Transcript of Massive Somali Fraud in Minnesota with Nick Shirley, California Asset Seizure, $20B Groq-Nvidia Deal

All right, we have a massive show for you today, besties, but it's not going to be our prediction show. We thought we were doing predictions end of the year, but we had so many amazing stories to cover in the news that we're going to do predictions next week. The first story is we have investigative journalist Nick Shirley on. He has uncovered in a breaking 42 minute video that went viral $110 million in potential fraud in Minnesota. It's part of $9 billion in, in overall fraud and we've got him on the show here exclusively. This video apparently perhaps prompted responses from Kash Patel and DHS Secretary Kristi Noem, who have sent agents in to inspect these facilities. Here's some sort of important context. These entitlement frauds in Minnesota have been going on for over 10 years. It's a 1314 year old story. It started by an investigative reporter named Jeff Balon. Launched his first investigation into this in February of 2013 at Fox 9 News. Local investigative journalists and after that expose, charges were brought in 2014 against a Somali woman and her husband. They skipped bail. They never faced trial. Here's a 45 second clip from 2016.

From Balon Ali is facing numerous counts of theft by swindle and racketeering. She ran a daycare business and home health care company that catered to low income families. But former employees told the Fox 9 Investigators back in 2013 that it was really part of a scam to collect millions in public subsidies.

When I saw the bank account for the business, there were large cath withdrawals on a continuous basis.

Can I ask you a few questions, please? A year after our investigation, Ali was arrested and charged with bilking the state out of about $4 million.

Okay. Since 2018, Minnesota has seen 9 billion, around 9 billion in entitlement frauds, according to federal prosecutors. Just to give you guys a concept of what that means, that's half of the total amount spent on 14 entitlement programs in the state. So here's the direct quote from the federal prosecutor on the Minnesota fraud. The magnitude cannot be overstated. It's staggering industrial scale fraud. There have been over 90 convictions for more than $800 million in fraud since 2022. In 2022, 47 defendants were charged in a $250 million fraud scheme called Feeding Our Future that was supposed to feed hungry kids. Then up to 220 million was stolen in funds for kids with autism. Then 300 million was stolen in Medicaid funds meant to help people with disabilities avoid homelessness. So starting with that feeding our futures fraud in 2022, 82 of 92 people charged have been Somalian. Joining us right now, 23 year old investigative journalist Nick Shirley. Welcome to the program.

Thank you. It's been a crazy past few days out here in Minnesota.

So I guess a good place to start is you could tell the audience a little bit about your background when you got into investigative journalism. Obviously You've got a YouTube channel. I watched some of your early videos when you were 16, 17 years old, I would say along the Mr. Beast vibes and then suddenly making a turn into politics, specifically around immigration and some vox pop kind of man on the street stuff. But maybe you could tell us a little bit of how you got into all this and how you got into this specific story.

Yeah, so I've been doing YouTube as far as I can pretty much remember since I was a sophomore in high school. It was just something I thought I could would be good at. So I'd do YouTube videos and all I could do in high school is to do prank videos, sneaking into places. Just kind of fun stuff you can do on the weekend. And then as I've grown older and I've had other experiences, I've matured and I've wanted to get more into more serious topics. And so as I've been able to go places and kind of see the world for what it is in different countries and whatnot, and have different experiences, it kind of led me to get into this more investigative journalism content. And also back in around 2020, you couldn't even make political content on YouTube without word with, without being demonetized. For instance, if you were to put Trump in a YouTube title or thumbnail on my channel, you'd get demonetized because I was a smaller channel. So it was impossible to make that sort of content. And I was younger, I was about 17, 18 years old at that time.

And now YouTube allows you to monetize. I noticed you had ads baked into the program, like many podcasters and you're not affiliated with any news source. And to the best of my knowledge, you're not backed by any special interest groups, you're not backed by some rich billionaire. Where's the money coming to do this reporting from? And just to confirm that with the.

Audience, yeah, everything I do, I'm 100% independent. And so I make my money off of YouTube, off of brand deals, inside of YouTube videos. And if people want to donate money, they can do that. However, everything I do is straight from my own hands and I don't have any other people really working for me other than me and myself, my mom, and a few other editors.

So tell us about the origin of this story and then I'll hand it off to the rest of the besties to do some follow up questions.

Yeah, so I've been looking into this fraud for a long time, since last June. I came to Minnesota to kind of do a video on what was happening with the Somali population as far as like how much it was increasing in how certain towns have been, the demographics have changed and how churches are turning into mosque and how mosques are growing inside of Minnesota. I thought it'd be an interesting topic for people to see. And when I was there, a lot of people were starting to tell me about the fraud that was taking place. And I was like, well, how do I, I just can't come and label everyone saying there's fraud happening. I need evidence, I need actual proof. And so I've been doing my own investigation. And then a man by the name of David, who's inside my YouTube video, he's been doing his own investigation for years as he works next to some of these childcare centers and he's driven by, and he's never seen a single child at any of these daycares. And so he started looking into the funding and he was able to get the numbers of how much money these people were receiving from CCAP funding, which is tax exempt, and it was in the millions of dollars.

And so I, I told him, all right, I'm coming to Minnesota, let's go see what's happening in these daycares. And when I got there, I was shocked to see when the first daycare we went to, all the windows are blacked out and you didn't have the option to open the door. Everything was locked.

So explain the, the mechanics of the fraud just so the audience, if they haven't seen this, understand how these frauds are being played out.

Yeah. So massive welfare frauds being committed. People are opening up these daycares, home health care clinics, you name it. Anything that has anything to do with like health, welfare or even just like helping people in general, like with daycare or with healthcare, they're opening up these companies and then they're able to receive millions of dollars. And the state, for instance, I don't know if they're doing any checkups on these places because these places literally had signs that said leering instead of learning on their, on their doors outside. And what business is operating in a way where you can't even go inside or the windows are all blocked out. Very strange.

Nick, let me ask you a question that I think a lot of people have, which is when your video, first of all, let me just say, took a lot of courage, and it was well produced, and you communicated some very complicated information in a very simple way, which I think is a tremendous skill. But the question that everybody asks is, how do we know that you are right? And in traditional investigative journalism, there's a process that people follow, and there's insurance that you have to get, and then there's errors and omissions, and you typically have to deal with lawyers. Did you go through that process when you made this? And do you think that it's an important part of what needs to be done for your credibility and for this piece to stand on its own?

Yeah. I think everyone knows that fraud's been going on for years now. Like Jason was just saying, everyone knows that the fraud's being committed, but nobody's actually went to go see it firsthand. They know this fraud's been happening. Right. That's why it's been so hard for people to say, well, this is happening, or this is why mainstream media has had such a hard time to actually get exposure on the fraud, because they've actually never gone and seen it firsthand or they had the opportunity to have a platform where they can share on their own. Right.

But did you check all the traditional boxes that the New York Times or other people. Because what I'm trying to get to is how do we make sure that then you're not attacked and that you're not discredited and that people say this process is faulty and he's mudslinging, and how do we make sure that you're not sued into oblivion?

Yeah, and it's specific to build on that chamath. The allegation has come out. Oh, you went on a Saturday. Oh, you went during Christmas. And I guess you could address that because now people are obviously vetting your journalism.

Yeah, well, it's on. I went on December 16 as a weekday before Christmas break. So there's that. And then, sorry, the question as far as, like, did I do the vetting and whatnot? The man who helped me, like, lead the investigation himself, David, he had all the paperwork from the Capitol. He had somebody from inside the Capitol leaking him the information. So there was my, like, fact check, per se, was he had a source from inside the Capitol. That's how we were able to get the number.

Specifically, do you think that it's Going to be important for you to have lawyers that help you navigate because, like, if you build on this, there's obviously more fraud in Minnesota. There's a bunch of stuff in our home state. A lot of people would love you and people like you to start looking in all of these crevices. But how important will it be that you have all of the legal I's dotted T's crossed here?

Yeah, that's a good question. I haven't really thought too much about that because I've never been in this position where you have hundreds of millions. Like, I think over 500 million people saw that video just alone, just from all the impressions, aside from the main video getting 100 million, 125 million views. Right. So, yeah, that's something I definitely need to think about. But I think more than anything, I'm not trying to go in and I'm more so just giving people transparency from the outside where people can't see it when they're sitting from behind a desk talking about it. Right, right. I wasn't trying to barge in any of these businesses. I was simply asking, like, okay, like, is it possible to enroll in child. A child in here? And they would say no. Like, what daycare center doesn't have a paper for somebody to enroll a child? So I think, like, yeah, I guess if I wanted. If I was going to do defamation on specific people and stuff like James o' Keefe style. I know he's always having to lawyer up, which I don't want to ever have to do. That's like, would suck because I hate getting.

I don't want to ever have to deal with that stuff.

Are you done with Minnesota? Like, have you uncovered everything you need to uncover and now you're going to look at another state? There was a lot of traffic this weekend about Ohio, Illinois, California. What do you do now?

Yeah, so I've been making YouTube videos consistently for the past 104 days. And I'll continue to. You show the fraud that's taking place here inside Minnesota. It's not like I only just do videos on fraud, but I think just showing people what's happening inside the country is super important. And yes, there's a lot more fraud taking place here in Minnesota. And I do have a Part 2 episode on a whole different segment of the fraud that is taking place within the state of Minnesota. And like you said, a lot of people have reached out to me, whether it be California, Ohio, and at that point I will have to kind of. I'll be doing My research as well, to then not have to be in a position where somebody can try and sue me.

What does it make you feel, Nick, as an American and also as a young American, you grow up, whatever your belief system is. What do you think, put aside the investigative journalist part of what do you think as just an American, as a.

Young American about the fraud? Yeah, yeah, I think it's very upsetting. I mean, so many of my friends and so many people are working, we're working so hard just to be able to get by. I don't even have a friend that owns a house at this point in the their life. And they're 23 years old. And we talk to our grandparents and they're all like talking about how they bought their first house, were married. And it's like that's not even a possibility for most of us. Right. And so when you see that people are making millions of dollars and not only is it millions of dollars, it's tax exempt money. They're getting it from CCAP funding, which is a tax exempt. Right. And so when we're working hard and we're paying anywhere from 20 to 50% of our money back into the hands of the government while people are just funneling money, it makes us all mad and it's not fair to anybody, quite frankly.

