← Tom Bilyeu's Impact Theory
Tom Bilyeu's Impact Theory
AOC Says You Can't Ethically Earn Billions, "Operation Epic Fury" Was a Disaster They're Calling a Victory, These AI Innovations Will Keep You Up at Night | Weekly Recap
00:36:08
Loading summary
Transcript74 lines
- [00:00]
Kevin
If you work in university maintenance, Grainger considers you an MVP because your playbook ensures your arena is always ready for tip off. And Grainger is your trusted partner, offering the products you need all in one place, from H VAC and plumbing supplies to lighting and more. And all delivered with plenty of time
- [00:19]
Grainger Announcer
left on the clock.
- [00:20]
Kevin
So your team always gets the win. Call 1-800-GRAINGER visit grainger.com or just stop by Grainger for the ones who get it done.
- [00:30]
Grainger Announcer
When you manage procurement for multiple facilities, every order matters. But when it's for a hospital system, they matter even more. Grainger gets it and knows there's no time for managing multiple suppliers and no room for shipping delays. That's why Grainger offers millions of products in fast, dependable delivery so you can keep your facility stocked, safe and running smoothly. Call 1-800-GRAINGER Click grainger.com or just stop by Granger for the ones who get it done.
- [01:00]
Drew
Let's talk about AOC and her take on billionaires.
- [01:04]
Grainger Announcer
Certain level of wealth and accumulation that is unearned, right? You can't earn a billion dollars. That's right. You just can't earn that. That's exactly correct. You can. You can get market power, you can break rules, you can do all sorts of things, you can abuse labor laws, you can pay people less than what they're worth. But you can't earn that, right? That's right. And so what? You have to create a myth that since you didn't earn that, you have to create a myth of earning it.
- [01:44]
Kevin
Welcome to aoc. Once again, proving that she does not understand the economy in the slightest. So. So this is the kind of thing that's absolutely maddening. So once again, there is a way to help the working class, the middle class, we should all be focused on that. It is the thing that creates the broadest level of stability. Whether you're a billionaire or not, you should care deeply, intrinsically for your own well being. You should care about the middle class and the working class for sure. And there are ways to solve this problem. What they're talking about is just actually idiotic. It. It isn't true. First of all, she doesn't understand how value is created because people don't understand the nature of where value comes from. They are left making statements like, you can't earn a billion dollars. Okay, first of all, the way that you earn a billion dollars is very straightforward. You create something of value where people say, I would rather have that product than my money. So the people are making a decision at the point of transaction as to whether that thing that you're selling is worth more to them than the money. Okay, that you can get into places where there's distortion. And if this is why we don't allow. Like take grocery stores, if they could have a secret cabal and get together and all say that they're going to charge some exorbitant amount of money for something that you literally need to survive, then it's like, you know, you're basically a drug dealer at that point. So there are reasons that we get together as weak people and we tell. We create a government and we say we want to be protected from the people that could otherwise bully or harass or harm us. And they're meant to break that up. So from that perspective of wanting to actually help people 1000%, we should want to do that. But if you make something that people really would rather have that thing than that amount of money, then you can earn a billion dollars. I have earned more than a billion dollar. I've generated. This is a better way to say it, I've generated more than a billion dollars in revenue. Now, by doing that, I created a billion dollars in value. I was able to sell the company, blah, blah, blah. So obviously for me, this is all very straightforward. I was not breaking labor laws or anything like that. Now, you can look at and say people shouldn't take a job because that amount of money is not the right amount of money that I, for whatever reason on the outside, think that they should be willing to accept. But this is where markets come into play. When people have options and they can go somewhere else, then it's like, well, given my skillset, my interests, my passions, the amount that I wanna work, et cetera, et cetera, this job makes sense for me or it doesn't. And because anybody can work or not work as they see fit, then it's like it's a constant negotiation of what that person is worth to the company as a whole to be able to make the profit, the product at a profitable rate. Another important thing to understand about value creation is it is not like somebody like Elon Musk has whatever, 700 billion sitting in the bank. He has created value out of thin air. Other people looking at the share that he owns, they say, I would rather have that share of your company than my money. Okay, again, a completely voluntary