AI, Middle East, China, Tariffs, Recon Bill, Invest America | BG2 w/ Bill Gurley & Brad Gerstner

0:00Can you imagine if in the year 2000 Washington DC had said oh my god Google is so powerful That we're not going to allow any other country in the world to have access to this Google machine that might give them answers to questions Unless Google comes to Washington and gets federal approval before it launches into any of these countries That's what we were doing in AI and I think we've ripped the chains off of that And I think now we're going to allow our companies to go compete and win Hey Bill, it's great to see you. It's been a while it has been a while. It's been I think three weeks since we did a podcast You know honestly and thanks as an aside to Hundreds if not thousands of listeners who are like you know remind us that they love the pod It is hard to get it scheduled Part of the reason it's been hard as I've been on the road.

1:02I've been in L .A. I've been in Washington DC And then I spent 10 days in the Middle East and I think about what's happened bill over that period of time We've basically landed the plane on tariffs We've had these huge deals announced in the Middle East the reconciliation bill is on track to passing and We have some talks of a ceasefire in Ukraine the market which was down 20 % for the year has now bounced 20 % in the last 20 trading days so maybe today we could just unpack this fury of activity that's occurred over the last three weeks That sounds great So you were at the big event the one that everyone's talking about in the Middle East Why don't you if you would you know give the listeners?

1:46I think at first just kind of what did it feel like what was what was different this time you've been there before but but frame what happened You know just at first from you know what did this look like and then I'd be interested in your takeaways Well, I have to say the whole orientation if you just think about it toward the Middle East over the last few years Has been kind of about control, you know We had syphias that was blocking all these deals in the Middle East We had the Biden diffusion rule That remember that in the final weeks of the Biden administration they passed a rule known as the diffusion rule that really created this complicated regulatory framework for selling Advanced chips and models and it broadly restricted the ability of the US to sell chips to like a hundred countries around the world And so I think that you know We it felt like a massive 180 shift from what I would call the Washington approach of control and Preventing diffusion of American technologies to much more of a Silicon Valley approach to partnership and openness and That was the language that I heard you know I was I was happy to be part of an AI delegation with a lot of CEOs who were over there Helping to craft these deals, but you know and getting to ride shotgun on some meetings with with David Sacks You know who is obviously leading the AI initiatives for the administration and I have to say it Just was incredibly well received in Riyadh and Doha and Abu Dhabi and there was a spirit of partnership in every one of those places And you saw the fruits of that major announcements of investments in the United States and major deals getting each struck about You know AI data centers et cetera that are opening in that part of the world.

3:37That's amazing I've all those things which one surprised you the most It's a really big change. I mean you can't underscore Enough what it means, you know like the Trump administration just repealed the Biden diffusion rule and may have 25 Right, and so it it literally is fresh off of that and if you would have told me that in the first five months of this year We would have gotten a trillion dollar deal signed with Saudi in terms of their investment in the United States Another trillion dollars with Qatar another trillion dollars with the UAE Those are all investments into the United States and then let me give you a Sense of the scale of magnitude of the deal that was announced in Abu Dhabi so in a Abu Dhabi they announced a five gigawatt US AI you know, it's a UAE US AI campus.

4:33It's an incredible architectural campus. It's in collaboration with Nvidia and open AI and an Oracle and Think of it as almost like a global stargate so to put that perspective five gigs every gig is about 500 ,000 GPUs So that's about two and a half million GPUs worth of Compute power to power the AI initiatives out of the UAE around the world and so if you would have told me that that would have come together in this short Appeared a time. I wouldn't have believed it. How are Latinx played an incredibly important role? Scott Besson was there with the president of course David Sacks helping to put those deals together You had CEOs, you know, you're asking how it looked and felt, you know, you had pretty much every major CEO In US technology Correct Jensen Huang was there, etc.

