progress. That is a very important thing to diagnose because it is not isolated. So I’m trying to ask the question which I think is a more practical and important one is what do we do to make sure that the narrative and the facts are clear.

72:00 Because right now you’re seeing very different and diverse pockets of people in largely purple and then some red states voting against the exact things we need to bring this abundance forward. And I think we need to figure out why and how that’s happening and have a version that counteracts that. Otherwise, this will become more slowed. It will not go faster.

72:25 Well, you bring up a good point there. There are I would say there’s legitimate and illegitimate reasons to be skeptical of AI. So, the one that you bring up, Chamath, that I think is very legitimate is that we are going to have to stand up a lot more electricity power generation. Otherwise, it could drive residential rates up and that will create a backlash to AI and the buildout of data centers and we don’t want that. So, that’s a legitimate issue that has to be solved.

72:55 However, there are what I would call illegitimate reasons to fear AI. And that’s got everything to do with the media environment. And there spreading of all these unproven narratives in many cases based on contrived studies where they’re saying that, you know, there’s going to be 50% job loss in the next few years or you have all the Terminator type scenarios where AI is going to grow beyond our control.

73:20 All of these doomer narratives that are being created that are scaring people and creating a knee-jerk reaction at the state level, which we talked about last week, where there’s now a thousand bills going through state legislatures mostly because the legislators feel a need to quote unquote do something, not because they know what they want to do. So, there’s a lot of unnecessary fear out there that’s been created by the media and then by organizations and companies who have a regulatory capture agenda around this.

73:50 I hear you. What I’m saying is we need to figure out how to fix this because you can’t have Google, Microsoft, and Amazon cancel essential projects that advance this entire sector and economy forward. We’re not talking about some random fly by night business here. We’re talking about three of the five pinnacle horsemen of the AI race that we are fielding on the field.

74:15 Well, we’re looking for suggestions. Do you have any off the top of your head? Do you think it’s in education? Do you think it’s in explaining the value of AI and how those people in those states would benefit from it or do you think it’s just simple economics lower their electricity bill?

74:35 I think there are two things. The people in Indiana and Wisconsin said again electricity prices, water and noise. I think that we can fix those problems and I think we we meaning our industry and specifically the hyperscalers need to start using these gobs of free cash that today public markets don’t value anyways. It’s not like Google, Amazon, Facebook gets credit for their cash.

75:00 In fact, Facebook’s stock price went up when they basically burned through all their cash. You want to see them invest. And so, if you really want to take the capex around AI and make it a true super cycle, there’s another avenue of where capital can be deployed. I would encourage the CEOs of these companies to wake up and get their act together and do it. That’s number one.

75:25 And then the second thing is I think that we need to have better spokesmen for our industry. So meaning every time you see somebody talking about all these navel gazing technologies and then can’t translate it into simple English into product value. For example, this week on the one side we have Anthropic AI doomerism that Sacks had to confront, but then on the other side there were all of these people that got freaked out because OpenAI wants to push towards erotica and all they could think of was the impact to their children.

75:55 Again, this is not necessarily true or not true, but the point is we need to have better, more eloquent, reasonable spokesmen who can articulate a vision that everybody can buy into. And I said this on X, what is Arabella and Soros going to get behind now to find a boogeyman? You don’t have Israel. You’re not going to have Ukraine soon. So, what are you going to find as a boogeyman? And it’s unfortunately sitting right in our backyard.

76:14 Yeah. I’m not sure Altman is the greatest spokesperson for the industry. This has been another amazing episode of the number one podcast in the world, the All-In podcast. Tell your friends, write a review about how much you love the All-In podcast. We’ll see you. This is episode 247. Thank you to our Sultan of Science. We missed you last week. To our Czar, have a great time this weekend at SlutCon. Be safe at SlutCon. SlutCon’s already happened to be clear. I’m not going. We missed it. And of course, puts the dick in dictator. Your chairman. Love you all. Let your winners ride.