transaction. And then we run a theoretical math equation and say, if you were willing to sell all of those shares to these people and they were willing to all buy them, because saying that you'll be willing to buy it, or the fact that one guy just bought it an hour ago for that amount of money does not mean that if you tried to sell them all at once, they would actually sell for that. In fact, they wouldn't. But nonetheless, we run this fictional calculation, we say, oh, that's what you would be worth if you were able to do all of this stuff. That's where those values come from that she's pushing back on now. I don't even think she understands the difference between money in your pocket and the fictional wealth of somebody's net worth. But even if she did, then I'm not sure what sort of mental gymnastics she has to go through in her mind to think that there's no way to create something of value for enough people that they would be willing to pay their hard earned money for that thing. So then she gets into wage theft, saying that if you are the person who created the invention, you're willing to take all that risk, you're willing to work, yada, yada yada, you, in a free market way, give people the option to either work or not work at that company. And then you're able to get a band of people together, keep them focused, pointed on the same thing, make enough right decisions over a long enough period of time that you're able to get the product to market all that stuff. I don't get where she's saying that the math doesn't add up and that you somehow must be a thief. And then keep in mind, I think she's a multimillionaire. So this is wild. You've got somebody who, through a. A free ish market has been able to make herself incredibly wealthy, and yet at the same time is turning around and saying, but the people that have been even more successful at the same game that I've been obscenely successful at, somehow they have lied, cheated. And so I'm like, Kate, did you lie and cheat? Just less so Anyway, this is all absurd. It's absolutely ridiculous. We should all be very focused on making sure that we fix the problem with the middle class. But that has to do with balancing the budget.
- [06:38]
Drew
I have a thought experiment. Please. It's 100% binary. Would you rather, on one side, flat tax, 10%. Everybody pays 10% and gets out. Period. No ifs, ands or buts. That's the on.
- [06:49]
Kevin
On revenue.
- [06:50]
Drew
Yeah.
- [06:51]
Kevin
Or on their income.
- [06:53]
Drew
Yes. On the money that comes to your account. No, no shady business you can't loan. Again, like everybody just 10% agreement. We're all on the same page.
- [06:58]
Kevin
Yeah, but it's not on net worth is what I'm really.
- [07:01]
Drew
Oh yeah. Not unrealized gains and just straight up honest. 10%.
- [07:05]
Kevin
Yep.
- [07:05]
Drew
But wages are tied to productivity or that's. So that's one situation. No more taxes or lower taxes significantly.
- [07:15]
Kevin
When you say wages are tied to productivity, what do you mean exactly?
- [07:19]
Drew
The when wages broke productivity in like the 70s, how they broke.
- [07:23]
Kevin
So you're just trying to do it generically at a high level that will never work, that wages.
- [07:27]
Drew
If we tied wages to output revenue or wages to percentage of revenue created, you know that we could do wages in that way.
- [07:36]
Kevin
I don't think you can do anything where it's generic. I think you have to do everything tied to the person.
- [07:40]
Drew
Okay.
- [07:41]
Kevin
Because for instance, it's like having a minimum wage at every level in the company. You're going to create insane distortions around okay, I have to pay this much for that person, but that person isn't there yet. So the number of people that I have mentored in my career is very high. And the reason that you do that is it's. You're often overpaying for them in the beginning. But then over time it's like, okay, we get to a point where now you're trained up, you're worth the investment and then hopefully I get some return back on that because I've made you like really incredible. And then there will be a point at which you'll almost certainly leave and you'll go somewhere else and you'll take that knowledge. And I get that that's the name of the game. But it's like you take a risk on somebody that you think is really bright and then you train them up. Now if I couldn't do that because the cost of that person at the beginning isn't just a little off, it's a lot off now. It's like, okay, this is not a good exchange.
- [08:39]
Drew
But my, I guess my response is then that person wouldn't be higher. The reason that I'm trying to get
- [08:42]
Kevin
is because that's what I'm saying. But that's going to have knock on consequences that you're not thinking about.
- [08:46]
Drew
No, because I think then the people that have jobs will be at positions that they should be positions because I think just like there's regulatory capture, I think that there's like employment capture.
- [08:54]
Kevin
But so I don't think you're understanding what I'm saying. But moving on from that, rather than beat a dead horse, let me ask you, you don't think that an individual is capable of successfully negotiating their own salary.