5:24And they were putting these deals together So it there were just a feeling of the of the art of the deal. What is possible? Partnership and acceleration as opposed to the deceleration You know, and the control that that I think you and I have felt over the last few years and frankly you and I have been worried about Yeah, right this idea that the US was going to somehow, you know shut down Our AI and not allow the rest of the world to have access to our AI I think we not only thought that was bad policy from an economic perspective But also just dangerous for the world It was basically going to allow for this Huawei Belt and Road where Chinese full stack technologies would would move into the Middle East And I've read I've read that was basically underway prior to this big event.

6:12I literally underway In Saudi alone Huawei's market share has gone up a lot over the last few years, right? It's not as though the these countries don't have They don't have the ability to do nothing and they felt a little frankly betrayed by the United States I think over the course of the last few years here. They are I mean take Saudi Arabia as an example You know, they've been our ally for 92 years. These are not new relationships And all of a sudden we have this technology that we're telling everybody in the world is existential to your national development And yet at the same time we're saying but we're not going to give you our best technologies And so while I was in Saudi I had the opportunity to travel with His excellency the the the minister of technology Al -Sawaha and I got to go to you know incubation labs and see what was happening there See the data centers on the ground You know, they have a huge AI project there called humane that they launched in partnership with folks like Nvidia and Grock And so there's just an incredible level of enthusiasm And investment that's going on because they know how important AI is and I think frankly the US was on the verge Right if if we had continued down the path that we were on one year from now This would have been largely they would have made commitments to build on Chinese AI stacks because they couldn't afford to do nothing And so I think the timing of this change was critical You could tell just the appreciation for the spirit of partnership I saw that in every every capital that you're asking question What do you think the competitive I mean I have an answer but I'm going to ask it not evenly first What do you think the competitive advantages of These national data centers in the Middle East?

8:09Yeah, I mean first, you know, you and I talk about it all the time a primitive to To AI is power and they have cheap power yeah, and You know eventually the price of producing tokens We're effectively converting electrons right their cheap energy and by the way It's both solar and nuclear and and and natural gas some of the largest natural gas fields in the world Those things are being converted into intelligence and to say more broadly You know for the last 50 years this part of the world has been powering the industrial age by exporting oil I think they're viewed to the future is they want to power the the age of AI Through the production of tokens and the export of tokens and You know, and that's just converting you know this power into tokens And so that I believe is a critical element But the here's the other thing bed wait.

9:01Let me let me poke it down I want to poke it down a little bit because I've been Just out of curiosity thinking about maybe trying to break down in my mind the percentage of Cost you know if you're out buying a token on the open market. It's tied to power And I'll tell you what I discovered but but I was just really talking with AI and a few friends So if anyone in the audience has better numbers let me know But what I what what I've seen is cooling in power might be 20 % of cogs Which depending on your gross margin on your hosting let's say maybe powers 15 % of cogs or I don't know and then that would equate to maybe 10 % of revenues so if you had Let's say a two to one power advantage you might pick up Five percentage points of operating margin something like that or be able to price 5 % lower I'm just trying to frame that advantage I throw a few other things in there number one right you just have the issue of latency right so This part of the world needs Local data centers so whether it's for Africa whether it's for Europe whether it's for The Middle East itself whether it's for India and so I think there's just proximity that's it's an important consideration here And then of course the cost of labor and they're building and investing in these robotic futures For their building very futuristic data centers.

10:26So I you know, I think for a long time the US has viewed for example This part of the world as perhaps a bit of an industrial powerhouse when it comes to oil But not very technologically advanced and I would I would tell you listening to shake tech noon You know in the UAE And their commitment it they are they are as technology forward as anything here in Silicon Valley Right paying at g 42 etc and all three of these countries Are going to invest aggressively at a level that really no other sovereign on a global basis is investing at To ensure that this set that this part of the world becomes a center for technology and AI and I think it's critical that the US was their partner in in that regard And so you know sacks.

