斯科特·贝森特：从做空英镑到美国财长

David Friedberg (00:00:00): Okay. We are here in Washington DC in front of the White House. Having spent the afternoon with our friend David Sachs, our friend Elon Musk, and others, we are here to learn about the debt, the deficit, what's going on in DC, and we have an incredible interview lined up with Scott Bessent, Treasury Secretary of The United States. Chamath Palihapitiya (00:00:19): It was amazing. David Friedberg (00:00:21): And it's been an amazing afternoon, and we're really looking forward to it. Chamath Palihapitiya (00:00:23): It was amazing. David Friedberg (00:00:25): Well, this is the pre, the intro to the It Chamath Palihapitiya (00:00:27): will be amazing. It's not the pre. Let's just David Friedberg (00:00:30): This will be What the You're gonna pretend it's the pre. It was amazing. It it will be incredible. Scott Bessent (00:00:35): It will be incredible. David Friedberg (00:00:37): But how cool is the White House? And here's a bell. Okay. I'm pretty sure I'm pretty sure the bell Chamath Palihapitiya (00:00:42): not even described to you the day we had running around. It's incredible. David Friedberg (00:00:46): Running around room to room in the White House. One of the Chamath Palihapitiya (00:00:48): best days of my life. David Friedberg (00:00:49): It was one of the best days of my life. It was incredible. Incredible. I think this bell is probably pretty important. Can you guys get a shot of this bell? Scott Bessent (00:00:55): I don't know what David Friedberg (00:00:56): it is but it's really important. Chamath Palihapitiya (00:00:58): Yeah. The White House to people to a one. Super kind, super open, super curious. I mean, did you felt it? I you felt accepted? David Friedberg (00:01:07): Yeah. I felt it. But I got free soda. They have a soda machine where you can make any Coca Cola flavor you want in the White House. It was pretty cool. Highlights. I took Chamath Palihapitiya (00:01:15): some, hummus. I wrapped David Friedberg (00:01:16): it on free bird's face. Chamath Palihapitiya (00:01:17): I punched it in place. David Friedberg (00:01:19): It was a cool afternoon. And, And, this is what is this? The East Wing of The White House. And we took a walk from the West Wing all the way over to the East Wing Through the portico. And then we we snuck in. Well, we didn't sneak in. We walked in. And then we're walking around the East Wing. We went to all of the private rooms. I got great photos. We'll we'll we'll slice them into this video. And then some secret service dude comes up, and he's like, what are you got? What are you doing here? This is the residence of the president. You have to get the fuck out. He's like, you need to go downstairs now. So we got kicked the fuck out. But it was an incredible, incredible tour. Chamath Palihapitiya (00:01:50): Super great. David Friedberg (00:01:51): Yeah. Anyway, we're excited for this interview with Scott Best and hope you enjoy it. Chamath Palihapitiya (00:01:55): Alright, besties. I think that was another epic discussion. People love the interviews. I could hear him talk for hours professionally now. Scott Bessent (00:02:03): We crushed your questions a minute. David Friedberg (00:02:04): We are giving people ground truth data to underwrite your own opinion. What did you guys say? That was Claude Palschka. I'm doing all this. Chamath Palihapitiya (00:02:12): Well, today's a really important day. We're joined by the seventy ninth Secretary of the Treasury, Scott Bessen. And this is an opportunity that we wanted to take as part of a longer form way of explaining to people, not just how the economy works, but in a little bit more detail, where are we in this moment in time, where are we with deficits, tariffs, the budget, economic, monetary, fiscal policy? How do we make sure that we all understand the plan to make America great again? So, Scott, thank you for joining us. Good. Scott Bessent (00:02:41): Thanks for being here. Thanks for having me. Oh, Chamath Palihapitiya (00:02:43): I actually wanna start with let's go back in the way back machine. So South Carolina, your father was a real estate developer. Tell us where the passion for finance came from. Scott Bessent (00:02:57): Well, I don't know where finance in particular came from. As you mentioned, my dad was a real estate developer and he he was kind of boom bus kind of, guy. So, I think that's where my passion for risk management came from. But, I was very fortunate. Went to Yale. Wasn't sure what I wanted to do. 1980 when I got there, probably you all can imagine this, but, there used to be these things called punch cards and we've just gone the Yale computer system just gone from punch cards to screens I was going to think of being a computer science major maybe a journalist because people actually used to read newspapers so punch cards in newspapers from the wayback machine. And I I got an internship just for an individual and he taught me the investment business really well. And I And Chamath Palihapitiya (00:03:56): who is that? Scott Bessent (00:03:57): His name is Jim Rogers. He's Yeah. Famous. He was George Soros' first partner. He had just completed an around the world motorcycle trip and written a book called Investment Biker. Fascinating guy and I did the investment business and I thought this is really what I like because it's quantitative so I get to use my quantitative skills but you're also constructing a narrative and it's also like human emotion. Chamath Palihapitiya (00:04:30): And you were trading equities, bonds, everything, currencies? Scott Bessent (00:04:33): Well, I started out with equities. Yeah. And I I did that for several years. And then, I actually ended up at Soros Fund Management. I worked for a fellow who's my mentor, Stan Druckenmiller, who's incredible. I I think he's on he's more than forty years now, never a down year. Mhmm. And when you're sitting next to him and what am I doing all day? David Friedberg (00:04:56): And notorious for going all in several times in his career. Scott Bessent (00:05:00): All in. Chamath Palihapitiya (00:05:01): All in. Scott Bessent (00:05:01): All in. And only when he's he's right. Yes well I but he he is the best at changing his mind. That's right. Of anyone I've ever seen. Chamath Palihapitiya (00:05:11): So Druck has that famous adage invest and investigate. Scott Bessent (00:05:15): Well he he has several and and I'm trying to get him to write a book because he has so many of these great things. Maybe you all could press him. But invest, investigate. It takes courage to be a pig. Right. Right. So, and then, I I was hooked on markets because again, it was every, it was quantitative. It was qualitative and it's real time. You get real time feedback all the time and you're you can have a long term view but then you're trying to gauge the short term against that and I loved it. And for thirty five years, I've gotten to, I did what was called macro investing so eventually I was trading currencies, bonds, commodities, the equities, some credit. And I got to travel around the world meeting leaders and, trying to figure out what the next move was in policy. David Friedberg (00:06:17): I think this is important because I've spoken with folks who trade in macro and a big part of the role of being a macro investor, macro trader is really knowing where central bank action is going to be, really knowing how government bonds are going to move and spending time with economists not just central but around the world and learning a little bit about how capital is flowing all over the world. Is that kind of the right way to describe that role of being a macro investor just for folks? Scott Bessent (00:06:46): Yeah. It's a lot of it's it's a lot of that. There's another great, macro investor called Bruce Kovner Chamath Palihapitiya (00:06:52): Mhmm. Scott Bessent (00:06:53): And he had this saying that he said, you know, I succeeded because I could imagine a different future and believe it could happen. So the key is to believe it could happen and then manage the risks. So could you imagine what would happen if the iron curtain came down? What would happen, I mean, you all do as venture capitalists but like, you know, how could the world live in a different state? Chamath Palihapitiya (00:07:22): Okay. Well, let's hold that idea and double click for us to '92. It's probably one of the most famous moments where the broader world at large met macro trading. And this is really where you and Druck and Soros basically broke the back of the Bank of England. And it's really an interesting window into assessing all of these things. So can you give us the conditions on the ground at that moment and what new reality you saw for England? And then it would be great. From there, we'll contrast and compare it to America today. Scott Bessent (00:07:59): Good. So, it's a great historical example and it also kind of brings in three dimensions. So I I was the analyst. Stan was the portfolio manager and then in a way George was the risk manager. So I I was running the The UK office. I was on the ground