Do we have free burgers? He did, he drop off for here is okay. Pretty much back. Okay, 3. Okay. I just have to take a leak. I just go outside my office and I come back. Oh you like a nature P. Your an HP God me too. I love a great nature. I have this great office at home, which is like a building outside of my house. So I like to go in the garden. Take a breath of fresh air and just, yeah, you don't sit down to pee. No, I'm serious. I'm not joking around you guys. It's so many jokes. I'm not going there. That's a soy. Has estrogen.
Boy joke is have no, we can cut this out, but my pediatrician said, hm. I think it's really important to teach your boys to pee sitting down and even fruit for you as you get older, I will you talk in a good for the it's good for the prostate and there's like a materially different percentage in terms of prostate cancer rates when you pee sitting down because you expel all the P, that just kind of gets caught their little, the dribble, swear to God, bro, I swear to God, you would have a good Shake. Wait, wait. What?
Shame, Nick, you can cut all this note. The shape doesn't do. This is great sitting while urinating AIDS and muscle relaxant benefiting men with tight pelvic floor muscles or symptoms of an enlarged prostate sitting to pee enhance the stability with back to the risk of Falls. Oh my God, this is messiness especially for sex whenever sacks gets a new home, he puts urinals in that's how much of a man he is not that severe staph. How does your staff hold your body while you pee like do they hold you?
Yeah,
this is like the vasectomy truck at the DNC. I mean, it's meant to emasculate men. That's the only interpretation of it nonsense.
A department has been revised down the job growth numbers as a number of members of this panel predicted. The BLS updated. Its non-farm payroll stats. Down groaning actual job growth to around 30 percent versus what was originally reported. This means the US economy, created around eight hundred and eighteen thousand fewer jobs, over the 12 months, leading up to March 20. 24, number was originally reported as 2.9 Million, new jobs created and it's more like to point
81 the labor department updates and revises. Its stats frequently, it gives disclaimers but this is the largest and most significant revision since 2009 after the Great Recession. And so the biggest downgrade came in the field. Not surprisingly of professional and business services with 450,000 jobs lost over the last year. We see that in all the stats of different tech companies and businesses finance companies doing layoffs.
Other fields that revised their numbers. Leisure Hospitality manufacturing retail makes sense and a little bit in transportation. Here's a couple of charts for you before we go and get some feedback, civilian unemployment rate, seasonally adjusted. As you can see, since the great financial crisis, we went from 10%, all the way down to, well, below for. And that's where we sit Today. USA Today chart here of gains and losses, since 1980, obviously, that massive
Op you see there of - nine point. Three million jobs was covid with the big quick rebound of 7.3. So overall, the country is in great shape, sax your thoughts on the revision. You obviously made note of this when we went through the numbers.
Well, yeah, I mean, I predicted this, this would happen and I didn't know exactly how we would get the correction, but now it's come out by the way. It's not just the this eight or 18,000 jobs if
You look at the last 12 months and out of all there were statements, it's been something like 1.2 million. I can share the chart on that but this is quite remarkable about a year ago. I tweeted really fairly casually that there was a hot jobs report. This is around June of twenty twenty-three that I didn't know where they're finding all these jobs. I mean, all I see is layoffs. That was my reaction based on, not just what I was.
Seeing in Tech and all of us especially last year, we're seeing nothing but layoffs, in Tech. It is also a feedback from Real Estate Investors that I knew. I mean, all new real estate projects have basically stopped because the cost of borrowing was so high and there was a credit crunch. So new construction projects at stop. Reef eyes were very hard to get, it's just that everywhere. I was looking in the economy and the feedback I was getting from people, things looked pretty dismal and yet the media was continuously putting out stories about hot.
Those reports and we've been getting this now for roughly a year. And then what happens is that, there's a revision and the revisions have always gone in One Direction, they're always revision down. I mean, if the revisions were completely sort of neutral and arbitrary, you'd expect it to be like a coin flip, you know, you might have 10 revisions and five would be up in five me down, but they've all been down. Yeah, so what I saw was a pattern of revisions down
And now we've seen the biggest one, so it's not altogether, surprising to me. And in hindsight, you know, when I tweeted out a year ago, I got this like, hysterical reaction. I mean, like it was one of these tweets that all of a sudden, everyone's like, quote tweeting and telling me to stay in my Lane, I'm a VC. And I don't know the numbers, and it was like, I hit some sort of nerve and, you know, whenever that happens, you're usually over the Target in some way.