11:17I saw tweeted when we got back Something that I thought was important. He said you know this this AI Acceleration partnership is not just a single deal It's a new framework for advancing American AI both at home and abroad You know and pers positioning the US tech stack to be the partner of choice in this region for decades to come and and I think that's right You know, this wasn't just a one -off deal I think a lot of people who are hearing about these deals thought Oh, maybe Trump went over there worked as art of the deal and got a deal done with the Saudis or the Qataris But no, I think this is a framework that the world can depend upon That in fact they are going to have access to these technologies Let me give you let me give you a comparison bill Can you imagine if in the year 2000 Washington DC had said oh my god google is so powerful That we're not going to allow any other country in the world to have access To this Google machine that might give them answers to questions Unless Google comes to Washington and gets federal approval before it launches in any of these countries I mean it would have it would have prevented Google from ever becoming the global powerhouse That it has become which has been so advantageous to the United States hard power soft power economic power And so that's what we were doing in AI and I think we've ripped the Rip the change off of that and I think now we're going to allow our companies to go compete and win Well and to frame that a little more um I just Put on ex earlier today article in the Wall Street journal that just came out that was talking about How far behind Europe is and broadly speaking in terms of of business culture and tech and The article goes into a lot of detail about how complex regulations have have limited or stifled innovation both on the labor side and on the technology side and The policies that were being considered let's say three months ago To me all were mere images of the ones that are listed out in this article So I think we were a hundred percent on a path towards Building a wall around America not building a wall around China and If we had continued on that path I think I would have predicted had we continue around that path That you know if you look at the internet error there really was The rest of the world using Americans internet and then China built their own internet correct We were headed towards a path where we were going to have a wall around America And there was going to be America AI and then China AI was going to have the rest of the world the opposite of the internet And it didn't go and I think had we continued on that path or if we go back towards that path because I don't think this is over I mean, I think some of the rhetoric coming out of the Hill and Valley conference was more consistent with the wall around America But but it's a great sign that we're not You know holistically committed to that strategy Well, I think I think you said it incredibly well It would be a disaster for this country If we embarked on a path that was the opposite of what we did in the age of the internet The United States was the greatest beneficiary from the internet boom of the last 20 years The AI boom is going to be even bigger than the internet boom And we need to follow the pattern and the protocol and approach that is made The United States a global leader in technology We do not want to be copying Europe We do not want to be in the situation that China was in the age of internet And so I think this was a major and important first step in that direction But you're right Bill.

15:07I saw a headline this morning that said Trump's rush for a ideas Deals in the Gulf opened up a rift with China hawks in the administration And you know that there's still these you know effective altruist types Who are these decelerationists in Silicon Valley who don't want to see the diffusion of any of this AI So it's creating this weird coalition of folks who have resisted the diffusion of American technology and I am I am firmly in the camp That we are not only safer we are more prosperous when the world runs on the American AI stack and I thought last week was I was celebratory because it was planting a major flag in this incredibly important part of the world With with world -class allies who have who have major resources and desire and commitment and passion to invest with America in this You know, I also think you know one of the side benefits bill This has been a part of the world that has been unstable for a long time Right We still have issues in Iran in fact.

16:14I think we're you know Perhaps on the precipice of a major fork in the road with Iran where they they're signed that the nuclear Non -proliferation deal on the table or you know, we could have a hot war situation with Iran But I would say I expect that the president's lifting of the sanctions on Syria probably gives way To the Saudis signing the Abraham Accords and other positive developments In this part of the world. So I don't think it was just a business deal Had we alienated this part of the world in terms of business I think it would have been a major setback for American diplomacy in this part of the world I think it was a good day for American businesses This is going to be an a ton of business for companies like Nvidia companies like AMD Folks who are suppliers to those companies.