in The UK and I I had this light bulb go off and you know I thought kind of the fulcrum thought or like my differentiated view was that The UK had just had a big housing boom. David Friedberg (00:08:34): And Scott Bessent (00:08:35): UK mortgages at that time they didn't have long term mortgages. They were all floating rates. So if the Bank of England raised rates on a Wednesday your mortgage went up on a Friday. Yeah. The UK had hooked into something called the exchange rate mechanism. They had to balance versus the Deutsche Mark. They had to stay within a band. I noticed that if they raise or I thought if they raised rates to try to stay in the band and protect the currency, it would be unsustainable because British homeowners would get bankrupted. Stan's great feat of analysis was figuring out that these bands set up this incredible asymmetric bet because I can push them up against one side of the band and their mandate is just to push me back to the other side. So we just lose two and a half percent. And, you know, Stan tells this great story of like telling George Soros, oh, well, you know, here's what I wanna do. And he says he told him and George says, well, how much do you wanna do? And he said, probably a % of the fund. And he said, Soros gave me this really sour look. And he thought that he had said something wrong. He goes, well, why wouldn't you do three times that deal? So, anyway, it was, we pushed them against the the band. The bank of England, the British government, had to buy this unlimited amount of pounds and they started raising interest rates and this was September of nineteen ninety two and, eventually, they just weren't able to sustain the the pressure from the high rates and came out. And then the asymmetric risk reward was we made about 20 something percent in a day. Yeah. Right. And it went back to what was really Stan's genius. I don't know if either of you play backgammon but in backgammon, there's the move after the move. Yeah. And so Stan, we'd made all that money and we're kind of euphoric. Scott Bessent (00:10:50): Okay now what? Because there's going to be the trade after the trade. So we made that much in a day but then it was actually the trade after the trade. This isn't well publicized. I think we made another 20% during the rest of the year. Wow. Yeah. Chamath Palihapitiya (00:11:08): So in that moment, what you're really observing is that the real economy is somewhat dislocated, maybe meaningfully dislocated from the financial economy in your operating. And I think you've said this now many times, and you've basically used the terminology the Main Street Wall Street dichotomy. How do you observe the moment in 2025? The maybe what rhymes with the early nineties or other periods where you've been trading actively? Scott Bessent (00:11:36): Well, look, I I I think it it goes back to something that's unsustainable is unsustainable and one of the reasons I'm sitting here now is about eighteen months ago, I went to see President Trump. I'd known the Trump family for thirty years. I've never known the president that well. But to tell him that I wanna get involved in the campaign because I was so alarmed with what the Biden administration was doing with the deficit debt and deficit David Friedberg (00:12:11): care. Endless stimulus. Endless spending. Scott Bessent (00:12:14): Endless spending but endless spending when we were in like solid economic territory or not in a war. First time first time ever and I I thought it was very cynical. Yeah. Because I I actually thought well we're gonna spend spend spend and then there'll be no choice but to raise taxes. David Friedberg (00:12:33): Right. Scott Bessent (00:12:33): So you go into this equilibrium that you could just never get out of and you become kind of a european style social social democracy you know the malaise. Yeah. And you know I I also think that we're very cynical on immigration. Right. Because if you take kind of the stated number 12,000,000, the president's number 22,000,000, I don't know what the truth is, kind of leaning toward the president, but it was, oh, we're gonna let all these people across the border. You can't ever make them problem's too big to make them go home. But I like to stay in my finance lane. So the finance lane was we're going to just go to the point of no return and kind of inflict these the progressive financial values on the country. There'll be no way out. Chamath Palihapitiya (00:13:23): Very meaningful wage suppression in that period. And you had an equity market that was incredibly well bid just because the money supply was just always there. Scott Bessent (00:13:32): Well, it was always there. And you had these distributional aspects because back to your question Wall Street versus Main Street that it was driving me crazy when Vice President Harris said I'm gonna fight for the middle class and she'd eviscerated the middle class. Or these policies inadvertent, intentional had eviscerated the middle classes and really the bottom 50%. So we're in this, because purchasing power goes down inflation went up. If you didn't have assets. Right. So, That's really important. David Friedberg (00:14:10): I think people don't understand this that if you had stocks, if you had assets, your assets inflated. Yep. But if you didn't, the cost of everything inflated but you didn't have the ability to purchase because your wages don't go up. Scott Bessent (00:14:21): Yeah. And they've not not only did inflation go up, but if you look, Jason Trinit has this thing I think he calls it the everyman index. Mhmm. And, so CPI went up about 22 during the period. Chamath Palihapitiya (00:14:37): Yeah. Scott Bessent (00:14:38): But the everyman index was up over thirty, thirty five percent because the the bottom, 25%, the bottom 50% of wage earners have have a different basket. %. And it inflated much faster. 100%. They used car prices. David Friedberg (00:14:53): Car insurance. Scott Bessent (00:14:54): Car car insurance rent. Rent. Groceries. Yeah. And you know like not not only is it unfair but it it's just unstable. Right. David Friedberg (00:15:03): And Create civil civil issues. Yep. Societal issues. And so Yes. But sorry. As you guys got into looking at this, I and I remember Stan talking about this in the summer of twenty three, I think it was, or '23. Yeah. And what was the point of view on what should have been done at that point in time, and then how much farther did it go? How much longer did it last? Scott Bessent (00:15:28): Well, I I think what happened, the the democrats will tell you that the big spending bills were needed for rescue. David Friedberg (00:15:37): Yeah. Scott Bessent (00:15:38): And I would say in March of twenty one the economy didn't need rescue was already in recovery. So these were rescue size packages and even Larry Summers. I remember there's a great debate between Larry Summers and Paul Krugman and Summers I think said, look this is at least $900,000,000,000 a trillion too much. And the Federal Reserve was the summer of twenty three, twenty two. Federal Reserve was very slow off the mark and you know we we ended up and you know again imagine top 10% has assets stock market is flying you're in the bottom 50% you have no assets but you have debt David Friedberg (00:16:24): yes Scott Bessent (00:16:24): so your credit cards are up mortgages impossible to buy a house, house prices had gone through the roof due to covid. So it really did like end the American dream and but we we've been suffering these distributional effects. Chamath Palihapitiya (00:16:42): Scott, what what is the American dream today, do you think? Scott Bessent (00:16:45): Look, I I think the American dream is what it what it's always been. But after World War II, I think 90% of American families, the children made more than the parents. Now I think it's fiftyfifty. But, you know, it's to own a home, it's financial security, it's to some some level of comfort, it's purpose in your work, it's the to be able to support your family, to be able to have choices, to not have to work two jobs. I made a remark at the economic club of New York last week, two weeks ago and Mike Pence decided he was gonna troll me and because I said the American dream is not built on cheap goods. Right. And he said, well, yes, it is. And, you know, I I just say with Vice President Pence, this let them eat flat screens economic policy that doesn't isn't what people want. They we they don't want the bubbles from China. It's like the old David Friedberg (00:17:55): They want progression. People want progression. I I mean, I remember reading, there's a, I think Jonathan Haidt had some work on this a long time ago where happiness is measured by your change in net worth or income per year. It doesn't matter what your absolute levels are by all these socioeconomic kind of surveys that they do. That feeling like you're having some progression in life is what folks are looking for. And I wonder whether solving for that, we created a system, and I'd love your point out your your your read on this, that we said everyone