#24 - Cory Levy Interviews Balaji

0:00Corey, welcome to the New York City Podcast. Thank you for having me. I don't really like being on podcasts, but here we are. And so I thought I'd maybe interview you and maybe it could be back and forth. Love it. Let's go. But maybe just to set the virtual stage, maybe you can just summarize in like two minutes what we just talked about on our tour. And then from there, I'll dive into some of the questions that I was thinking about in our walk. Totally. Yeah. So briefly, as we know, it was easier to start Netflix and reform blockbusters, easier to start Bitcoin than reform the Fed. And I believe it's easier to start a new city than to reform San Francisco and may even be easier to start new countries than to reform America.

0:39And at least with 99.99 % of people working on the reform path, we should have some small fraction of people working on the path for building alternatives, which tech is good at, right? Peaceful reform by just building an alternative and then the customers of the old come to the new, the parallel institutions. And in a sense, what we've done here at Network School is just like you take a Google Doc and you print it out or you take metaphorically an Amazon shopping cart. You print it out to your doorstep, right? Like it comes to your door. You take a Uber in the app and you print out an Uber to your door.

1:14In the same way, we're taking a cloud community and we're printing it out in the physical world. And we're showing we can do that here at Network School. And if we prove that here, we can scale that out to other Network School nodes around the world. And eventually we can do that where we have many students and many people who come to Network School start their own startup societies and pop-ups become the new startups. And so that's it. And so how's it going? I think it's going great. I don't know. Give me your impressions. You were here. I think it's pretty cool. Yeah. Yeah. So I just got here, you know, less than an hour ago.

1:43And my, you know, Instagram versus reality is I thought, you know, it was going to be a little quiet and not that many people. But in fact, when I arrived, it seemed to be like a hustling sort of place. And so I was surprised in a very good way to see that. And so I guess, how do you think about success and KPIs for this place? Remind me, how long has it been a place? Just a year, just a year or so. How long has it been? I think this has been a place for about a year. We opened Network School September 24th, 2024, right? Cool. So it's just a little bit over a year, about a year and a month. Yep.

2:21And I think we have succeeded in bringing people from more than 100 countries here. And basically, I think it feels like SF. I think like the good parts of SF, right? You know, like it's like the tech, kind of like walking into a tech cafe. Which surprisingly, they're limited in SF where you can walk into a tech cafe past certain hour. Yes, that's right. So we keep ours open late. And we are essentially something where there's a recognition that, you know, there's many cities around the world that have unicorns. So now tech is decentralized out of SF. I'm sure you see that in your founders. The internet is obviously outside of SF.

2:54Most billionaires are not American and so on, as we were just talking about. So can we just print out the values of the good parts of SF and California and tech? Can we print them out somewhere else? And that's what we're doing here. Understood. On our walk, you mentioned about some of our friends being in denial in the United States. Yes. Talk to me about that and what else do you think people are in denial of? Sure. So the issue is basically that think about, for example, during the Biden administration, to many people, it was obvious that Biden was senile. Yet he managed to make it through the 2020 election and four years of a presidency and even the Democrat primary.

3:35And then even six months of like the general election period until at the very final moment, like three months before the election, it was finally mark to mark and acknowledged, OK, yes, he was seen all along. And it was this is this thing where you can see on Polymarket like Biden's chance of being the nominee or something. And it just then collapsed like this. Right. And Polymarket was maybe the best tracker we have of objective sentiment because you weren't necessarily doing a real-time poll on that. And so that's the mark to market. The West right now is in this weird stage where whether it's SVB or it's FTX or it's Biden, they are denying that rather than a gradual decline like this, where it's sort of acknowledged all the way down, that they are, quote, taking the L.

4:20Right? They deny, and then it's just digital death. Correct. It's like a square wave drop off. All those things you mentioned happened. What do you think it is today that they're in denial? It hasn't happened yet. Well, several things. One that's happening right now is the death of the dollar. Gold is appreciated by, it's doubled against the dollar in the last two years. And Bitcoin has quadrupled against the dollar in the last two years, which means really what's happened is the dollar has dropped 50 % against gold and 75 % against digital gold. And so that's like, we're in the middle of this, but people, there'll be a point, I don't know exactly the point.

