E152: Real estate chaos, WeWork bankruptcy, Biden regulates AI, Ukraine's “Cronkite Moment” & more

the business is just drowning in these lease obligations and to restructure 777 lease obligations in this environment that we're talking about while doing what Chamath is saying, lowering rents to attract employers to show up and actually rent space from them is obviously causing the business model to distort even worse than it has been historically.

There's no question that WeWork has been a capital destruction machine. That being said, I actually think that some private equity player is going to buy this out of bankruptcy and make a fortune.

Oh my God, you just convinced me. Let's go buy it.

if what we think is now this is just a version of conflict, timeout, and the market de-risks that, then it's actually pretty positive for equities, for startups

So if you believe that we're going to be in a cycle of rate decreases and that whole thing has played its way out, then everything's going to rally.

If we don't allow our market to develop in the United States, India and China and Singapore and other markets will get well ahead of us in terms of their model development and their capabilities as a nation and their capabilities as an industry.

Yeah, but I think, Friedberg, your larger point about US versus India versus China, I think this could have a major impact on our global competitiveness.

I think what changed for the market was the Fed's rhetoric. And I think that they were holding on to this option that they were going to show up out of nowhere with another 25 or 50 basis point increase. And I think that that's fundamentally now off the table.

I'm just really of the point of view, as you guys know, that the market needs to be allowed to develop... the more our government actors step in and try and tell us what systems and methods we are allowed to use to build stuff, the more at risk we are falling behind.

This is how we're going to end up with a Federal Software Commission, just like we have an FCC to run big communications and we have an FDA to run big pharma. We're going to end up with a Federal Software Commission to run software, big software.

So I did write a blog post sort of asking for this AI regulation. And I do think the model of the FDA is probably the best one, where in certain use cases, I do think that you can create a sandbox where these things can be tested and I think can be evaluated.

We have nothing to really show for it yet, so it's hard to say that. It's cute and it's cool, but there's nothing really substantive.

One is a new modality in human-computer interaction through chat, which is incredible and opens up lots of new software applications and markets, which I think can be transformative and worth trillions of dollars.

The $3 trillion of debt that we just mentioned that's sitting on all the bank's balance sheets is all being held at par. They're not discounting it at all, and they're not marking it as being impaired in any way... there's a real risk in the market that I don't think has been fully accounted for, that we're starting to see the cracks.

I think you could give it to me for zero and I wouldn't bring my team back there.

for San Francisco, I'd say probably half the debt should be written off... there'll be about 20 more that are coming to market that will trade in the next year. It's going to be fire sale after fire sale.

You know, when you see like what Jimmy Donaldson does, or even like Kim Kardashian, what they do as content creators, it's just an intense process that then creates all this upside.

It looks like the markets are stable. Let's cut rates, right? Let's reintroduce some demand into the market.

So I mostly see this Biden program as symbolic, but the question is whether the symbolism will actually drive better behavior by these blue cities.

I personally think they're just trying to find more ways to pump money into supporting commercial real estate markets because of the issues we just highlighted. And I think this is the first of what will likely be several programs to support, framed as things like affordable housing, but really designed to support the economic loss impairment that's going to be inevitable at some point.

There's gonna be a huge budget shortfall over the next year and next couple of years, because there's no activity. I mean, a third of the economic activity of the city has just dried up.

counties and municipalities and cities that are in much worse fiscal shape than San Francisco was able to stay incompetent for a lot longer. And so that delta T of incompetence tends to be about five to ten years. I would say the midpoint is eight.

There's a level of investment multiplied by a level of improvement in the underlying hardware, multiplied by a level of improvement in the underlying models that's creating a 400x improvement from the baseline every year.

Will policymakers in Washington change their tune or change their perspective on this? Probably not, the uniparty of both Republicans and Democrats are still seems to be a majority who want to fund another 61 billion for Ukraine.

I've shared my point of view for a couple of years now. I think the US is in a, call it subconscious conflict escalatory state that would continue to drive us into these sorts of conflict

Because one of the big targets here is going to be open source software. So if you are, for example, open AI, which is no longer open, it's closed source, the number one thing you want to do is pull up the ladder before open source software can get a lot of momentum.

And by the way, Lama 2 is out there. Hardware is out there. All the tooling is out there for others to start to get well ahead.

Yeah, before I give all the credit to Facebook, I'd rather say that I think there are a lot of open source alternatives, including Mistral, that I think are much better.

Well, book value is a term that you need to put in quotes. So my question would be, what are the rules around the real mark to market? Because I think that when we talked about the banking crisis, the biggest problem was these guys were playing fast and loose with valuations.