should own a home. That's the American dream. And in order to do that, people put most of their net worth into a home. 60%, I think, of middle class net worth is tied up in a single asset. And then in order to get them to feel like they're progressing, we've created a system of loans and a system of kind of economic and fiscal policy that ultimately drives the value of the home up every year. Now we're kind of in an unsustainable housing bubble. Most people can't even afford to buy a home. What did we get wrong there, and how does that affect what the American dream should look like going forward? Scott Bessent (00:18:56): Well, I I think a lot of it's scarcity. Because what what you're talking about is like out in San Francisco, super tight zoning laws. So there's scarcity for homes. If if you think like Ivy League education, all of a sudden you gave all these people access to Ivy League educations. You brought in international students but the the number of degrees awarded at Harvard, Yale, Princeton probably hasn't changed very much since the 1950s. So you you created just this demand for scarce things which leads to this anxiety. But you you you also created I think a sense of hopelessness through because David Friedberg (00:19:44): if you're I can't access I will never get I will never be able to pay down my student loan, I will never be able to afford a home, I can never see my income growing to give me access there. Scott Bessent (00:19:54): Yeah and David Friedberg (00:19:57): So is that is that a dereg solution? Is that the Chamath Palihapitiya (00:20:00): Well, I think the fir the first part of it is it's a data problem because in order for the government I mean, the one thing that struck me about, I think, this Trump two point o administration is I think you have a better beat on the fact that this data is not as reliable as other administrations would say they were in order to do whatever it is they wanted to do anyway. So it's sort of like, let me just find the data that justifies what my action is. And part of why you can't, I think, tell this story is do you trust the GDP numbers? Do you trust non farm payrolls? Do you think these are reliable enough for you to act on behalf of The United States? Scott Bessent (00:20:36): States? No. Look, they're subject to big revisions over time and I thought one of the big mistakes the Biden administration made and thank goodness they made it was they refused to they went with the numbers not what the American people were feeling. They said, no it's a vibe session and you really don't understand how good you have it. You know this has happened, this has happened. When in reality, I was on Meet the Press yesterday and there was something that said well the American people don't believe Donald Trump's doing enough on the economy. And I told the host, I said you know the one thing I'm not going to answer is that they don't know what they're talking about. I have to have respect for how they feel and then we need to go back and look at what is causing this anxiety. So that's what that's what we're gonna do. Chamath Palihapitiya (00:21:31): So let's peel the onion back. What do you think is causing this anxiety? Where are the levers that maybe the federal government can control in releasing some of the pressure? And what are more market functions that just need to clear up some of these? Scott Bessent (00:21:48): Well, look. I I think there we we we're we're trying to do three things. And I I think you may have talked about it last week week before. Yeah. David Friedberg (00:21:59): The the three legs on the stool? Scott Bessent (00:22:00): Three legs on the stool. And and for from the outside that you intuited that very well. I I would do just a little refinement on that. That's what David Friedberg (00:22:10): I was going to ask you. Yeah. Just tell me where I was right and wrong. Scott Bessent (00:22:13): But you were adjacent to everything. Okay. So, on on one, we are trying to bring down this massive federal debt, cut the spending, and but in a controlled way. You can't do it all at once. I I don't like to repeat private conversations with the president but I'll repeat this one because I think it's very the it really illustrates where his head was at. First time I went to see in to see him, saw him at Mar A Largo and walked in the door and said, Scott, how are we gonna get these debt and deficits down without causing a recession? Fantastic. Good question. That's exactly where we are now. How are we gonna get the debt and deficits down, not close a recession? And I said, sir, when you win, you didn't get us here. We're gonna set a goal by 2028. We wanna get back to the long term average. We're gonna deflate it slowly and Chamath Palihapitiya (00:23:15): Long term average being about 3% deficit to GDP. Scott Bessent (00:23:18): About three, three and a half percent deficit to GDP and you know like I keep saying The U. S. We don't have a revenue problem we have a spending problem because we are averaging right about 18% revenue and I'm talking about federal government. Yep. Federal government only. We're at about 18% and Biden administration blew it out blew the spending out to 25. Normally, it's about 21, 20 one and a half. We have the 2% inflation, nominal GDP. Take a real GDP is one eight so we get nominal GDP 3.8 and it all works out. Yeah. And it was very I had one of the heads of one of the Singapore sovereign wealth funds here last week. Guess what Singapore spends in terms of spending to GDP? David Friedberg (00:24:12): Deficit 3%? Scott Bessent (00:24:13): They they have no deficit but they they spend 18%. Eighteen %. Eighteen %. And he said you know he said, we have a lot in common with the Trump administration. We like small government. We don't like immigration, illegal immigration, and we like personal safety, which I thought was very interesting. David Friedberg (00:24:31): Sorry. So let me just, understand. So deflating government spending is key, but the big challenge has been that we have now accumulated 30 some odd trillion dollars nearly of debt, and the interest on that debt has started to grow. We now have to pay $1,200,000,000,000 in interest payments per year. So that starts to consume more of the spending budget that we have at the federal level, which means we can spend less on the rest of the federal government's programs, meaning you have to cut a lot more than you otherwise would have, which is what makes it so difficult and so painful. Is it realistic that you can get Congress to act in the way that Congress needs to act to get to the level that we need to get to given the high interest payments and the high debt level that we have. Scott Bessent (00:25:20): Yeah. And with this republican congress, and look. I I I'm I'm not sure what a deficit hawk is, but I I think I I would qualify as one. And, a lot of the Republicans, I actually have to coax them. You can't do this all at once. I I was with one of the congressional budget committees two weeks ago and you know they really want to cut this fast and I said you do realize every 300,000,000,000 we cut is about a percent of GDP. So you could so we are trying to land the plane, well and the plan, because that's really what I would like to talk about today. I think there are three plans here but plan one, we're gonna delever the government via the spending. We are also going to shed excess labor from the government. So, on that side and then on the other side, we're gonna we're gonna deregulate the financial system. The regulated financial system's really been in what I call a regulatory corset for a long time and as we deregulate that then the private sector can re leverage. So government deleveraging, private sector re leveraging and the employment or the folks who will bolster government jobs will be picked up by the prime minister. But David Friedberg (00:26:50): this sorry. This is really important, and I think this is the most critical thing. I'm really glad we got the chance to talk today because I hear so much about the conversation on any one of these topics independent of the others, and there's a relationship between them that I think is critical to understand on how this administration is aiming to drive an economic recovery that is not inflationary, is sustainable, and also will allow people to have the American dream in a way that they can't have access to today. Scott Bessent (00:27:18): Yeah. And that so part of fixing the affordability crisis is what can we we come back and talk about it if you want but what where can we get prices down? You know, like eggs are easier but the the other side of getting prices down is getting real wages up. So on getting real wages for working people up. It goes back to the Main Street versus Wall Street and the the second plan is to the reorder the international trading system and bring manufacturing jobs back to The US and have reinvigorate the the middle class because again David Friedberg (00:28:02): Through tariffs. Scott Bessent (00:28:04): Well, to to use tariffs that we're needed to bring other