E151: WW3 risk, War with Iran?, 4.9% GDP, startup failures growing, new Speaker & more

As of late October 2023, the probability of a nuclear weapon being used somewhere in the world over the next 20 years has increased materially versus earlier in 2023 (on the order of a few percent to high single‑digit percent), due to rising multi‑front conflicts and constraints in conventional munitions production.

“let's say something goes from 2% chance to 8% chance. It's now for X in the next 20 years. That's a significant shift in risk.” View on YouTube

Over the ensuing months after October 27, 2023, the Israel‑Hamas conflict and the Russia‑Ukraine war will tend to remain in a "slow and simmering" state without rapid military escalation to a much larger regional or world war, with de‑escalatory actions coexisting with heightened rhetoric.

“So I don't know what to say, except that it does not seem to be escalating. And the reason it isn't escalating is that there is enough emotional impact that's causing people to understand that the stakes are high. And so when the actual actions are relatively de-escalatory, I find that the rhetoric ratchets up right. It's almost inversely proportional.” View on YouTube

If Israel proceeds with a ground invasion of Gaza following the October 7, 2023 attacks, the resulting military operation will be relatively short in duration (not a prolonged, years‑long campaign) and will end with a negotiated ceasefire before the conflict escalates into a wider regional war.

“So I kind of think that the most realistic good case scenario is that if they do go in that the military operation, for various reasons, is not a long one, and eventually a ceasefire can be agreed to before this can escalate out of control.” View on YouTube

The U.S. economy will enter a recession over the 2–3 quarters following Q3 2023 (i.e., sometime between Q4 2023 and Q2 2024), which will in turn lead the Federal Reserve to begin cutting interest rates around mid‑2024.

“we are betting on increasingly is that consumer demand has basically stopped. So you can see here Adyen is down 50% since the beginning of the year...So so that's one thing, which is this is a big bet that consumption is slowing and shrinking. The economy will be in a recession over these next 2 or 3 quarters, which will give the fed the motivation and the justification to lower rates starting in the middle of next year.” View on YouTube

When Stripe next prices a large liquidity event in the public or late‑stage private markets after October 2023 (e.g., IPO or major secondary), its equity valuation will clear in roughly the $25–30 billion range, implying about a 50% markdown from its prior $55 billion round valuation.

“the problem now for stripe is that the public comps dollar for dollar are off 50%, which from the beginning of the year, which then says that if you apply that ratably to its valuation, they did around at 55 billion, then the market clearing trade may be 25 to 30 billion now.” View on YouTube

From late 2023 through roughly mid‑2025, there will be an elevated rate of startup shutdowns and failures compared with 2021, as companies that raised large rounds in 2021 exhaust their cash and are unable to raise new financing on acceptable terms.

“So I think you're going to see this dynamic for the next 18 months or so.” View on YouTube

In the period following October 2023, the venture and growth equity ecosystem will undergo a substantial valuation reset, with many private tech company valuations (from seed through late stage) being marked down significantly from 2020–2021 levels rather than reverting to those peak prices.

“I almost think that maybe none of the hard work has actually yet started. So I don't know. I'm just putting that out there. Guys, do you think that we've all just kind of been hoping maybe that all of this would pass, and now we're getting more and more signals that we actually have to do a pretty hard valuation reset.” View on YouTube

Over the next several years after October 2023, a significant number of venture capital firms will cease active operations—either formally shutting down or effectively becoming "zombie funds" that manage existing portfolios without raising new funds or leading new investments.

“Musical chairs, as you described it, is what is literally the description of the venture capital industry and GPS. Right now, a lot of people are losing their seats. H: Yeah. D: And there's a lot of shutdowns of venture firms. I think a lot of venture firms are going to shut down. This could be zombie funds.” View on YouTube

Following the 2021–2022 bubble, a large number of venture capital firms launched in the prior cycle will either shut down or become effectively non‑operating 'zombie funds' over the subsequent several years (through roughly the late 2020s).