17:02I think it's important for companies Like open AI that want to build out capability there. You know a major development You know two things I would mention on the end of this that relate to You know global AI the global AI race. Let's just call it that First this hill in Valley conference, which I watched a little bit online. I didn't go you weren't there where you I wasn't I wasn't but I one of my one of my partners was there and I went last year and you know There's a lot of good that comes out of that conference. There may be but the tone on the AI tone I would say was the opposite of everything we just talked about In fact, there's a there's an interesting right up on it where This one blogger titled welcome to the China hawk industrial complex So so I'm not I'm not I'm not trying to pour cold water on everything we just talked about I'm just saying there's still there is there's a large group of people in our community who have invested in Either software that they sell to the military or now Products and services they sell the military that I think Need to be China hawks in order to justify the Business they're in and in order to root for their companies and I will tell you after spending 25 years Adventure capital.

18:22There's just this instinctive thing. It's like defending defending your children once you invest in something you just start to adopt the The mouthpiece for it and make a lot of arguments that are central to that company's success And I think that's happening now that we have a large number of VCs in the military space Well, I don't know. I wear a big investors in andro You know, we're big investors in bite dance. I have an intellectual capacity To you know to understand these investments for what they are and these partnerships for what they are But most importantly, I think Everybody has to figure out what's best for team America right?

19:01We need to put America first when it comes to thinking about our global diplomacy Rather than what's best for my investment maybe in a bite dance or what's best for my investment in andro but I I do I do think there is a valid Disagreement here, right? And I've had this debate with Josh Wolf You know, who's a good friend and Josh is much more skeptical when it comes to China And and open and free trade on on issues of American AI I would say than I am I think he has some thoughtful arguments on the issue But you know on some things we can just agree to disagree as it pertains to the Middle East And I'd welcome Josh's Josh's view on this.

19:41I'm not sure what they are But I think it's unquestionable the US is better off Having American AI in partnership with all of our allies in the Middle East if we can't be in partnership with our allies Like India like the Middle East, etc. Then what are we doing? Yeah, right? I totally agree with that. I will agree to disagree on the other thing I do think that once people start back in this stuff in a big way that it's going to be naturally would take on that point of view We talk a little bit about the Middle East maybe you know the other big news I did want to finish with one thing It appears the markets reacted positively specifically to the Middle East talks and and events correct Is that correct?

20:25I mean, you know the the Sunday That you know before the Middle East so like the day before the Middle East visit began You had Scott Bessett who had concluded the Chinese negotiations in Switzerland and I think that was the bigger catalyst, right? So we had this huge bounce back in the markets these two converging events You know you had the walking back of tariffs on China and Bessent said you know our goal is not to decouple from Especially in non -strategic goods, right? And remember which China almost everything is non -strategic goods But to open markets and restore balance we will he said in his tweet We will continue trading with China especially in non -strategic goods and at lower tariff levels At the same time we're focused on reshoring critical industries like medicine chips and steel to protect National security interests.

21:21So remember when we talked bill three weeks ago I was very vocal in saying there was there were two paths being presented to this administration There's what I described as the nuclear and Navarro path which was High structural tariffs on everybody in the world generate two trillion of tariff revenue and get rid of the internal revenue service Right that was door one Which the markets abhorred right? That's what sent the markets down 20 % Because we knew two trillion dollars in tariffs is probably a 600 to 700 basis point headwinded GDP And door two was what I described as the Bessent or the Hassett approach Which was more consistent with the fair trade argument the president had previous outlined Which was to reshore critical industries to have some tariffs on the rest of the world But to be modest in the scope of the overall economy and so it looks like and I think what the market was reacting Was that the president has has has leaned in the direction of the fair trade the Bessent approach To China and to rest of world on tariffs and away from the Navarro approach In fact, we haven't seen much in Navarro in the last three weeks and who's been in the lead lead chair on everything Who was on the talk shows again this weekend?

22:37It was Scott Bessent and so I think the When the tariffs started you and I talked about the fact that that chaos Is very difficult both for investors, but also for executives like committing to hiring programs committing to catbacks all these things And there's no doubt that that Bessent brings a notion of calmness, you know to the table almost every time he talks He just talks in a calm way But he's the president the president said every time you go on television the market goes up I think the president agrees with you. Yeah Yeah, so so that's that's all good and just to Because this I think I think the markets appropriately recognize that the China tariff agreement is the biggest one in the most imposure You know more than any others so as I understand it We're in a 90 -day suspension on drastic tariffs We we we have a 30 % import on Chinese still though so if you're if you're importing 80 % of your you know cogs from China that's still a big deal It's split.

