E162: Live from Davos! Milei goes viral, Adam Neumann's headwinds, streaming's broken model, microplastics & more

27:07When you look at airplanes, you have these three sections of risk that each are compounding because there is no competition. Number one is that the monopoly vendor has zero pressure to actually test these things adequately, because on the other side of building something well is shareholder pressure to deliver something sooner and faster so that they can reap more profits. Then second is you have a regulatory infrastructure that puts rules on top of rules, but then will bend the rules if you donate to them. Right, and that's measured and known and then the third are the folks that actually operate the planes who have this Actual incentive to not see technical improvements because it defends their job for longer And in all of these cases there isn't enough competition to shine the light on this to say how does society actually want this market to operate?

27:58This is collectivism. It's not working Freiburg, you have thoughts on this Boeing regulatory capture in the issue of only having two vendors there and And the complexity of these machines now in relation to that. Nick, you can pull this up. This is an audit of the business model for a company called TransDime Group. TransDime Group is an aircraft aerospace parts manufacturer. They sell certified, regulated aircraft parts to aviation companies as well as to airlines, private pilots and also the government. And they do about $7 billion in revenue, $3 .5 billion in EBITDA. So, Timoff, here, point a couple of weeks ago about what's the appropriate competitive EBITDA margin that a company can ultimately achieve.

28:51Their EBITDA margin is 53%. This company. Better than Facebook. Insane. On $7 billion of revenue and growing, Nick, if you want to pull up their stock chart, and you guys can see how the business has performed over the years. And their business model has been relatively simple. They've acquired aerospace companies that have certified parts. They drop the cost and raise the price. And they do that over and over again. And here's the business over the last 10 years. This thing is roughly 10 -bagger, 8 -10 -bagger in the last 10 years. The market cap is 60 billion today. No end in sight. And so there was a government audit done of the business.

29:29by using uncertified cost data, which is one of the most reliable sources of information to perform cost analysis, we found that TransTime earned excess profit of at least $21 million on 105 spare parts on 150 contracts. So there are selling spare parts into the government. The government auditor came in, audited them, and identified because there's no real audit, there's no real accountability in government as purchasers, but there is regulatory authority on deciding who are the winners and who are the losers in the market. Transtime has been elected a winner because they have regulatory approval to make and sell these parts.

30:05The cost to get approval to make and sell these parts is so high that it makes it prohibitive for startups to come in and compete in this marketplace. And now that they're a preferred supplier and they get these single contracts where there's no competition to be a supplier, they can raise the price every year. multiple audit reports over the last 23 years have highlighted the problem of the Department of Defense paying excess profits on sole source contracts where cost analysis was not used to determine fair and reasonable prices and this problem continues to occur. Now, I'm not necessarily saying that this is a negative on trans time.

30:38It's a fantastic business. It's well run. It's one of the best run public companies with a multi -ten billion dollar market cap in the world. But the condition is that the US government comes in and picks and chooses through its regulatory authority, which companies can make products, the cost to enter and compete becomes prohibitively high. And then the company has complete pricing power and there's very little accountability in the overall system. And I think that this plays out not just with this company, but obviously also with Boeing and the fact that we've narrowed down the competitive market space to just a few sole source providers that have very little accountability and eventually these sorts of conditions arise.

31:12Either prices get too high, quality degrades, all the other things that natural market forces would keep it check on. Yeah, and in terms of competition, Chimoff, the, I guess the only thing you could say is consumers could potentially maybe try to avoid the 737 max. I know I did when all these accidents happen. I just told my person who books the flights, hey, do not put me on a 737 max period full stop. And you know what, you're going to wind up paying a lot more. You're going to have a hard time getting certain routes. You're going to reduce it because most airlines, I think, have these 737 max.

31:48maxes in there. So when you have such a few number of providers to your point about, it's not like cars, it's not fragmented like that. You can't avoid a certain car type, a plane type the way you can avoid a car type. So just wrapping up here, Trimoth, what changes should we see in terms of late stage capitalism, something in the example like air travel and manufacturers? Is there any way to unwind this reasonably or is it too late because we're at this time. Well, I go back to some of the examples that we've made fun of before. You have to rely on the government to actually be competent in key moments in time.

32:28I think this is one of them. The organization that could do something about it, for example, take the FTC or even take the DOJ. We are investigating Amazon's purchase of the portable vacuum cleaner, Roomba, right? Critically important issue. And that is apparently for the American people higher than the sclerosis that the government has enabled, enabled in the airline industry, which affects everybody. So could the right government agencies choose to actually focus on something important here and actually figure out, hmm, why is this happening? Because I think the door plugs issue is in the endemic of a much bigger problem.

33:16This is a company that's rotting because there is no accountability. And the reason there's no accountability is there's no real functional competition. And I have not seen any good answer to accountability other than competition. Yeah, I mean, the good news is the FAA really took a quick action to ground these 171 Boeing 7379 max aeroplanes. But they do not understand the scope of the problem if they let them back in the fleet and this is happening. The bigger picture problem of lack of competition, yeah. They are... No, no, no, my point is... My point is, you had to adjudicate the interaction of very complicated hardware and software in that first go around.

34:00Here is just a pure systemic hardware failure. So the point is that whether it's them or their suppliers, there's just some complacency that sets in when you know you will always have the business to Friedberg's point. It is a very corrosive thing in running a business, trying to have motivated employees when they know on the back end of it that they could make anything in the world and they'll just be able to sell it to somebody and they'll have to take it. That's that example that Freeberg just cited. 20 odd million dollars for just random stuff. What is it? 15 pieces. That's crazy. That's just straight up theft.

34:47And so when you have that, how do you expect the employees of that organization to give a ****? I don't see how I don't see how you could expect that. And so my point is the FAA has a much bigger problem. So for example, like the DOE has a loan program to try to create a diverse energy infrastructure in the United States. Maybe we need to look at some of these sectors and instead of building the administrative state, take some of that money instead and just create programs to get more competition. All right. In other news, Adam Newman, you remember from WeWorkInfamy -slash -fame, it has a new start.

35:22that you may have heard of a flow, they've raised a ton of money. He started buying a bunch of apartment buildings, the idea. People can rent nice apartments in cool cities. That focused more on social interaction and hanging out, common spaces, all that great stuff. And there's also allegedly or reportedly some sort of rent to own where renters can receive equity in the company over time. And I don't think this has ever been released, but the idea would be maybe you own shares and flow, flow manages around 3 ,000 units, most of which were purchased by Newman after he left. We worked and you know, he took down a windfall as an exit package.

35:58And so according to the real deal, this is a real estate publication. Newman had a 60 million variable rate mortgage on one of these properties in June. Sax, maybe you could explain to us what's going on here since you have a lot of experience in real estate. Well, it's pretty simple. He can't make his interest payments. Okay. So the reason is is because he had floating rate debt. So if he had locked in his debt over say 10 years back in when he bought this building in 2021 or whenever it was, when interest rates were extremely low, you know, that was during the the Zor period. Probably could have locked in long -term debt at maybe even 3 % 3 or 4 % and instead he got floating rate debt and if you look at or commercial debt is now, I mean, it's 7, 8, 9%.