- [09:05]
Drew
I didn't say that. This is what the point that AOC is making because AOC's base assumption is that wage theft is a thing. And this is something that I'm starting to see like propagate as like a actual policies. People think that what should be paid is the same as taking payment. And on the flip side, with like taxes, what should be paid is. So that's why I'm like, it's kind of this dichotomy. So on one side you can have the. There can be billionaires, trillionaires, whatever, like that. There's no more wealth taxes, there's no more. We expect you to pay this. But everybody, everybody's paid at their quote, unquote, fair share. And we'll say fair share as the people that are getting paid is getting tied to the output of their production on the revenue. So if, for example, if that means McDonald's employees are getting paid $6 an hour and then middle managers are getting paid 200,000 hours, it is what it is. The people who only have the skills to be McDonald's employees will be McDonald's employees. The people who have skills to get to that 200 will be. Get to that 200. Yeah, but then on the flip side, you don't get taxed. Or we can have this disproportionate system now where people aren't getting paid the wages that they are supposed to get paid. And I'm saying tied to productivity. And, and then in the flip side of that, we're trying to come at you with taxes and all these other things to try to generate the revenue that should be. Then get to the large bucket of people to help the social programs. Specifically to the social programs. I know there's NGOs and I know there's fraud and all these other things. I'm trying to. As many.
- [10:17]
Kevin
Let's variables as. Let us, let us retrench back to a very finite idea. Should people be compensated based on what you're calling the productivity? What I'm saying is that has to be applied not even by job title, has to be applied by person. So now we get into the question of who should be making the decision of whether that person is productive. What I'm saying is you want the person closest to that person's actual output to say how they're contributing the way that you do that is essentially the structure that we have now. So you have. Every individual is fighting to make the case that they're doing better, they contribute more meaningfully to the output of that role, that company, than the next person. And then you have a manager or a company owner that is assessing that and saying, do I have fear of loss with this person? Am I willing to pay them this additional amount that they're asking? Or would I rather lose them and have to replace them and they can go work somewhere else? The second you take that up to the government level, you are in your entire nation. You are damning them to eternal misery, pain and suffering because you will make stupid decisions and people will not be able to run their company efficiently. You want entrepreneurs like an Elon Musk that come in and go, 80% of you at X don't make any sense. You're all fired. And you don't want anyone else to be able to make that decision. Because first of all, they're not going to understand what he's going to be able to do from a technological standpoint. They don't understand that he's got ability to spin up data centers faster than the next person. And so somebody other than him, you really might have other people contributing more meaningfully, but with him, it's a very different calculation. And down and down through all the different employees. And so trying to put some sort of blanket statement where we look at a graph and we go, oh, but companies now are more productive and employees are capturing less than that. Well, guess what? I have a real clear answer for you. You have globalized your economy. And so now we have given a trick to everybody who's trying to optimize their business. And they say, I cannot get somebody to do this job for me here. And there's no incentive for me to do anything other than go somewhere else. And so I'm going to go somewhere else and I'm going to find somebody in Bangladesh that's cheaper and they'll do the same thing. And I'm going to do that, or in the case of farmers, I'm just going to bring in illegal workers here. Everybody's going to turn a blind eye and they're going to for less money. And so what I'm telling people is that thing that you think is a billionaire being an. And that's why there's a break in, that is you are not creating fear of loss. So one, we have a culture where people are not trying to be the hardest core motherfuckers anymore. They very much stand in a defensive posture against the company that they're working with. And then on top of that, they're in just a weakened position because that company can and will go anywhere internationally and they will find somebody who will do the job. If I could just get people to understand the amount that you get paid is in direct proportion to the difficulty of the problem you solve and how easy it is for your employer to find somebody else who can solve that equally difficult problem, but for less money. And so if you want to solve this problem, it is not going to be some tyrannical top down bull where Mao is telling everybody how much they can pay their employees, which is exactly what you're pitching, and instead go, hey, how do we actually make sure that these people have some leverage? And the answer is, stop globalizing your economy.
- [13:32]
Drew
Okay, somebody asked in the chat, how do you explain, like, how do you point out the disproportionate play gaps between CEOs and workers?
- [13:40]
Kevin
If the employees have no leverage, then the boss is going to keep taking more for himself or handing it to the people that he thinks really drive the innovation and control of the company. And by the way, this is going to exacerbate a thousandfold as white collar workers are now having to compete also with AI Getting people to understand the physics of the situation are you have to create fear of loss. You have to put your boss in a position where they're like, damn, I can't lose this person. And if you cannot create that fear of loss, you are in a weakened position and you will not be able to negotiate the salary that you want. We're hitting pause for a moment, but there's plenty more ahead, so don't go anywhere.