23:47I've been told 10 % tariff and 20 % this odd fentanyl tariff and I I guess The second part leaves open the door that if China agrees to something on fentanyl precursors that immediately drops to 10 That's my interpretation. I do I don't know if you know more than I do Well, so what I would say is Going into this year Our tariffs on China were 15 % okay, okay, and so my you know, but look at the tweet that that Bessent sent he said especially in non -strategic goods and at lower tariff levels So there is the possibility that on certain non -strategic goods you could actually have be back to 15 % or maybe even lower bill as you suggested But I think on the strategic belief textiles Home home goods correct toys would off it in that right backyard umbrellas Yes, all the stuff that people want to buy on Amazon, you know, that is non -strategic But when it comes to steel and aluminum and chips and items that we consider very strategic certain medicines Solar panels might be a borderline issue right they've said on those they're going to be higher tariff So maybe those stay at 30 % bill when you blend it all out.

25:04I had my team rerun the math So remember I came on here on Liberation day and I held up the list of tariffs that that we're on the poster board that Trump showed And I said if you just had all those up it comes up to $800 billion in tariffs Right, we have three point three trillion dollars of goods that are imported every year into the country from abroad And so eight point eight trillion dollars or eight point eight 800 billion dollars a tariffs is pretty substantial Um, it now I had them rerun the math today and if you put China at 30 % on strategic at 15 % on non -strategic And though in the rest of the world roughly at 10 % you come up with about 300 billion in tariffs Okay, I just told you that last year tariffs were 77 billion So that's still a 4x increase in tariff revenue right to the United States But it's 300 billion on a 28 trillion dollar economy So I think what the market was saying is okay 300 billion half of that will show up as increased prices and taxes on consumers and on businesses Half of it will get eaten by the the producer of the product in China in India wherever You know, that's not that big a headwind to the US economy And that's why I think you've seen the markets bounce now remember we're just back to where we started here The markets were down 20 % now they're up 20 % And so I think this is about Giving a a path and giving some Definition around the path forward the flight path forward and if you take these two things together Okay, we went to the Middle East and we landed the plane did a bunch of deals got trillions of dollars of investment into the United States.

26:46We unlocked Hundreds of billions of exports to the Middle East Then then you landed the plane on tariffs those two things together bill are a very positive Orientation toward the world right again. So you know, you were saying this is still not a settled in issue within the administration on on the diffusion of technology But these two things together are not an isolationist approach to the world Right these two things together are still somebody asked me on CNBC I think in March I was saying there are these two doors that we could two paths we could follow and they said well What do you think Trump is and I said at the end of the day he wrote a book called the art of the deal Right this guy is he wants fair trade, but he's a deal maker on tariffs and on AI diffusion He's been a deal maker and I think both of those things are positives for the economy And that's why you've seen the market bounce back the way it has Certainly has So by the way one one other thing I wanted to mention Just because we didn't mention it, but I know there was a lot of concern Among some of the companies that use strategic inputs the rare earth issues that the magnet issues those were Um those restrictions were removed as part of this first 90 day pause Yeah, I think that's going to be a critical question, you know, remember we still have We're not done.

28:10It's a 90 day pause. So it could come back if things you know where to Go off the rails and remember we still have a ban On the export of h20 so there are no chips Currently being sold by Nvidia into China. Yeah, right. We have a complete ban on AI chips into China I think jensen was on the social media again in the past two days Expressing dismay about that and even he came up with some math that he would have sold 15 billion next year And he said it would have created three billion in us tax revenue The US won't man I mean, I think I think if you forecast out two or three years They were on track to be a 50 billion dollar business I think in China and if you just apply a normal margin and tax rate to that You know, that's billions and billions of dollars lost to the US treasury.