4:57Maybe it's$10 ,000 an ounce for gold, or maybe it's, I don't know,$200 ,000 Bitcoin. I don't know the exact number. There'll be some number where people realize, I'm not getting wealthier, it's the dollar that's getting weaker, there's a loss of confidence. Powell was talking about stimulating into an already high inflation economy because they might need that for the 2026 midterms or something like that. Dahlia has written about this. Elon went into the government, our best guy, who could literally land a rocket with chopsticks and do electric cars and brain machine implants and genuinely have more Tesla humanoid robots, Tesla diner, the kinds of things he can manage in parallel.

5:38as you and I know, we know a lot of people in this space. It's remarkable how many things you, Elon said it can't be done, right? So our best guy went in and said the US government can't be reformed after going all in in an Elon way. There's been essentially, though it's not being called this, a surrender to China that just happened, where essentially Hegseth and Trump said everlasting peace with China after this meeting. And the new national defense strategy, when it's published, it is reported to essentially be withdrawing American troops from East Asia back to the Western Hemisphere. And then, of course, there's the political, ongoing political fighting within the US.

6:18And so what they're in denial about is a simultaneous economic, military, and political decline. And it's not just confined to the US, it's happening in all the G7. If you look at yields, for example, they're spiking in the US, UK, Germany, Italy, France, Japan, Canada. And there's headlines like the UK may need an IMF bailout. France may need an IMF bailout. But isn't the IMF composed of these countries, right? So you're seeing essentially the simultaneous collapse of the major countries that fashion, whether you call it the international community, the rules-based order, the Western world, including Japan, the American empire, whatever you want to call it, that's all going down at the same time.

7:00And the issue is that people have seen lots of movies on, let's say, invasions by aliens or killer robots. And it's actually easier for them to envision a post-apocalyptic world like this than a world where actually there's simultaneous military, economic, political collapse in all Western countries at once, similar to what happened with Biden, but even more severe, right? That is what I think we're in the middle of. But there'll be maybe some moment where it's recognized and it's very dramatic the way that social media works is like this and snap i can say more but let me pause there cool um and i guess my my follow-up to that would be like um don't take this in a bad way but yes but so what so what yeah for people that are in the western culture right and that are in america right now um you know do you think it'll be a a sudden flee or do you think it'll be a gradual sort of uh recognition of this and i guess more more specifically like so what for the person that's living?

7:56Extremely good question. And Dalio actually, I think if you read Dalio's book, he thinks the US or the empire, American empire, by the way, I say American empire in a, most people will say it in a negative way, like it's imperialism or a republic, not an empire, but the left and the right will say those things. But there was a good version of American empire, which was certainly a better empire than the Soviets or the Nazis. And the central left and central right version had diplomacy that was the best in the world and signed all of these trade deals to everybody and the military that's the strongest in the world and generally maintain the peace in the high seas and blue jeans rock and roll there are lots and lots of good things about american empire right so i'm actually somebody who i write in praise of it you know it's it is at a minimum mixed so that's so you can't say it's completely negative there's a lot of positives about it um there's you know the internet itself came out of that the human genome project blah blah we could go on and on right so i want to just calibrate and make sure that that's being understood.

8:51I'm definitely not a hater. I am, however, a realist, right? And sometimes when you look at a company and you see its balance sheet, you realize this one isn't going to make it. And you have to give the hard news to the people in that company that their salary is there. But you know what? Life is going to be different. They're going to have to find a new job and so and so forth. However, we don't have is, and by the way, you know this overseas as well. Once in a while, you'll flip the channel and you'll see some country where it's a failed state. Everybody's yelling and shooting each other. And you'll say, well, that sucks.

9:27And then you'll flip the channel because what are you going to do? Are you going to go and parachute over there and say that? And now I increasingly have that feeling when I look at America. Everybody's yelling and shooting each other and so on and so forth. It's getting more and more intense and agitated. But I think it's only a shadow of what it's going to be. And the reason is dollar inflation is global taxation. What I mean by that is it's not just Americans who are taxed by inflation. It's the entire world who is part of the US financial system directly or indirectly. For example, all these countries that buy treasuries and they save in treasuries, if they hold US stocks, even until the mid-2010s, Alibaba and other Chinese companies were going public in the US, right?

10:06If they have Delaware companies, and so on and so forth. There's so many ways in which they're dependent upon the US financial system, right? Which is why treasuries are able to sanction all these countries and so on. But now we're seeing simultaneous run, and I'll get to your point in a second, simultaneous run from US treasuries into Chinese treasuries whose yields are at all-time lows, by the way. And China is bigger than the G7 combined. So if their yields are low and all the G7's yields are high, that means neutral global investors who are not mandated to buy treasuries, because some people have that in their charters, they have to buy treasuries, right?