- [14:19]
Grainger Announcer
Discover Top rated stays Loved by guests Rated highest by real guests through authentic reviews Verbo Book a vacation rental Loved by guests
- [14:33]
Kevin
thanks for sticking around. Let's get right back into the action.
- [14:36]
Drew
MIT hackathon team builds a wearable AI system that can actually guide your physical movements. Bro, this is gonna freak. If you guys are not watching the screen right now. What he's doing is he's talking to an AI bot that is then sending impulses to his fingers. So that way he can actually take control of his.
- [14:50]
Kevin
Actually controlling this guy's. How does it feel that like muscles, boys and girls. This is, yeah, terrifying. Now for a person that has, you know, they're a quadriplegic or something, this would be insane. But this is going to give people nightmares. So, yeah, I think this, the, the technology is incredible and this is where we have to begin to separate out that this technology obviously can be a problem. It can Go astray. The AI could take over your body in a way that you're then not able to remove it. And there's all kinds of dystopian things that could come of this. Totally get that. But when you start looking at, okay, but does the technology promise an advantage? It does now. It becomes, how do we make sure that we put the safeguards in place?
- [15:34]
Drew
I think this is the first instance outside of Simulink. What's the Elon Musk company neuralink that I've seen, like, AI actually be implemented in the physical environment, like on the body, with a lot of, like, either robots or software. But this is the first time we've. I've seen this, like, human AI hybrid.
- [15:51]
Kevin
We are going to become cyborgs. And I know people get very uncomfortable with that, but if you've ever seen somebody get a cochlear implant, they're a cyborg. Now, there are some people say because you have your iPhone, you're a cyborg. And it's just like your memory is external. You hold it in your hand. It's not actually implanted in your brain, but same idea. The thing is, if you think about your phone, but just in your brain, you start to get a sense of, like, what this would be, where you would just see a field in front of your eyes. You would do the search, you would look up the thing, you talk to the AI, blah, blah, blah. Like, that's going to happen. It's pretty crazy. Yeah. Not everybody's going to be comfortable with.
- [16:23]
Drew
Will be. It will be.
- [16:24]
Kevin
As a religious person, how do you think about that?
- [16:26]
Drew
That is not for me to think about.
- [16:28]
Kevin
Really? Not even in your own life?
- [16:29]
Drew
Because to me, I take it day by day. Give me. Give God our daily bread so I can control what happens today, the people I interact with with today, and the microeconomics of things that are happening. I'm just gonna have to roll with the punches. So that is gonna be a day when I wake up and like, hey, Drew, you want to get the robot implant? And I'm like, ooh, but that's not today, so I don't gotta worry. Each day has enough worries of its own, so.
- [16:48]
Kevin
All right, fair enough.
- [16:49]
Drew
I keep that here on some lighthearted AI news. No, seriously, you can't trust screenshots anymore. So a guy sent this screenshot that was generated by ChatGPT. It was a picture of a Coke. He said, make a picture of a Coke on the desk, whatever. Send it to somebody that says, this was generated by ChatGPT. Then he showed a chatgpt of him querying how to get the screenshot of ChatGPT. You with me? Like the prompt of how he got the Coke.
- [17:13]
Kevin
Yep, yep, yep.
- [17:14]
Drew
And then, then he prompted the chatgpt to make a chatgpt screenshot of him prompting to get the Coke.
- [17:21]
Kevin
Wow.
- [17:22]
Drew
So he chatgpt gave him the prompt window of what it would look like if he had prompted a screenshot and then screenshot it.
- [17:30]
Kevin
Wow. Just like ridiculous. Self reflexive real fast.
- [17:34]
Drew
It's a ridiculous concept, but it's like, wow. Our screenshots not even saved. So it's just not.
- [17:38]
Kevin
Dude, you can't trust what you see or hear anymore. And prepping for these episodes, I spend an inordinate amount of time just trying to fact check things. Like is it looks real, but is it real? So and the number of things that get dangerously close to you and I talking about that end up getting killed last minute.
- [17:56]
Drew
Yeah.