36:43If you can get it, which is pretty hard. So he maxed out on debt when he bought these buildings. He bought them top of market. It sounds like in 2021 because real estate, like a lot of things, moves inversely to interest rates. So when interest rates spiked over the last year or so, then real estate valuations went down. So he bought a bunch of buildings, top of market, using a lot of debt that was floating rate, Interest rates spike perfect storm now we can't make his interest payments Crazy part about this when I was watching it happened to math and we talked about it I think on the program at the time was in recent horror.

37:21It's put in like over 300 million at a billion dollar valuation But they didn't do that in peak syrup. They did that in 2022 and the writing was on the wall What do you thoughts on why they would make a bet like that and Yeah, just tech vc's betting on real estate for a second time. How does that occur? Well, I don't think it occurs because they cared about real estate. I think it allows them to take $300 million of committed capital and put it out there so that they're $300 million less available, which means that they're $300 million closer to raising a new fund, which means that they can raise, they can charge 2 % on more money.

38:02That's why they did it. Got it. Yeah. So just keep the money train deploying capital. It's a place where you can put a big huge check. and you can raise your next fund. Yeah. Why not? Okay. Well, there you have it. Let me offer a counter. I don't disagree. I think that candidly what you've said is exactly how mega funds are thinking about it. We have to deploy capital to raise our next fund. And if we still have capital in our last fund, then we can't deploy. Jason. Freeberg. Well, if you're going to have to deploy large amounts of capital, wouldn't you feel better deploying that capital with an entrepreneur who's actually run a big business before, or even though the business failed.

38:39No, no, if you're, if you, if you are not optimized for fees, you would do what Peter tealed did and just have the fund and return the money. Right. And for Peter too, because he's already won. But for the else that's trying to win, the only way to win in a world where your exits are not that great is to actually generate money via fees. Even though that fees are taxed at current income, that's the way to win, inventor. It's not caring. It's by fees. And so it's and I don't blame Andrews and I think like that's that's smart for them to do and if they have folks that are willing to Enable that by giving the money they should do it But are they gonna generate huge rates of return?

39:20Probably not because that's not what real estate is known for real estate is known for long steady tax arms That's slowly compound for the for the owner of the company over 20 or the owner of the business over 25 to 35 years. That's not what adventure fund is supposed to be doing for a 10 year, 12 year return cycle. So obviously they're doing it for fees. That's okay. I think that's capitalism. What do the LPs then think, SACs? If we look at this, you know, you're an LP and a technology firm, I'll take Andreessen out of it for a second, but let's just say some giant LP gives giant amounts of money to adventure capital firm and then they'd deployed in real estate.

39:57What happens, you know, in their minds, and is there any kind of tension that would occur? Just handing out in the situation. You can never judge a VC based on one investment. If we were to do that, every VC would have a lot of egg on their face because we're supposed to take big swings and swing for the fences and try and hit home runs and grand slams. And a lot of them are going to make you look foolish. You have to look at an investment portfolio and track returns over time. So I wouldn't judge any particular investor based on one investment. So I don't think that's fair. Now, in the case of this investment, if you want me to explain what I think went wrong, I think Adam Newman had a compelling vision.

40:37His vision was to create a new experience in, I guess you call it, apartment living, and that people would be willing to pay more for that because he would create this national brand in apartments. And right now apartments are super local and there is no brand in apartment living. So I think as an entrepreneur as an operator, he had a great vision and I think he actually achieved his vision. If you read these articles carefully, what they say is that his occupancy was high and people were willing to pay at least a little bit more for the experience of being in a flow apartment. The problem, Fradam Newman, is that at the end of the day, his plan to raise rents by experience even though it worked, it just didn't raise rents that much and what ended up being much more important were the moves and interest rates and how he capitalized these acquisitions and the price he paid on the acquisitions.

41:36So there's an old saying in real estate that you make money based on the buy not on the sell meaning that when you go and sell your apartment building office building or whatever, you're monetizing an acquisition that you did correctly. If you don't buy it the right price, you're never going to be able to make money on the sale. I think this is a really good example of this, where he bought at top of market. His capital stack was over -alliant on debt and he had floating rate debt. Those are just financial mistakes and timing mistakes that you can't make up for no matter how good an operator you are in real estate.

42:13And in a way, I mean, this is the same thing that happened with we work, which is he delivered an excellent product. I mean, people love we work offices. Absolutely. Yeah. They pick them over other offices because of the vibes, because of the culture, because of the community. So he is a master, he has some mastery of that, but to your point, entry price matters and the economics matter. If you look at we work, it didn't fail because the product wasn't good. but it was because he didn't pay enough attention to the financial aspects of the business. With we work, he leased a bunch of offices at the absolute top of the market and then over invested in TI's 10 improvements.

42:50With flow, he bought a bunch of real estate at the top of the market and sort of did it with the wrong capital stack. So this is the problem is that when you get into a real estate business, it doesn't really matter how great you are as an entrepreneur operator. if you're not good at like sort of the legacy old school real estate part of it. And the old school real estate guys were saying during we work, this is not going to work, you know, this is this is a regis, but with a bad capital structure. And the old school real estate guys were saying something similar about this. And you know, it just goes to show that if you are going to try and disrupt a legacy industry, you do have to kind of understand the ins and outs of that legacy industry.

43:34The great paradox of this act was when he did green desk, which was the precursor to we work, when he did the first we works in San Francisco and other places, his playbook was find a building that's empty, that cannot be leased. So he got 25 Taylor Street, like sixth and market. The worst area by the tenderloin, and we had an office there for a little bit, and I have my podcasting stood there for a little bit. This was a terrible off, this was a terrible area, but he made it hip and cool, and it was really cheap. And man, it sold out, and it was packed and the vibes were great. But then, as you're saying, then he moved all of a sudden to Soma and he started opening up these glass -filled ones and, you know, he was renting them for less with all their giveaways and six months free and all this stuff then they could have reformed.

44:18So he kind of had mission drift, right? The playbook, they just, they changed the playbook and it economically was not viable. Well, the timing, the timing got really bad and again, and they didn't pay attention to the financial aspects as much as they should. In this case, I think that if he was trying to execute this play today and doing his acquisitions today, he could actually make it where he would need a lot more equity because he wouldn't be able to get as much debt financing, but if he had the equity and could do more of an acquisition based on equity, the prices he had paid right now would be much lower.

44:51And then as interest rates come down, he could ride that wave, he could refi, pull his equity out and put debt on it that is cheaper as the price goes down. So there was a way to maybe make this work, but you know, with real estate, the timing is just so important. Again, your cost basis of when you get in the investment is probably the most important thing in terms of whether you make money or not. Did you see this by chance, the real estate piece in 60 minutes, the package they did last week's tax? It was basically what we were talking about here a year ago. super compelling if you haven't seen it.

45:25It's basically the only podcast from 12 or 18 months ago. Has anything changed on the field in terms of commercial real estate or is it just continuing to collapse? I mean, nothing's changed. I think that all the commercial real estate guys, the sponsors and the deal makers and so forth, they're all kind of hanging on by their fingernails, waiting for interest rates to come down. And all the leases are still coming off, right? Like people are still who had six, seven, eight year leases that were signed pre -COVID before Depends on the market. I mean, some of the markets are coming back. But again, what this flow news show, this Adam Newman news shows is that you could be fully occupied and you could still default.