countries, into line. David Friedberg (00:28:12): And to create an economic incentive to onshore for some industries and some supply chains? Scott Bessent (00:28:18): Well, so there's tariffs. Then I think there are three other things we can do, which are the centerpiece of the administration. We can have the low and predictable taxes. We can substantially, slash regulations because regulations are the equivalent of David Friedberg (00:28:38): That'll drive investment dollars, private investment dollars. Scott Bessent (00:28:40): And predictability and regulations Mhmm. And then cheap energy. David Friedberg (00:28:46): Right. And, sorry, what what is the relationship between the tax cuts and, the getting to 3%, three and a half percent deficit as a percent of GDP? Chamath Palihapitiya (00:28:57): Especially because the CR unfortunately gave folks a get out of jail free card because we kept the, you know, $2,000,000,000,000 cap for an exit alone. Scott Bessent (00:29:08): Yes. But you're gonna have we we I I've been in this building, I think this is my seventh week, president Trump, been back at the White House for eight weeks. So you actually do need time. Yeah. So what there are a lot of people who weren't happy about the CR, but shutting down the government wouldn't have been productive either politically or economically. David Friedberg (00:29:32): So sorry. Does does, tax cuts get made up with tariffs or does tax cuts get made up with cutting government spending? Scott Bessent (00:29:40): Well, tax cuts will so tax cuts and deregulation will change the growth trajectory. Grow GDP. Grow GDP. If trend line has been 1.8, if you can move the growth to three or above. Right. Then, you really change their trajectory and if you can, keep expenses flat or do the unthinkable and cut expenses, then, you can really. David Friedberg (00:30:08): So, this is important. So sorry. Government revenue as a percent of GDP can go lower if you have lower expenses and a faster growing economy. Scott Bessent (00:30:17): Yes. I David Friedberg (00:30:17): think that's like really important for folks to understand that relationship. And so in isolation, tax cuts might reduce revenue. But when done with reduced government spending and deregulation and a reordered international trade model, you theoretically will accelerate economic growth in this country, increase government revenue overall even with a lower tax rate. That's kind of Scott Bessent (00:30:37): the theory. Right? And and, you know, I'll I'll tell you, shame on me. I was in the investment business thirty five years. I talked very confidently over that CBO scoring says this and it turns out I didn't know you know what about CBO scoring. Like when you're on this side of the wall you realize how crazy it is. David Friedberg (00:30:55): Right. It's crazy. So just find a gameable system. Scott Bessent (00:30:58): Yeah. It's very gameable and one of the most gameable parts of it is in normal CBO scoring that so we're calling we're saying that we want to renew the tax cuts. Right. We're actually just renewing the current tax regime. Right. That that somehow after they expire, then they go back to the old rate. Spending never changes. Right. Spending never has to get renewed. Right. And I think when when I look and think about a mental model and how do systems work, how do they break down, one of the things that has caused this spending bulge is this idea that you never had to rescore spending. David Friedberg (00:31:41): Oh, it's not. And the incentive model is when you have a constituency that you represent as an elected representative that's earning from that spending, They're telling you if you want to get reelected make sure my earnings stay and get me more. And then every year you've got a set of elected representatives whose, you know, primary objective in a democratic system is to go in and get more money for their constituents. How do we solve that fundamental problem? How do you think about that? Well, we're we're we're we're we're we're we're we're we're Chamath Palihapitiya (00:32:10): we're we're we're we're we're we're we're we're we're we're we're we're we're we're we're we're we're we're we're we're we're we're we're we're we're we're we're we're we Scott Bessent (00:32:17): OPM. It's other people's money. But they David Friedberg (00:32:21): Danny DeVito had that movie. Yeah. Scott Bessent (00:32:22): Yeah. But but you you would regard that as being a good politician. Right. Like, you brought home the bacon for for your district. Chamath Palihapitiya (00:32:29): Yeah. Scott Bessent (00:32:30): That it because the the CR, a lot of people didn't like it, but one of the things that a lot of people didn't like, there were no earmarks in it. Like, how dare they? Totally. Chamath Palihapitiya (00:32:41): The Christmas tree bill that kinda shows up at the eleventh hour. David Friedberg (00:32:44): Where everyone gets a little bit. Scott Bessent (00:32:45): Yeah. Yeah. Chamath Palihapitiya (00:32:46): Can you talk about so we talked about this deregulation as this one very important lever. Right? So how do we add 50, a hundred basis points of growth back in? We're gonna do it through deregulation. How do you undo the financial course as you said? What are the what are the sort of three or four big ideas that you'd like to affect? Scott Bessent (00:33:04): Yep. So we are re examining all all the bank regulations and why are they there? Why why do banks have to I can't remember it's five or 7% to hold treasury bills what are the regulations why do I I had a whole group of community bankers or small banks here last week and why do they have to hold the same amount of capital that JP Morgan and Wells Fargo and Citi hold when they don't have the complexity? They don't have why do the regulators one of these small bankers said well you know Bank of America does it this way. Well Bank of America has a trillion dollars in deposits. Chamath Palihapitiya (00:33:50): Yeah. Scott Bessent (00:33:50): This was a hundred $83,000,000 bank. Yeah. Chamath Palihapitiya (00:33:54): But when you look at the regulatory overhang of some of these things, Basel one, Basel two, you have all of these frameworks and then as a result, all these organizations that are running around trying to help you administer this complexity, all it does is just lower economic activity in the end. Scott Bessent (00:34:09): Well, and and but it's I know you all talk about incentives a lot. Back to incentives, what's a regular rate regulator's incentive just to keep keep tightening the core set? Chamath Palihapitiya (00:34:21): Yeah. Scott Bessent (00:34:21): They don't care about growth. Yeah. They they don't care about the, common sense. David Friedberg (00:34:28): Turn off turn off every risk. It's their job. Chamath Palihapitiya (00:34:30): If you had to create a metric then to say, okay, here's how we're gonna measure this undoing of the financial corset. Is it sort of the lending velocity by private lenders so that the private releveraging can occur? Is that a good way to think about that? David Friedberg (00:34:44): Or is rates a way to think about it? Scott Bessent (00:34:45): Well, it it doesn't have to be rates. But if if we do all the things I was just talking about, if we deregulate, if we have cheap energy, the if we shed excess labor from the government, if we get government spending down Yep. Then rates inflation should come down, rates should come down. Yeah. But the on the question of how are we gonna measure it, I don't have any problem with private credit. I actually think it's exciting. Yeah. It's dynamic. It's dynamic. Chamath Palihapitiya (00:35:17): It meets the business where it is. Yeah. Scott Bessent (00:35:19): I agree. And the the strength of The US financial system is the depth and now the breadth. But you you could see that what's happened that so much lending is being pushed outside the regulated banking system that tells you it's over regulated. Chamath Palihapitiya (00:35:35): Right. Yeah. Scott Bessent (00:35:36): Right. So now, once we so one test will be how has bank lending, especially small regional, small banks, community banks that come undone and you know, the the small banks, the small banks and community banks, they're 70% of ag loans. They're 40% of small business loans. And that's one of the reasons Main Street's been stifled. Chamath Palihapitiya (00:36:02): So can you talk about then how you will work with the Fed in sort of the change of all of this financial need? David Friedberg (00:36:11): And do you need to work with Congress too to make these changes? Chamath Palihapitiya (00:36:14): And and also just generally maybe your thoughts on just the Fed in this process of helper, foe, like, where where do they stand? Scott Bessent (00:36:21): Well, the the Fed, I a % support the Fed's autonomy in monetary policy. David Friedberg (00:36:29): Yeah. Scott Bessent (00:36:30): I don't agree with it all the time, but Right. That How it is? That it's how it is. It's it's how it is. And, so and and I've said I won't comment on perspective