It's interesting. Freeberg, I know you're interested in the media as well, like I am. This story has been covered for over 10 years by local news. You came in and did this. It became essentially a national story. But when we did our research, we did find a New York Times story last month. But none of the CNNs of the world have actually covered this. So there seems to be a little pocketing going on here. Freeberg, the local news, covering it doggedly. Running gun journalists like yourself, Nick, doing an incredible job knocking on doors. But there's this vacuum, Friedberg, on the national level, any thoughts on that?

Well, Nick, I think one of the things that makes your content so compelling is that it is long form. When you watch 60 Minutes or CBS or whatever, they're cut down. They're sort of like segment pieces. It's seven minutes long. What's so great about your footage is you get the raw, true experience. It really is what citizen journalism is meant to be. And you and I have talked for a while, I think, you know, we talked months ago about some of the work you were doing in Portland because like I was asking all these questions like, well, what is everyone else in Portland up to? Because all the video from all the news stations was what's going on right outside that gate where the ICE facility was. And there was like 20 people going crazy. But like, what's the rest of Portland like? And you went out and collected that content. That's the sort of stuff that I think makes your work so compelling, is it feels so real. There just isn't a way for a network news station or CNN to do that sort of work where you can sit down and spend 45 minutes looking at like the very real footage that you put out, which is awesome.

Can I ask you a question? So you grew up Mormon, is that right?

Yeah.

And did you do a mission?

Yeah, I did do a two year mission in Chile.

Do you think that that prepared you, like knocking on doors or engaging people openly in your missionary work to be able to do this? Because I can tell you, I know so many journalists who would be scared shitless to go do the stuff you've done in New York City and Portland, now in Minneapolis, where you're actually going into these facilities, looking people face to face. Like, how did you develop that, that capability? Was it rooted in your missionary work?

I mean, I think that might come from a little bit of it, but I think being the youngest brother also really just always happened to impress your older brothers. And being the daredevil for him and his friends, like, I just didn't grow up with fear. Like it wasn't even a concept for me to go and do, go do the bike jump when I was five years old. Right. So it's always been something that I haven't been afraid of. And I've never been afraid of rejection as well. I used to do door, door cells and the mission. You literally are just walking around trying to talk to people about Jesus for two years straight and you just get denied every single day. And you're just hoping to have like a small sliver of success for what you actually do. And so that definitely helped. But my mission more so taught me about the effects of mass migration because I would see so many people fleeing countries like Venezuela. And then I came to the back to the US and I saw what's happening on the BO and I was able to learn Spanish. But I think just like my upbringing in general, being the youngest brother and then also my morals from being a member of the Church of Jesus Christ Latter Day Saints.

I don't drink, I don't smoke, I don't do any of that. So I feel like I have an advantage compared to a lot of people as far as like my Mind's always, I'm not getting skewed with addictions or trying to go and do something else.

Nick, are you still very religious?

Yeah, I am.

Sacks, what's your take on this? In the question I asked Friedberg, which he didn't get to maybe you could take, which is this hasn't seemed to make the national press, but it has been on the local and obviously it's on X. Maybe you could give your handicapping of the media sphere and Nick's role in it as you see it in 2025.

Well, I think it's an indictment of the press that they haven't covered this and they still haven't covered Nick's video, which is now, like you said, a viral video with hundreds of millions of views and everyone can see what's happening. You basically have this huge multi billion dollar fraud taking place. Yes, there were stories going back a decade like you said, Jason, but they were isolated stories where they could be portrayed that way. And I think what Nick has done is show that the fraud is massive and in plain sight and no one bothered, no one cared enough to expose it. And you know, Nick, you did this by just going around to all these supposed daycare centers which are receiving vouchers from the government, anywhere from what, one and a to $4 million per daycare center per year based on fictional enrollments of children. And these centers aren't even operating and they're collecting millions of dollars from the government. All told, I guess it adds up to 8 to 10 billion. So this is taxpayer money that's being stolen from Minnesota, that's being stolen by this Somali community basically. And I think the story's gone viral because it includes so many aspects of dysfunction.

I mean you've got the issue of illegal immigrants. Some of the people in the Somali community got here illegally, some of them didn't. You then have these progressive judges who foolishly voided convictions of some of the fraudsters who were doing this. I mean it's just classic example of suicidal empathy or something like that. So you have that aspect of the story and then you've got the political corruption. Again, these are not isolated incidents. This is a case where I think we have to see this as a system at work, not just an example of like a few isolated fraudsters. There's some round tripping here where some of the funds that are going into the pockets of the Somali community through this fraud end up back in the hands of politicians. And the really extreme example of this is that Tim Waltz even changed the Flag of Minnesota to resemble the Somali flag. I mean, he lowered the old flag and raised this new flag that resembles the Somali flag, which shows the political clout of this community, which is why I think a lot of politicians turned a blind eye to what was going on.

So I just think you've got all the ingredients here of this story. You've got this suicidal immigration policy that we've had, combined with massive government fraud, with dereliction of duty and incompetence, combined with political corruption. And that's why the story's going viral and has gotten hundreds of millions of views. So kudos to you, Nick. And of course, the way that they are defending themselves. Well, first of all, the press is trying to ignore the story as much as possible. But to the extent that they have to confront it, what they do is just accuse us of being white supremacy. That anyone who notices that this fraud is being perpetrated by this Somalian community, that somehow that must be racial animus. That's the only reason people care about or something like that. And so they've accused Nick. And that actually is the last element here, which is again, this tired, worn out trope of accusing anyone who threatens this corrupt government machine of being somehow racist, any event. Let me stop there, Nick. Let me get your reaction to all of that.

Yeah, no, I love everything you said because it's so true. Especially like, for instance, they found a man here, $7 million he had committed in fraud. And then the judge overturned it, right? And then Tim Waltz is calling people like me a white. White supremacy. He says we're acting on white supremacy. No, Tim, it's millions and billions of dollars in fraud of hard working Minnesotan people that's being sent who knows where. And so it's not like. And then today I'm just looking at the media and people are. Is the craziest thing. I get on there and people are starting to say all these like crazy allegations about me. I'm like, whoa, where are you guys? People have even came out saying, said I'm like a pedo. It's like, what? Like I literally just went and did the job that everyone's been wanting to see done for years, right? And I just brought limelight to everything. Try to make it as just a simple issue about fraud happening.

Let's just be clear. You just went to these daycares and just. I looked up the CCAP that you mentioned. It's the Minnesota Child Care Assistance Program is what CCAP stands for. And it's a state administered program, but it's funded largely by federal dollars to subsidize childcare for low income families. So it's not just Minnesotans who are paying for this, it's all of us through our federal tax dollars. And I'm seeing a lot of follow on commentators in other states now saying, hey, you know what, in Ohio or in the state of Washington, we're looking at the government roles and we're seeing that there's over 500 Somali owned daycare centers. And by the way, that's just like one type of fraud or one type of very suspicious behavior. But you can start to see that people are starting to pull the thread here and they're seeing like where this fraud goes and it's starting to raise questions about lots of other government programs as well. For example, in California, we have $24 billion going to quote, unquote, homeless programs. And yet the number of homeless people keeps rising. And you know, everyone knows it's called the homeless industrial complex.

They can't pass an audit. The state refuses to even permit an audit. So we know there's massive fraud going on in that program. There's massive fraud going on in entitlements across the country. And I think part of the reason why Nick's video has gone viral here is people can kind of feel that the whole country is really being eaten alive by this fraud and corruption. And it is a huge part of why we have such a huge deficit, why we have so much government debt. And it feels like finally someone's blowing a lid on it. And Nick, it feels like you're achieving what Doge set out to do. And I think there's no one feeling more vindicated right now than Elon Musk, because literally some of the things that he was saying back in February you have now proven are true, that there's huge amounts of entitlement fraud. Some of that money that is stolen then goes to politicians who then either support the expansion of that system or turned a blind eye to what's going on. And some of this is even connected, I think, to voter fraud. So you're talking about here stolen money maybe leading to stolen elections.

I mean, it really feels like you've kicked this rock over and we're starting to see a bunch of nasty things underneath it. And what I think is really cool is that you're inspiring copycats. Now some people have called this decentralized doge where now hopefully we get 1000 or a million Nick Shirley's all over the country who start to show up and try to Shine a spotlight on what's going on with all these government programs.

Yeah, I think it's essential that people realize what's actually happening and realize that, like you said, like, we are getting eaten from the inside. Like, why is our money going to these places we always talk about? Tim Wallace was ranting about healthcare the other week. I'm like, well, maybe you shouldn't be giving hundreds of millions of dollars to healthcare companies that have nothing to show when you go to their business. And all the other stuff that goes along with what you're saying, like, yes, this, like, I think Elon's why it sparked Elon's interest is because it's physically showing people with their eyes, not just a contract. And it's sparked such con. Such conversation across the Internet because it's something people can physically see and people are actually feeling inside of their communities.

Nick, do you think that the fraudsters are going to get a little bit better at covering their tracks now that you've exposed them? Because I feel like one of the things that was really amazing is you would just show up at these daycares that you can see from the government rolls are receiving millions of dollars. They call themselves a learning center, but they misspell the word learning. So it's a leering center, and it's these cinder block buildings. There's no reception. There's no one there. I mean, it's almost like they've made it too obvious. Then there were cases where you would have people that got busted a decade ago, the locations didn't even change. They just renamed those fraudulent businesses, and they were literally operating from the same locations a decade later. I mean, it's almost like there was just no attention paid whatsoever to where this money was going. And I'm just. I guess the only thing I'm kind of worried about now is that with you blowing the lid off this thing is whether the fraudsters are just going to get better at covering their tracks.

Yeah, well, I think they're gonna have to look into where they're sending all this money. Right. Because if they wanted to really confront this fraud, they could have just cut off the. They could have just cut off the money and said, all right, one sec, let's take a month. Let's figure this out. But no, they just kept giving more and more and more, and they even started expanding it. For instance, how does a place just have an increase in autism? Like, how does that happen?

Yeah, it made me wonder whether a lot of our statistics about issues like that, like autism, like to what extent are they manufactured? Because we're creating this huge incentive for people to create cases of autism. These fraudulent healthcare centers. And it does make me wonder, well, can we trust any of the numbers.