46:08And the reason is because of your capital structure, the interest rates have spiked up. You're now paying all of your operating income as being eaten up by your debt service. The only way to make it through that is you go to your bank. There's one of these regional banks and you work out a deal to extend. They call it pretend and extend. They let you hang on there. You'll extend the term of your low... Kick the can down the road, yeah. Yeah, the lower your debt payments in exchange for more term and you just try to get to the other side of these high interest rates. Once you get to the other side, again, you're hanging on and you're not defaulting.

46:46That's what everyone's doing. If rates don't come down as expected this year, I think the market's expecting. 150 basis points of rate cuts. If that doesn't actually happen, there's a lot of real estate sponsors who are in trouble. And in turn, there's a lot of regional banks who are in trouble because they're the ones who made all these loans to these sponsors. So everyone's trying to, like you said, kick the can down the road. Yeah. And the 60 minutes piece also talked about how there's some emergency rezoning going on in New York specifically where they take the floor plate in the middle, which I think you talked about, SAC, you have to have windows if you want to convert to residential.

47:24And they just make an empty space, the void they call it, in the middle of the building, that they'll deal with in the future. But they just have this empty space in the middle of the building that's not going to get used. And then the rest that has windows gets used to be converted into lofts, et cetera, in New York. So people are starting to think creatively if people don't come back to office. Okay. Let me ask you a question just based on that set of comments given Adam Newman's experience as an investor in this space and this general opportunity, wouldn't you rather back a known, someone who knows and has been through the market and has experienced versus some founder who shows up and has never run a business in this space?

48:02I mean, this guy is more experienced than anyone else. It's such a great point. Well, here's the thing, Fribert. The great point about that is you don't see a lot of founders who explicitly come out and say, I want to build a hundred billion dollar business. I want to build a giant business. They're so rare that VCs who have a lot of chips, They would like to back those, you know, swing for the fences folks. And so I do understand why people would back him again. And they've run out of it before they've done it. To something. So me and he learned from mistakes and this time around, he remembers from the same mistakes.

48:34So therefore they made the bed bet. I'm not advocating, by the way, I just ask you. You know, I understand, to your point, Freeberg, I can understand people want to bet on somebody who is crazy and swings for the fences. This entrepreneur clearly does not learn from their mistakes. I think both of those things could be true, right, Trima? What I would say is that I think that where I've made the biggest mistakes in my investing career is when I confused what I was investing in, for one thing when it was the other. And so when I look back and I had a small dolly ounce in biotech because I thought, oh, this is going to be more computational biology and I understand computation.

49:12So this gives me an edge. Turned out I was wrong. There was another time where I have invested in certain sectors of the economy because I thought they were Technology businesses and at best they were tech enabled versions of an existing industry and When I look at those investments the thing that I got wrong was not listening to the very experienced investors in those sectors and why they passed and That has caused me no shortage of headache and grief and And so if I had to learn anything from all of this, it would be that if it looks like a duck and it quacks like a duck, it's a duck. It's not a tech company.

49:52And so if that duck means it's a real estate business, how would talk to a real estate investor and wonder to myself why they wouldn't have done this deal? Similarly, when it's a biotech business, I have to ask myself, why wouldn't they have done it? They know more than I ever will in this space. And so similarly, I kind of look at this as an example of that, which is, could be a very talented person in an industry. I think just it gets important for us to be very clear and lucid and intellectually honest about what industry that is. I think it's a great point. I mean, look, I think whenever you're dealing with a tech enabled business, which I would define as a more traditional business model with some sort of software layer, you know, on top of it.

50:37You have to kind of assess like how much of a difference does that software really make at the end of the day. In this case, this is a real estate business with a very thin kind of software slash of a year of technology. Yeah, the experienced layer is a very small part of the overall, let's call it P &L, of this business. Such a great point. Sex, I mean, perfect analogy would be like if you're taking a flight on United, the United app is delightful now. It's a really good app. I don't, you, this is a commercial airline. It's called United Airlines. Sex, you pay for one ticket instead of the whole plane.

51:15But have you been to a McDonald's recently? I actually went to McDonald's. Yeah, you order through an app now and there's a big screen. The point is you walk in there and it's probably not the McDonald's you knew 15 or 20 years ago. It's not about waiting in line and ordering and it's not how it works anymore. So the point is, is that a tech -enabled business, or is that still a restaurant? Well, if you spend a lot of your time intellectually contorting yourself to try to justify why the next version of McDonald's is a tech -enabled business, you're just going to lose a lot of money. It's a restaurant.

51:45Now, all restaurants need technology. And what you see by McDonald's is even the oldest and most established are running forward very quickly to implement technology because they know that it creates efficiency which then flows to the bottom line for them. So the reality is that we have lived in this wonderland Where we've looked at these software businesses that have 80 and 90 % gross margins and impose that expectation on other markets And then made investment decisions by trying to justify how that it's a tech -enabled Realistic business a tech -enabled healthcare business a tech -enabled energy business without being honest with ourselves that those businesses have over decades because of lots of competition found a a consistent and reliable resting place in terms of gross margins far below 80 and 90 percent and so instead of willing tech -enabled businesses to be at 80 and 90 and tricking oneself I think it's more realistic to ask yourself why aren't 80 and 90 percent gross -paragene businesses decaying 230 and 40 percent gross margins like every other part of the economy when everything will be technology enabled I think that that's a very reasonable question and I think the answer is there is no safe place I don't think that you can justify 80 % 90 % gross margins and software when you can use a model and whip up a competitor I just think that we are all going to a place where Everything is a tech enabled version of some marketplaces would be a notable exception there with network effects So door to edge versus the tech enabled restaurant asset light marketplaces you and I and Sachs have been involved in a bunch of different marketplaces together Sometimes they're asset heavy sometimes they're asset light when they're asset heavy man It's really hard to make those businesses work out Sachs Yeah, I mean, I think we should differentiate between gross margin and then the net operating margin or profit, right?

53:37And so, you know, gross margin is what is the cost on the margin of providing one incremental unit? And the thing about pure software businesses is that on the margin, you can provision another instance of the product almost free. I mean, there's a little bit of hosting, cost at AWS or whatever. So on the margins, it's, you know, it's like the perfect gross margin business as opposed to a hamburger as opposed to a Yeah, restaurant is gonna have very large Cost of goods sold or cogs the simple Heuristic that I use is just does this company have large cogs cost of goods sold and are they physical world cogs?

54:18If they are it's not a software business. It's a best -to -tech enabled business So just look for that. You know, does this business have large fiscal world cogs? Now what I would say is if the cogs are virtual, like, you know, it could be hosting costs or it could be paying Twilio for telephony or something like that, then at least it's still not like as good a business because the margins aren't as good, but it's very scalable, right? Because you're not, you don't have that like huge friction of needing to scale up fiscal the infrastructure, physical world, supply chains, that kind of stuff.

54:57So I like virtual cogs a lot better, they're digital cogs a lot better than physical cogs. I love it when marketplaces, though, I mean, we could speak to that too, you know, when I had Dara on the pod the other week and when he launches an adjacency, hey, we're going to sell alcohol, hey, we're going to sell groceries, hey, we're going to add this thing that's right next to the already, you know, portfolio of, of Uber offerings. It doesn't cost them much, right? They just have to get the supply side up and running, but they already have the demand And I think that's where like these super apps are doing really well or Airbnb adding, you know, some inventory in a new city that they unlock, right?