policy. I can talk about their mistakes in the past which have been numerous but I I think like like with with with any system as it expands beyond sort of the core, I I actually think that some of the things they've done in regulation, some of the things they've done in kind of climate and DEI, some of the things maybe even nonstandard monetary policy threatens their independence and I want them to stay strong robust and independent on monetary policy. On regulation, I think that they have they have been much too harsh on especially the smaller smaller banks, medium banks. So there's three main bank regulators. There's the Fed, Office of Control of the Currency, OCC, and the FDIC. And then there are other regulators, the SEC, CFTC, but the banking regulators at the federal level are those three. Here at Treasury, we have something called FSOC, Financial Stability Oversight Council, and I chair that and via that the president's working group, which is another convening mechanism that I plan to just keep pushing for safe, sound and smart deregulation. Like why are we doing this? Why are we doing that? And again that there's a capital charge to banks for buying treasury bills. Chamath Palihapitiya (00:38:22): Totally. Scott Bessent (00:38:22): So I actually think there's a chance that if we take it's called the supplementary leverage ratio. If we take that away it becomes a binding constraint on banks. We might actually pull treasury bill yields down by 30 to 70 basis points. Every basis point is a billion dollars a year. Chamath Palihapitiya (00:38:46): Can we talk about that for a second? Yeah. So I think and I've I've said this for a year probably, but the one of the biggest mistakes that I think Janet Yellen affected was this continued issuance of money on the short end of the curve to finance these deficits, which gives you you inherit an incredibly difficult challenge, I think, over the next nine months. I think there's, like, 9 or 10,000,000,000,000 that has to get refinanced. Do you wanna talk about that? Scott Bessent (00:39:15): Yeah. Look. I I I thought that it that when rates were low, you're supposed to turn out rates. Chamath Palihapitiya (00:39:21): Exactly. Scott Bessent (00:39:22): And instead, the the treasury for the past few years has pulled rates in and I think part of that was to keep rates lower. That they they change the issuance schedule when rates move back up towards 5%. I have maintained that policy, but I'm maintaining it because, back to David's question, when are you going when are we gonna see the results from this, the getting the government spending under control? And I don't think the markets recognize it yet. Yeah. Like, you know, again, if we do David Friedberg (00:40:04): They don't they're not sure what to believe. I mean, we hear this commentary a lot. Like, what do you really what do we there's just a lot of uncertainty. There's a big spectrum of opinions there. Scott Bessent (00:40:14): Yeah. Like like the the central value tendency, you're right, the central value tendency like what's the center of it because the the range of outcomes is so so broad and you know like we know we know there's a problem there. We know there's waste, fraud, and abuse. Quantify it. Quantify it. So I I think as we are more able to quantify it we will get credit for it. David Friedberg (00:40:39): So let me go back. So outside of waste, fraud, and abuse, as it's termed, I wanna go back to the question I asked earlier. How much do does this administration need Congress to act to get to three to three and a half percent deficit to GDP? And how what's your read on the Congress and how willing and able they are to take the action that's needed here? Scott Bessent (00:41:03): Yeah. I I I think there are a lot of headlines especially after the CR about the Democrats being in disarray and media like media likes to write about disarray. David Friedberg (00:41:13): Mhmm. Scott Bessent (00:41:14): I I think the under or untold story here is Republicans have for a change actually been very disciplined. That and I think a lot of that President Trump is kind of shepherding the party, shepherding the movement because imagine you said oh that Mike Johnson will never get reconciliation instructions out of, he's got such a slim majority. Well, he did it. Chamath Palihapitiya (00:41:43): He did it. Yeah. Scott Bessent (00:41:45): That he'll never be able to pass a clean CR. He did it. Chamath Palihapitiya (00:41:50): He did it. Scott Bessent (00:41:51): So let's see what happens with the budget. So we need Congress to be our partners on the budget. They're very engaged, the House and the Senate, that everybody recognizes that if we don't get this done it's gonna be the biggest, it's pass fail. It's the biggest tax hike in history. Chamath Palihapitiya (00:42:09): Where where does Doge come in? Scott Bessent (00:42:11): Well, Doge, that's the the cost cutting and it's the first time we've really ever had business people looking at it. Right. This Clinton Gore commission that we hear a lot of like Yeah. Or hear a lot about. I I think it was a bunch of business school professors. And But David Friedberg (00:42:29): here you've got real CEOs. You got Lutnick. You got Bergam. You got Elon. I mean, this cabinet is stock full of experienced operators that can go in and identify where there's an opportunity for saving the taxpayers money and still getting the results. Scott Bessent (00:42:44): Well, it's sad. And we we had this crypto council meeting the other day and I was sitting as looking as myself, secretary Lutnick, and Kelly Lauffer, everybody was a market person. Like forget business. Yeah. We and but with with Doge that I am completely aligned with what Elon's doing and everyone says, well, do you have to do it so fast? Do you have to do it? I I like I said, I've only been in in this business for seven weeks. I've only been in DC for eight weeks. The thing I can tell you is if you don't move fast, the vested interest will weigh you down. Like the the quicksand will come up Chamath Palihapitiya (00:43:29): or The claws get Scott Bessent (00:43:31): The the claw yeah. Everybody's got lobbyists. Everybody's got Yeah. I mean, think about it. Within a 10 mile 10 mile radius of here, 25% of the GDP of The US pulsates David Friedberg (00:43:45): through here every day. Scott Bessent (00:43:47): And everybody wants to just skim a little. I said to Elon, we were in a meeting and I said you know people are mad at you because you're moving their cheese. And he goes it's not their cheese it's the American people's cheese. David Friedberg (00:44:01): Every dollar spent goes into someone's pocket and that person's gonna fight tooth and nail to get that dollar to keep flowing into their pocket. And it's a it's a it's a very like there's no winning in Elon's role. There's every single time he takes action there are people that are gonna come after him, that are gonna come after the administration. There's no situation and obviously gets recast, reclassified in media as being something different but there's nothing but downside as you make these changes to individual organizations that participate and then it takes a while for the flow of that money to find its way or those individuals to find their way back into the productive private economy. That's where I think there's a big gap and a big challenge in the perception of the actions that are going on with the changes right now is everyone sees the cuts, but they don't see the benefits. And that's nine months, twelve months, fifteen months down the road, and that's a really hard thing to reconcile for most. Scott Bessent (00:44:55): Yeah. And and I'd I'd say there are a couple of things too is, one, like, everyone's hearing cuts and they think their government services are David Friedberg (00:45:03): going to be cut. That's Scott Bessent (00:45:05): right. That's right. They're important. They're not. I keep saying it's the Department of Government Efficiency, not government extinction, not government elimination and can we make it run much better with fewer people with fewer cost? And I don't wanna demonize any of these federal employees because I tell you in this building, I've been so impressed with the quality of the people. I would have hired them in my private firm. They are great public servants. I need to stay for the weekend. I need a 25 page memo in seventy two hours. That super high quality. I actually think what when when when all this is done there there will have been two big savings. One will been on these contractors. Sure. Totally. David Friedberg (00:45:53): We were just talking about this. Chamath Palihapitiya (00:45:54): We were with Elon just now. We were just David Friedberg (00:45:55): with Elon and Chamath Palihapitiya (00:45:56): the West Wing and Incredible stat he said, I'm not gonna name the firm so that I don't wanna but he said this one organization gets 98% of the revenue from Scott Bessent (00:46:04): It was in the newspaper, so we can say it. It's Booz Allen. Exactly. David Friedberg (00:46:08): So we were talking