Yeah, it's generating. Its triggering people is what you're saying.
Yeah yeah. So the question is like a why were they so triggered? And I think the reason is that on some level people were into it and that the numbers didn't really make sense of didn't really match up with what we're seeing in the economy. And now a year later, we have the proof of that. So tomorrow when we go to you next, could you point it out that these numbers seem to little fugazi fugazi
But we have 162 million, people record employed in the country. This number if it's 162 you take out 800 it's 161. This is what the Fed was been trying to do to cool off inflation, right? We need it to see a little bit less employment and that's part of it. So, I guess the Silver Lining here is if we are
Revising. These numbers down that would give more of an indication that we've slowed the economy. Correct. Yeah. I mean I think the economy is a lot slower than what people thought which to your point. The Silver Lining is that it probably Now tips.
the balance of action in September to a cut and if it was 25 basis points, there's probably going to be a lot of folks lobbying
The fat to cut 50.
And I think that they probably have enough numerical justification. Now to cut 50, mmm.
I think the bigger problem though is if you don't have an accurate sense of where employment really is and sacks did mention this, you will also then have an inaccurate sense of where GDP use and I think the one-two punch could be very problematic. I think what we're learning more than anything else. As we have a very sophisticated economy, we have a very sophisticated Capital Market System, we have very sophisticated actors.
In those markets, all of us included who can react to real time data and make the right decisions. The problem is, we have bad data and the bad data. I think it's something that is fixable, but we need to make an effort to do it because it's insane that the largest and most sophisticated economy in the world is this unpredictable. And I think that's like the big question that I have. Which is how is it possible in 2024 that we haven't just made this a priority to fix this and
All of the systems that exist and all of the SAS tools that exist in everything that's used to like hire and fire and pay people, we don't have an accurate sense of this number and it can easily trim off. That's a real head-scratcher to me, this could easily be crowdsource or we could pull data from a lot of different places. Obviously, they pull some data from employment rolls, but I remember you had a start-up. I can't remember the name of it, but you had crowdsource people were going around and taking pictures of the price of tomatoes in different places and
Then putting it into a database and organizing, I think from its funds and other folks. Yeah, yeah. So what that company did was it was an agent that you would download on your phone and we would ask you to go and collect certain kinds of information. And yeah, there were some socio-economic data that was collected. A lot of it now is what three-letter agencies and the like so, without getting into details that companies doing quite well, but it's just moved in a different direction. If you just created some kind of like a
DARPA challenge, like, equivalent to this, give it to strike, give it to Augusto, give it to a handful of these Smart Companies to give a guesstimate and see who accurately predicts its number over the course of a year or two, that's more reliable. And frankly, more useful to the market than what the BLS is doing my first job out of college. By the way, was not in Tech, but it was in finance. I was a derivatives Trader and what was so incredible. As I remember sitting at my desk in front of me,
I terminal on the trading floor. When non-farm payrolls would hit and people would just go crazy. There were just be literally tens or hundreds of billions of dollars that would start flying back and forth based on what that number was. And now to think about that much velocity in a totally random way because those numbers aren't reliable teams, just crazy. Okay Freiburg. Here's a chart for you to comment on, maybe we open the aperture here.
Total employment and unemployment here in the United States. As you can see, you know, since the 80s population has grown and the number of people employed has continued to grow labor participation. It kind of peaked in the 90s in the Clinton era and it's come down a bit since then. But overall, what do you think of the health of the economy and employment?
But I mean, I think the said Target is 4% which is kind of where we're at. I think we're at 4.2 or 4.3 now and so the FED tries to balance
inflation unemployment and rates, that's kind of the three things that there.
Looking at. So they make adjustments to rates. Obviously, if you take rates too low too fast, you have an increase in inflation. So they're targeting inflation is 2%, they're targeted unemployment 4% to be take rates too high. You can certainly reduce inflation but then the economy can contract or slow down and job Cuts start to come through. So now with inflation, kind of supposedly approaching 2% and unemployment over four percent the market. If you
Look at the trading markets are now, estimating, 100% chance of a three quarter of a percent rate cut by the end of 2020 for and a 70% chance of a one point rate, cut by the end of 2020 for. So the question is, are they going to do three quarter point cuts by the end of the year? Or they going to do a 50 basis point cut in the 25 or 50 and 250 the next couple of weeks will determine which direction. And then obviously,
Chairman Powell has his big speech happening on Friday Freiburg. What are the what is the betting markets? A first specifically for September 50 or 75 percent chance of a quarter-point, cut, 20% chance of a 50 basis point cut.