55:30Well true true marketplaces are perfect gross margin businesses as well because they don't know if it's a little inventory that they themselves own. What you'll see is with a lot of marketplaces they'll cheat by buying the inventory themselves at least to jumpstart the market and then selling it. Yeah. And so when you see that line item on the PNL, the, you know, that they have real costs of good sold, you know, wait a second, this isn't a true marketplace. They're providing the service. Yeah. And so again, it's just a way to like catch whether the business is truly one of these great high -grows margin businesses or whether it's more of a tech -enabled business that's pretending to be a pure software business.

56:13Yeah, direct consumer got people in a lot of trouble during the last cycle and venture capital. If you look at a lot of these companies, even the best SaaS businesses have seen their gross margins are rode by about 15 to 20%. It used to be that best in class software business can generate 90, 90, 1%, eight high 80s to low 90s gross margins. Now that's not true. You see a lot of these best in class companies that are in the high 60s to low 70s. So it already just shows you that that pressure has come upon the market. And so is it that the software enabled business goes towards 85 or is that the 85 % gross margin business goes towards 30 and looks like it's the latter.

56:55That's just what the data says. Well, may I'm just categorizing certain costs differently than you are, but I don't know why a software business would go all the way to 30, right? Because again sales and marketing don't count in the gross margin. G and A doesn't count. Even R and D doesn't count in the gross margin. and it has to be a unit cost that you can attribute on the margin to that incremental instance of the product. So things like, again, paying Twilio for meter to left knee or paying open AI for meter to API access, all of that is definitely in Cox. And I think some customer support costs that can be attributed on kind of a per instance basis that goes in there.

57:36But if sales and marketing and R &D and GNA aren't going in there. I mean, I don't know why you go all the way to 30. I guess I'm just saying that I still think software businesses and marketplaces for that matter are still the best kinds of businesses on a margin profile basis. The problem is that there's a lot of fake software businesses or fake marketplaces out there that are pretending to be pure tech businesses when actually they're more like old -school businesses that have the veneer of technology. And I think to your point, the trick of saying I'm an 80 % gross margin business, but having no profitability is then who cares?

58:16So when you look at the profitability of these businesses, again, you'll be in the 20 to 30%. That's why when you see companies that are in the high 30s to low 50s, they're a very unique and B, you should expect that there is something fundamentally monopolistic about them. And that is a sing -plus way to filter out these companies because in a highly competitive market, you cannot extract those kinds of profit dollars. Capitalism says you can't do that. So you can only do it when you have an end -of -one or end -of -two kind of competitive dynamic where there's essentially a mutual detot with your biggest competitor.

58:57Yeah, it is a good point that just because you have good Uniconomics who could gross margins doesn't mean that the businesses Profile at the end of the day. Yeah, yeah, I mean you can have 80 % gross margins and still be losing a ton of money because you've got too much overhead You've got too much sales and marketing you touch my car and D. Yes So you're selling to customers who don't really need it and then they eventually cancel right like we see that a lot Look at the streamers look at the streamers That's just a big recycling exercise. It's just like people come to the top of the funnel, they use the product, and then they leave, and then you have to reacquire them over and over again.

59:31And it could be the case that SaaS actually looks a little bit like that too at the bottom line level. When you hit your natural audience, it does get challenging. Well, this is why in SaaS, there's a heuristic called the rule of 40, which is for public market SaaS companies, you want to see that their operating margin plus their growth rate equals 40 or is greater than 40, ideally. So in other words, you could have a SaaS business with a 20 % operating margin and a 20 % growth rate and that would hit rule of 40 and that would be a very attractive business. Or you could have, I don't know, it could be growing 50 % your over year and this operating margin could be negative 10%.

1:00:10And that'd be okay too because they're losing money but at least the investment is leading to a well above average growth. or you could be growing slower, you could have a 10 % growth rate, and have a 3 % operating margin, and that would also be hitting the rule of 40. So it's just a simple way of tracking whether this is a good business at scale. I don't think startups have to worry about this until they get to the later growth stage. Yeah, when you're in your BC round, you're making 50, 100 million. Yeah, you've got to be really thoughtful about this. In the beginning, you're trying to get product market fit and try and get on something.

1:00:46So, Jamat just mentioned streaming NBC Universal if you didn't know it paid the NFL $100 million for the exclusive streaming rights to one. That's right, one first round playoff game for the NFL. That happened last weekend between the chiefs and the dolphins. That was on their service peacock NBC's app, basically their version of Netflix or Disney Plus. It garnered 23 million viewers, which makes it the most streamed live event in US history. even so, that's almost half of what the Packers and Cowboys had, about 40 million, lines versus Rams, same weekend, 36 million. And so this has brought into question, what's going on with streaming?

1:01:30Have these businesses gotten ahead of their skis? Just to give you a couple of charts, Disney Plus took off like a massive rocket, peaked in Q4 of 2022 at 164 million subscribers. They're now at 150 million, And here's a chart. I mean, just amazing how quickly they got to Netflix -ish numbers. Here's Netflix's chart. Again, this is quarterly. They're up to now in all time high 247 million subscribers and the annual growth rate all the way back to 2001. Still pretty spectacular and their revenue. Also very respectable for Netflix. However, they overspend massively during the peak streaming era 2019 to 2022.

1:02:12And that's when subscriber growth started to slow. Obviously, they were spending way too much. And other entrants came in like Apple Plus and Amazon Prime, where they really didn't even think that they had to make a profit. They were using streaming, maybe to sell more iPhones, or to get more Amazon Prime subscribers. So here is the major problem. Here's the chart. Basically, a churn means people cancel, right? And so as these services have cut what they're offering, the number of Marvel shows or Disney, you know, having Star Wars shows, the churn goes way up. People are also having subscription overload.

1:02:49I don't know how many of these I subscribe to, but I think it's all of them. Or maybe out of these one, two, three, four, five, six, seven, eight, nine on the chart, I think I have seven of these. So there is definitely some unbelievable subscription burnout. And the streamers in order to get these businesses above water have raised their prices. We all know that you've probably seen your streaming bills, you know, have three, four, five bucks added to them every month. And at the same time, they're cutting how much they're spending. So you're paying more for last month, your thoughts on this dynamic.

1:03:20If you bring the chart back up, here's the most important thing that's worth noting. Let's take stars as an example. It turns all percent of their users every month, which means that over a year, they've turned to 144 % of their user base. That means that they have to basically turn their entire membership base one and a half times in order just to tread water. So, if you start with 100, it's a lot of money that you have to spend to make sure you end the year at 100. Forget about growing. If you look at peacock, they're going to lose 100 % of their subscribers in a year. If you look at discovery, they're going to lose 75%.