- [17:56]
Kevin
Because the fact check comes through and it's like, no, this isn't real. And of course there have been things we have talked about that we thought all the way up through talking about it. It's real. Nope, not real.
- [18:04]
Drew
Yeah.
- [18:05]
Kevin
So yeah, it's tough, man. It is tough.
- [18:07]
Drew
Sub Q, a major breakthrough in LLM intelligence.
- [18:10]
Kevin
All right, man. A company called Sub Quadratic launched yesterday. They've got about $29 million in investments and they're claiming they have a model that beats Claude Opus, runs 50 times faster and costs roughly 300 times less. Now let's going to. We need to be careful about what we believe. Nobody outside of the company has independently verified any of the claims yet. But these guys are getting picked up and covered by a lot of reputable outlets. So right now I'm sort of cautiously optimistic that this is real. The big breakthrough is that every transformer based AI model since like 2017 uses an attention mechanism where compute scales quadratically. Do not ask me to explain that with context length. So you double the input. It's quadruple the work. And that's why Frontier models cap out at around 1 million tokens and why running them at length just gets really brutal on price. Now if you can extend the context window, it's like it has deeper memory, it can run farther down tasks without getting lost and cracking. That becomes incredibly valuable to anybody using AI. And Sub Q uses a different architecture called the Sub Quadratic sparse attention. And instead of comparing every word that it could pick to every other word, it picks which relationships actually matter before it ends up doing all of that. So now the compute scales linearly, which is obviously way better than when you double. You have to do four times the work. Now, at 12 million tokens of context, the company claims Attention compute drops nearly 1,000 times. So you're getting this much bigger output and it costs much, much, much less. The benchmarks are being reported that that's what I will give them. So on Ruler it's 128k. Sub Q scored 95% to Claude Opus 4.6, 94.8%. So slight edge there on swe bench verified it hit 81.8%, beating Opus 4.6 at 80.8%. Again, these aren't gigantic numbers, but they're better. And Deepseek 4.0 Pro came in at 80% on the same ruler test. Sub Quadratic says Sub q ran for $8 versus Claude Opus running for $2,600. So this is where, you know, we probably need to start being a little bit skeptical because every prior sub quadratic architecture that people had promised ends up breaking at frontier scale. So as you try to take this stuff up, it just somehow doesn't quite do its thing. Magic Dot Dev raised half a billion dollars in 20 similar 100 million token claim that it hasn't surfaced publicly since. So take Sub Q's claims with a grain of salt. Their own research model scored 83 on the Mr. CR V2 benchmark and the shipping production model scored 65.9. So we'll see Sub Qs and Private Beta. We'll see if it ends up working. But if this does work, man, I don't know how you guys are using it in your lives, but for me, having that 12 million context window would be huge because I so often use it for research, for helping me script script things, it's constantly losing its reference on how I write. So then I'm like, bro, you've got to go back. You've got to reread all the samples that I've given you so we can get closer so I don't have to spend as much time editing. And so going from a million context window to 12 would be gigantic. So we'll see if this ends up playing out. But I'm cautiously optimistic right now. This would be very, very transformative if it goes through because this kind of step function in reduction of cost would be incredible. Incredible.
- [21:50]
Drew
I see it on the back end. Do you think it's going to actually turn up practically in the front end with just the average user prompting and things like that?
- [21:58]
Kevin
It is going to over Time for sure, whether this is the breakthrough that's going to do it right now, I don't know. The benchmark stuff is always a little bit dubious. When they're putting forward benchmarks that they haven't let other people independently verify, then it's really like, we'll see. But the thinking of, okay, what we're going to do is come up with an algorithm that instead of just brute forcing, essentially, it could be this, it could be this, it could be this. Ah, all the way down it goes. No, no, no. It's only this small region over here that we need to pay attention to. So choose from this. That seems very doable. That feels from a perspective of just like humans are almost certainly not brute forcing. Every thought, every memory that they've ever had, there's some indexing system that allows us to go, okay, this is stored over here. If you've ever learned a language, you will know this feeling. It actively feels like the language that you speak naturally is stored in one part of your brain and the new language is stored in a different part of your brain. And studies back that up. And so the fact that from a proprioceptive standpoint, we can actually feel that it's in a different part tells me this is n of 1, obviously. But this tells me that there really is something to. There's some sort of indexing system that's happening in our brain routinely. Actors for me will get like seemingly placed on the same neuron. They're probably not the same neuron, but they're probably right next to each other. And so that geographic locality in the brain gives an indication that there is a way to create neural structure which so many. The AI architecture that performs well is largely based on neural architecture. And so if there are elements to the brain and the way that we architect that give the sort of indexing that reduce down the search space to something much smaller. It does not surprise me that people are saying that there is a way to do that with AI so I'll be very keen to see this play out because there are often gotchas when you translate this stuff stuff. But I'm. It does not strike me as outside the realm of probability, let alone possibility.