And then six percent chance of no cut which is kind of strange because the trading Market. This is a obviously a prediction Market, but the trading markets are showing effectively 100% chance of a three-quarter point cut by the end of 24.
And sacks here is the traumatic fed. We always talked about them, kind of getting on this a little bit late, but you can see here, man, what a ramp up in 2022, where we were basically had a quarter point and they just had a quarter point and fifty beps. All the way up to 5.33, where we've been flat inflation. Obviously, we have the to handle now. So now we start the process of going down and I think people generally believe 25 steps at a time.
Time will be there pattern coming down. You think that seems
wise. Well, I think the FED is ensure that inflation is a solved problem. I mean, I think that Powell is a little bit reticent, to start the rate cutting cycle because he doesn't know for sure if inflation could take back up, this First Cut is in a way the most important one because it signals a regime change that were beginning, the rate cut cycle, and what he doesn't want to do is cut any amount and then be proven wrong. And we get a bad inflation report, then all of a sudden he has to raise it again. Sorry.
Doesn't want to be caught in that position, but I do think that the economy is obviously showing significant weakness. Inflation is not completely solvent. It's down to two point nine percent, at least, as a to handle on it now. And so yeah, I think the market is pricing in these rate cuts for a reason. So either mission accomplished or we'll see if we have a soft landing, hard Landing or something in between, most people feel like it's going to be soft with a little bit of bumps seems directory. And I mean,
That we know that the jobs picture was inflated by 1.2 million jobs over the last call it roughly a year or 14 months. I think we know that this is not like that perfectly soft Landing. I mean I think that the economy is a little bit shaky and as being propped up by massive amounts of government spending, like we talked about on a previous episode, we're running unsustainably, high levels of deficit and dad were running. What to trillion-dollar your deficits right now. And what are we getting for that? We're not
Getting a super robust economy, we're going to an economy that's narrowly, staying out of recession. So, it's a little bit of a scary picture. I think that the economy is is so shaky, and we're spending so much money to prop it up and we'll just have to see what happens. Yeah, and it doesn't seem like either of the incoming administration's really cares about spending. It seems like we're going to be in still big money spending mode independent of who wins. We'll see how long that can last as the
A country and then we talked a little bit about the Supreme Court decision. Last year around affirmative action and
It turns out now, MIT has released their data, it's getting a lot of Buzz online. Here's a chart. Basically what you can take from this chart in this is people self-identifying at MIT and the buzz is that Asian Americans have gone from forty one percent to 47 percent and those gains came.
On a percentage basis from a decline in the number of black and Latino students coming in. Here's the chart as you can see. So people are wondering about, I guess the fairness of this and yeah, I guess you could have either one or two positions. Trim off Asian students were being penalized for a long time or now I guess you could believe that Latin and black students are being
Impacted negatively about this. So I'm not sure what your take is, but it's obviously moving to more of a meritocracy. According to the people at MIT, it's not even clear how they were making decisions before nor now,
But you know, I tweeted about this yesterday. I think the thing that matters more than anything else is to make sure that the people that they are letting in.
Are in love and obsessed with the things that MIT is supposed to be great at. So if you are a great
Creative thinker designer architect you should be at RISD. I'm just I'm giving an example. If you are a great musician, you should be a Juilliard, you should not be going to MIT because you think it's a check mark, you should be going there. Because you think that there are professors in organic chemistry in physics. In these disciplines that are really important who are experts in their fields that you can learn from and become an expert yourself.
And I think the problem with all of this other stuff is once you make it a credential, there are some folks that we are only going to MIT.
Because they could get in and because it's a great credential in their minds and they shouldn't go there either. So I think the thing is, you have to get back to what matters, which is there are all of these industries that have not progressed that much, and in order for those Industries to advance, you need really talented, young people who can learn and apprentice and then take over. And I think MIT is one of these rare places that focuses on this part of the physical world that hasn't had
Much progress. And so I just want to make sure that the people that go there actually want to be there for that reason, gender race, all that other stuff, shouldn't matter. And that is what the Supreme Court decision. Did you cannot take race into account Harvard, had some weird thing Friedberg where personality was one of the vectors and it's our hybrid. I would say that and no offense to everybody at Harvard, but like Harvard is more of a pure credential, like a mighty. I buy more that you
Oh, there for certain kinds of specializations Caltech. You go there for certain specializations. Sure, if you're really into wine, you go to UC Davis. My point, is these schools exist for reasons other than just, as a
Collector coin that you put in your pocket. Hmm, I'm not sure. Harvard is really known for anything other than, for being quote, unquote Elite, but even that's questionable now. But in the technical areas, I really do think that that MIT was an important place where people would go to train. And I just want to make sure whoever they're letting in actually cares about the thing, they're studying member, what's your take on this you know moving back to a meritocracy and a colorblind.