10:39So those who are not forced to buy treasuries, if you were forced, by the way, you lost your shirt over the last few years, you're completely dead. It's like one of the worst times ever for bonds, maybe the worst time ever. There's some charts that show that. I think Charlie Bielio posts things like this, you can find the exact chart, but it's definitely a bad time, if not the worst time. So they're going out of US treasuries and they're going into Chinese treasuries, they're going into gold and they're going into digital gold. So this whole thing, this financial system is going to zero. And you're seeing that with, for example, seizures of companies.

11:10You're seeing that with the government taking equity stakes in companies. You're seeing that with the tariffs. You're seeing that with the wealth taxes on the left. You're seeing that with the remittance taxes on the right. You're seeing that with the property taxes where inflation is boosting property values. The pie is shrinking. And even as the numbers are going up, the actual real value is going down, which is why the political fighting is getting more intense. When that pie collapses, then the last piece of paper holding blue America and red America together was green, like a tattered piece of paper of the dollar, because blue Americans certainly don't vote for red Americans.

11:43They don't socialize with them anymore. They're in blue sky versus X, and they don't actually even marry them. Only 4 % of Democrats are married to Republicans. That's not actually a country. It's an economic zone. You've seen the tweet saying, it's not an economic zone. It's a country. It's actually an economic zone, not a country, because these are two tribes like Sunni and Shiite, right? Protestant and Catholic during the 30 years war that don't get along. So green is the last thing holding them together. When that tears, the whole thing is going to come apart because the economic union comes apart.

12:14And the extent to which American living standards are subsidized by dollar inflation, every time the trillion dollars is, to give it just a very rough calculation, Let's say there's 3 billion people out of the 8 billion that are in the American dollar economic union globally, right? If that contracts back to just the 300 million of the US, right? For example, what are the tariffs doing? They're telling other countries, don't send your shoes from Vietnam to America for printed dollars, right? Don't send your valuable goods to America for printed dollars. Because ultimately, that's all America is sending back.

12:45That's what the trade deficit means, right? So you're saying dollars are not valuable outside America anymore. Fine. This is something which means the scale of American empire is going to contract, just like the Soviet empire contracted, right? It went from this thing which had military bases in Cameran Bay and in Vietnam and in Angola and had bases in Cuba to all the way back, or like informal base in Cuba, to all the way back to just Russia. And it lost Ukraine and it lost the Warsaw Pact countries and it lost Central Asian countries. That's what's happening. And what does that mean? Well, first is it means living standards plummet.

13:21And how much do they plummet? If you go from 3 billion people to 300 million people, your printing is spread over 90 % fewer people. So your inflation is way up, right? Number one. Number two is there's starting to be retaliation against the US by the rest of the world. The US passport has just dropped out of the top 10. It's collapsed in terms of the number of countries you can go to because places like Brazil, for example, have reciprocity rules. If America makes it hard to get in, they make it hard for Americans to get in, right? So U.S. identity is actually plummeting along with U.S. currency.

13:55U.S. currency is being devalued. U.S. identity is being devalued. So it becomes hard for Americans to get out. Taxes go up. Violence increases. Shootings of CEOs. Shootings of Charlie Kirk and so on. And basically, I think what the issue is, is most Americans don't – I mean, they know 1945 and they know 1865 and they know 1776. But they don't really understand 1917 or 1991 or 1949 or 1947. That's to say they don't understand the history of, let's say, Russia or the history of India or the history of China. And those countries have histories where America is in a current state that's more like a, like a state space theory.

14:36Share more. Okay. In, in control theory, in math, right? Like, for example, a car, you don't summarize its current state by just its position or its velocity or its acceleration. You have all three of those in a vector, right? And each of these are themselves vectors. and then you have all these other variables like how much fuel does it have in the tank, right? What is the state of each of the tires? So it's like this big vector that has all of these components on it, right? And then given all of that, there's a system in the car that says, given all this stuff, okay, we'll spend this much fuel to accelerate.