29:03Yeah, Chinese consumers Would have would have effectively been paying It's probably another 10 billion dollars of profits to Nvidia that were lost that they are they would have otherwise plowed into research and development to keep America At the forefront of chip technology So I think that we could we could still see as part of the negotiation over the next 90 days I would not be terribly surprised to see Nvidia allowed to sell some form of deprecated chip into China And I know again different people have different opinions on on on that My opinion and I think you share this is China already has frontier AI Huawei is already there we have demonstrable evidence of that and their models are already there arguably their open source models might even be in front of the United States at this point in time And so there's no keeping China from frontier AI So the better question is are we better off competing against them?

29:58Right? Are we better off selling to those countries Those companies keeping companies like bite dance and Tencent etc in the kuda ecosystem Rather than allowing all of that data all of those profits to flow right into the Huawei ecosystem and benefit the Chinese AI stack I think listen I think that's a closer call than selling chips to the Middle East But if you when push comes to shove I would sell chips into China because I think it's a net benefit to the United States And we've talked about that in the past yes and and and and there are many many many people who now believes that You know restricting our technology into China just gives them more and more incentive to implement their own technology faster And to invest behind it which has been happening Well, I mean if you look at you look at auto's autos robotics etc I mean, there's plenty there's plenty of evidence about that Well another I would say the third big thing that that's happened since you and I were last on I can't believe by the way You step away for like 15 days You know and all of this stuff happens.

31:05It's really crazy. I like time has has new data every day But the other big one here is underway is the reconciliation bill and as a reminder to folks We have to pass a budget for the United States the reconciliation bill It's a special type of legislation in the Congress designed to expedite right budget related laws And the way it does this bill is it basically suspends the filibuster So so long as you're complying with these budget rules in the Senate Known as the bird rules which is the only things that can go in to this package have to be related to the budget But if that is the case then you only have to get to 50 votes in the Senate Rather than the 60 votes otherwise required to be filibuster proof So you basically take all of these smaller pieces of legislation that might have otherwise touched the tax code or the budget And you roll them up into this huge package called a reconciliation bill Now the reconciliation bill it started in with a draft in the house The Senate will then review that draft and the White House is weighing in on it So it's you know the expected timeline and I think the president was at the At you know spoke to the House caucus today But it's expected to be passed out of the house this week Then the Senate will weigh in on it for two to three weeks It will amend some of the language in it.

32:32It will add things it will subtract things etc It'll send it back to the house at the end of June And then the president is expected to sign it into law Somewhere at the end of the month or around the the first or second of July So maybe we can break down a little bit what's in the in the package bill I think the biggest thing is it's the extension of the Trump tax cuts right And so remember when those tax cuts were passed in 2017 They they only had a 10 -year life So they're set to expire in about a year unless they're extended And so that would be a major like a three trillion four trillion dollar increase to taxes At the end of this year unless they're extended So the first thing they do is just extend those tax cuts for another five to ten years Whatever they agree on in the reconciliation package But then you have all these additional tax cuts that he talked about on the campaign trail No tax on tips No tax on overtime No taxes on Social Security The immediate expense scene of capital investment.

33:39This is huge for business So if you're buying capital equipment if you're buying plants or equipment or software even You will be able to immediately expense those items from a tax perspective not a counting one It's incorrect. It does are two separate things but yes From a tax perspective and so all of these things get pulled together in this bill And there are a lot of there's a lot of debate and questions out there as to what does this mean? You know like you add those things up That's probably a four or five hundred billion dollar annual stimulus to the economy But I know I know a lot of people talked about this But they got to put a cap on this tax on tips thing because it's going to leave a loop hold it Everybody in their brother will walk through so It needs to just be some cap that won't hit I think it's diminimus tips I think it's diminimus tips Cuz that's why you just redefine your consulting company as all tips Correct correct So yes I think they already have that in there.

