E112: Is Davos a grift? Plus: globalist mishaps, debt ceilings, TikTok's endgame & more

The dynamic between the four individuals revolves around playful banter and a shared sense of camaraderie. They engage in light-hearted teasing and jokingly label each other as misanthropic malcontents, highlighting their individual worldviews and behaviors. However, underneath the jokes, it's clear that they value each other's friendship and enjoy recording their podcast together. The discussion then transitions to a debate about Ron DeSantis and his policies, with differing opinions on the impact it will have on his popularity. Ultimately, they express a desire for non-political, non-career politicians to enter the political arena, emphasizing a need for change and fresh perspectives. Despite their differences, they maintain respect for one another and welcome diverse viewpoints.

The speakers value a candidate who is moderate, reasonable, and capable of getting things done. Nikki Haley believes that this candidate, who happens to be a woman of color, deserves a close look for the presidency. Jason Calacanis is influenced by the idea of a candidate who can control the budget and reduce spending, as they perceive the country to be facing a serious financial crisis. Both speakers agree that social issues should take a backseat to economic concerns in order to address this crisis effectively. Ultimately, they lean towards supporting the Republican Party in the upcoming budget showdown, emphasizing the importance of fiscal responsibility over other factors when choosing a candidate.

Fiscal responsibility and a strong balance sheet are crucial for national competitiveness. The discussion highlights the importance of controlling spending, implementing austerity measures, and addressing economic velocity and employment. Maintaining a solid balance sheet allows a country to operate effectively over the long term and maintain the creditworthiness of its currency. The balance sheet is seen as more significant than social issues, climate change, or infrastructure because without financial stability, these issues cannot be adequately addressed. This concept also applies in the business world, where a strong balance sheet is essential for competition. The conversation emphasizes the need for politicians to prioritize long-term economic prosperity and be willing to make sacrifices for the greater good.

The World Economic Forum gathering in Davos has been cast as a gathering of global elites, with some perceiving it as a way for them to take control and run the world as they see fit. While globalism has played a crucial role in driving global economic growth and prosperity, it has also led to adverse effects such as wealth inequality and loss of jobs. However, demonizing globalism and leaning towards isolationism can have significant economic consequences for countries worldwide. The conversation highlights the need for a balanced approach that promotes economic growth, reduces global debt, and supports a more prosperous world. It also emphasizes the importance of addressing issues like ruinous deficits, diplomatic failures, and mismanagement of crises like COVID-19.

Global trade has both positive and negative consequences. While trade creates prosperity and economic growth, it also leads to dependencies and distributional effects. The rise of China as a major competitor to the United States is an example of the downsides of trade. The unrestricted free trade ideology promoted by neoliberals has allowed revisionist powers to gain strength and challenge the US-led global order. In hindsight, it would have been wiser to have been more restrained in trade with China and not open markets too freely. The World Economic Forum, which was initially focused on supporting global trade and economic prosperity, may have transitioned into a neoliberal organization that appeals to a certain elite class. In reality, the significance of Davos and similar conferences is more about status and signaling than meaningful impact.

The world is moving away from a singular, globalized perspective towards a more balanced approach. The extreme swing of the pendulum towards globalization has led to negative consequences like hollowing out local economies and loss of jobs. There is a need to find an equilibrium that allows for consistent progress and benefits a greater number of people. This shift may result in slower economic growth, inflation, and higher prices, but it also brings about more prosperity for a larger population. The idea of Davos as a gathering of global elites with their own agenda has led to public skepticism and mistrust. It is important to strike a balance between globalization and domestic challenges, taking into account the limited spending capacity and investment needs of individual economies.

There is a growing sentiment of distrust and disdain towards the Davos gathering and the elite individuals who attend. Jason Calacanis expresses his disagreement with the notion of having to pay a large sum of money to be considered a future leader and criticizes the lack of transparency and accountability in issues such as the origins of COVID and energy policies. He argues that people want ownership of these issues and resiliency in the supply chain rather than elites gathering to set an agenda. The conversation highlights the divide between the elites and the general population, with a call for more transparency, accountability, and inclusion in decision-making processes.

There is a growing reaction against globalization, leading to the rise of nationalist leaders and a shift towards promoting a country's own interests. However, there is a need to create economic vibrancy at home in order to quell discontent and populism. The debate over the debt-to-GDP ratio is controversial, with some arguing that it is a relative problem rather than an absolute one. The argument is that raising the debt ceiling and funding the transition away from globalism will bring spending, stimulus, and jobs to struggling regions. However, it is essential to make economically viable investments that align with advanced technologies and systems of production in order to avoid negative returns. Changing the guardrails on profit-making ability, such as extending the investment window or adjusting discount rates, could provide a different economic justification for such investments.

When making investment decisions, it is crucial to consider the time horizon for returns and filter out unnecessary expenditure. It is not sensible to spend such a large sum of money, like $100 billion, on a high-speed rail project in California when the payback period is too long. Additionally, looking ahead and investing in areas where the future is headed, rather than where it has been, is essential. Countries like China are focusing on building nuclear power plants, driving down the cost of electricity and gaining an economic advantage. However, it is important to consider other factors such as inputs and resources. The trend of de-globalization and strategic decision-making is emerging, with countries like India, Germany, and the US controlling natural resources and regulating trade to their advantage. Entrepreneurs and innovation remain key for America's success.

The combination of immigration and entrepreneurial inspiration plays a crucial role in the success of a country. Jason Calacanis highlights that the United States has historically thrived due to its ability to attract entrepreneurs and innovators from around the world. He emphasized the need to fix immigration and continue allowing entrepreneurs to define the future, as governments can only do so much to drive progress. Additionally, recruiting the smartest and most talented individuals through university programs can further bolster economic growth. Furthermore, Calacanis suggests that while the country should welcome millions of immigrants to fulfill important job positions, it should also prioritize recruiting individuals who can contribute to innovation and entrepreneurship.