1:04:02If you look at max, they're going to lose 50 % Apple TV, same. Hulu and Disney +, will lose 60%. Netflix will lose almost 40%. So the only winner in all of this is Facebook and Google. The only winners are Facebook and Google because that's where the ads will appear to try to reacquire these folks, right? So I guess that's a positive indication. But the reality is that money isn't infinite. And so what happens in a dynamic where you have a category where there's just a lot of consumer turn, I think what happens is it evolves in phases and in phase one, which is sort of where we are now where there's a bunch of relatively well -established folks is that they are going to initially overspend on content because they are going to try to differentiate the cost the acquisition based on content, right?

1:04:55Which makes sense. I have a tent pole come and watch it here. You can't watch it anywhere else. And I think that was the peacock example where they had this football game and all these people showed up and they thought this is exactly why we're paying so much money for these rights because people will show up. I think the problem is that when everybody is doing it, everybody's doing it. And so you don't know how to differentiate, even in our group chat. Look at the number of times when somebody randomly says, is there something to watch? And everybody's got 50 recommendations. Guess what I do?

1:05:27I tune it all out because I'm like 50 across six different services. I have no way to track it. And then I lose interest. And I'm like, you know, I'll just stick to YouTube. So I think what happens is in phase one, folks spend a lot of content. In phase two, they realize that actually what you need to do is spend on a long tail of content in a much more disciplined way. So there's a company that I know about, for example, they just signed a pretty big deal with Amazon hundreds of millions of dollars. And I was trying to figure out is that a lot or a little? And it turns out that Amazon's trying to get three or four or five versions of these going, which means that before we probably could have and five or six hundred million and instead you get two or three hundred million.

1:06:17It's still an incredible thing but it just goes to show you that there's a lot of competition. And so instead of having a single mode, right, if you were to grab something where there's a few pieces that just get all the money, now you're smearing this content across all kinds of stuff. And I think that that makes it very difficult to keep folks. So I suspect that you're just going to see a lot of churn. I don't like this category at all as an investor. It's clearly there's been an overspend here, but consolidation is coming. Freeberg, are you thoughts on the streaming space? I just think this is the opposite of what we were talking about earlier, where there's a free market competing, and it's benefiting consumers.

1:06:56I mean, the point that you made is a really good one, that there's a lot of great content to watch. Folks that raise prices, people cancel. So you got to drop prices, you got to offer good content. And I actually think this is a really good and healthy thing to see happen. and is competition that benefits consumers. And there'll be some set of winners here and some set of losers, but I think ultimately, it's just really good to see how it all shakes out. Who's willing to put up the big bucks, who's got the smarter algorithm that predicts how fresh your content has to be and how unique it has to be relative to other platforms to keep the audience attention?

1:07:31I would argue if you look at those numbers and you look at the performance over time, Netflix absolutely rules the roof in the sense. They're an incredible operating team. They have an incredible capability of predicting what content will work, how quickly they have to refresh content, how much they should be investing in content per quarter per month, and they're clearly retaining users and making money. And others maybe that are newer to the game haven't figured that out yet, but it's just very good to see the competition. So I don't know how to predict what's going to happen here, but it's good to see.

1:07:57It's clearly going to be massive consolidation. Also, these folks are launching advertising based version. So you probably saw Netflix as an advertising tier. And so a lot of these folks didn't have those Disney plus. I think it's going to have one as well. You know what no one's paying attention to is YouTube TV? I don't know. You guys subscribed to YouTube TV? I'm a Hulu person. Yeah, I think it's fantastic. If you look at some third party data on YouTube TV, the subscriptions are going through the friggin' roof. And it's really interesting to see because with YouTube TV, you're basically rebundling the unbundling that happened in cable, except you're doing it over the internet, and you can access it anywhere.

1:08:32So they've basically converted the pipe as the value to the service itself as the value which you can access anywhere you want on any TV in any room without boxes while you're on the road on your phone on your laptop. And it seems to be kind of highlighting that maybe it wasn't necessarily the bundling that was the problem, but the way that the service was being offered. So who knows maybe bundling versus all of this part and parcel you got to pick five different providers and buy content on the fly. Maybe that's not what consumers want. Yeah, young people don't care about the live channels old people do but yeah, Hulu and YouTube TV are really wonderful Products because they work really well on Apple TV the apps work great, but they also work great on your iPhone your iPad So yeah, you know, they're really spectacular in that way sacks Well, this is tie this conversation back to what you're talking about with margins and sass and tech enabled versus real software businesses I personally have never seen a beta -c subscription business that works.

1:09:32The turn is just too high. I mean what I've seen is that the monthly turn rates on a software subscription for consumers is somewhere in the 5 to 10 % range. So on a full -year basis you're retaining maybe 50 % of your customer base. You're effectively rebuilding your business from scratch every two years. It's a very tough place to be. This is why I basically skewed towards B2B SaaS is because a good B2B SaaS business will have net expansion. Instead of 50 % churn, you'll do 120 % expansion. And so you're actually building a subscriber base with long -term value. Now, how did Netflix do it? I mean, Netflix avoided that prohibitive level of churn by spending literally billions at dollars on content and original programming.

1:10:16And again, it goes back to the point that this is not a pure software, pure tech business, it includes an old school studio, which is very capital intensive. And they financed a lot of that content acquisition with billions and billions of dollars raised during that Zerp period for, I think, both equity and debt. And you have to wonder if that could be done again in this post -Zerp period where capital is just a lot scarier. I think this is going to work really well, though, for Netflix and Disney, man, these huge archives that they own these libraries are going to get them to 3, 4, 500 million global subs and has become money printing machines that I don't think they're going to need a ton of New content.

1:11:01The question is whether you could recreate an archive of that level today given how much more expensive capital is. My point is that Zurp Helping Netflix catch up to these studios and create this huge library. But still I think that what the streaming services have shown in their turn is that if you don't provide original content and original programming, then users will turn off that. So you have to kind of have both. You kind of have like the library as filler, but if you don't have a hot show come along every so often, the subscribers will turn off that. You need to have some new content depending on how deep the library is.

1:11:38It feels like Netflix and Disney Plus have done a great job with our libraries just to give you an idea. Revenue for Netflix for 2023, $33 .5 billion, $247 million subs. That's an RPU yearly revenue for those folks, $136 a year. Now the reason you're seeing that number not makes sense if you're paying $15 a month is because internationally, Netflix is a lot, lot cheaper. But I love those two businesses. I think they're going to be extraordinary over time. Netflix has to acquire 100 million people a year just to stay even. What's their turn rate? Four percent a month. I think it's fine. Right. So they're turning half their customer base every year.

1:12:18That's my point. A hundred million people. They're rebuilding their customer base from scratch every two years. How does that make sense? It's totally fine because what happens is you have people coming off their parents' plan, getting their own, people go through a bad beat, they don't like it, you know, whatever they unsubscribe. But they all come back, back and forth, back and forth. and then it just keeps growing over time. I think you're describing something that's true. I think David is describing why it's a shit business. I mean, if they make more of money than they spend, and I don't think they need to do a ton of advertising.

1:12:52Eventually you turn through so much of the market that actually you can't maintain that growth rate. I mean, if you reactivate, maybe you can do it, but I don't. I think that's what's happening. From a business perspective, the only logical thing that I would do if I was running one of these businesses is attach it to another business where you can think about it in terms of LTV. So the only obvious example of that I think is Amazon video because you can stick it beside prime and a bunch of other things and now you have a very different way of justifying LTV and minimizing churn. And that seems like a I buy that argument Jason.