34:40They've done a lot of work on this So remember the two people in the house that are relevant here. You have the speaker Mike Johnson you have Jason Smith the chairman of the ways and means committee Obviously everybody's relevant But those are the two leaders in the senate its senator its leader Thune and it's It's Mike Crapos the chairman of the senate finance committee and then in the house or in the white house You have Kevin Hassett and Scott Bessett So the six of them think of them as the big six They're putting together this package. They each have a list of their priorities And then they get together and negotiate those priorities We don't even know exactly what's going to be in the house bill yet.

35:18Let alone what's going to survive in the senate But we certainly we certainly have the contours of what's going to be in it and you know I saw this morning that the council of economic advisors which of course is in the white house Is saying yes, although this will increase our spending our cbos scoring because the taxes cost money The tax cuts cost money It also will lead to much higher economic growth than we would have otherwise had and so that's a normal argument That you see out of of those who support tax cuts. Where you see Well, of course, we're you know higher taxes lower economic growth lower taxes higher economic growth I think I'm firmly in that camp, but I do worry That you know, we had just had a 2 .2 trillion dollar deficit You know, we have a 38 trillion dollar debt We all got excited about Elon and Doge being able to cut a lot of costs out of government But I suspect when you look at this package right and again, I'm just saying based upon how the congressional budget office will score it And this is kind of arcane scoring But it will probably increase the deficit and at best it would reduce it by 100 or 200 billion dollars Depending upon what where our economic growth comes in bill right?

36:40Obviously if you have higher economic growth You have higher tax revenues and so there's a huge benefit to drive higher economic growth for the country But there are no big areas where we're taking out 500 billion or 700 billion or a trillion dollars And I think that when you look at the tariff revenue a couple things a couple nuances here We talked about the tariff revenue being 300 billion dollars. They don't count that in the budget Okay, so think of that as as part of your cash flow But it's not really in your in your P &L for the year And so that's just one of these esoteric Washington things You know, it is money to the federal government to the US Treasury But it's not included as part of our budget scoring.

37:24I think another thing is the Doge cuts Those are real there are bunch of real cuts coming you know coming to fruition I don't know what those will total Maybe a hundred billion dollars, but they're not going to be counted In the budget bill unless there's an article of recision So the White House basically has to get Congress to agree to rescind the monies And so that hasn't happened yet. So those cuts are not also not added into the budget the budget math that we're seeing But people should not get their hopes up that they're going to wake up next year and that our our budget deficit is going to magically be You know cut by 50 percent.

38:04I don't see that in the cards. You know one thing I would reiterate just because it would be such an amazing scenario There was a moment in time in the past six months where Trump mentioned potentially Discussing with China and Russia cutting all of our military budgets in half If that were to happen I think it's the biggest thing you possibly deliver as president if things calm down in the middle least If Ukraine Russia can be taking care of maybe that gets on the table and that could be a big cut That would meet this agenda or Our neo -China hawk friends wouldn't like it, but I would like it quite a bit Well, I think the the defense department budget goes up by about a hundred and fifty billion dollars Is part of this package and it's about a trillion dollars for the year and so you know, I don't again Part of the whole taking on my part I'll just read a piece of it.

38:59We have this challenge is that you know, you have You have a lot of members of the house and a lot of members of the Senate and you know, it's just very difficult to Cut our way You know out of this problem and so I do think that and you know freedberg had a good rant on this on the all -in pod I give him a lot of credit for continuing to beat this drum I've long supported a balanced budget amendment. I think we have to come up with some structural changes Right that will allow us to get this under control I would love to believe that we're going to grow our economy at four or five percent per year Instead of two percent per year because that would grow our way out of the problem So but I think that that would be aggressive to forecast that kind of growth We haven't seen that kind of growth in in a while One data point.