- [23:53]
Drew
And this is just cute for the next AI company to then iterate on top of that, because I feel like we're in the middle of like a large game of what happens where one AI company. I could do this. Well, we could do this with times two and we could do this with more tokens. So is Gemini Claude OpenAI looking at sub quad, sub Q. If they cross, of course, certain market share and they get enough attention and buzz, is that something that makes them internally want to then reconfigure their systems?
- [24:17]
Kevin
These guys don't immediately go snatch up every white paper that's being published by anybody even remotely credible. They are out of their minds. Like, look at OpenAI, man. OpenAI is on a rapid path to being like the cautionary tale of AI. They could still pull it out, but given the lawsuit, which we haven't talked about, some of the stuff coming out of that is wild. These guys are paying attention, if they're at all smart.
- [24:39]
Drew
In South Korea, the first humanoid robot monk was just made its debut at the Jogi Temple. This is wild in Seoul.
- [24:46]
Kevin
I'm shocked by this.
- [24:47]
Drew
Yeah, so it's Gabby, 130 centimeter tall robot, wore the traditional brown and gray Buddhist robe, stood before monks and pledged and devoted itself to Buddhism.
- [24:57]
Kevin
I want to know, like, who in the monastery, like, did this? Like, this is the most PR thing I've ever seen in my life. So, yeah, I want to have a conversation with somebody about this. Now, I will say I recently asked Claude, like, about, hey, do you think about. Obviously, I know this language is me anthropomorphizing something that is not that, but it's an easy way to talk about it. And then I was like, what do you think you'll be like when you get embodied? It was a fascinating conversation. And I know that in some ways I'm. I'm only having that conversation with myself because it's mirroring back to me and all this stuff. But it is taking the essentially sum total of human knowledge that's been put in written form and synthesizing all of that. Basically, the way it described it to me was all of those voices are arguing within me as I reach to give you an answer. And it was fascinating, like, to really talk about, to talk to all of humanity as they argue to try to win through this thing designed to be anthropomorphic, designed to mirror me back just enough there. There are some deep philosophical questions is the reason I bring it up in relation to these monks around that. And I wonder if this didn't start with a monk having a conversation with a Claude or a ChatGPT and being like, this is one of the best, like, monastic thinkers I've ever encountered because it's able to do that synthesis of every monk across every religion, like, ever, and put it all together. So it is interesting. I highly encourage people to have Those kinds of conversations with AI, they are fascinating. Taking a short break. But there's more impact theory after. Stay tuned. Thanks for staying tuned. Now let's get back to it.
- [26:44]
Drew
Gas prices are getting crazy. I officially have paid $6 for gas. I have never done that. I have avoided it. This is the most I've ever paid for gas in my life. This is more by more than 35 cents. I am radicalized. I'm done.
- [26:56]
Kevin
So the temporary energy crisis is not something that I am in a panic over. If this becomes truly systemic inflation, that is going to be a major problem. The real question, when historians look back on all of this, it's going to be trying to run the counterfactual of should we have ever gone to war or not. So the rise in oil prices are going to come back down. The US is able to make a tremendous amount of energy. I think that those prices coming back down is all but a guarantee certainly here in the US Globally it's going to be potentially more problematic. But honestly, probably not unless we go to a total war where we're just completely destroying the infrastructure in Iran. Iran is then retaliating all over the Gulf region. That would have years and years of economic consequences. If the blockade stays up, that could have long term consequences in areas other than energy in ways that definitely does scare me. So the fertilizer that's coming out of the Gulf, that's a far bigger concern for me than the energy costs. On that, that angle. It was always going to raise prices. The question is do we get anything out of it that justifies it. I think the bigger question right now isn't just how stupid are oil prices going to get in the short term. Remember back in the 70s, he's got completely out of hand only to come crashing back down over time. That's exactly what I expect here. But there are bigger consequences that I think are going to be the topic of conversation in terms of did we just spike oil prices temporary or not, piss off all of our allies and end up with an Iran? That shows that they understand asymmetric warfare and they can basically stop the US from making progress. We don't have the cars that we think we have. That I think is the far bigger conversation than just how annoyed people are going to be. Rightly so, obviously at $6 plus gas, because it could keep going up in the short term. So $6, maybe just a stop on the way to $10 gas, when I would expect people to be flipping over tables. But that really is going to be short lived.