Asian process.
Not being able to use race in admissions, don't think that.
someone's genetics, should determine
Whether or not they go to a school.
And I think that their socio-economic background experience set values, successes failures are the things that they could have affected or that, I think probably better to find whether we want to take a moral stance on giving other people opportunity. So I think that that's a kind of good reasonable place for us to end up.
Saxony thoughts for you from you on
this? Well, I mean, I support the idea of color boy, meritocracy. I mean, I agree with Jonathan Freiburg, that the traits that you're born with or not skills or qualifications or just the accents to your birth. And what was she trying to create as a society where those things don't matter and everyone has the same ability and opportunities for advancement, based on how hard they work and their skills and
This concept of Merit and I think that's from Court decision gets us closer to that. Remember that the reason why that's true courtesan happened or what the plaintiffs were arguing, is that the previous regime on college campuses was unfairly discriminating against Asian Americans because whenever you try to engineer the classes to a certain proportion of the population, somebody has to win and somebody has to lose and the students who are losing were Asian Americans.
And in many cases that these Asian Americans were first generation immigrants or they were coming from disadvantaged backgrounds and yet their population was engineered to a smaller number than Merit would otherwise suggest. And now you're seeing it in this new class at MIT the percentage of Asian Americans is increased somewhat. So I think it's good. I mean we're reducing the form of discrimination that discrimination may have originally started for
Good reasons to try and create a remedy against a different kind of historical discrimination. Nonetheless. It discriminated against talented Asian students. And I think now that that's been that's been fixed. What do you guys think about?
creating a leg up for people that came from a disadvantaged socio-economic background, so put race aside,
But an, you know, an individual that grew up in a difficult circumstance that didn't have the privilege of going to a good school or having a good education, worked hard tried, but didn't end up with the best test scores or didn't end up with the best GPA because of the conditions. They were born into. Do you think it's appropriate to give those individuals a leg up in the application process putting race aside, but just call it socio-economic disadvantages?
To some degree I do. I mean, look, if you have a student who gets a fort, let's call it a 1450 on the SAT, but they've got tutors and classes. Yep. And they're growing up and they went terrible and they went to school in Atherton and right there getting the best teachers, the best schools, the best environment. Then you take a kid who grew up in, I don't know. Like a dangerous part of the inner city where they're shooting is happening or a rural district with no education Appalachian Appalachia, both are kind of equivalently dissident or different different way. But both disadvantage the upright, they don't have access to the
The best schools best or best funded schools best teachers. And let's say that person gets a 1400 on their sat which one is better. I mean certainly if they got a 1450 and you're comparing two equal scores, it's really awfully early that the disadvantaged student.
Probably has more Raw Talent.
Totally. I 100% agree and I feel like, I feel like we've used race as a heuristic for that conditional background. And that's what makes it hard. Because race is not necessarily, it's certainly there's a correlation but it's not necessarily indicative of the socio-economic disadvantage that someone may have faced and had to overcome in order to perform and succeed at the level that they could have given their conditions. And so I certainly think that
That the incorporation of one's socio-economic background, should be a critical part of the application process and a certainly. In the same in the job setting. Ultimately, I think, I think what would be much more valuable than all of this is for companies to hire from a whole bunch of different schools than they do today and to break the back of this?
Elitist culture, we have around certain schools, all of the things that you guys are talking about to me sound kind of crazy and the reason is because you could go to Iowa State, or you could go to Harvard and you could make a claim and I would buy it. But in some random social science, maybe there's an advantage in the people that you meet but there's not necessarily an advantage for studying.