Just to be specific in the areas that you guys are talking about where they think there was fraud? Medicaid claims for autism in Minnesota spiked 130x in five years.

X.

What the hell? Percent x so kidding me?

1:30. Not to 1.3. Oh my.

From 2018 to 2023, it went from 3 million to 400 million.

It's probably the water. It's probably the water. Or vaccines.

It could be anything.

Who knows what it could be? It could be fraud.

Jason, I have a question for you which is twofold. One, what do you think of what Nick did if you've watched the video? And two, why are your former brethren trying to bury this story?

So I think Nick is doing the most fundamental act of journalism for which he should be lauded and is correctly being lauded, which is just go knock on a door, right? And ask the most simple question in the most unbiased way.

Aren't there kids here?

And can I send my kid here?

You know, I looked into Nick. I looked into your videos.

How basic could you get?

Yeah, that's incredible.

And they test.

They failed the most basic test.

The most basic, simple test. And you know, I looked into all of Nick's videos because I saw anytime you do something like this investigative journalism, people will correctly and alluded to this chamath in the beginning, start to vet the vetter, right? And I was like, okay, tell me everything about Nick Shirley. Let's look at all his Twitter feed. Let's look at his YouTube videos, like, who is this person? Why are they doing what they're doing? And I watch Nick as you ask questions that are Bernie Rally and some other events when you're doing your man on the street stuff, which is also very brave because you can get your ass kicked. I don't know if you have security or not yet, but you're going to need it. Do you have security?

Yeah. Now I have to.

Yeah, of course. So this is brave stuff, but this is the core task of journalism, is to get this primary information and let the viewer decide without bias. And we can criticize 60 Minutes and the New York Times and there's plenty to go around. But if you look at the history of it, I think Nick, you've got incredible potential to sort of take the baton that you saw from that local newscaster on Fox 9 and keep building on that and to your point, David, I think Freiberg, you made about crowdfunding and crowdsourcing this journalism, it's going to be very powerful in the future. If you look at how long it takes, though, to do this, these things take decades. So I think you got to stay on the story. And if you look at the Catholic Church Spotlight, the Frontline documentary, you look at 60 Minutes and what they did with big Tobacco, these things do take a long time. So you should keep your hooks into them and keep working it. The other thing I thought that's really interesting here is this could be the opportunity right now is everybody in the United States who's a taxpayer does not want to see fraud.

They don't want to see waste. They don't want to see abuse. So although, Nick, I think your leanings are right.

Are you sure?

I am pretty sure that 90% of Americans don't want to see their tax dollars wasted.

What if there's a group of people that would be okay with it even if they were told it was fraudulent, but it allows their side to keep winning?

Yeah, that's like a conspiracy theory, I don't think.

No, I'm just saying it's a boundary condition. I just wonder if you actually put it there, that you would get 95% that says this is wrong.

Yeah, I think you'll get 95% that says it's wrong, but we'll see. And what I think could happen here is that this could be the issue that pulls Americans together, that we could have consensus on, which is we don't want to waste our tax dollars. Putting aside the fact, Nick, that you're conservative, it doesn't matter. You're religious, it doesn't matter. What matters is the truth. And the truth here is there's massive waste, fraud and abuse. And Elon saw it, Elon told us, he confirmed it, and he got attacked for it. Elon was 100% right. Everybody who attacked him, they may not have liked his tactics and how fast he was going and locking doors and turning off credit cards. His techniques they may not have liked. But we as Americans can all get behind not allowing any more fraud. And we should not be increasing taxes into a system that is ripe with fraud that I think everybody will agree on. And when all that fraud happens, it keeps us from actually sending the money to things that we might actually, as a country, that might pull us together even more, which is like, I don't know, maybe we could have universal healthcare like the other 80 most developed countries in the world.

If we rooted out this fraud because there's just far too much waste. And so I think you did a great job, Nick. And I think this is where we could see massive opportunity for investment in new publications and new news sources that take folks like Nick, pair them with two or three other folks, and now you got a team, which it seems like you're building. And then you could have a permanent funding source. So if you could get. You only have GoFundMe, Nick, right now?

No, I don't have GoFundMe. I just accept donations via Venmo or if you want to send.

Yeah.

So you should start a subscription service, you know, like Substack or any of the other ones, Beehive. And you should literally use this momentum to get to 10 to 100 to a million dollars a month in donations that reoccur. That's the key is the reoccurring. Go.

You have young people reaching out to you that want to do this work with you now.

Yes. I think if people are interested, like, people are like, how do we start? Or how do we do it? And it's a good question. I think most people, like, I didn't go ask somebody how to do it. I just went and did it. And so a lot of people are so scared to take those steps when in reality you just have to go do things if you want to make stuff happen.

There was an image that I saw on X and it had a ship running into the iceberg. Nick, maybe you can find it. And the ship's name was the USS Taxpayer. And the top of the iceberg that was visible was Minnesota, but the bottom of the iceberg was California.

That's great.

Which is the fourth largest economy in the world is just the state of California. I don't know if you can just show the tweet from Kevin Kiley, which I retweeted with a couple of things on here. It is what he says is a third of college applicants were fake. 17 billion was spent on high speed rail with no track. 24 billion in homelessness funds disappeared. 32 billion was lost to unemployment fraud. Medi Cal and Snap are rife with improper payments. It's probably $100 billion a year that's being just completely pilfered out of California. So I don't know if Nick, Shirley, you have the time to come out west, but if you do, you're just going to find an entire treasure trove of opportunities to look at.

Oh, there's massive fraud in California. I mean, the homelessness has Just increased as they receive more money. And that's just one part of it. Like you talked about the light rail and everything like that. The fraud is like crazy in California and they have the highest taxes.

Yeah.

They want more.

Nick, has anybody approached you about this thing? I tweeted it about it. I had never heard about it, but these guys educated me on it, called quitam, which is this framework where you can actually sue on behalf of the state and on behalf of taxpayers. Has anybody approached you about thinking about using all of the information that you've garnered to try to launch some of these lawsuits or no?

Yeah, I actually had somebody reach out to me the other day about it. So I'm going to actually hop on a phone call with that guy.

Yeah. Also, as I understand it, some of these whistleblower laws reward the whistleblower with something like 20 to 30% of amounts.

Up to 50% in some cases.

Yeah. That are. I don't know if it's like fines or it's amounts that are recaptured.

Recaptured.

But I don't know. Nick, you could become a billionaire here just with all the billions you've exposed.

I know, right. I gotta sit down and figure it out.

I know that's not why you're in.

It, but you'd be the most well loved billionaire in America if you did.

Absolutely. Well, the way to do it is, you know, since you're drafting off of these other news reports, is to set up your own tip line. So Nick, what's your website? Where do you have a website where people can donate? And do you have a tip line? Because you wouldn't get the whistleblower awards for the stuff Fox 9 has been doing for a decade, but for the next one you could. So what is your website where people can donate, Nick?

Yeah, everything just on social media so they can message me on any platform. I should probably get a website going.

Nick, what's your social media handle where people can DM you and donate?

Yeah, it's just Nick Shirley and if you go on X, I do have my tip section open. So if you would like to donate there, that gives them all the. Whether it be Venmo Cash app crypto, you can all do it right there.

So x.com Nick Shirley, you can go right there and you can tip if you want to support this kind of research. Well done, Nick.

Thank you.

Are you spending all your time in the US or are you still thinking about some international stuff?

Yeah, I have a international trips planned for this month as well that I had planned before. This because it's funny, like everyone's talking about this fraud stuff, but I have a business I have to run with my YouTube videos. I've been posting every week consistently for the past 104 weeks or so at this point. And so I have to keep moving on and keep producing content for my followers. So yeah, I do have other videos and I have other places I'm gonna go film as well.

Look into those whistleblower laws, I think.

Yeah, make some money.

No shame in the problem.

You'll probably get a ton of invest investors.

Yeah, yeah, yeah. It needs to look into all that stuff. So it's been cool. Like the crypt. I've had like some crypto communities. I've like even like funded money and I have, I'm like just down on my laptop at night and people are sending me money. I'm like, what's going on?

It's awesome.

Well, what's the sweatshirt you're wearing?

Just show us the quality center.

Is that for sale now?

Is that the merch?

Yeah, I'm gonna go do a video outside of it right now in the.

You can put on your YouTube channel for merchandise.

Yeah, I'll put on my YouTube and I'll just put like on X. I'll probably just take a one time drop.

Oh my God, dude.

The guy who I guess runs that place or owns it, he had a video on X today saying that. No, no, no, no, no, no. This is a real daycare center. Nick just happened to come by in the morning and that's when all the kids are at school. So he just came at the wrong time.

What was super funny about that too is the Department of Children was doing a live feed at that same time and she said that the daycare was closed one week ago and it closed after I posted my initial video. So like while he, while he was saying that it's open, the lady who runs the whole thing or runs something in the government said they closed it last week.

Sorry, Nick, just one before we lose you, do you have evidence or have you collected evidence that people within the agencies are part of the fraud syndicate and that they're participating in the fraud?

And it's hard to say like that you have like the paper trail of it because you don't. It's hard to get me the access to that. But I think if you just look at like Elon Omar's net worth, if it's true that went from negative to 30 million since she's been in Congress two years. Yeah, let's.

Yeah, let's make sure we put a couple allegedly.

No, it's all over. Yeah, you're right. It's all over social media.

But yeah, which means it could be wrong.

And I haven't seen a fact check.

I mean, I'm not always putting allegedly.

They are just.

Yeah, I think Congress people can report a range. I think the range is 6 to 30, so they use the upper down. But let's just throw in a couple of alleged.

But still she went from negative to being a multimillionaire.

No, no, I'm not debating that. I think the trend. The trend is quite curious, Nick.

I'm not talking about the federal congressperson. I'm talking about people within these agencies that are signing off on the check, signing off on these centers. In your investigation and the conversations you have, do you have reason to believe that the individuals within the agencies, within the government agencies are complicit and partnering and participating in the economic fraud?

Yeah, 100%. Because a lot of these daycares, there's six, seven violations and they're still continuing to give funding to these daycares. And they have the same name. The same person has opened up. I was in one of their fraud committee meetings. The same person had been opening up daycares and healthcare companies and it was all big. They had all the, they had all mapped out and somebody from inside the government in Minnesota still continue to write these checks. So.