“there's a lot of shutdowns of venture firms. I think a lot of venture firms are going to shut down. This could be zombie funds.” View on YouTube

For mid‑tier venture funds that historically would have produced roughly 1.8x gross multiple over 10 years, the current cycle will result in them returning only about 0.5x–0.7x capital over their fund life, i.e., they will be net capital‑losing funds when fully realized.

“And now those guys are all underwater. So instead of being 1.8 x they're all going to return 0.7 x or 0.5 x. And they're going to lose money.” View on YouTube

A true, market‑wide reset of late‑stage private tech valuations will not fully occur until after Stripe completes an IPO; Stripe’s IPO pricing will act as the key reference point that forces down valuations of other private tech companies in its cohort.

“I don't think the reset can happen until stripe goes public. I'll be very specific. I think that is the company that sets the cascading valuation framework for every other company.” View on YouTube

As ocean heat content and sea‑surface temperatures continue to rise over coming decades, the frequency of extreme, fast‑intensifying storms like Hurricane Otis will increase, producing cumulative economic losses on the order of multiple trillions of dollars globally via insurance, reinsurance, and coastal real estate devaluations.

“the truth is, the frequency of these events and the risk factors, which is this ocean heat, temperature rising continuously for long period of time, are going to drive that frequency of events. And there's going to be a real economic cost to bear on the order of several trillion dollars over time, because someone has to underwrite that real estate and someone has to underwrite the insurance to support that real estate.” View on YouTube

At some future point, the Florida state reinsurance backstop will prove effectively insolvent after major climate/insurance losses, leading to federal intervention on the order of roughly $1 trillion to support or backstop coastal real‑estate–linked insurance obligations in the U.S.

“So the federal government's going to be asked to step in and cover that thing at some point, and then someone's got to write $1 trillion check. I mean, you know, you want to complain about sending 100 billion to Ukraine and Israel. Wait until most of the country has to underwrite coastal communities real estate values.” View on YouTube

Hurricane Otis–type catastrophes will act as catalysts that trigger a cascading repricing downward of high‑risk coastal real estate in multiple regions over the coming years, as insurance becomes unaffordable or unavailable and owners are forced to sell at lower values.

“These sorts of events like Acapulco are catalyzing events for forcing the market to rewrite this stuff. This is the beginning of a cascading effect.” View on YouTube

Within roughly 10 years of October 2023 (by around 2033), the Middle East region (including Saudi Arabia, UAE, Qatar, Egypt, Jordan, etc.) will become the world’s second‑largest region for venture capital activity (e.g., capital deployed or ecosystem size), behind only the United States.

“I will say this is going to be the number two region in venture capital, and it's going to be that in ten years, because I met with a lot of the family offices, and the family offices here are extraordinary.” View on YouTube

Newly elected House Speaker Mike Johnson will not remain Speaker for the long term (i.e., he will be removed or replaced before serving multiple Congresses), though he is likely to survive at least the first few major political skirmishes and not be ousted immediately.

“Look, I don't think I don't think he's going to last long term, but, um, but it may be more than a few skirmishes.” View on YouTube

In the months following his election as Speaker (from late 2023 onward), U.S. media outlets will continually publish previously overlooked statements and sermons by Mike Johnson, portraying him as an extremist or 'wacko' based on those past remarks.

“there's going to be a drip, drip, drip Of all the things that he's ever said when he was kind of a backbencher and no one was paying attention, all these sermons that he's given and so forth. They're going to be, you know, writing stories about that, and they're going to make the guy seem like a wacko.” View on YouTube

In the Georgia 2020 election RICO case, prosecutors will use plea deals with lower‑level defendants like Jenna Ellis, Sidney Powell, and Kenneth Chesebro to attempt to secure cooperation from higher‑level figures such as Rudy Giuliani and John Eastman, and will then attempt to use any such testimony against Donald Trump, though these lower‑level witnesses will not themselves provide direct incriminating evidence sufficient to convict Trump without such higher‑level flips.

“I think what's likely happening is that they're flipping these lower level figures in order to flip the next higher level, which would be Giuliani and John Eastman, because I don't think these people have anything on Trump. So they're going to try and, you know, use Jenna Ellis to flip Rudy, and then they're going to try and see if Rudy will flip on Trump.” View on YouTube