Exit any of these two schools it's not like one's teaching you that gravity goes up in the other teaches. You that gravity goes down. So I think the bigger problem is that we don't value enough. These fundamentally important skills that we need for Humanity to evolve. And a number two, we have fallen into this trap of saying that these schools these highly credentialed schools that cos 60 and 70 and 80 thousand dollars a year, graduate the best kids and I don't think
That that's true either. So the thing that we could all do, because we're all hirers, we hire thousands of people is, we should be going to all kinds of different schools today. I just gave an offer to a guy that went to Virginia Tech and this kid seems awesome kick ass. And when we put out job postings for 8090, we Veer towards the schools that are, like, hardcore, technical places, where none of, all of this random,
Credentialed nonsense gets in the way. And so they're hungrier as a result. They're more Earnest and you can cut through the BS. The other thing I would say is that it's even more capable. Now of getting to the filter of these credentials and knowing the quality of a person, you can look at GitHub repos. If you're a developer, you can look at all of these things that allow you to understand. So I don't know. I disagree with your guys's thing of like, let's go figure out all these other things. How about we stop hiring and valuing I think
Randall can Bond specific degrees just because they come from a good school. Well, I think that would be wrong way because we do still have a college application process jamaat. So, there are still going to be a set of criteria used to determine whether or not our kids end up getting into a specific school. If we and they all kind of say, hey, make sense, but I'm saying if your son or daughter were to go and study computer science at North Carolina State, the biggest thing that that you could do is be okay with it.
Another example of a school that does a great job of recruiting from non-traditional processes out and I'll be okay with it. No, no, this is my point. I think it's a decision I'm saying that, I'm not saying that you are, but I'm saying that if you make it a big deal that North Carolina state is somehow worse than some other credentials school, because our social cohort says that those other schools are better. We're part of the problem. Well, in my work cohort North Carolina, State's a grade school. We tired of people from. So that's a great school actually.
Honest, I think schools like that or better. I mean, I think probably which may attack is better. They're gonna burn and the reason is because they're less infected with all woke, Dia ideology that now pervades these like top schools. So the students are more likely to learn something.
Why you should stop saying top? They're not top schools, they're not top schools anymore, they're not the smartest kids. They're not the hardest working kids so we should stop saying top schools. These Ivy League schools are not the top
schools tiger thought.
Yeah, there might be the most notable schools.
Quickly, but they're not necessarily the ones that
are the biggest brands and they're not new brands their old Brands and we've seen that these old Brands depreciate over time and people read way too much
into them.
I think the structural Monopoly is that they then get and have the most Capital, which they can then use to build and facilities and support staff, that can come and do core research. And so you, then I get all these research staff in particularly in technical fields in science and medical fields and so on that want to come and be on campus. And that then creates a network effect of undergrads getting a better education because they're getting exposed to the best talent.
In the kind of, I don't know, birthday. I don't actually think that better fits the undergrads me, first of all, these campuses I was a huge
experience at Stanford. I think you're the only Ivy Leaguer here,
you went to Berkeley, that's something for you. Lately, is not in the ivy league. Ivy league is like an East Coast Club where a Stanford was kind of the West Coast. Disruptor
look, did you get it? I know what I worked at when I went to Berkeley I worked at Lawrence Berkeley labs. I got to be exposed to Nobel Laureate. It was actually like I think it's particularly
I feel like I'm major NASCAR physics and physics like that was a great school to get exposure and you actually had that opportunity. I think that's part of the challenge schools with really great graduate programs and research that goes on on campus actually can give a better educational experience to the undergrads. It's almost like you're getting
These internships and these fellowships. And these Tas and professors, well, that's that's a different thing. I actually think what America needs is what I benefited from at the University of Waterloo, which is an active and vibrant Co-op program. Yeah. That's right. Yeah, I do really disagree with you. I don't think that there is a incredibly better way to teach thermodynamics. I think that's a bit of a jerk. Okay, I thought that's it. That's a lot about LR some talking about applied work tomorrow. So I'm talking about
Go up to Lawrence, Berkeley lab and you work in an actual lab that does not want to enter separates, okay? So my point is, if we both agree, sir, you're a great mental Sciences. Definitely yeah. That's why I'm pointing out. So then, like the universities in America that have these co-op programs, I think are incredible institutions. Again, they're not the typical ones there are places like Drexel and other places, but now you allow these kids to be in the trenches with people building things and I just think that that's an incredible gift for them. But it's also an incredible opportunity.
For these organizations to understand the quality of the person Beyond some credential? Well, I do think in a digital era, core education has commoditized and I think, most people can get most of the way there without necessarily paying 60 to 80 thousand dollars a year and then being partnered in some way with that on the ground internship or integrated kind of program where you get actual hands-on experience. So I don't know like I mean University model maybe does not make sense for most Fields. Jake, how what do you think?