1:13:29I don't buy like a standalone business like this trying to do it. this. Yucky. Sorry, real quick, have you guys dug in the Netflix's business? I mean, there's still growing top line. The EBITDA margin continues to expand. I mean, all those facts might be true, but that churn engine and that recapture engine seems to be working in a way that they're printing cash and growing. It's pretty impressive. I don't know if there's a limit there, but I mean, I haven't looked at the analyst, but I think that is the key question. Yeah. To the bundling point, Apple Plus, which is the TV component, not the hardware where product is bundled as part of this Apple One program, which is kind of like Amazon Prime.

1:14:06And so I think you're seeing a little bundling there. Netflix also added video games to make it even more sticky. So I think there's like a subscription super app coming, which the New York Times is kind of done, right? With word -o, crosswords, the athletic, wire cutter, and the New York Times. So I think you're gonna start to see. So I wanna see you just at a jumble of names that went in one year and out the other. I don't remember a single one. You said, this is my point. Like for most people, Jason, not a media -efficient model. New York Times is doing fantastic doing the spundling. Some people come for the crosswords in Wordl and that's why they subscribe and they like the news.

1:14:37Other people come for the news. They discover crosswords in Wirecutter and the athletic and they stay for that. So I do think there's going to be an incredible business here. I'll take the other side of it. They spent a lot on content though during that period where Disney Plus came in and I think everybody's now has a little more discipline and the budgets came way down. if you didn't know the Hulk cost 250 million or something, the she -hulk rather, that cost 225 million for nine episodes. What? The first eventers, 225 million. Wait, sorry, 250 million for nine episodes of the she -hom. Yeah.

1:15:09And people criticize it for having bad CGI, so I think there's like new discipline coming down. Was this a Netflix show? A Disney Plus show. A Disney Plus show. I don't know about you guys. I've been rewatching the sopranos. I find some of the content on HBO Max to be the best content out there. Oh my God. I've watched so much of my watchability on it. Disney doesn't have that much rewatchability I don't know the only reason I keep my max description is so I'm waiting for a house of the dragon season two I Mean they didn't have that one show. I'd be like yeah, cut it, you know Yeah, I do think this could help Netflix because a lot of these streaming services came along We had way too many right we got saturated with streaming services and most of them you subscribe to you may now even remember subscribing, you may just subscribe to a free trial to get an NFL game and then you get billed because you forgot to cancel it.

1:15:55By the way, yeah. Have you guys ever gone into Apple? I cloud settings and looked at your subscriptions. Oh, boy. Yeah. Get in there. Guys, just rip, go, if you have like an extra five minutes, you will save so much money by going into subscriptions in your settings and just turning them all off. I was shocked. I was shocked. I mean, this is part of your off -steready measure. Absolutely. You know how many subscriptions to Disney Plus I had? How many? Well, this is what's so gross is why they even let me do this. I had three. What? Three. How's it going to be possible? One for the plane. One for the kids.

1:16:36I had three. I had two HBO's. I had two Netflix. Oh, no Netflix keeps sending you messages saying, hey, you need to update your payment information. But then I'm watching Netflix on my Apple TV. So I'm like, I'm clearly paying for it somehow. I'm so confusing and sh**. I have the perfect solution for you. There are credit cards now where you can set a spending limit. And so what I do is every year, I just turn off the limit on that credit card. I just take it from unlimited or on cap down to zero. and I do this for business as well. And then all the subscriptions time out. You know what I call that?

1:17:12What? Jeff. Jeff does that for me. Jeff does it for me. But I mean, having somebody go in there and then I have a Jeff. I have a Jeff. Just know, but it's very simple. You only use one car for subscriptions and then you turn it off every year. Yeah, I see. Which one do you want to keep going? It works really well. And then you move the other ones to a new car. I don't even want to say how many thousands of dollars I was wasting on like dual -lingual. I was like, I'm paying for dual -lingual and then I was paying for like, and your Italian is still terrible. Yeah, terrible. and then I had, I had like a kiss against them.

1:17:40No, then I had a dual lingo and I had babble and I had Rosetta Stone. So I'm like, my Italian is not improving because of any of these three apps, but I was paying them collectively like $400. I had a whoop subscription. I don't even have a whoop. When Rick Thompson started Manscaped, I was, I signed up for Manscaped. I get all this bald -yodorant. I've never used it once. We know, we know. We see that you're in poker. We know. It's not working, bro. Just a message to Manscaped, I have tried to cancel. I have hauled, I have emailed, I took it upon myself to try, it's impossible to cancel. They won't even let you reset your account so you can get a link to cancel.

1:18:18It's so hard. And still your balls are terrible. Yeah. My balls are phenomenal. Now, I've sat next to you in Pokemon. Not in real. Okay, let's get into plastics and get off Chimouth's balls. I mean, how did we get here? of subscription services. Subscription services. Yes. Streaming is not a crosswords. And a crosswords apparently. So they're really trying to make that ball deodorant happen, aren't they? They're trying to make it happen. Well, they're trying to make fetch happen. Ball deodorant's not happening. I'm sorry. What are you supposed to do? Squat and swipe? What has to work? Is it a spray?

1:18:54Are you lifting and spraying? Maybe you're not giving points for creativity. Trying to create like a new thing, but yeah. I was trying to support my friend and signing up for a subscription service. And now I can't cancel. That's my problem. That's my predicament. Could you also take a shower and you're soap? I don't know, just put it out there. I'm trying, it's, what's going on in there, try not to do it with the product. I signed out because Rick was the venture investor that seeded it and started, I supported my friend. Yes. And now I want out. And I cannot get out. Every time I try to get out, they pull me back in.

1:19:29I'm just gonna say, when it comes to man's cape, No, no testimonials, please, no testimonials. The worst part is like, you know, it comes to the house and oh, somebody opens your ball the other end and puts it on your desk. They do, no, they put it right on the desk. No, they do it. They do it. Well, that's what's so funny. They put it right on the kitchen counter. So as I walk through the bathroom, everybody, and I think it's my eye. I grab it and I'm like, who's seeing this bottle? Oh, there it is. What is it? There is bottles going. I'm shaking, balls the other way.

1:20:03Oh my God. Oh, how do you apply it? Is it just a little dab will do you? No, I mean, you know, I just right. It's apparently an I'm not waiting, Saks, it's an oatment. This is far too much information. Yeah, I'll try it. Don't you have to, I'll try it. I'll try it. Good, come in the can I respond? You know what, I'm gonna give you my subscription. It's gonna drop, oh, fall deal.

1:20:30Why not? Oh man. Use the promo code Jamath for 10 % off your... Use the promo code, Dictator, you get deffisive. You can never cancel. I'm going to get this. I see K Tater. Tater. Yeah. You stick from a dictator. Get 10 % off your ball deodorant at Manscafe. All right. Pretty great. It's your turn to shine. No, not ball deodorant. We wanted to talk about micro plastics. A study came out. It's terrifying. We've known plastics have been terrible for years. I was turned into some sort of political discourse which draws and everything. but plastics are horrible. We shouldn't be using them, but the study confirms a bunch about drinking microplastics, educators on this study that everybody's talking about right now.