39:55It's kind of interesting. I listen to that same episode and and the team at all -in was talking about potentially monetizing the balance sheet right The question is are there assets that exist on the United States balance sheet that could be turned into offsets for the for the deficit and One of the things that actually comes up is land, you know, living here in Texas, you know, many people probably don't know this But the university system here was don't was granted as a gift years ago 2 .1 million acres in the in the Permian Basin And wow and that spits off I believe I could I could have this number wrong, but like $894 million a year Now the US has way more than 2 .1 million acres, but That is an example I guess of an endowment -like situation where land is monetized and creates cash flow So yeah, so maybe there is something to that well, I would say I would say one thing I was I was happy to hear the president say over the course of last couple weeks He said if we do do anything like that That rather than putting that money in a in a sovereign wealth fund.

41:10We're just going to use it to pay down the debt And you know, so now it sounds like the sovereign wealth fund is on the back burner, which I think is a good idea To put it on the back burner and I do think that we ought to have a task force in this country Specifically coming up with ideas for how we achieve deficit reduction and debt reduction and monetizing the balance sheet should be one of the things on The list to be discussed Along with other mechanisms to allow us to have permanent, you know cuts things like the defense stuff that you're talking about Bill I think everything has to be on the table We have to come up with a plan that over a reasonable period of time.

41:52Let's go at 10 years Even like a family, you know, you put a lot of path you start small and you work your way over a longer period of time Toward deficit reduction, but I think it is morally unacceptable to saddle our kids With what will be over 50 trillion dollars in debt that we you know, we effectively increased our quality of living during our lifetimes And it will only hurt theirs because we're saddling them with that big pile of debt We got to get about to Wittling away at that debt and hopefully we can get it done in the next couple years Hot topic always on in Silicon Valley is carried interest on the table here I think I mean the president has come out in support of Eliminating in support is a port of eliminating carried interest as well as you heard him come out in support of Raising taxes on the highest earners.

42:50I don't know the last I heard neither of those provisions Are in the house version of the reconciliation bill they may get at it in the Senate But I think those are are fairly controversial remember Republicans generally in the house and Senate they're against tariffs and they're against higher taxes and they're against all taxes You know all forms of higher taxes Whether on on all these different brackets and you know, I heard somebody come out and say it You know, maybe it was philip on the all -impot he was saying in New York all -in He pays 57 % in taxes, which is I think what I pay in the state of California There is a tipping point right people are familiar with the laugh or curve at some point taxes go up to a point where your tax revenues actually go down Right, and so I would argue that at 57 % all in for the highest earners You're getting to that point where you disincentivize additional work Right and and you know, we may not be there yet and you know You may be able to increase that tax bracket even more But I would love to think that our country could come up with more creative solutions to solving our debt and and fiscal crisis than just raising taxes it seems like the easy way out And I think there's a better way in fact I'm happy to report That you know one of the things that got included in the house version of reconciliation bill Was invest America and you know one of the purposes of taxes on high earners is is redistribution And I think there's a much better way to achieve redistribution And that's by getting everybody in the game from birth.

44:26So it was a it was a huge breakthrough bill That we got invest America included in the house version of the bill Well, congratulations, Brett. I will tell you you know, I've talked to people that have You know pivoted later in life and dedicate themselves to philanthropy and the the number one thing I hear from all of them is how heart things are and how slow things move and So for you to tilt at this and get it included So quickly and and DC time this is ultra quick is a huge accomplishment. So Thanks for that. We're not we're not done yet But I would say I would say this maybe just a little behind the scenes on it bill because listen This is all new to me and I learned a lot as most people know I started invest America The not for profit about two and a half years ago the idea was very simple That we needed to attack the wealth gap we needed everybody to feel like they were part of the system And the way to do that was through the magic of compounding So it's a thousand dollars every child born in America There are three point seven million kids born a year we get a thousand dollars in a seed investment account in the S &P 500 It would act like a 401k from birth and then companies and parents and you know in others Church groups whatever could add to those accounts such that by the age of 18 You could have about 50 thousand dollars in that account at age 30 you could have about a hundred and fifty thousand dollars in the account You couldn't take the money out you couldn't trade it.