And they're not. They can't be dumb, right? They can't be that dumb, I guess is the point.

Well, I mean, it's possible that they're totally incompetent or they're turning a blind eye or they're getting payments. Probably one of the first two, but who knows, right?

Well, the thing with the money they're receiving is that CCAP money, it's a tax exempt. And so they, they literally get like the, the money and they get it in cash somehow. They don't pay the woman that are working there. Like there's videos of them just handing the ladies cash in Muslims. They're able to have four wives. And so they're able to collect welfare on top of that. That's why 81 of the population, Somali population inside of Minnesota is on welfare because they're actually not paying the people. They're just collecting the welfare from it. And then if you go into any of the grocery stores here, they're not grocery stores. They have like six different shops inside of them and they all have money transferring sites inside there where they're just siphoning money out to other countries and back home. And a lot of time you can. There's actually a Fox did a thing on it in 2017, and I actually had somebody who's going to be in my next video talking about this. He used to work at tsa, and the Somalians would literally bring in millions of dollars in cash through tsa, and then they'd fly from there to Atlanta and then to Dubai.

And then, because there's no taxes in Dubai, they then send that money back to Somalia. And so, like, the rumors of them funding Al Shabaab, they're real because they've been able to funnel all this money. And once they go through that TSA with a luggage full of cash and they make it to Dubai, they're able to send it to wherever they'd like.

That's a terrorist group or.

Yeah, Al Shabaab. Yeah, the terrorist group. Nick, let me ask you another question. In the last two days since your video went viral, we've seen the mayor of Minneapolis and the governor come out and effectively say, hey, we need to protect this community. Why do you think the leadership is not up in arms on the obvious fraud that you've demonstrated so clearly? Why are the government officials within Minnesota not throwing their hands up saying, we have to make this stop right away? Why are they taking a defensive posturing? They're, like, incompetent? Or do you think there's, like, complicit behavior here?

It's because if there. That's such a large group of votes that they can receive, and David said it as well, there's some weird voter fraud that's also taking place here where you just literally need a license, like, even one. In one of the committee meetings, they said that. But essentially, like, this happens in the UK, Too, is that when they bring in specifically Muslims to a lot of these areas and then comes time to vote, the leader of the mosque or the leader of this apartment complex will say, all right, everyone, now it's time to go vote, and let's go vote for this person. And because it's tough because of Islam and everything, like their religion, like, they should be more conservative if they're actually voting off what they care for because of their values. But they're always voting democratically. They're always voting for the Democrats, like.

If you're gonna give more money.

Exactly.

And so they're not really voting for what they actually believe in. They're voting for who's gonna keep funding them and who's gonna keep writing the checks. And so that's why you'll see them going to eat at a Somalian restaurant and you can tell the guys are ready to barf when he's trying to put the food into his mouth and then the lady putting the hijab on inside of one of their grocery stores. It's just all panhandling to get the most.

Nick, you mentioned this terrorist allegation and the funding of terrorism from the social programs. Is that something you've firsthand investigated or something you read online or something you talk to an insider about? Can you unpack that first? Because that's a pretty explosive one and I know Besant has mentioned it, but maybe you can unpack your firsthand knowledge of it, if any.

Well, there's the reports from 2017 and then it's also came out, still coming out, and people are talking about that. I think even the government, the US Government has said that as well. And also I've talked to people as well inside of these grocery shops where they have 10 different stores and I ask them, like, what do they do? And they have these shops where they wire off the money to Africa.

Right.

But specifically the funding of terrorism, you don't have firsthand knowledge of that, just to be clear.

Well, I don't think Somalia, I don't think it's like very ran very well. So, I mean, there's a lot of corruption there. I mean, when you're being an import and exports pirate in piracy, I don't think that's probably the best thing.

Okay, got it. Just want to confirm because it's like an explosive allegation. I want to make sure you're not saying, you know, the Besson Besson said.

It on national TV today. J. Cal this morning.

Yeah, no, no, I know. That's why I'm. The way Nick phrased it. I wanted to make sure if there was firsthand knowledge he had or if he was just referencing the Besson stuff.

Yeah, it's really tough to say like it firsthand because it's always like, how does somebody just go get the papers? And so that's why you rely on the government. For instance, like he just said, like Besset comes out and talks about it and so like it's our responsibility to keep investigating and looking into it and also trusting the people that we trust.

Is that going to be your international trip? Are you going to go try to track that down on the international.

If even $1, if even $1 went abroad to a terror network, this is an entirely whole new kettle of Fish, because now you're not just talking about domestic fraud, now you're talking about international terrorism. And now you're going to bring in every single agency of the United States of America who will have an opinion. Yeah, that is bad news bears for these guys. If this is true.

That's why, that's why you double clicked on this is like how this could be the next story.

Watch out.

Yeah. And I'll tell you where I have the most concern as a citizen. I'd be most concerned about these members of the government that are complicit or turning a blind eye to allow this capital to flow to individuals who then turn around and use that capital to make donations to those government representatives campaigns. If that paper trail is found, that the government representatives are causing money to flow basically back into their own pockets or their own campaign coffers. That to me is the most offensive thing as a citizen. That not only are they enabling fraud, but the.

We already know that.

I've had mayors in California tell me about that who've given me first hand accounts of them knowing the family members of people inside of the government opening up nonprofits. And then that's how they get a lot of campaign money.

Yeah, look, there's a very important word here that we haven't used. We've talked about incompetence, greed, theft. There's a very important word, patronage. This is a patronage system. An ex account called Amuse wrote a really good blog post about this. Let me just read you this part. Basically, this fraud is not incidental misconduct. It is the patronage system operating exactly as designed. Large welfare states generate predictable cash flows. Fragmented bureaucracies create blind spots. Language barriers slow audits. Cultural deference paralyzes enforcement. When one operation is shut down, another opens under a new name, a new board and the same people. Money moves through layered nonprofits, shell entities and informal remittance networks. Accountability evaporates. And then crucially, the system does not require that all patrons be Somali. It requires only that patrons be paid. Non Somali politicians learn quickly. They adopt the language, symbolism and rituals of the community. They attend the right events. They avoid uncomfortable questions. In return, they receive votes, campaign muscle and money and insulation from accusations of racism or Islamophobia. Investigations stall. Prosecutors hesitate. Regulators retreat. The system expands. And play this video. This is of Tim Waltz. Play that video.

Whoa, wait a minute.

This is Tim Waltz, the governor of the state, replacing their old flag with a new flag that's designed to resemble the flag of Somalia.

So the allegation, Sachs, just to be Clear is they are giving this money knowing it buys votes and knowing that.

The Somali community is incredibly well organized. In Minnesota, there was an interview with the Attorney General where he was saying that this is another X video that you can find. I think his name's Keith Ellison. Anyway, he was saying that the Somali community was incredibly potent politically and was a big reason why he got elected. And like I said, it's very well organized. And of course they're turning a blind eye.

Get their votes by giving them this money to steal.

Okay, it's not even a question. It's a fact that that's why they're only after. So they're allowing the fraud to happen because of votes.

Wait, that's just. Again, that you're saying that's a fact that they are.

Please don't act shocked. Come on.

No, no. It's a. It's an allegation. I. I just. I would. I would tell you. You changed the flag to put.

You think that's a coincidence?

Allegedly in the front of these things until you actually know it's.

Where did that new flag come from?

I'm not saying it's not pandering to them, but to say it's quid pro quo, just.

That's the same thing.

Nick, instead of taking Sachs's advice here, my best advice.

Allegedly.

Put the word allegedly until you know it's a fact. Don't say it's a fact unless you.

Know it's a fact.

Allegedly.

Okay, yeah.

Just.

Just so you don't get sued and you actually know it's a fact.

I mean, like, is speaking the truth, like, criminal, but because it is a fact.

Okay, great. You say it's a fact.

How much do you need? Jk?

No, no, it's.

You won't believe it until Tim Walsh is caught on video accepting an envelope from, you know, one of these. What is the fraud? That's not my point. My point is this is political patronage. And look, a lot of it is incompetence. And they probably didn't think they're going to get caught. But on top of that, it's turning a blind eye to an obvious problem because it's going to alienate a critical demographic who supports and has supported you in all of your elections. It's that simple.

What's the polymarket say, Jay? Colin, whether Waltz is going to get prosecuted, go to jail?

Let's find out from our friends at Polymarket. Tim Waltz charged by. And there's a lightly traded $60,000 9%.

Chance, 29% before 20, 27.

And here's your other poly market. Will anyone be charged over daycare fraud in Minnesota by the end of January, the end of June, the end of December? 56, 91, 94. So people are betting somebody is going to be charged over this. And if Tim Waltz is specifically knows about this and did it to buy votes and that can be proven, he should go to jail. And if he knows and anyone over there knows that this money has been routed to a terrorist organization, that would be treasonous and that would be an even higher level. So we need to investigate this massively. So if Besson is listening. Friend of the pod. Yeah. Double click, double click, double click.

Sortie on Scott's agenda. That's why he talked about tv.

Talking about it. Dude, he's been all over it.

You can't hide now that that this is Pandora's.

As part of that investigation, someone needs to investigate why these three liberal judges have repeatedly refused to hold Somali fraudsters accountable, even when the evidence is overwhelming and a jury has convicted them.

Unbelievable.

These three judges set aside convictions.

Well done, Nick Shirley. And next time you have a great.

That was awesome, man.

Please come on the pod again and let us know.

Thank you. I appreciate you guys. Appreciate it.

On the right side of history, support.

On X and everything like that means a lot.

Yeah.

And believe me, there's, there's a ton more in California.

Okay, let me just go around the horn here. Lightning round Sachs, a year from now, what will happen in relation to what we've seen in Minnesota?

Well, I hope that there will be a serious investigation. I hope that there will be indictments. I hope there will be deportations, hopefully massive amounts of deportations. And I hope there'll be impeachments to some of these officials who let the fraud happen. Oh, the country is being eaten alive, it feels like, by fraud. Government funds are being stolen, votes are being stolen. I believe elections are being stolen. And it all comes from the fact that the party of government doesn't really care where the money goes. It's all just patronage to them. Whether it's to Somali daycares or whether it's to this high speed rail line that doesn't have one piece of track laid. I mean, how much is California wasted on that or 24 billion to the homelessness only to see the homeless population increase. Look, these politicians don't care how the money is spent at all. All they care about is rewarding their supporters. That's the whole game. And then those supporters round trip a portion of the ill gotten gains they've gotten from the government back to those politicians. That's the whole game. And then when the whole thing blows up because it's just so corrupt and inefficient and so absurd, what do they do?