1:21:16Dr. Friedberg. I wouldn't start with the statement that plastics are awful. Plastics are polymers, which are long chains of what are called monomers. This is hydrogen, carbon and oxygen that comes together to form these specific molecules. And then we can kind of bacon into crystal -like structures. And the reason the plastic industry took off is because it ended up being very cheap to create materials that we could turn into chairs, that we could turn into bottles to move stuff around. A lot of applications, everything from solar, photovoltaics to our computers, to our laptops, to our phones, everything has some form of these polymers in it.

1:21:55The polymers that are commonly used for making bottles that we consume beverages out of of our PET plastics. These PET plastics are made from a combination of natural gas and crude oil. So we kind of have a production process where we get the carbon hydrogen and oxygen that's naturally found in natural gas and crude oil, converted into these molecules that we turn into long chains and we turn them into bottles. And fill those bottles and they end up being a lower carbon footprint than using glass about 5X, the carbon footprint to use glass instead of plastic and making a bottle to store stuff and move liquids around 40 % cheaper and a lot of other reasons why the industry and the world adopted plastics not just for bottle beverages but for other applications.

1:22:46So in bottle beverages because these are polymers, there are these long chains of little molecules that are stuck together, some of those chains break and then some of those little chunks of those molecules end up floating around in the liquid that were consuming. And what this study did that kind of highlighted a set of data that hadn't really been studied well before is they used a form of spectroscopy so kind of a multi -spectoral light system, shining light at different wavelengths on the liquid in a bottle, in a plastic bottle, to figure out how many of these little plastic particles there were in the liquid.

1:23:20And in doing that, they found that there was on the order of 10 ,000 little plastic particles per liter of water, per liter of soda, or drink, or gatorade, or whatever, the beverages that you're drinking. The real question then is, well, how risky is that? So if you look at a lot of the health agency studies, the kind of well adopted and well researched efforts on is there toxicity associated with PET plastics on its own? They find that there's very little genotoxicity or no genotoxicity in the NHS. It doesn't change your DNA. There's no carcinogenicity, so it doesn't cause cancer. But there are other studies recently that have shown different mechanisms by which these little tiny microplastics might end up in your cells, because they absorb into your body, and they're small enough that they can cross into barriers, they can get into your brain, they can get into your cells when they're in your cells.

1:24:12There are other mechanistic studies that are done in a petri dish as opposed to being studied in the body Where they've demonstrated that they can actually disrupt the function of organelles like mitochondria endoplasmic Reticulums all these little things that operate in yourself they can cause irritation They can trigger chemicals to be produced that might cause allergies that might cause inflammation and so on and so forth So while the general molecule of PET itself isn't known or shown in any way to cause cancer or to cause changes in your DNA, there are other mechanisms by which these little tiny plastics might be disrupting cellular function, might be causing other health issues.

1:24:48And that's now going to open up a big area of research that's going to be predicated, I think, on the fact that this study now shows that there are thousands, hundreds of thousands of little pieces of tiny plastic in these plastic bottles that were drinking water and soda and juice from that are getting into our body and into ourselves. It's 40 ,000 little pieces in the average one liter plastic bottle. It's a pretty scary statistic when you see that small enough to cross the blood brain barrier. Right. And in rats and mice, they've shown that these little microplastics can actually accumulate in the brain if they consume enough of them.

1:25:24Now, the reason this hasn't been well understood or studied in the past is we kind of look at the aggregate amount of plastic that's in a liquid. And So when you start to look at how small these little pieces of plastic are and add them up, the cumulative effect over time that they can actually cross into cells, cross the blood vein brain barrier, maybe you're not getting removed from the body, that's opening up a whole lot of research because there's no easy way to just scan a body and say, is there plastic in it? How much plastic is there? Because there isn't a good chemical signature for it.

1:25:55And what these guys did is they used light to look in the liquid to find the plastics, which we can't easily do in the body today. So, Freyberger, are you going to drink plastic bottle water anymore? I'm not. Okay. Chama, I've already stopped. This started for me about four months ago. My wife basically said we're getting rid of all plastic. And at first I really pushed back and I'm like, this is crazy. And she just kept talking to me about it and showing me all this data. And yeah, about a month ago, I would say I switched. So now I use glass and a graph like this. Yeah, much better. We got rid of all of the plastic in our house in the gym, no more bottles.

1:26:32It's wasteful anyway. Like, why not? You have beautiful filtered water at home, put it in a crack. Sure, but the scary thing. I mean, it's a little bit more inconvenient. I'll be honest with you, but it is very scary. And I think that it does alter the phenotype of the human body over time. And I think you'd have to be insane to bet against that. And I suspect when you look at the rates of depression and autism and Alzheimer's and dementia and autoimmune diseases, Crohn's, rheumatoid arthritis, to think that all of these environmental factors have no impact, I think, is taking a very scary bet.

1:27:08Here's what I do. I buy these glass bottles on Amazon, you know, two or three cases of them. I have the best water filter system at home. We fill them, we put them in the refrigerator and we have them bought plastic in years. Sacks. Wow. In years? In years. Only because I care about the environment. because I'm a good person for you. Jason, I'll also say that application is a pretty small, I think on the order of I'm right, 80 % of bottled beverages are drunk outside the home. So people are buying stuff at convenience stores, at gas stations, at markets, taking them with them to work. And that's how a lot of plastic bottles are considered.

1:27:48I have a small percentage of the global population. You go to Africa, you go to Brazil, you go to China. There isn't a great, like, people don't have these amenities that we have in our upper and middle class America That plastic bottles have provided access to products that consumers around the world Yeah, but otherwise wouldn't be able to afford. So there's a reason they exist But by the way, I also want to just be really clear. There isn't conclusive evidence or science that shows these plastic Microparticles or nanoparticles are causing these health effects There's certainly a lot of questions that it brings on well what is the cumulative effect of these little things getting into cells?

1:28:23Did they get into cells? Why? Why? Why would anybody bet that it's zero? Right. So that's the real where the upside. Right. Well, the outside is that people get to access cheap averages on the street. That otherwise people that are living on $13 ,000 a year that can buy a, you know, a plastic soda for 25 cents. You can also buy it. That's what it can. So that's, that's definitely an alternative. They're a little more expensive generally. Plastic just became the cheapest container. Sacks. You're a thots. Sorry guys, I stepped out to get a drink here. Diamonds anything. It would be better if you had put a straw in your water bottle than with drinking pro -flat water bottle.

1:29:02Now I understand your level of depression. It's just causing it. It's actually just killing those arrow water bottles. Yeah. Diamonds something. Yeah. As a science core, I stepped out. Also, I use these beautiful contigos. I think some people use yetis or other kind of things. And I actually carry that with me only because I try to like think about the environment I just the amount of plaques is being created. I don't know if you've seen this But like you go to Whole Foods now or you go to any supermarket and you see this wall of salads Freiburg like this is Unconscionable like they were literally giving people salad in a giant plastic box Yeah, let me just say a couple things about this because there's this conception that this is just awful awful awful but plastics, there is a degradation of these PETs when they're exposed to sunlight.