Yeah, it's very interesting. The code you go to school. Jacob and I went toward the Fordham University at night. I got in three weeks before you get an undergrad degree from Fordham. Yes, Warden. I was going to either, I had taken the New York, what was your degree in? But it's psychology. I was going to go into the NYPD. I have was about to get accepted at 18 years old, 17 years old, 18 years old, and then I decided the last minute to go to Fordham at night. I had to work in order to pay
Pay for it. So it took me four and a half years but I did like almost a full credit load at night and then I was going to go into John Jay for criminal justice and get my friend Zeke degree and then join the FBI. So I was in the process of applying to the FBI and then the internet happened. I started a magazine about the internet and it went in a totally different direction. But the coop stuff, I remember, when we went to Waterloo, we did a speaking gig there years ago, Jim often, I was very taken with the students there and like,
They're like drive. And so I think that's the key piece and what I did in Venture Capital because I needed to have a team of about eight people, screening all the companies we get and the applications. So I just made my own training program and I hire a lot of people in Canada to do it and basically they do five meetings a day, they write up coverage. I made an entire framework and I'm doing professional development because I found a lot of the top people from these brand name schools were entitled.
They didn't want to do 25 35 meetings a week with Founders and I just found these other student from Waterloo and other colleges like that. And I've trained them in my framework. For these are the 13 qualities. We look for in investing in a start-up and these are the 25 red flags. And I've now got seven people, we did 110 120 meetings, one week recently. And so it's just much better to train them ourselves and make your own training program. I believe. And so it's evenly. Malcolm didn't mouth.
I'm glad well write something which is roughly the equivalent of like you're better off getting the top 10 student at a non IV versus like the 50th student at an IV or something. I don't know. There was like something. Like, maybe, maybe it was a good chapter. I'm always reason because of motivation.
Yeah. It's like these kids are excellent when they're, when they're achieving and they're excelling in things that are
Not subjective. You want to go get those kids?
Yeah. You know, till they've performed. Yeah. I mean I think one of the one of the problems with the whole deai policy and whether you want to do it based on race or socioeconomic Source or whatever it is that you're doing, is it keeps happening at every layer of the stock and at some point you just need to say, look, we've made up for whatever came before and now it just has to be about that person's performance. We need to stop putting our thumb on the scale.
And just hire the best person by view as you can probably do that after undergrad. Like there's no need to keep
artificially adjusting the weights of how you hire people after undergrad. But yet you have all these like programs that keep trying to make the decision based on something other than Merit. And I think that that's the part that needs to stop. I mean, we had Coleman use on and, you know, I think he had a very good perspective on it, which is like, maybe starting with earlier education is where you could probably solve some of these problems over there effectively. I will say, I feel like my experience in the
Our place is that one's College universities. Completely decoupled from one's performance or ability to succeed in the workplace in America Craddock workplace. And when I say meritocratic, I mean excluding nepotistic. Workplace, settings and excluding demographically bias, 100%. And if you interpret you exclude those two, it honestly does not matter. What school someone went to, they could be brilliant, they could be hard working, they can be passionate, they can be a leader, the school doesn't matter. And in fact, perhaps
Soooo. The corollary is true which is the people that went to the schools that determine success. Generally have a very hard time succeeding in the workplace because anytime they face failure, it is a challenging circumstance for them but they are unable to overcome and that's particularly true in entrepreneurship. That's been my experience. Perhaps in the broader workplace setting, they could work well where they're told all the time. If you do this, then you get that they do this. They get that they feel good, they succeed in that model, but in the, in the real world, that's not the model.
And I think that that's a like a really important fact that's colored my point of view on how the higher education system actually does perform with respect to improving the quality of our work force in the u.s. separate of that. I will say that in technical Fields, the research environment on certain college, campuses can be incredibly to mobs point opportunistic for getting exposure to Hands-On work that you might not, otherwise get in technical field. So, a lot of this comes down to motivation.