15:15And you can have a very sophisticated kind of mechanism here where perhaps, okay, we're running lower on fuel, so we're going to reduce the velocity and so on and so forth to optimize fuel mileage, for example, right? What it means is that the state of many complex systems is not univariate. You can't just point to an interest rate, for example, but it's multivariate. It's interest rate, it's unemployment rate, but it's also how many people in the country know math and how many of them are married to each other versus childless and all these other variables, right? So if you think of a country as having a vector of variables, I think the vector of variables that the US is most similar to now is not 1945, certainly, which is very highly homogeneous, aligned, integrated country where the rest of the world collapsed.

15:57It's three examples. The Soviet Union in 1991, when it was on the verge of collapse, because it had both ethnic nationalism in the Union and basically the economic system was at the end of its legs. India during partition. Okay. So India had essentially two, what were today, Bangladesh and Pakistan flanking India. And essentially the borders were announced and people just ran across the borders, right? And the Chinese civil war between communists and nationalists. And so you're actually seeing people pattern recognize at least the last one of these now, where they're like, wow, okay, after this Mamadani election, it's communists versus nationalists in America.

16:34Okay, so that's one piece. The second piece is Indian partition. The geography is very similar to the East Coast or the, you know, West Coast is blue. Northeast is blue. Heartland is red. That's actually very similar to how Indian partition looked if you go and look at the map, right? And the migration back and forth is similar to Hindu-Muslim migration with partition where reds are going to red states and blues are going to blue states. And finally, the end of the Soviet Union, people understand the economic issues. They don't really understand the ethnic issues. In 1989, a census came out that showed that the Russian ethnic group was down to 51 % of the Soviet Union.

17:10Many Americans just think of the Soviet Union as Russian, but actually had like Turks and Uzbeks and Koreans. It was this huge Eurasian empire that spanned every kind of thing there. It had Eastern Europeans and all these different ethnic groups started to feel oppressed by the Russians. And the Russians, in turn, felt oppressed by them. The Estonians felt oppressed by the Russians because the Russians moved in and made their country Russophon. And then vice versa. The Russians felt they were carrying the weight of the Union. And so the whole thing broke apart in ethnic terms, not just economic terms.

17:38Both those kinds of factors are there in the U.S. today. Why? The, like, Wokes and Magas both feel that each other is oppressing them ethnically, number one. Right. And number two, Keynesianism is a lot like communism. Should I explain that? I know. I know. I'm just like, go, go. No, no, no. I'll, I'll, I'll, um, what, one thing I want to kind of shift to is kind of talent pipelines. Yes. And so there's maybe a clear distinction, whether you're in America or out of America, where to go. Um, if you are, you know, super young and ambitious or just, you know, period ambitious. Yes. Um, let's talk about America.

18:11Sure. You know, the ones that, you know, they end up on the coast, most likely, you know, New York, San Francisco, or, or, or, or, or. Boston, where do you think that will be in the future? How do you kind of think about talent pipelines here where we are today? Sure. And then kind of more broadly, if you're like 16 to 22. Great question. What should you do now, given everything that you just said? So at a minimum, you should visit Dubai. So visit Warsaw and Poland, Dubai, Riyadh, Bangalore, Singapore. If you're here at Singapore, come visit NS. um uh ho chi minh city in vietnam and uh and then go to shenzhen in china but then also go to like the number 52 city in china now you'll finally be calibrated on where the world is right and what you'll see is that poland which is where wasa you know so warsaw and dubai and riad and even Bangalore actually, and certainly Shenzhen and Ho Chi Minh City in Singapore and some, you know, number 50 city in China you've never heard of, have higher living standards than much of the US.

19:21And so they're not third world countries. They're not backwaters, which they were in 1991, right? Over the last 30 years, history is running in reverse. And in many ways, the former first world is becoming quote, third world and vice versa. The reason I'd say that's the first thing to do is you have to calibrate on where the world is. And media reports of this kind of thing, there aren't Hollywood movies on this, right? The New York Times, Anglo media is more and more and more insular focused on the civil war within or cold civil war, quasi-cold civil war, whatever you want to call it. And they're not showing images really of what's happening outside because it's depressing to people who are still caught in that Anglo kind world.

20:02And our friends will, they'll tell me the coolant of, we're building, we're building. And I love them. I love them so much. But to me, it's as if, imagine they're on the Titanic. And they're solving the Riemann hypothesis on the Titanic. They're mashing the keys. They're having breakthroughs in math, computer science, whatever. All this is happening. It's real. It's genuinely real. But the vector on which they're accelerating is not the vector on which they're decelerating. And so the physical platform that people are taking for granted, the reason I brought those historical examples is nothing that most Americans have experienced, certainly most 10th generation Americans, right?