about this. And then but then we're going through the numbers on the other firms, Chamath Palihapitiya (00:46:11): and it's David Friedberg (00:46:11): just the whole thing Scott Bessent (00:46:12): That's shocking. What what kind of risk management is that, by the way? David Friedberg (00:46:15): Yeah. Yeah. Scott Bessent (00:46:15): Right? But it tells you that that they didn't manage the risk. Chamath Palihapitiya (00:46:21): That's right. Scott Bessent (00:46:22): Tells you how entrenched they believed they were. Chamath Palihapitiya (00:46:24): And how good it is for them. Scott Bessent (00:46:25): And how good it is. Chamath Palihapitiya (00:46:26): You're absolutely right. Scott Bessent (00:46:27): And and the way the grift works, you can only have six month contracts but there are people who have had forty six month contracts. David Friedberg (00:46:35): Incredible. Scott Bessent (00:46:36): But they've been in situ for twenty years. Incredible. And it's this whole David Friedberg (00:46:42): I'm I'm so happy there is transparency and visibility into this. If for nothing else, the administration providing this level of insight and data, I think, is so important for taxpayers and and individuals in this country to see, to recognize, and importantly to understand just how much of this grift is going on. It's frightening, and I'm glad that it's, like, being addressed. Scott Bessent (00:47:03): And and the the American people can see if they want it. So this Chamath Palihapitiya (00:47:07): is what I was gonna ask you. Let's just say that some somehow the Borg slows this whole thing down. You know, what people say is that the conventionalism, well, then then the only place to look will be things like entitlements. David Friedberg (00:47:21): Good question. Yeah. Chamath Palihapitiya (00:47:22): Do you do you think that that's true? Scott Bessent (00:47:24): Well, I I I think that now that the cat's out of the bag that the American people are not gonna stay with this is that maybe again here, maybe in the Northeast Corridor, there's some pushback but when I've seen the polling data and the rest of the country does not want this to stop and this administration is not gonna stop. The courts, they're trying to throw sand in the gears with the courts and how some judge can say, oh, all these workers have to come back in. But I also think we've moved really quickly. Now I think when we start putting out some of the anecdotes and the the messages and talk about what's happening, like I'll talk about it, I'll be talking about it soon, but there's one very large department that everybody deals with on April 15 that their help desk is fully staffed twenty fourseven, three sixty five days a year. They have the same number of people on Christmas Eve as they have on April 14. Chamath Palihapitiya (00:48:40): Wow. David Friedberg (00:48:40): This is this this by the way is something that I've seen being a lightning rod. Theoretically every dollar you spend on the IRS you get $3 back or whatever it is. That's not necessarily true. Like I just want to be clear that there's you can still get all your tax revenue at the federal level but you don't need to waste. Scott Bessent (00:48:56): Well look I mean I'd be the ultimate chump if I said oh we're gonna cut spending. Yeah. But I also cut revenues with the IRS which Treasury controls. My three goals are very simple, revenue enhancement, privacy and customer service. Totally. Chamath Palihapitiya (00:49:16): You know, there's a Yeah. There's a body of knowledge that says if we just fed in and by the way, four or five of these companies can do this now. If we just fed in this entire federal tax code into these AI models, what you can give to Americans is a very guaranteed resolute ability to file taxes with the assurance that there is no waste, fraud, and abuse. And now, all of a sudden, you take this incredible weight off of people's shoulders. You know, sometimes it is said that you get audited for almost political reasons, it seems like. You know, people that Scott Bessent (00:49:49): Not almost. We have a big we we had a big announcement on Tuesday, and we brought in the two Hunter Biden whistleblowers who they, have a lot to say about who gets audited, who doesn't. They're gonna be sitting in this building working on IRS, the matters, and understanding exactly how these audits get triggered, how these political witch hunts happen, and trying to change the ethos of the building. And again, 99% of the people at the IRS are good people. It's just like all these other agencies where they're they're bad folks. Totally. Chamath Palihapitiya (00:50:32): But to your point, this is where technology can create, very reliable guardrails for the American citizen. Where it's like, okay. Well, if this model says I owe a thousand dollars in tax, this is it. I'm not trying to change anything. I've thought it all the time. David Friedberg (00:50:48): Software first. Chamath Palihapitiya (00:50:48): Yeah. Software first, and you just know. David Friedberg (00:50:51): Let me go back to entitlement. I talked last week on our podcast about Social Security. Mhmm. Social security has a 2,700,000,000,000 balance which is just a basically a treasury bond that's owed that they can't trade out of. Should social security have invested in the S and P or invested in equities and why don't we turn social security into a sovereign wealth fund and invest it for the benefit of all Americans going forward? Scott Bessent (00:51:17): Yeah. I I I think, like, there's the optimal then there's the possible. George w Bush tried to privatize social security and, you know, I I saw your your numbers, listened to your numbers going way back. David Friedberg (00:51:33): Nineteen '70 '1. Scott Bessent (00:51:34): Nineteen '70 '1 and with $1,516,000,000,000,000 that we'd have. I I don't know what the numbers are since W tried it. Yeah. They'd be substantial. We wouldn't be thinking about a problem in a few years but I think now you got to play the hand you're dealt. I think we are dealt the social security hand and I think maybe we could re engineer it if we could create the sovereign wealth fund and have that on the other side. There are a lot of philanthropists who are looking at baby bonds. So if you can create a some kind of an investment account for newborns, then that would run on a parallel track to social security. So that would be compounding. The other thing would be a safety net. David Friedberg (00:52:28): Yeah but it's still sitting in Treasury. It's on the other side. And that's where there's an opportunity not just to drive up returns but participate in the American economy and give all Americans today the ability to know that they have some participation in the American economy rather than having their retirement funds being sitting as a loan to the federal government for spending, which I think could be a big dramatic change. I don't know if they need to be independent, but I I I would I think it's a it's a real opportunity for us. Chamath Palihapitiya (00:52:54): Are you excited by the idea of the sovereign wealth fund? Scott Bessent (00:52:57): I am. I'm excited by the idea. This is President Trump. Everything he does isn't in a straight line but I guarantee you he has a destination in mind and the idea that he's going to be the first president in generations who is going to he wants to create assets for the American people not just debt. Yeah. So he wants to take the debt down and then this idea of assets, there was a lot of talk about this economic deal we're gonna do with Ukraine, that would have gone in the sovereign wealth fund. Chamath Palihapitiya (00:53:35): Right. Scott Bessent (00:53:35): Yeah. Government has big stake in Fannie Mae and Freddie Mac. Chamath Palihapitiya (00:53:42): Yeah. When it comes out of conservatorship, where does that go? Scott Bessent (00:53:45): Where where does that go? Right. As you meant, Doug Burgum did great work when he was governor of North Dakota. North Dakota has the equivalent of two state sovereign wealth funds for, I don't know, are they seven, eight, nine hundred thousand people? Right. I think they had $25,000,000,000 Right. Chamath Palihapitiya (00:54:05): Alaska permanent. Alaska permanent. Alaska Scott Bessent (00:54:08): permanent. But all all that's from the natural resource money going in. David Friedberg (00:54:12): Yeah. Scott Bessent (00:54:12): So to the extent we start the other day when the sovereign wealth fund was announced, President Trump surprised me in the oval and said could you make a few remarks and I said well we're we're gonna we're we're gonna mobile we're gonna mobilize the asset side of the balance sheet and all the gold books said he's gonna re he's gonna revalue the gold. I I can say today we're not revaluing the gold. Yeah. But what we are gonna do is Doug Burgum at Interior, every other department head is looking for the assets that we can mobilize. Yeah. So, if if we have energy leases, federal government owned, back to the housing shortage, federal government owns a lot of land in