They try to find productive people to scapegoat. And they say that billionaires are your problem. They'll blame billionaires for that or they'll blame the tech community. Look, the startup community or the tech community is one of the, I'd say, last extremely well functioning parts of American society, but they don't control it yet. And so that's what the politicians will do is they will try to find scapegoats to expand their control and expand the size and scope of the corrupt system that they're running.

Freeberg, what do you think a year from now, where will we be and what do you think this says about America at the end of the empire, which you've been focused on? Yeah, probably two things.

So this is like everyone pocketing the silverware as the Titanic is sinking because the spiraling spending, the lack of audits, the lack of accountability effectively enables an environment like this because we've basically increased government spending so much to basically try and grow the economy, prop up the debt, keep the debt service payments flowing, et cetera. So as a result, anytime you have a bubble, and in this case we have a bubble in government spending, you have frothy fraudy behavior. There's my guess, tip of the iceberg. Elon's estimate was 20% of federal spending falls under this kind of fraud camp. Could be more. And then when you add in state and local spending and you start to do the accounting on all of this, we're probably talking about a sizable percentage of overall GDP that is effectively theft through government agencies or government checks being written. And I think that's going to be the great uncovering of 2026 is we're going to see on the order of trillions of dollars, trillions, trillions of dollars of this sort of behavior happening across the economy. And I also think the other side, nothing will happen and, and I think nothing will happen because the cost is going to be so significant.

It's almost like staring into the abyss. It's going to make people feel sick to try and address it.

Chamath, actually, let me ask Friedberg a question. How do you differentiate between legal theft and illegal theft? Meaning I think what the Somali daycares were doing was outright fraud and is illegal. But when Stacey Abrams creates a NGO in the final days of the Biden administration and that gets stuffed with $2 billion. I mean, technically, I guess that's legal, but it's clearly a different kind of theft and fraud.

Would you throw up in your mouth when you heard the news? That's the test. That's the little test. Yeah. And I call that the common sense vomit in the mouth test. If you don't pass the common sense vomit in the mouth test, it doesn't matter whether it's legal or illegal. It's up. And you'll realize that pretty quickly.

Chamath your thoughts on what we just discussed. And maybe a year from now, will any of this change?

It is a crucible moment for American society. If nothing happens and we deem this kind of theft acceptable, it is the beginning of the end of the American empire. It's just a level of disrespect and lack of care for this country. I think. So I will be waiting and observing how important it is to root this out. That's number one. The second, which is more tactical political calculus. This is an enormous opportunity for the Republican Party if they take this and run with this. Is there waste, fraud and abuse in every state? Absolutely. I don't think this is endemically a Democratic problem, but the scale of it is so gargantuan in these Democratic states that if the Republicans don't take advantage of it, I think it is a huge political miscalculation. So there is this tactical opportunity, which I think if you want to have a chance in the midterms, and if you generally want to have a chance to level set the country, you must take this and run with it.

Yeah.

Separately. If, as Friedberg says, it does die on the vine, it is the beginning of the end of the American empire.

Unfortunately, I was thinking the same thing as you. These Democrats have nothing to hang their hat on. They have no platform. They're lost, they're adrift. If you know it's going to be impossible for Gavin to do this because there's been so much corruption in California, but if he did, theoretically, Gavin Newsom, Josh Shapiro, Pritzker, if they came out and said Elon was right, Doge is the right idea, we should take what Elon did and we should take every agency, audit them, and we should prosecute anybody and fire anybody who's incompetent, prosecute anybody who's a criminal. And we should cut these programs, you know, 10% a year for two or three years and tighten them up and make them perfect for the American people so we can lower taxes and we can provide better services. And that's my platform for 2026 and 2028 for president. That is going to be the easiest path to victory and rebooting the failed dopey Democratic Party.

Yeah, I think you're right, jcal. If the message from both parties is enough is enough and let me just end on an optimistic note and they say enough is enough. We've seen it. It's staggering. We are going to fix it. That is the party's message. That is the country's message. That is the government's message. Whether they're holding hands or yelling across the aisle saying we're going to fix it. No, we're going to fix it. It's an opportunity. And the reality is if the fraud, waste and abuse is of the scale that it seems it might be, based on what we're just seeing with the tip of the iceberg here, then there is a very significant opportunity for us to significantly reduce government spending and get out of the debt spiral at a federal, state and local level. If it is this easy to just stop this sort of bull and you can actually save trillions of dollars of wasteful spending, we could be in a very good position with a growing economy.

And what would that do to the economy?

I think it will actually happen. I'll build on something that Freeberg and I talked about over the holidays last week. We were talking about all of this fraud in California and he said, chamath, mark my words, wait until the bond market sniffs out how fake and propped up the California economy and balance sheet and pension system is. And he said you're going to see these bonds run because those folks don't care about anything other than the ones and zeros of their own financial survival. I completely agree with that. So if you take that to the limit, the optimistic part of this is that now that this is being exposed, you are going to see risk get repriced. And if risk gets massively repriced and munis the bed and a bunch of state bonds, the bed and a bunch of these issues get broken, these folks will have no choice except to run and hide and cover their ass and crack. That is a very and by the way, so that falls on the feet of a lot of people outside of the United States who when they see this issue, will have a lot less tolerance even if Americans may not run to solve it.

So the good news is that there is an overwhelming amount of debt in the United States. There is an even larger amount of debt that's owned by Outsiders and those folks, fortunately, I think will have zero tolerance for this. They will want their debts paid back.

This is so key because muni bonds have been the tax free stable. I mean I've played tax advantage, but.

Not for much longer. If you, if you know that this is happening.

Yeah.

If you break munis, you can't underwrite.

This, then what happens to bridges and schools and all these. In order to build infrastructure, you need these muni bonds to work. And it all starts with three words. Elon was right. That's why I said at the beginning the first Democrats to say Elon was right. They are going to win the prize. If you don't say that, you don't win the prize.

I don't think they're going to say that.

Those are wonderful sentiment. Those are wonderful sentiments, J. Cal, but Democrats can't do that. Look, Democrats denouncing government waste is like Don Corleone denouncing the mafia, okay?

It's a myth. It's an urban legend.

No, that it's like. The Democrat party is the party of government waste and spending, taxation. It's the party of government, okay? And they just want the government to be as large as possible. And if a big chunk of that goes to fraudsters, so be it. You know what? Those fraudsters are donors too. And that's the issue here, is this is all just political patronage. So yeah, you know, it would be a smart strategy for some Democrat to say the words that you're saying. And in fact, Ro Khanna just did. He said, I support having an investigation to root out government inefficiency.

Which speaks perfectly to our next story. Thank you for the master strike.

But I don't believe them. I don't believe them because they are the party of government. And so. And it's the Republican Party, when it functions well, is the party of the people.

Right.

It's a party of everyone else. No, when it functions well, it's the.

Party attacks cuts for the rich. No, it's not.

And Trump Marshall is that populist energy. So it's got to come from.

The Republicans may not deliver.

I'm not saying the Republicans are perfect, but yeah, the Republicans.

Let me just explain to Marshall that populist energy. Okay, go ahead.

The TikTok of this is you have all this fraud, let's say in California or Minnesota, you're going to bury it, okay? Per freebrew, nobody wants to do anything. They want to just sweep it under the rug and keep it going. Okay? The fraud needs to keep going. The deficits keep growing because again, it's fraudulent, right? You're not accomplishing your goals. You keep raising taxes and eventually people start leaving. First it's the people that can leave, then it's the people that must leave. And then you have whoever is left over left over. Now your tax rolls actually start to shrink at some point and your deficits start to become bigger and bigger again because you've decided to not root out the fraud. The bond market will look at that and they will throw up in their mouths first. So they will pass the throw up in your mouth test that Friedberg talked about. And then they are going to down the throat of these state balance sheets. That is the technical term that I want you to understand. Down the throat. And what that means is that the 401ks and the pension systems that all rely on these muni bonds and all these tax advantages to actually generate yield will start to turn.

And it will be the fault of these politicians who let that happen. And what I am warning all of the governors and all the politicians that listen to this pod is you need to get in front of this issue. Because even if you think the voting population will not force you to do something, the financial markets will. And now that they've seen this, they will not stop. They will reprice and reprice and reprice this risk until they get you to capitulate.

California has half a trillion dollars of bonds outstanding and the state of California is looking at an $18 billion deficit. They're going to continue to issue bonds. Over the next year, that number is going to climb to 30 billion. So the bond market is crucial for California to continue to operate. This is the world's fourth largest economy, the state of California, and it is already in a bit of a fiscal bind. Not to mention what we've talked about in the past, which is the looming pension obligations. The state of California is going to have to borrow somewhere on the order of another. This is going to sound crazy. Half a trillion dollars plus in order to pay out their current pension obligations. How the hell is that going to happen?

The US Government will give it to them. That's it. They're going to go to the Fed, obviously, they're going to try to get bailed out, which is what the states always do, just go for the ballot.

My point is the pressure is on and I think Chamath is right that this market is going to start to basically put pen to paper on the reality of how things are operating. It's not just going to be.

And by the Way we're about to light the spark, which is the Billionaire Tax Act. Once the bta, if it gets on the ballot and gets passed, it lights the spark on the death spiral of these states.

Right?

Yes.

Yeah, I think you're all right. I think you're all right. And I think, Jake, I was right about you. Look, California, Illinois, New York, these states are all in a death spiral. They're all in the process of collapsing and they will try to get bailed out by the Feds. That's their only potential savior. Cuz they're not allowed to declare bankruptcy. By the way, that would be a good thing if states could declare bankruptcy so you could unwind some of these crazy obligations they've taken on, but you can't do that. So they will go to the Feds. And I think they're all just trying to hold on until they can get Democrats elected back in Washington. So 2028 will become a very, very important election because this can determine whether these states have to finally make ends meet or whether they will basically just try and federalize their problems.

No, no, no.

The bill always comes due. That's the truth. The bill always comes due.