20:40The longer you've been in America, the less you've experienced genuine catastrophe. And whereas if you're an immigrant, you have. Like that's the other part of it. Like if you're from Cuba, if you're from China, if you're from India, which went socialist, if you're obviously from Russia. and you know certainly the Jewish community came from you know obviously Germany they've got maybe the most memory that things can go wrong in America right now but the people who've been there for a very long time think it will always get better you know it's a USA don't count us out they'll basically quote homilies like this right and that's similar to people thinking oh real estate always goes up you know and so unless you look at the history of other countries you don't to have a sense of how far it can go down.

21:22Like, actually, I'll put it a different way. In tech, you know that just the fact that something has never happened before doesn't mean it can't happen. Example, air flight, right? Like for thousands of years, humanity could not fly and you're crazy to think if you could fly. And then one day we could, right? Like AI is like that, right? You know, space travel is like that and so on and so forth, right? These things literally were not possible and then it happened. So that's in a sense, a positive surprise. But now you have to visualize a negative surprise like this, like what COVID was, like what the collapse of the Roman Empire was.

21:55That's what I think. And so let's see. For talent, right? Talent calibrates by going outside the US, number one. Then they're going to see it's actually possible to build in the physical world. The reason we've been confined to building in the digital world is because of regulations and rules in the Western world. Outside of that, those don't exist. And at the one silver lining to the American empire receding is that regulatory harmonization also recedes. Do you know what that is? Share it for those who don't. Sure. Okay. So FDA, SEC, all these three-letter agencies, some anonymous bureaucrat in Silver Spring, Maryland, is setting essentially the health rules for the whole world.

22:36Because until recently, the Czechoslovakian FDA or the Chinese FDA, even the Chinese FDA, would respect the American FDA's decision. In fact, even the fact that there was a cognate of them, that those countries were structured in such a way that they had a FDA equivalent, SEC equivalent, they basically were copying the American political system and how it was set up. So the reason that both the government and pharma companies like this is pharma could get its approvals in the US and they could ship around the world. It was a homogeneous market in a sense, right? This is called harmonization. All those countries essentially sing together in harmony.

23:09The big problem with this is some anonymous bureaucrat who you've never heard of who was not elected and can't be fired. So neither electoral nor market theories of accountability actually deal with this. They're saying the rules for the whole world. And if they make a mistake, then whole swath of technology are knocked out. And this has happened with biotech, which is an area I'm very familiar with. And there's various kinds of holes on the side of the system. For example, right to try laws or LDT and CLIA for clinical laboratory tests or compounding pharmacies for mixing drugs or awful little prescription or medical tourism.

23:42Those are five different workarounds to get outside of the FDA system. And we saw first with Uber and Airbnb, how much regulation was holding back innovation in the physical world. And then with crypto at 100X scale, how much the SEC and FTC and so on, CFTC were holding back innovation in the digital world. And I think now we're going to see how much innovation in the physical world has been held back by regulatory harmonization, right? So the major opportunity for talent is be mobile, be global, and realize that there's actually advantages of being outside 20th century regulatory spheres. And that doesn't mean, by the way, no regulation.

24:19It just means better rules. So what, I mean, I guess the be mobile part, you know, kind of go visit the cities. You go and see, like, how do you think about accelerating if you're someone that's 20 years old today and you go visit, insert one of those cities. you've spent a lot of time in San Francisco. Do you think one will find the communities there yet? So San Francisco is interesting because it is possible. San Francisco could go, it depends if like someone like either Zuck or somebody like Zuck who has yet to show themselves, you know, like we're in a time where someone can come out of nowhere politically like Bukele or Mamdani or something like that.

24:57You need somebody who has the drive of a Zuck or a Nealon. and I don't know who that person, it would have to either, Zuck is the only person in the Bay Area who kind of has that level of drive. Go ahead. Go for it. I was like, influence, drive, et cetera. Influence, drive, capital, and so on, to like what Elon is doing at Starbase, right? What actually Republicans are doing in Florida is possible that someone could do that in the Bay Area. But it's also, I don't think most people in the Bay Area understand the severity of their situation. Should I explain why? Please. They're building AI, and other things, but especially AI, and the bluest city and the bluest state in the union, and saying very publicly, they're going to make billions by putting lots of blues out of work, right?