E110: 2023 Bestie Predictions!

Episode Summary

Executive Summary: The episode is a 2023 predictions roundtable spanning politics, markets, and media. The hosts argue that the year will be defined by Republican infighting, global realignment around Saudi/China/Russia, pressure on consumers and leveraged growth companies, and a breakout year for AI. They also debate affirmative action, Ukraine, the dollar’s reserve status, and which assets—cash, T-bills, seed-stage startups, and infrastructure names—will outperform or implode.

Main Topics: Political winners and losers (Priority: 5/5): The panel predicts political winners like Asian American college applicants, MBS, Nikki Haley, and DeSantis depending on nomination dynamics, while naming California, the IMF, and DeSantis as likely losers. A major thread is the erosion of Trump’s influence and the GOP’s need to unite its establishment and populist wings. Global power shifts and the dollar (Priority: 5/5): Freeberg and Sachs argue that Saudi-China-Russia energy and trade arrangements could weaken US financial dominance over time. They frame the petro-yuan, Saudi diversification, and Russia’s dependence on China as potentially reshaping reserve-currency dynamics. Business winners and losers (Priority: 5/5): The hosts predict OpenAI, natural gas, SpaceX/Starlink, laid-off tech workers, and seed-stage startups as winners, while capital-intensive growth companies, consumers, Google search, junk debt, and commercial real estate are expected losers. Inflation, debt, and recession risk (Priority: 5/5): The conversation repeatedly returns to debt overload, sticky inflation, rising rates, consumer strain, and the likelihood of recession. They argue the pain is unevenly distributed and that many private growth companies are already in a recession-like environment. AI disruption and copyright risk (Priority: 4/5): OpenAI is viewed as a major business catalyst, but the hosts also dig into legal and technical concerns about training data, derivative works, and whether AI commercialization will trigger copyright litigation. Asset allocation and safer places to hide (Priority: 4/5): They favor cash and short-duration Treasuries as attractive risk-free yields rise, while also highlighting infrastructure-oriented industrials and biotech/therapeutics as long-term opportunities. Media, culture, and anticipated trends (Priority: 3/5): The panel closes with film/TV/media picks such as Oppenheimer, Succession, Ted Lasso, Dune Part Two, Cocaine Bear, and AI-generated media, showing how generative AI may reshape creative output.

Key Arguments: The Supreme Court is likely to strike down affirmative action, which the panel frames as discriminatory against Asian American applicants and inconsistent with federal anti-discrimination rules. Trump’s early dominance in the GOP is weakening; candidates and voters increasingly want electability and party unity over loyalty to his post-2020 focus. Saudi Arabia, via MBS, could become one of the most influential geopolitical actors by balancing between the US, China, and Russia and by advancing yuan-denominated oil trade. The world is overlevered: high global debt and higher rates will pressure sovereigns, consumers, and growth businesses, making the IMF a likely scapegoat. OpenAI is poised to become one of the defining tech companies of the year, but its monetization may be constrained by copyright and training-data disputes. Capital-intensive Series B-D startups are in trouble because later-stage investors are retreating, pushing many companies into harsh down rounds, converts, or shutdowns. Consumers are the weak link in the economy due to credit card debt, mortgage rates, and declining savings, making recession likely or already underway. Google search is vulnerable because AI/LLM products can redirect user behavior from search to answers, reducing engagement and profitability. Cash and short-term Treasuries are attractive because they provide 5%+ returns with limited risk while uncertainty remains high. Laid-off tech workers and small founding teams may become unusually strong because layoffs push talent into new startups and gig platforms. The US natural gas industry is an underappreciated winner because Europe has rapidly replaced Russian supply with American LNG. Commercial real estate, especially San Francisco office towers, is facing a reckoning due to vacancy, remote work, and higher financing costs.

Data Points: Global debt: $235 trillion - Used by Freeberg to argue the world is overlevered and vulnerable to debt-market stress. US unfunded liabilities: $1.5 trillion+ - Mentioned as part of the broader fiscal burden facing the US. California budget swing: $76 billion surplus in 2021 to a $24 billion deficit in 2022 - Sachs used this to argue California mismanaged its windfall and is headed for austerity. San Francisco vacancy rate: 27% - Cited as a sign that downtown office commercial real estate is in distress. Credit card rate: 19.6% - Used as evidence that consumer debt costs are becoming unsustainable. Mortgage rate: Above 7% - Referenced as a key reason housing activity and consumer affordability are weakening. Facebook/Meta-style layoffs reference: 18,000 Amazon layoffs and 8,000 Salesforce layoffs - Used to support the claim that white-collar labor demand is contracting sharply. OpenAI valuation: $29 billion tender offer - Discussed as breaking news and as evidence of investor momentum around AI. OpenAI reported losses: $3 million a day - Mentioned during debate over whether the valuation is justified. SpaceX/Starlink valuation: $75 billion for Starlink alone (predicted) - Chamath predicted Starlink could go public at a massive valuation. Citadel revenue: ~$45 billion over two years - Referenced from WSJ reporting to illustrate the profitability of hedge-fund/private-market winners. Citadel Securities revenue: ~$7.5 billion - Used as another example of highly profitable market-structure businesses. US LNG infrastructure: Rapid terminal buildout in Europe - Sachs cited the New York Times reporting that Europe fast-tracked LNG import capacity. Approved cell/gene therapies: 27 FDA-approved therapies - Freeberg cited this to show the sector is transitioning from science project to commercial platform. Clinical pipeline for cell/gene therapies: Over 1,000 in trials - Used to support the claim that the field is entering a major growth phase. Cost of cell/gene therapies: Upwards of $1 million per treatment - Illustrates why the infrastructure and delivery model must change for the market to scale.

Pivotal Quotes: "the world has too much debt" — Freeberg: He explains why sovereign debt markets and the IMF may become central political and market stories in 2023. "the big business winner of the year is America's natural gas industry" — Sachs: He argues Europe’s pivot from Russian gas to US LNG creates a major structural win for American producers. "I think that the biggest potential business loser this year is Google search" — Chamath: He lays out the case that AI products will erode Google’s search dominance and engagement.

Implications: Listeners should expect more political fragmentation, continued macro stress, and accelerating AI-driven disruption. The biggest opportunities may lie in cash-like yields, energy/security infrastructure, seed-stage startups, and companies able to monetize new AI and biotech platforms.