I've gone through that scenario analysis with a bunch of macro folks and a couple of external central bank folks. That's not going to happen. And the reason that's not going to happen is that you'll see a 20 to 30% of the bond buyers just leave the US bond market. And so you will have auctions that start to fail. This is what I'm saying. There is no way out for these states. If the states think that they can fail and they will federalize it, that's not going to happen. Because once whoever is the then sitting Secretary of the treasury starts to call and says we're going to run this auction, they are not going to like what they see. And the reason is because of what Nick Shirley has exposed. Because everybody will go back to this and say, hold on a second, if you could have cut 20 to 30% of all of your budgets over the last 10 years, that's 25 or $30 trillion you could have used to pay down your debts and you chose not to and now you want to come to us. So I just think that it's an untenable situation.

The dollar will basically have decayed in that entire process another 90%. So whoever is sitting in the seat of government at the federal level will not be able to do anything at that time. That could be 28, it could be 32 it could be 36. My point is this is just a wake up call for America. We don't have a choice. As much as you thought you could hide it, you can't hide it anymore. So you're just gonna have to clean it up.

Do you think that Gavin Newsom will cut $1 of state spending? I don't think so.

No, no, no. I'm not saying he will cut a single dollar of it proactively. He will try to keep the gravy train going. What I'm saying is whoever is the then Secretary of the treasury, if somebody goes bankrupt at the state level and they ask to federalize the debt, what he or she will do is sensitize the United States balance sheet to absorb that and then have to go and see who's willing to buy the debt of the United States of America to backstop that. What I'm saying, David, is that's when it fails.

That's your prediction. Yes. And it makes sense. Yeah.

I think that these scenarios can be run now.

At the end of the day, I.

Think that that's why it probably makes sense for the Federal Reserve and all these folks to basically write the white paper now that says we're not in a position to do it so the states get the memo.

This is all going to require somebody to get elected who has the platform of austerity and fiscal responsibility.

And you don't need austerity. These programs can work. Stop pilfering and stop stealing, number one is fine. Be competent. Yeah.

But it's going to require a message to the American people chamath that I am not going to allow not only fraud, which people agree on, but we're going to need to have some level of austerity as a country. And nobody has gotten elected on that. You don't need austerity, you need fiscal responsibility.

I do think that is different than austerity. You don't need to cut these programs. These programs don't work. They don't work because everybody's stealing all the money. Why don't you first spend the money for what you told us you were going to spend it on when you asked us to give you the money and forced us to give you the money, then measure it, then tell us it's not working and before you ask for more.

I mean, I think this is the core of this issue is going to be can somebody get elected on the platform of fiscal responsibility? And nobody has been able to. I will say this. We did have, I think a bit of impact on this podcast when we kept harping on lowering the deficit, even though that hasn't happened, it's still top of mind in the country. And I think putting above that, my number one issue going into these elections is going to be who is Doge positive and will run Doge at all levels of government. If you're not willing to say I attack fraud first and then second, balancing the budget slash, reducing the deficit, then why are you even running for office now? You have to do those first two things. If you don't do those first two things, everything's existential from that point on. Which leads to our next story.

Well, Jacob, I hope you can admit that closing the border was a big win in the 100%.

Like, that was long overdue. And I was wrong about how many people were coming in because it made no logical sense to watch it go like this. And my hand is going straight across at a million a year or so and then pop up to three or four. And there was no data to support it other than people sharing random clips, which I don't trust. The. The border problem has exacerbated this massively because there are states giving entitlements to people who are here illegally. That's insane. And if we want to maintain a low unemployment rate while jobs are displaced, the best way to do that is to shut the border and not let more people in because they're going to take jobs, obviously. So that actually could be the mitigating factor in all of this. And it's probably the. I would say that's the topic that got Trump elected. The number one reason Trump got elected is because Biden is senile. And the second is because Kamala was an idiot and couldn't even debate. So you take those two things together. You know, the third issue was obviously immigration. Okay. But we have to get on to this next story because I don't want to run out of time for it, which is California wants to do an act called bta.

This act stands for Besties to Austin. This is the Besties to Austin. And it's worked. Two or four besties, I believe.

Well, no, no, four or four. The other two are actively looking for houses.

They're circling.

We haven't found something we like.

I don't want to say where I'm.

Living, but okay, besties to Austin.

I'm a Texas.

Let's go ride them, boss. There's a four of us on horses. Let's go. Let's get some Terry Blacks. Oh, man. Sax and I. Terry Black's eating beef ribs with our shotguns and our pistols. It's gonna be a good time. Let's go. Anyway, we brought this up back in October. A lot of people taking victory laps, but we got on this first. This tax for billionaires is going to target residents with over a billion in net worth. The history of this is really interesting. Freeberg, why don't you walk the all in audience through how this came to be.

So California has a direct democratic ballot process. So anyone can file for something to go on the ballot and it allows them to get around the state senate and the assembly and basically allow the citizens to vote directly on an issue. When they make a filing, it costs $2,000. Anyone can file for ballot measure and then you have to go collect signatures and you have to collect roughly 900,000 signatures. Once you've collected those signatures, it makes it on the next ballot. The state attorney general looks at it to make sure that it's legally compliant and so on. They write their summary of it and then it makes it on the ballot. People vote for it. And if it votes, it passes. So in this particular case, the Billionaire Tax act, as it's titled, which is likely going to get retitled when it's finally filed for people to review, is a 5% tax on the assets of anyone that's got a net worth over a billion dollars. It was proposed by a guy named Dave Regan, who runs seiu, which is one of the unions, in order to make up for the health care shortfall that his members are going to be experiencing.

So this was not a broad coalition that filed this. This is not filed by the state. This is not filed by anyone in the assembly or the Senate. This is one individual at one union that's put it forward and is now trying to collect signatures to get it put on the ballot.

To be clear, I just want to read it back to you. It's a union leader who has a shortfall in health care for some number of members. I don't know how many members are in that union. And they just came up with the idea people hate billionaires will seize their money, 5% of it, to get health care for our members of this very specific union. Yeah.

And the truth is, it's actually been set up as a negotiating technique. So it's primarily. It may be. Yeah, I mean, look, there's momentum behind it at this point, but it's fundamentally a point that creates leverage that allows this individual to go out and negotiate with other parties to try and find a way for this money to show up so that he can reduce the health care costs for his members, which is what his objective is. And this is the way the direct democratic process works in California. Now, it's not the first time a wealth tax has been proposed in California. And I want to be really clear on this. I think this is very important for everyone to understand. Forget the term billionaire, forget the term wealth, what we are talking about. And this is now being proposed in multiple places in the United States. And there is also a federal bill being proposed, several federal bills that have been considered. We are talking about for the first time, a tax on individual people's private property, not on your income. So the way taxes work today is when you earn income either via labor, so you collect a paycheck, or via the sale of an asset.

So you sell a house and make a profit, or you sell a stock or bond and make a profit, you are earning income, and you pay a tax on that income. And you only pay taxes when you realize income, when you sell something or do work and get a paycheck. So only when you get paid cash. So for the first time ever, we are talking about placing a tax on people's private property that hasn't turned into cash. For example, you own some real estate. You own an apartment building.

Well, I think it's worse than that. I think it's worse than that because a lot of people were calling this an unrealized gains tax, but it's not an unrealized gains tax. You could have realized, let's say, that you just had a big outcome and you sold your stock and you made a billion dollars. You were fully paid up on all of your taxes.

Yeah, let me just say not even a billion dollars. Forget about a billion. Let's say that this asset tax, because in some cases it's being proposed on anyone over 50 million or anyone over a million dollars in the country.

This story just got really important to.

Me in the country of. And this is why this is such a principled discussion, and I'm trying to avoid this current California thing as the primary topic, because there are multiple of these being proposed around the country and they have been tried in the past. You sell a stock or you do some work, you make some money. That money now sits in your bank account. You've paid your taxes on that money. You sold your stock, you sold your house, you did your work, you got paid. You pay your taxes. After you pay your taxes, the government comes and says, hey, how much money do you have in your bank account? What's the value of your car? What's the value of the thing that your grandma gave you? Give me the value of everything you have in your house. Add it all up and give me a percentage of it. That's what this is. It's a private property seizure. It is a seizure of your assets to pay a tax based on all the things you own, even if you've already paid your taxes on all those things. Correct. Now, this has been tried, and I'll give you guys a couple of anecdotes about this.

In France in 1988, 1989, they passed this millionaire tax. Anyone with 1.3 million euro or greater net worth had to pay a tax of like 1% a year, 1 1/2% a year of their total assets. And it raised 4 to 5 billion euro a year in new tax revenue. But what happened? 200 billion euro of net worth left France and the total income tax went down by 8 billion. So they ended up seeing a complete reduction in overall tax revenue for the country of France when they passed this. So by the year 2018, they tried to revamp it a bunch of times. They never got it to work. Twenty years later, in 2018, it got completely turned off. So there's no longer this asset tax in France, and that was a small asset tax. The reason they're calling it a billionaire tax is to make it easier for people to vote for it and sign up to this entirely new tax system that they're proposing to put on all Americans at some point in the United States, and for the first time ever, degrading our private property rights. Forget about how much wealth you have, forget about how rich you are, forget about the term billionaire millionaire, whatever it is.

We're creating or proposing the creation of a new tax system that allows the government, for the first time ever, to come in and audit everything you own, all the jewelry your grandma gave you, all the value of all your couches in your house, the value of your car, the value of all your stocks and bonds. And the government can now, in and for the first time, look through the veil into your personal property and say, here's how much all this stuff is worth. I'm charging you a percentage of that. That's what I need to get paid. And it doesn't matter that it starts with billionaires. What matters is that we're giving the government the right to look into our private property and take a percentage of it every year, which is different than an income tax, where every time you sell a stock or bond or your House or get a paycheck, you pay tax, which is totally reasonable because all of that is trackable and that's a transaction that's happening legally in the public and so on. So the government has a right to look at that stuff. But we're giving the government the right to look into our private property.