downtown urban areas. Can we or in suburban adjacent things in Nevada and Utah, Can we use that land? Chamath Palihapitiya (00:55:01): Do you see a wave of privatizations as a way to sort of both pay down the deficits and debts and also just David Friedberg (00:55:07): That's important to me. Like, why put in a sovereign wealth fund versus pay down the debt? Help help kind of do the finance map for us. Scott Bessent (00:55:14): Oh, could you think you'd get a higher return? Right. Well, David Friedberg (00:55:17): it's Anything that anything that beats our current return our current interest rate. Scott Bessent (00:55:22): Yeah. I mean, not not that in keeping score, not that I watch it closely, but the ten year treasury today is four twenty eight. Chamath Palihapitiya (00:55:28): Four 20 eight, yeah. Scott Bessent (00:55:29): So, can we Chamath Palihapitiya (00:55:31): It's responding well. Scott Bessent (00:55:32): Can can we can we do better? Yeah. Four can we do better than four twenty eight? And I think with this group and this cabinet and if we can put in, right now we're working on the the steady group for the sovereign wealth fund and we want to do best practices. We're talking to people around the world, we're talking to investment people, we're talking to a lot of the other big sovereign funds and we're going to do best practices and we want this to be a legacy of that. Totally. David Friedberg (00:56:03): Well Dan Loeb made this comment that the Australian superannuation, they've got 30 managers and they have as much in their on their balance sheet today in their fund than social security does, about $3,000,000,000,000, and they have 7% of our population. Scott Bessent (00:56:18): Yeah. No. It's incredible. David Friedberg (00:56:20): It's incredible. Scott Bessent (00:56:20): It's incredible. And, I was with one of the Middle Eastern funds, and, you know, I said something about oil revenue. No. We haven't had an an injection Yeah. Into the fund in twenty years. David Friedberg (00:56:33): Why was this such a miss for America? What happened in The United States was that it we took every excess dollar we had and we invested it in the future. We bought in we built infrastructure. What happened that kept us out of this model where others were so successful and clearly have now gotten ahead of us and their their people have a greater kind of safety net than we do? Scott Bessent (00:56:54): Yeah I I think it was just this idea of it was supposed to be a safety net not some kind of prosperity ramp. David Friedberg (00:57:03): The old age and survivors disability insurance fund. That's what it's called. Right? Under social security. It was like Chamath Palihapitiya (00:57:08): You, you've mentioned cheap energy as a critical part of this holistic program, I think three times now. Where do we make mistakes in that path where energy gets out of control? What what do we need to do to make sure that energy actually the the incremental cost of the electron basically goes to zero? Scott Bessent (00:57:28): Well, I I think the biggest challenge we're having right now is trying to get private sector to lock in for some things that might not have a payoff for five, ten years and how do we avoid student body left, student body right with administrations coming and going. So we're we're trying we're we're working on that. Chamath Palihapitiya (00:57:50): Well this is an incredibly nuanced and I think an important point because we have this very vibrant as you know tax equity and transferability market that allows a lot of these organizations to make these five and ten year investment cases. And, you know, for all the issues with the IRA, of which there are many, I think the one narrow aspect that it did was, it calmed the markets about the future of those specific ITC credits and transferability. And it's a critical thing because there was a report, you probably saw it, but, you know, FERC said 90 plus percent of our incremental electrons as of December were from sources that were leveraging these ITC credits and that transferability. So, to your point, we have this very delicate balancing Scott Bessent (00:58:34): act of making sure we But there's the the tax side but then the regulatory side with fossil it's tougher. Yeah. Because it crosses a lot of state lines. There's a lot more permitting. Right. A lot less permitting for solar farms, for wind, for geothermal. David Friedberg (00:58:52): Yeah, yeah. And nuclear? Scott Bessent (00:58:54): Nuclear is going to be a big part of it but it's not going to happen tomorrow. David Friedberg (00:59:00): We got to fix the supply chain and the regulatory. Scott Bessent (00:59:02): Well we got to fix the supply chain, we got to fix the regulatory, we've got to decide which model are we going to go with and you know I'm told that you you two probably know more about nuclear than I do but he loves it I hate it. Okay. Chamath Palihapitiya (00:59:20): Well no I don't hate it I mean I I like I like nuclear I just think it's 10 years old. David Friedberg (00:59:23): He's a loser go listen to him. Scott Bessent (00:59:24): Yeah he doesn't know what to do. Chamath Palihapitiya (00:59:25): It's just not an investable thing. David Friedberg (00:59:27): Well but it's important because the question is when it becomes one that's when we know we fix the problem. Scott Bessent (00:59:34): But but but to the point that it's not investable that's where the government needs to step in. I Chamath Palihapitiya (00:59:40): 100% agree with you. Scott Bessent (00:59:41): Like we that's where we have to bridge to to the technology. We have to do the time arbitrage. David Friedberg (00:59:49): And 100%. Scott Bessent (00:59:50): And also I'm told especially with the smaller SMRs. Yeah. That you that you need to cluster them. Yeah. And you gotta find somebody who wants to cluster them. Yeah. And and all that. David Friedberg (01:00:00): And, let me ask you one more question as we kind of get to the end. But, what's been the most surprising thing for you in this role since you've, since you've been in office? Scott Bessent (01:00:10): The national security aspect. Mhmm. That I I would say 50% of my day, Treasury does a lot of national security work. Whether it's CFIUS in terms of, foreigners who want to buy US assets, whether it's sanctions, whether it's OFAC, anti money laundering. We've just designated the Mexican cartels as foreign terrorist organizations. We, President Trump, over the weekend launched a very aggressive strike on, missile strike on the Houthi Yeah. Assets. Well underneath that we'd already been working for several weeks on their bank accounts. Or anyone who is adjacent to them, the Iranians supply the Houthis with their ecosystem previous to my getting here, treasury had disrupted the ecosystem so much that, the Iranians used to hand them cash now they're just handing them here take take this oil tanker and try to sell it. Right? So, like, there there is the ability to to break that down. Chamath Palihapitiya (01:01:27): So when you go home and you're talking to your kids, you're talking to your husband, and you're like, this was so cool. There must be these moments where you're like, this was so cool. Do you have any anecdotes that you you're comfortable sharing where you're just like, this is I can't believe I'm doing this job? Scott Bessent (01:01:44): Well, there there have been several, but a good example my family was actually there because after the inauguration I asked President Trump may I bring my family in, say hello, get a photo and we're sitting in the oval so it's myself, my 11 year old daughter, my spouse, fifteen year old son and the president Trump's having a great conversation with them and then he said, oh Scott while you're here let me call in these other two people and we need to discuss this. So they actually got to see government being done live. So there's that I have to say I think the moment with President Trump, Vice President Vance, President Zelensky was kind of a once in a lifetime thing in the Oval Office, I hope it's once in a lifetime, and they, but you know I was sitting there kind of in the front row of history, vice president, secretary Rubio, myself on the sofa and watching president Zelensky do what I thought was the the biggest diplomatic own goal in history. Yeah. Chamath Palihapitiya (01:03:05): Yeah. I think you said it very well in in TV afterwards. It really, really was based on and you you said, because you were there, you tried to negotiate with him in Kyiv. It was a very escalated I think you used the word escalated or high high decibel conversation. Scott Bessent (01:03:19): High decibel. Yes. Yeah. Yeah. So, but it kind of my my job for thirty five years was to be outside the room try to put my ear to the door maybe lift myself over the transom figure out what the leaders needed to do were going to do, and then how it would affect the market. And now it's fantastic and amazing and stimulating and a little scary being the person in the room who has to what should we do, what can we do, how's it going to