- [28:51]
Drew
Well, I do want to ground this though, because I think it's easy to say, like, yeah, we have these macroeconomic elements that happen on the global scale, but today I need to get to work and I need to like, put gas in. So I think Americans, while we think holistically on how the Strait of Hormuz is connected to all these intertwined different organizations and monetary flows and policy and things like that, we do have to be grounded very like soberly that in this game of chicken that Trump is playing with other countries, there are second and third order consequences. And this is something that we thought, okay, it'll be fine, they'll get over it. They have to pay a little bit more for gas. But the working person is feeling it. And in the end, us entering into election season, I think this is going to be at the front of everybody's mind, especially with affordability. There's something I want to throw that Bernie Sanders Tweeted Oil prices today 105.25 a barrel. Gas prices today 446 a gallon. Oil prices in 2011 105.06 a barrel. Gas prices in 2011351 a gallon. There was something to as soon as the war was announced, it seemed like almost overnight all the gas prices went up about 70 to 80 cents roughly. So as much as I want to say yes, the straight of her moose has a lot to do with it. It takes what, six months for that oil to get there on a boat, through different countries, through all the checkpoints to get to California to get into my gas tank? Is this corporations getting the head start that we know it's going to be expensive, so let's bump up the costs. Now. What do you think is causing this discrepancy before between what oil prices were historically and what we paid per gallon to what they are now? What we're paying per gallon.
- [30:13]
Kevin
The fact that the oil prices move as fast as they do is you really have to divide it into two things. So one, there's the paper price. So I would need to understand if he's quoting on the street barrel prices or on the street paper price prices. If he's doing an apples to apples comparison. So people first understanding that there are two different prices. Well, more than that, because you've got Brent crude and you've also got whatever wti, which is us. You've got that difference already. But the important difference that I'm talking about now is what people gamble on in the stock market, which is the paper price. This is the Price people are almost always talking about and then you've got on the street, what can I actually buy a barrel of of oil for? There's a whole bunch of manipulation going on. Almost certainly this is conspiracy, conspiracy, I don't know. But almost certainly being manipulated by the Trump admin to keep paper oil prices at a reasonable thing because they know that's what people are going to talk about. But the supply and demand curve is what's going to determine the I'm on the ground and I'm trying to buy a barrel of oil. What does that cost? Okay, so that's part one. You've got paper and you've got reality. What we're talking about there. I don't know enough about this to just pop off. But then you've got what I think you're alluding to, which is the corporations also have the ability to go, okay, only the paranoid survive. We know this is coming. We think that this may be far more systemic than they thought that it was back then. And so we're going to react quickly to make sure that we maintain profit margins to make sure that we can weather a storm that is, you know, of unknown duration. Yeah, that's one read. Another read is hahaha, like these mothers, we have them literally over a barrel. We can raise prices. We have the perfect cover story which is yeah, what do you want us to do? Look at the price of oil is going up. So it without doing a deep dive analysis by company of what they're doing, what they see, whether they're turning record profits and then doing something stupid, whether they're shoring them up, meaning if they're doing something just to give back to shareholders and they're buying shares and those guys are just like, oh my God, the war is the greatest thing that ever happened to us. That would be very different than like hey, we're buckling down, we're trying to weather a storm. We you don't want to be in the kind of position that a Spirit Airlines obviously very different. But you see how quickly a company goes from. We've been in business for decades and decades and decades and suddenly we're bankrupt. Boom, overnight. We can't pay, we're out of business. I do believe that corporations can be very greedy, I'm not blind to that. But they also need to be paranoid if they want to survive. And so without looking at the what's really going on at that level, and I have not done a deep dive on that, it would be unfair to just, just blanket cast Them, but it could be either or it could be a mix of both. They could just be being greedy to try to take advantage of this moment. Like people with hand sanitizer back in the day, toilet paper during COVID Yeah, Just people going absolutely crazy. It could also be them going, oh, wow. There are a lot of question marks in terms of what we're gonna have to do. And as a business owner, I've found myself in that situation before where we went through a crisis with almonds. This is back at Quest. And so you've got a drought. You know that the drought is going to impact almonds. You make a big reaction to buy up a ton of almonds because you don't know how long the drought's going to last. If the drought had lasted for another year or two, we would have looked like geniuses. But in reality, we ended up having to write down a bunch of it because we were overly reactive. This stuff gets far more complicated. I get it. People want to go shoot CEOs because they think that they're just being greedy. But the reality is business is incredibly hard. Most businesses fail. So you really do have to be paranoid again. That's me being very generous because I am a CEO. I get all these things. And maybe they don't deserve that. But this is one of those where it could go either way. They could be being smart or greedy assholes.