A more nuanced policy is needed when discussing immigration and border control. Both parties tend to conflate different issues, leading to polarization and emotional responses from the voting base. It is important to separate recruitment of higher education talented individuals from migrant workers, as they are two different buckets with distinct considerations. Canada and Australia serve as examples with their point-based immigration systems, where individuals are assigned points based on factors such as education, language proficiency, and skills needed in the country. Implementing a similar system in the United States would allow for a more rational and compassionate approach to immigration, considering the needs of the country while maintaining border control. The extreme positions and lack of nuanced policy options have contributed to the current immigration debate and the need for change.

Implementing a skills-based immigration system and securing the southern border are two separate but crucial actions that need to happen simultaneously. The point-based system, which focuses on admitting immigrants based on the skills and contributions they can make to the economy, is a concept that many agree with in principle. However, it is important to address border control to ensure stability and control before implementing such a system. Examples from countries like Finland and Sweden, who have successfully managed immigration based on compassion and available resources, can serve as inspiration. Additionally, countries like Australia and Canada have successfully enforced immigration reforms that prioritize skills and points. In the case of TikTok, there are growing concerns about the security threat posed by Chinese-based companies having access to user data. Restructuring the ownership and oversight of TikTok within the United States is being considered as a potential solution, allowing for greater control and monitoring. The focus on a Chinese company like ByteDance allows legislators and politicians to rally support against a common "boogeyman."

There are concerns regarding TikTok's future due to its involvement in the geopolitical rivalry between China and the United States. Jason Calacanis expresses mistrust in the Chinese government's ability to protect intellectual property and avoid spying on users through backdoors in the software. This lack of trust is further evidenced by the banning of Chinese 5G technology by multiple countries. Nikki Haley adds that TikTok's ownership by ByteDance may result in a significant depreciation of its value, leading to the suggestion that those invested in the company should consider selling. Furthermore, there are concerns that TikTok is intentionally tailoring content to manipulate and distract American users, presenting a potential threat to national security. While there may not be concrete evidence of TikTok as spyware, the Chinese government's aspirations raise suspicions.

There are valid concerns about data privacy and security when it comes to apps like TikTok. While it is true that many other apps also collect a large amount of personal data, the issue with TikTok lies in the perception that this data is being accessed and potentially misused by a Chinese company. The fact that the Chinese government has significant influence and control over these companies raises questions about how user data is being handled. Furthermore, the conversation highlights the need for stricter regulations and transparency in data collection practices, particularly when it involves sensitive information. Ultimately, it is essential to balance convenience and access to features with protecting user privacy and ensuring that data is not exploited for malicious purposes.

There are concerns and risks associated with the potential sale of TikTok US to a foreign company, particularly one with ties to the Chinese government. The participants discuss the importance of ensuring that control of the asset remains in the hands of US investors and overseen by the US government. They propose the idea of selling TikTok US to a US owned private equity consortium as a possible solution. However, it is acknowledged that the equity value of the asset may be impaired, and potential buyers may drive a hard bargain. The conversation emphasizes the need for shareholders to consider their options and evaluate potential markdowns in order to protect their investments.

The application of AI and machine learning tools in various industries, particularly in the realm of healthcare and pharmaceuticals, can have significant impacts on business value and outcomes. In the case of BioNTech's acquisition of Instadeep, the integration of AI technology is aimed at accelerating drug discovery through predictive modeling and in silico testing. This approach allows for more efficient and targeted research, resulting in higher success rates and potentially multibillion-dollar revenue streams. Additionally, the conversation highlights the emergence of AI and ML companies that focus on providing services and partnering with businesses, rather than traditional subscription models. Although the trend in this space is still developing, it presents new opportunities for businesses to enhance their value through AI and ML partnerships.

The value of ML AI companies in terms of acquisition and M&A has increased significantly, even without having a core product in the market. Companies with platform capabilities and AI engineers are being bought for large amounts of money. However, relying solely on the hope of being acquired for an unreasonable valuation is not a sustainable approach for investment. The pricing models for ML AI companies are still being figured out, as the traditional seat license model may not reflect the true value of the insights generated. Novel business models are emerging, such as value capture and outcome-based royalties, in industries like pharma and biotech. The value of acquisition has decreased because the technology has yet to prove a meaningful improvement in the success rate of drug companies. Giving away capabilities in exchange for back-end revenue sharing and royalties is also a viable option in some cases.

There are novel business opportunities and approaches in the field of AI. One example discussed is the concept of buying small pieces of royalties from AI tools. By providing just a small amount of support, companies can justify receiving a percentage of the generated revenue. Another potential business model mentioned is taking open-source projects, forking them, and specializing them for specific industries. For instance, there is a suggestion to create AI software for accounting that follows established accounting rules, guaranteeing accuracy and minimizing human errors. This would provide better risk management for CEOs and CFOs, as they can trust the AI-generated financial statements more than a human auditor. Ultimately, the conversation highlights the potential for AI to revolutionize various industries and improve efficiency, accuracy, and risk management.

There is confusion and disagreement regarding the responsibilities and liabilities in the tragic incident on the movie set involving Alec Baldwin. David Sacks argues that Baldwin, as a producer, should not be solely charged for the accident, emphasizing that the armorer holds the senior responsibility. Sacks questions the presence of live ammunition on the set and stresses that it is not Baldwin's job to handle guns or be responsible for the physical and business aspects of the production. Nikki Haley supports the idea that only blanks should be used, highlighting negligence in the handling of live ammunition during off-set activities. Overall, this conversation reveals a need for clarity and accountability in ensuring the safety of movie sets and handling of firearms.