Now, I'll say another thing. It's totally reasonable to say that billionaires aren't paying their fair share of taxes. And it's totally reasonable to say that ultra high net worth people aren't paying their fair share of taxes. They pay an income tax. But the truth is a lot of ultra wealthy people borrow money against their assets and live off of that borrowed money. So they never have to pay taxes by selling the stuff that they own. That's the core fundamental issue that people are trying to address when they say that folks aren't paying enough. And there's a simple way to address it, which is to charge them a capital gains tax if they borrow against their assets that they haven't paid capital gains tax on. Very simple. That can resolve this. Another thing you can do, you can raise the capital gains tax rate. Sounds unpopular. I don't agree with that. But that's another way to deal with this, which is take the capital gains tax rate from 20 to 30. Make it sound more. Make it more like an income tax. You could do that. And I'll give you guys another statistic. In the state of California, these billionaires, there's 200 of them.

The total net worth of billionaires in the state of California is $2 trillion. So you're talking about raising $100 billion on this one time, 5% tax, or as Ro Khanna would say, 20 billion a year. California is looking again at a $1.5 trillion liability hole that it's facing. Taxing billionaires doesn't solve any of our problems. We have more fundamental problems with respect to spending and the overall debt level that we've already taken on. And if you tax billionaires of the whole country. Let me give you guys the statistic on this. There's about 900 billionaires in the United States. The total net worth of billionaires in the United States, $8 trillion. So if you took, let's say 1% a year, every year, you take 1% of the billionaire's worth, that's $80 billion of income for the federal government every year. That will pay 20 days of interest on our debt. 20 days?

Yeah. The real money's in the middle class.

The net worth of the United States, the middle class and everyone else is 170 trillion compared to 8 trillion of the billionaires.

They need a way to open the door so that they can go after the real honeypot. The real honeypot.

And so the real, the real goal of this, just so everyone understands the real goal of this is not to tax billionaires because there are other ways to tax billionaires. The real goal of this is to create for the first time in American history a private property asset seizure tax and to use that as a book, to take a percentage because they're going after the 170 trillion, not the 8.

Trillion that the billionaires have normalized, auditing every American to understand what they own and then take a percentage of it every year. It's been tried in France, it's been tried in other countries.

It never works.

People leave.

Never worked in Norway.

Yeah, that's why this is so offensive. Why not just raise, as you said, capital gains or the income tax.

Let me get in here. J. Cal.

Yeah, go ahead.

The biggest lie in this whole debate over this supposed tax is the term one time they keep describing as a one time tax. Freeberg, even you said a one time tax. It's not a one time tax. There's no guarantee in the language of this ballot initiative that they'll never do it again. They're not writing into the Constitution that, okay, we're just going to take 5% this one time and then we're going to prohibit doing it thereafter. This is the first of many. This is not a one time tax. It's a first of many tax. It's a presidential tax. And like you said, the goal here is to create a new. I don't like using the word tax because it's not, it's a taking, it's not based on seizure income. It is, it's an asset seizure.

And the idea, it's a private property seizure system.

Yeah, it's a private property seizure. It doesn't matter whether the assets are realized unrealized, whether you pay taxes on it.

Do it again.

But look, the point is that it establishes a precedent that we can define an arbitrary group of people and confiscate a bunch of their property because they're politically unpopular. And if it succeeds here, it will be replicated over and over and over again. And obviously the line will come way down below billionaires because there's not enough money there for this bloated wealth.

8 trillion out of 170 trillion of assets. The billionaires aren't the target. At the end of the day the billionaires don't make a dent. If you took 1% of the billionaire's net worth every year, even if you took all their net worth, you still wouldn't make a dent. You've still got 40 trillion of debt outstanding at the federal level and we're adding nearly 2 trillion a year. It's not going to make a difference.

The impact is in the middle class.

Let me tell you another lie about this.

That's where the money is.

So when you got into that debate with Ro Khanna, who by the way, I think is actually very smart and as far as progressives go, I like him in a lot of ways, but he was trying to frame this thing as, oh, it's only 1%. Right? 1% a year for five years.

That was the first line.

Yeah. And again, this minimizing language, they're using 1% one time, they're trying to say, well, this is just an eensy beansy little thing. It's like we're only going to use the pinky, not. Not the fist. Right. We're going to use Let me whip.

My beam as well.

Just the tip of the pinky.

Just the tip of the pinky here.

Oh, too much, too much, too much, too much.

No, the point is they're trying to minimize it because they know that the real value here is in establishing a new precedent that now asset seizures are permitted. And that's the beginning of basically the government owning all of your property. In fact, all of your property is effectively owned by the government, subject to people thinking that you're a good enough person that you should be allowed to keep your property. Because basically what they're saying is, look, there's an old line about democracy, that democracy can't be two wolves and a sheep voting on what they're going to have for dinner. In other words, people have rights. And so you have the system of democracy, but you also have this system of rights and those two things go together. And so we have a bill of rights, we have protections. There's some things that a majority of the population cannot take from you.

A lynch mob.

Can I just say.

Hold on. A lynch mob cannot vote to take your life. You have rights, you have due process.

I just want to make it clear. Look, I think what's going to happen is that if people don't see the forest from the trees here and this thing passes, it's going to get litigated. Because I think many of us feel that this is fundamentally illegal. That's going to take six Seven, eight years to resolve itself. And I suspect that it will go all the way to the Supreme Court. Let's just say that it does pass. The thing is, it's much easier for 900Americans to litigate in tax court that this asset was mispriced, that other asset was mispriced because you're going to be talking about big, chunky things. But by the time that that rule, if it's valid and it stands legal scrutiny, rolls down The Hill to 170 million Americans, they're not going to be in a position to take it to tax court. And what's going to happen is that there's going to be these frameworks and these actuarial tables and all these other things that are set up that says, oh, you have a 20, 25 Lexus, it's worth this. And you'll say, but I don't think it's worth that. It's a little beaten up, I had a car crash in it, you know, this and that.

Sorry, that's the price. And you're going to have no recourse. You live in a certain neighborhood, your house is worth that. You have a certain asset. Okay, well, we think it's worth this, your wedding ring, which is a class C diamond, it's worth this. And you'll say, but you know, it's kind of nicked and it's not. Sorry. And when you multiply that by 170 million people, there is no recourse. And now you have this level of taking which is just, I think, egregious. And then on top of that, what are you actually taking it for? Because we've now just already proven that you can't spend properly what you're already being given. And you're creating some kind of corrupt money wheel, but you're going to create this another avenue of just taking more and more and more. I think it's crazy.

And the fact that this story broke the same week that you had this California state Auditor released a 92 page report that over $70 billion in taxpayer funds had been, quote, lost. I think that's a euphemism for stolen. It can't be accounted for. And this includes things like the 24 billion on homelessness, the 18 billion for the high speed rail where not a single track has been laid. Two and a half billion for snap fraud. I don't even think this includes the 30 billion.

That 72 billion would have paid for the healthcare and it would have plugged the deficit.

And that's kind of where I was.

Going just by not allowing it to leak out.

And that's kind of my point. But it's politically easier to say that you're going to plug this hole by confiscating the wealth of an unpopular group or a group of people that you can demonize as opposed to actually making the government more efficient. Because again, every single one of those fraudsters who receive the government payment, they're basically a political supporter. I mean, those people don't get chosen by accident. Right. It's a patronage system and they're the ones who are part of the Democrat machine, you know, this homelessness, industrial complex and all the rest of it. So they're never going to see cuts. And by the way, the only reason this hole happened, this cut, if you want to call it that, is because in Big Beautiful Bill, it said that you can't use federal Medicaid funding anymore for illegal aliens. That's the origin of this whole thing. That's why they're trying to plug this hole. But look, this is why these deep blue states are fundamentally broken and probably unfixable. I don't want that to be the case.

But Sachs, is the Trump administration or Congress, if that's what it's going to take, going to be able to get legislation passed or an order passed that will allow for bankruptcy of states? Because some people, I think you've mentioned this, but some people have suggested that that's going to ultimately be a path to resolution on the bad fiscal condition that these states are in and will allow them a way to kind of crawl out of the holes with respect to all the obligations that they've accrued that they can't actually pay for.

I just don't know. I mean, I think it's a great idea. I think that states should be able to declare bankruptcy. I also think that if states go broke, there needs to be a way to put them in some sort of receivership. Right.

But they're not allowed to today. Right. There's no legal mechanism. Yeah.

I don't understand what happens when a state goes broke, which these states are on the verge of being. So I don't know what happens. But, you know, to get something like that passed, either you do it through reconciliation, get 50 votes, maybe that's possible, but I don't know. I haven't heard a lot of conversation about that in Washington, not yet, but it should be on the docket, if anyone's listening. I think it's a good thing to start thinking about.

You have the ear of Certain people that might be able to do something about it to keep us posted.

Just to do a little self reflection here, I always like to think why or how did we get to this billionaire's tax? And I think the fundamental issue is that people really don't feel safe in this country when it comes to healthcare and housing. We heard that come up with our guest earlier. He said, none of my friends have a home. And then obviously we hear it come up all the time with, hey, can I get some forgiveness for my student loans? But just looking at health care, the fact that the United States does not have universal health care is complete Description. There are 80 countries in the world that have it. We are the second biggest economy in the world. We are the leader of the free world still to this day. The fact that we are so polarized as a country and we have so much fraud as a country that we can't solve something as simple and basic as universal healthcare, that is the root of this evil. And I think the technology industry has not participated in universal healthcare, but there is a solution to it. And I think if we as very affluent people and as leaders cannot come up with a way to give the poorest people in this country, and this is not virtue signaling, this is just catching up to the modern world where people can feel some base level that they can go and get health care.

We're going to continue to see people go to a billionaire's tax. We're going to continue to see people like, you know, the CEO of UnitedHealth Get Murdered. That's where this is coming from. There is a deep fear in poor people in the lower classes in this country that feel like, hey, if I get sick, I could go bankrupt. We must solve this problem. And it's become such a political hot potato that there's no creativity, there's no plan. It's just fighting. And Obamacare is terrible. And you know, back and forth, that's what needs to be solved. I don't know which politician is going to be able to create some unity on this.

Entrepreneurs people get incredible health care. It's the middle class that gets screwed over.

Okay?

The people in this country still feel fear that we don't have universal health care. And if we solve this problem, I believe that a lot of this resentment would.

The problem is the middle class getting squeezed because the price keeps going up. Because Obamacare did not bring down the price, it made it more expensive.

Yeah. So what's your solution?

You keep wanting to give away for free.