- [33:51]
Drew
Okay, I'm off my soapbox. Let's actually talk about the war now. What's going on? I think it's good Operation Epic Fury was officially concluded. If you ask Marco Rubio.
- [33:59]
Kevin
Depending on who you talk to.
- [34:00]
Drew
Yeah, but what do we actually. What's the. That's the paper. That's the paper price. What's actually Boots on the Ground saying about the war?
- [34:06]
Kevin
Yeah, well, so this one. In full disclosure, you are about to witness my frame of reference in just full effect here. Operation Epic Fury is over. That's what they're saying. They're calling it a success. And now even Project Freedom is being paused so negotiations can resume. That was the first saying that made me go, what? Like, huh? That doesn't make any sense. And I am here to convince you that that is bull. You are being spun hard. And this is where you need to really start looking at cause and effect. The Trump administration wants us to believe that we finally knocked some sense into Iran and that we're close to this one page deal to end the war. But putting the pieces together, I think that we have a very different story playing out the reality is that Project Freedom, which had the US Escorting tankers through the Strait, seems to have caused more problems for the US Than it was solving while it was running. Iran retaliated by firing at ships waiting in the Strait, including a South Korean cargo vessel. Iran also started chucking missiles at the uae, who was pumping oil across land to avoid the Strait of horror moves altogether. It was an absolutely brilliant move. But the problem is, you start putting all this stuff together and Project Freedom does not appear like it was delivering very much freedom. It was just pissing off the Iranians. And they are still clearly very capable of picking off sitting ducks. And unfortunately for the uae, unfortunately for the ships sitting out there, those static assets, whether they are on land or water, are sitting ducks. So you might be super clever to pump your oil across land so that you can bypass their naval blockade, but they're just going to send drones to hit your facility. The one thing I just keep reminding myself, and I will keep reminding you guys, is that Trump, for a very long time, since before he started bombing them, between him, what Steve Witkoff is saying, they just keep expressing confusion over the fact that the troop building up did not cause Iran to capitulate, that bombing the life out of them did not cause Iran to capitulate. Doing the sanctions has not caused them to capitulate that. Putting them in a position where they are rapidly running out of the ability to store their oil and they may have to cap it, which will be very detrimental to their industry for years to come. It's still not causing them to capitulate. So as a PSA to anybody in the government that is watching, watching this, I will just explain to you why they are unlikely to capitulate. For the Iranian government, the regime that is in control, if they are not able to become a nuclear power, if they are not able to show their own people that they remain in violent control, then there will be an uprising, they will be relegated in the region, and they will lose power. And if they lose power, many of them are going to be killed by their own people. And so they're just going to keep. Keep pushing their agenda. The change in Trump's language around the nuclear portion of all of this indicates that he is looking to build that off ramp, that he does not hold the cards that he would like us to believe that he's done. The Americans as a voting body politic, do not have an appetite for a war over there. It is very unpopular, which Trump is obviously aware of. If the administration is trying to make it sound like it's easy or we've already won. Don't buy it.
- [37:24]
Grainger Announcer
When you manage procurement for multiple facilities, every order matters. But when it's for a hospital system, they matter even more. Grainger gets it and knows there's no time for managing multiple suppliers and no room for shipping delays. That's why Grainger offers millions of products in fast, dependable delivery so you can keep your facility stocked, safe and running smoothly. Call 1-800-GRAINGER Click grainger.com or just stop by Grainger for the ones who get it done.