1:29:55There is a recycling system that many of much of this material ends up in. Not of it? Yeah, I mean, not at all. Not at all. That's actually correct. Not at all. But what would the alternative be? So the alternative is you put it in a class thing and you charge people $15 for a couple of pieces of lettuce. The reason the plastic industry emerged is because it provided a low -cost way to transport materials. And that we're all very wealthy. So we have to just step outside of our bubble for a second and recognize that most people, you know, the dollar difference is a huge difference for most consumers.

1:30:25They're not going to make that dollar leap. So, you know, the fact that plastics emerge is to support a consumer market that's grown up all over the world. Yeah, but how does this make sense? Look at these bananas. Just as an example, to give people an idea, bananas already come with a case. Oh, that's crazy. And they're literally wrapping bananas in plastic now. And you know, I think this is where regulation makes sense. No, there must be a gas in here or something, because they're trying to keep the bananas from going bad. That's why I thought I wanted to put it in there. I want to shout out like this is where I think regulations actually do work.

1:30:57France, Spain, a lot of countries now are just saying, you know what, for fruits and vegetables, like yeah, don't put them in plastic, please. We're not going to allow you to do that. And I think I'm not pro plastic, by the way, I'm not drinking plastic from plastic bottles, but we have to be cognizant of where this industry emerged from what the science says about it. Like I don't want to just be flip about it. What is doing to plastic about it? What is giving the oceans freeberg is unconscionable? Like this, this is not like a do good or thing. It's just awful. There's no reason that we need to have plastic as a stand.

1:31:27I'll give you some good optimism around this. There's a lot of efforts right now to develop microbes that can actually biodegrade these PET plastics. So there's, so we're engineering these microbes that will produce enzymes, these are little bacteria that will produce enzymes, those enzymes can then be made in the plastic itself. So then the plastic will biodegrade within a year after you use it. So there's a lot of this kind of effort on how do you make naturally biodegrading plastics using biosources and biological molecules as part of the production process and a lot of big plastic packaging companies and industrial biotech companies are investing in this area.

1:32:06This work collectivism can do good. You know, like if we actually, as a society say, we want to do sustainable packaging, like because of the tragedy of the Commons, like you're saying, Freeberg, because it's cheaper, capitalism, like there's no floor here, you know, to stop people from doing this, and stop from using plastics unnecessarily, like wrapping bananas, etc. All right, listen, it's been an amazing episode of the All -In podcast for the dictator. Wish me luck today, boys. Wish me luck. Use the promo code, Dick. We'll be following the livestream on the chat following the live stream. He's promo code deck to get 20 % off your ball.

1:32:42The other eight. What do you guys think about actually like running some poker tournaments through the year called ball and 100 % that would be super fun. No 100 % I think we could replace the WSOP pretty quick. I mean, I mean, pretty good place. I don't know. I'm not kidding. We have to help you on our. Jason's right. I'm not just helping you. I think you can get all the pros because I think the problem is like those championships have been so watered down, right? There's 52 of them just in Vegas in June and July. And then now you have like the circuit rings. So now there's bracelets and rings.

1:33:17And then there's the European one. And then there's this one. There's the. The hauling all the same. You can't have, I think, you know, it'd be a world champion. Can you really have like 150 winners a year? Sex, are you bored with hold him? Well, I play with you guys, but yeah, I'm kind of bored with it. Yeah, I played a tournament yesterday, big O, 37 players, I came in first. I don't know if they played big O. Where did you play? I had a speaking gig yesterday in LA. After the speaking gig, I was going to the airport, I had a little time and I just stopped by Hollywood Park where it stopped.

1:33:49You would do not. I didn't. Why did you pick up the one that was the best? I wanted to see the new one. You're in the best. And I don't know, there's nothing more boring than playing in a tournament with people you don't know. Oh, it was great. It was great. There was like a fight. The term is loud forever. I mean, I did the WSOP a couple of times and, you know, I think I lasted like three days. It's a long time to be playing poker and tables for people. Shema, I got to the final table and they wanted to chop. And I was the short stack. I was like, well, you know, my flights in for a couple of hours, I'd rather not chop.

1:34:19And this woman got in a fight at the casino almost. This woman was wearing a mask and she goes, this mother, Afer won't chop. and I said, man, it's my option to not shop. Madam, madam, I said, man, madam, whatever, say them and she went crazy and the floor came over and said, man, you have to sit down. She called me a mother effort twice to my face. And I went on the win. You went on the win. And I went to short stack and I went on to win the tournament. I kid you're not. How much did you win? $1 ,400. So what is your, what is your early rate on that? You make like $14 an hour. $100 buy it. So yeah, it was $200 an hour.

1:35:00But here's what happened. So I had this guy massively. You came for seven hours? Six hours. Maybe it was awesome. It was great. I had the time of my life. It was the first time I played in a tournament for life. Since we played the one drop that time, I haven't played in a tournament system. It was so much fun. Jason goes from playing the 100 K points, $100 buy it. I had a time of my life because I've never played big O before. It's where you have five cards and it was high low. It was so dynamic and fun. Oh, yeah, big oh, yeah, yeah, yeah, yeah, I've seen it. I've seen it. Five pole cards and it's high low.

1:35:32So I was like, I'll learn big. Oh, I've never, I've literally not played one orbit of big. Oh, I won the tournament. It was awesome. And so then it's me and this one guy and you know, I've got like, I've got him like three to one or whatever. And he's like, listen, I got to go. Please, I got my kids. I was like, no problem. I'll chop it with you. If we take 400 off the top for the dealers, the dealer, a cry, she was like, what? And I was like, yeah, I'll chop it with you evenly. And so I won and I just chopped it up and gave a big tip. What did you, did you get like a certificate or like, I think they put you on the website or something like that.

1:36:06Like, yeah, it's on the poker classic website that I, or I don't know if it's called the poker classic, whatever it is. But my point is we would have a great tournament. We do each of the games. Each of us gets a free roll into the game. And then everybody else buys it and I like it. Sacks you like PLO or you just like chest now? No, I like the hold on but I'm just saying I wouldn't play with a bunch of strangers. Yeah, I like playing with friends You know, but to goof off and have fun. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah, like sitting the problem with tournaments Your RSVP to my game show up at six and show up at 830 Yeah, and then listen to yourself on the bottom and leave Yeah, there's a lot of things you can do while at a poker game Um, you can watch your podcast, you can edit your podcast for the Sultan of science, the King of David Freiburg and yeah, definitely the rain man himself.

1:36:56We're live from Davos. We'll see you next year. Bye bye. Wait, did you give me the shot? I'm I did for the dictator himself use the promo check. No, chairman dictator chairman dictator use the promo code chair man or dick I could get 10 money or 30 % off. Can somebody from Manscape please let me cancel, please, please. He's five, it's like 10 bucks a month. It's just 10 bucks a month. I'll give you the money. I just don't want to get, I want to be able to cancel. You 10 bucks a month to not send all the order. I'm going to the toilet. Well, let your winners ride. Brain man, David Sackett. I'm going to the toilet.

1:37:38And it said we open source it to the fans and they've just gone crazy with it. I'm the US Ice Queen of kilowatt. I'm going to the toilet. What? What? Your winners ride. I'm going to the toilet. Besties are gone. Go through it. That's my dog taking it away. She's driving away.

1:38:01We should all just get a room and just have one big hug or two because they're all just just like this like sexual tension that we just need to release some of them.

1:38:27you