You guys can, I know you guys can criticize it. What is your plan? What is your plan for doing? And you don't have to give it to me now, but I think as an industry, we represent the technology industry here. Sachs, you represent the 47th administration in Southwest. You're part of it. We need to come up with a plan for America.

If you look at health care just as an example, and you can graph it, there was a trend line in the cost of health care. It was going up and to your point, which is fair, under all administrations, we had not yet cracked that code. Okay. But there was something that was massively discontinuous that happened in Obama, passed in 2010, implemented in 2014. And what was that? Obamacare had this one incredibly fatal, flawed, which I still cannot understand how these folks did not understand this. They capped the gross margin. Some people at the extremely high level would say, well, that makes sense, except it doesn't. Because then how you make more money is by just charging more. If you can only make 15% instead of making 15% on $1,000, you'd rather make 15% on $10,000. That is what's happened. It has just gotten steadily up, up, up, up, up. And then the quality has obviously decayed. So if we're going to unwind this, we need to unwind the gross margin caps that exist in Obamacare and try to wind these cost curves back to normalcy.

Freeberg, if we look at ourselves globally, I'm curious what you think. Actually, hold on, let me just.

You mentioned 80 countries that are supposedly better than us. Would you want to have surgery in any of those countries? Just wondering.

Oh, for me, I'm rich. I can do whatever I want. I would go to the best place. And if you look at which is where Americans, in your view. Absolutely. America. Oh, unless it was plastic surgery, then South Korea.

Yeah.

So these 80 countries supposedly that have figured it out somehow. The healthcare, you would not want to go there for.

No, no.

Just wondering.

No, I'm just wondering if you looked at the price to value, which is the point I was about to get to.

Where would you get your next proctology exam?

On the all in podcast by you.

They have to remove a gerbil from your ass. Where are you going?

I would go to you. You seem to have the most experience.

Experience.

I would look to you for a referral. Sacks, where did you get yours?

Good, sir.

All right, let's go.

But the point is, let's get serious. No, I want to finish my thought. Thank you. If you look freberg at the cost here. Knee surgery in the top five, you know, healthcare providers that have countries that have universal healthcare, it's six to eight times more for bypass surgery, four times more for a knee replacement. You know, just getting an MRI is five to ten times more than the United States. Obviously there's some problem here with where we're paying a lot more than everybody else and we're not getting 5 to 10% more. What do you think if you had a creative solution, if you put your great entrepreneurial mind to this, how do we solve the problem of America not having universal healthcare?

I'm not the guy to answer that question. AI J cal, there are people that study this and it's going to solve all these problems. There are a lot of proposals out there.

I want to throw up this one chart because I do think this is our politics in a nutshell.

Here we go.

Someone had this great tweet, I've got to just show this and then we got to move on. But the people who created the red lines are blaming the people who created the blue lines. This is our politics in a nutshell.

Yeah.

So look, Jake, how the issue with health care is the more the government gets involved, and I agree, you got to have health care for poor people. I understand, but the more the government gets involved in healthcare, the more expensive it gets. And the same thing for college tuition. What's your category?

What would you do?

Well, I mean, look, you gotta have market forces. That's what that chart shows. Is that where you have the most market forces, which is technology. That's where you have continual quality improvements and price decreases. And while that's happening, the people who create the red lines, basically the people who create this out of control fraud and corruption and cost problem, they're the ones attacking so that people are actually.

Creating useful needs to attack this with innovation and marketplace dynamics and get the government out of it. That's the solution. That's a solution. In part, that's what I'm trying to get across here is that we are actually our industry is uniquely qualified to lower costs and create marketplaces and competition. I would like to inspire our industry to maybe get back on this. I know that none of us do it because it's the hardest castle to take, but we could as an industry, I think have a dramatic impact on this. Just like our friend from Spotify, Daniel is, you know, doing his 3D scanning. And then you have function, health, superpower. Tons of these companies trying to get self directed healthcare going in lower costs anyway, we have one thing we need to get to here on the docket, which is a victory lap for our bestie Chamath Palihapitea. This week Nvidia entered into a licensing agreement to license Grox technology for inference chips. Chamath was the backer of this company for close to a decade and had to come rescue it a couple of times. It was a brutal non consensus bet. You invested in Grok, essentially formed the company with your partners 5 years, 6 years before ChatGPT even debuted.

So this was a visionary thing to do and it was a hard bet. And so congratulations from one Bessie to another on this incredible non consensus bet. You made Chamath, but maybe take us through a little bit of the backstory.

We started the business 10 years ago and the whole idea was just observing that there is these patterns that was happening inside of AI that we wanted to be ready for. And I think that this is going to be really important over the next five to 10 years. So to the extent that you're either a technologist or an investor, let's just take 30 seconds. So in a world of kind of these LLMs, there's two terms that I think you're going to hear a ton about over these next few years. The first term is pre fill and the next is decode. Gavin Baker had an excellent tweet that broke this down. Nick, you can include that in the show Notes. What pre fill and decode are is two very distinct ways of how models think think and how a model goes through the process of answering a question that you ask it. And so when you send a prompt to AI, what happens is that the model processes it. This is called the reading phase or pre fill. It reads your entire prompt all at once. And then it does a bunch of math, okay? Calculates all these relationships between all the words and it stores them in temporary memory.

The problem is that this is really computer bound, so it requires massive brute force and Nvidia GPUs crush you. And their architecture is designed for massive parallel processing, which makes them really amazing at digesting these long prompts, right? And Sachs and a bunch of other people have talked about context windows growing and growing. So the problem just gets bigger and bigger. Nvidia just completely dominates. But the next phase though, this critical phase, the decode phase, is the writing phase, right? So the model starts to generate a response, you ask it a question and its response, one token at a time, and then to pick the next token, to pick the next word, it has to look back at everything it has said already so that it doesn't hallucinate. The problem is that this is incredibly memory bandwidth constrained. The math of all of this is easy, but then you got to do all of this nonsense. Imagine like a building and from getting from point A to point B, you've got to take an elevator, go up to the 10th floor floor, take an X elevator, go back down to the ground floor, then walk across.

That would never make any sense. You'd want to just walk across the hallway. Right? And in our architecture, a long time ago, we made these design decisions from day one. We said, you know what, there's an entire technology stack that Nvidia and Google have pioneered. If we try to go and build a building that looks like that, we will fail. They're too smart, they're too capitalized, they're too good, they're too big, they'll get the best deals and we'll just be shut up. And so what we did was we took a very different architectural approach. We took a very conservative process technology. We weren't pushing the boundaries of physics and we used a lot of what's called sram, so memory on the chip so that we could do this decode thing as well or better than everybody else. And so now when you put these two things together, I just think it's going to create a huge acceleration in the ability for this entire infrastructure layer to get much cheaper and much more valuable, which I suspect then it'll have a lot more developer pull, you'll get a lot more applications being built, billions and billions of more people using it.

So think about it as pre filled decode. We were really great at decode and I think partnering up was the strategic rationale. And so essentially what happened was last May Nvidia announced this thing which allowed their chip to talk to other things. And our team reached out and said, hey, can we experiment to see if our chip could talk to your chip and we could do this thing better? And over the summer there was some kind of like spreadsheet work that happened. Then they were interested enough where they were like, I'll give you a couple engineers. And Jensen was kind of curious about it. And then about a month ago, he and I had a call on a Saturday and he's like, I think this thing is really real. And I called Jonathan and Sunny right away and I said, you should be prepared that if this thing works, there's going to be something interesting to be done here. And one thing led to another and they acted decisively. Here's what I'll tell you about Jensen. Just seeing a little bit up close. He is operating at a level of insight about what's happening in this industry that I've really never seen with other folks in other industries other than in Elon.

In his industries, it's a level of mastery and a level of skill that is really impressive. Obviously, it's a really big deal and I'm really thankful to have been a part of it. Yeah, it's great.

Slack 25 billion. Groq. 20 billion two incredible.

But Slack. We sold the salesforce. The thing with Groq is I just think that it wasn't a point product. I think what will happen here is if successful, we will be a foundational layer that Nvidia can used again, make AI much more accessible, much cheaper, much more beneficial to everybody.

Was there a point? Just as a capital allocator, as an entrepreneur, which I consider you very entrepreneurial in the case of Grok, that this looked like it was going to get not make it. Because we went through Covid. We went through things. And how did that.

First eight years. First eight years. I mean, look, Jonathan is a genius. I said this on X of biblical proportions. His vision for the V2 chip, V3, V4 chips. He is a volcano of technical creativity, a true volcano. He was the inventor of TPU at Google. There is very few people like this in Silicon Valley or the world Savant. But he's not a savant. I just think he's incredibly brilliant. Okay. So if that roadmap can be married with Jensen's brilliance, I think that, like I said, it'll be hugely beneficial for AI in general. And then separately though, two years ago they acquired Definitive and we were able to bring one of our other besties, Sunny Madra, in as president. And I think the combo of those two, Sonny's team, which are very practical, kind of like put your head down, go to market technologists. Plus Jonathan's vision and technical brilliance, frankly, allowed a lot of this to happen. It wouldn't have happened without those two working together.

Well, congratulations. It's awesome to see you get a win.

Yeah. I'd like to say a couple things to a couple of people those days.

Absolutely. It's like the Oscar, you know, like my.

My ostensible, you know, You got. Okay to number two to the VC community. You can also. Number three. I have a message to all the people on social media, Reddit, you can also.

Now the audience knows what it's like to lose a huge pot of chamath.

Yes, Allow for your turn, Betsy for your pre.

He's a sore winner. He's a sore winner. He doesn't give a speech when he loses like helmet. He gives a speech when he wins and he berates you. Yeah, you played the hand.

They were terrible. And I hit my two outer. Like, literally. Grok was a two outer. He fakes it and he's like, I told you it was coming. So much for your nut flush. All right, boys. All right, everybody. This has been another amazing episode of the all in podcast. We'll see you next week for our prediction show. Sorry I got delayed. We just had too much on the docket. Love you besties.

Let your winners ride Rain Man.

David.

And I said we open source it to the fans and they've just gone crazy with it.

Love you, queen of quinoa. Besties are gone. That is my dog taking a notice in your driveway.

Oh man, my will meet.

We should all just get a room and just have one big huge orgy.

Cuz they're all just useless.

It's like this like sexual tension that they just need to release somehow.

What you're to about be wet your feet.

We need to get merchies.

Our family.