affect the markets, how's it going to affect the real economy, what what's it going to do to working people in America? Chamath Palihapitiya (01:04:03): So how do we fix affordability? Scott Bessent (01:04:06): We're just gonna have to go through and where where's the problem, what's the solution in terms of like are are the insurance markets broken? Chamath Palihapitiya (01:04:18): Right. Scott Bessent (01:04:19): What can we do? There there's been no and I've been involved in the house building business. There's been no technological change in house building in fifty years, maybe sixty. Some of the building codes go all the way back to the Chicago Fire. Chamath Palihapitiya (01:04:35): Right. Scott Bessent (01:04:36): So what can we do that the way we categorize housing it's stick built or modular. Is there something in the middle prefab? Because the more that comes out of a factory, the more that it's standardized that neighborhoods from DC from DC to Bethesda to Potomac to you could be in contiguous neighborhoods and if they're different municipalities, they'd all have different building codes, not zoning, building. Yeah. And why is that? Like, they're adjacent. Why do the houses have to be? So, is there some kind of window guidance that the federal government can give in terms of the more that comes out of the factory the cheaper it'll be the faster we can make it things like that. Chamath Palihapitiya (01:05:28): Yeah. Is there pressure that you can apply or influence you can apply? One of the things you mentioned earlier was just, you know, take San Francisco. There's an artificial constraint that's created by the zoning paradigm, and it's not clear how you unlock that. You know, it maybe is it up to private citizens to sort of like have regime change at the local level, but how do we sort of unclog that part of it to marry up with this kind of stuff? Because it would be great if you could just build up in many places. Scott Bessent (01:05:55): Yeah. Well I I think there are a lot of things where you can look around and find what's interesting that something what's something that's interesting that's being done somewhere. So I lived in Greenwich Connecticut for a while. Maybe the richest suburb in America. There's a ton of multifamily there. Very expensive, very nice multifamily. There's some affordable housing but Greenwich is not all 10 acres and a horse farm. The state of Connecticut has put in a, I guess it's a law, that every municipality has to allocate 10% of vacant land to multifamily. And if the zoning board won't give you a hearing, you as a developer, you as a non profit for housing can go over the top and go to Hartford and then Hartford will give you the authority. What no no town wants the state doing on their behalf so now the towns negotiate. Chamath Palihapitiya (01:07:06): Yeah. Scott Bessent (01:07:06): So like I I think there there are a lot of things that that can be done. Again on insurance, is there something that I've been thinking about is there something the federal government could do for California? Where we come in, everyone's paying homeowners insurance, then there's reinsurance on top of that, then I think the California reinsurance company is called Fair on top of that. David Friedberg (01:07:34): So Well it's a separate plan but Scott Bessent (01:07:36): yeah. Yeah but it's it's David Friedberg (01:07:38): it's it's you're stacking Scott Bessent (01:07:40): it. So is there something we could do where you put another layer of private money in there and then the federal government is the fifth risk tranche. Right. But if the federal government comes in, can we mandate down here proper hygiene? Changes in the building code. Well changes in the building code, changes in brush cutting. Right. Material choices. Yeah. David Friedberg (01:08:06): Exactly. Right. Right. Yeah. Makes sense. Scott Bessent (01:08:08): Great. So I think there's a lot. If we David Friedberg (01:08:10): And obviously energy, I mean just getting back to affordability right energy costs come down. That's what they Scott Bessent (01:08:15): I took the words out of my mouth. Sorry. No no no no but I mean energy costs are energy costs but then there's also that for food the transportation cost of getting it to the grocery store Everything that's made out of petroleum products. So I think we can do that and you know I think there's a lot to do. And it shouldn't be too hard. So we're actually, we should probably be announcing in about ten days. We're gonna have an affordable affordability czar but it's gonna be someone with a lot of experience in supply chains figuring out what are a lot of the quick fixes we can do because back to the question what really has people anxious inflation for now is actually pretty close in. And, but the affordability has gotten so away from everyone Sure. That how can we bring that down? David Friedberg (01:09:20): Yeah. Yeah. Chamath Palihapitiya (01:09:21): Yeah. Good. David Friedberg (01:09:23): For all our friends at home who talk a lot about the conversation about climate change and carbon free, I think one of the things that I always point out to people is the cheapest way of driving energy production in this country is that there's a low carbon or carbon free alternative that's out there that's actually cheaper than standing up new new plants, and there's an acceleration. I don't know how much this administration thinks about that relationship, but it it seems to me like if we can unlock energy production costs come down and this economy transitions. Scott Bessent (01:09:55): Well it transitions and I think it's also not being dogmatic. Totally. I saw what the Biden administration did with EVs. I have an EV, I can't wait for it to come off lease and but also have a hybrid and I think I fill it up maybe three times a year. David Friedberg (01:10:12): Yeah totally. Scott Bessent (01:10:12): But this administration had a jihad on hybrids because they're it they didn't pass the purity test. Yeah. Chamath Palihapitiya (01:10:20): But they were picking winners and losers in a way that a lot of us were left scratching our heads. Scott Bessent (01:10:24): Yeah. Yep. And David Friedberg (01:10:26): I think cheap energy solves a lot of problems Scott Bessent (01:10:28): for us. I think it'll and cheap energy is energy security too. 100%. Because that's why Europe's kind of over a barrel literally and it's why the Russian war machine hasn't again, literally run out of gas. Chamath Palihapitiya (01:10:48): And to the extent that we believe we're in an existential arms race for technical supremacy, it's really on one dimension, which is AI, and that is so needy of energy. Scott Bessent (01:10:59): Yep. Chamath Palihapitiya (01:10:59): So if we don't pull all of these issues together and realize that we need to basically take the incremental cost to zero, whatever we do, we need to create the incentives and package it altogether. David Friedberg (01:11:08): I mean, we can't we can't compete manufacturing Without energy. Without a bone. Certainly can't compete with that energy. Scott Bessent (01:11:13): Yep. Yeah. I mean, we're we're we're not going to crush labor like China and some other countries have done. So we got to crush the energy price. Alright. Chamath Palihapitiya (01:11:22): Exactly right. And when you're in the oval, what are the truths and misconceptions of the president? Meaning on the outside and what people know or don't know. Scott Bessent (01:11:30): Oh, how about this? We we had a lot of, foreign leaders come in and I I knew someone in the in one of their entourages. I won't tell you which one. But afterwards he comes up to me and goes holy crap because he's really smart. President Trump has perfect recollection because he was talking about something that had happened in that country thirty years ago and he said he really. So the president listens, he is judicious, he is just taking it all in, he likes to see how people react. It's just incredible executive skills. Yeah. And the other thing too that he's tough, but I went in and I showed him we were talking about something the other day and I said well this is going to cause some layoffs. Well let's try to fix Chamath Palihapitiya (01:12:30): it. Yeah. Scott Bessent (01:12:30): Yeah. Let's try to fix it. So I I always say he really regards himself as the mayor of America. Right. Yeah. 330,000,000 people. David Friedberg (01:12:40): He wants to be personable to Scott Bessent (01:12:41): And he cares deeply about all of them and he doesn't care whether you're Elon Musk or the the guy cutting the rose garden. You're his constituent. David Friedberg (01:12:54): Right. Well, Scott, thank you so much for taking the time. This has been Chamath Palihapitiya (01:12:57): a Wonderful. David Friedberg (01:12:58): A pleasure and we really appreciate the insight. Scott Bessent (01:12:59): I wish Chamath Palihapitiya (01:13:00): you the best. Yeah. David Friedberg (01:13:00): Yeah. And thanks for the service and thanks for doing the role. Good. Scott Bessent (01:13:03): Thanks, Rose. Thanks, Scott.