You notice certain point, a person has to be motivated to put in a lot of hours and become excellent at whatever. Their chosen profession is. I talked about a previously when we started talking about macroeconomics here. I took a macro economics course at MIT on their website or on YouTube rather, right? There's incredible that this stuff is all out there and anybody can take any of these courses for felt exam by like the basic, The Base education has been commoditized, you know, it's the hands-on experience. That one gets, that makes a huge difference. A mighty 1401
as in microeconomics supply and demand. And mean it was like incredible and you know this is stuff. I just didn't ever get exposed to and I was able to do it for free. I listened to the course actually twice and I took notes on and I really got a lot out of it. All right. Listen more stuff on the docket. Anybody else have final Dots here before we go into the election stuff and taxes. Let's all commit to hiring as many people as possible from non-traditional schools. Absolutely. I mean, that's what I do already. I mean, it's working. All right, decision.
20:24 get ready for a bit of chaos here, folks. The DNC is underway as we tape, we tape on Thursday. As you know, I think Kamala will give her acceptance speech tonight. DNC pulled out all of their own storms. Michelle Obama Barack Hillary Bill Clinton Oprah and Tim walz spoke last night. Most people felt they had a pretty strong showing our guy Nate silver friend of the Pod has
The election and has essentially neck and neck. We're in coin toss territory here. I think it's going to be come down to the debate. Some interest here on my besties thing. Here is the silver bulletin. His new publication, he's not at 5:38 anymore, just Kamala at 47 trumpet, almost 45 and this all will come down to the swing States and I think as we all know, he's got a really great interactive chart over there. He's got Harris with clear leads in Pennsylvania.
Second Wisconsin, Arizona and Virginia. Think those are about sixty eight Electoral College votes, vote Trump with clear leads in Georgia and Florida. My Lord Florida is 29 or 30 Electoral College votes, that's a lot, the toss-up States, Nevada with the Tipping and no tax there, but that's only six, North Carolina.
Is been flip-flopping back and forth from Harris to Trump. Those two are were 24. So we swung from many paths to Victory. Basically, a certain victory for Trump with versus by it into. Now, a toss-up, this is an interesting chart here. Sax. I want to get your take on, which is the polling averages. I think you said last week or the week before that, we would see the hair has bump reverse and that's exactly what's happened. The month-over-month change is dramatic. As you see in this table.
Abel.
But the week over week change. So in the month change, you have Democrats running the table in all the swing States. Then you look at the weekly change the opposite. In the last week, the Republicans have not caught up but made significant gains are all between a half a percentage point to point with the exception of North Carolina, which I stated earlier is a toss-up, your thoughts on the
On the election right now. Sex before we get into the issues, just on the numbers
here,
Well, the elections going to nail biter and it's going to really come down to a few thousand votes or a few tens of thousands of votes in swing States. I think we've known that now for a while I would say since Biden abdicated and they did the hot-swap. I think the most interesting poll numbers over the past week is, if you look at Polly Market that is has swung back to Trump being in the lead over the past week as opposed to Harris last week I think Harris was favored to win.
By quite a bit and you have to ask the question. Well, how does this happen during her own Democratic Convention, which is supposed to be, you know, nothing but a four-day infomercial for the Democratic candidate. Yes. Of coronae. Yeah. It's a coronation. So she should be getting nothing but a bump and instead it seems to be the opposite and I think the reason is is because the more substance her campaign puts out the more policies it reveals that were she does. First they had her give that
Comic speech last Friday on price gouging and price controls. And we spent a lot of time last week talking about why price controls would be a disastrous Economic Policy subsequent to that. There were stories that came out about her campaign supporting these huge tax hikes that were in the original by Daenerys budget. Including a 25%, unrealized gains tax. Which we can talk more about. Yeah. But I think just a boil it down. I think the more the public.
The more we learn about what you would do as president the work she does. And they've now got to run out the clock for another. I know what 70 80 Days in terms of running a campaign that substance free that's just completely on Vibes. That's about Joy without answering any questions without doing any press interviews and I think we predicted some time ago that this was not going to be sustainable that at some point, they're going to tell us what they think. And as they do that, the more they do that, I think the more her poles will
correct.
What do you think too much? You trust these betting markets? Because there's so much at stake at this election, right? I mean, people are pouring money into both campaigns. It's really contentious people. See it as existential on both sides and then you have, you know, these prediction markets that, you know, have low tens of millions or hundreds of millions of dollars being bet. Could these not be, you know, influenced you trust them because we are seeing this is the first time
these prediction markets have become a major discussion point because their businesses, obviously,
But people are really getting into them and I wonder if they could be manipulated or if you think you trust them. I guess the way I'm asking you because we've had this discussion a bit off line. I mean I think these are really good businesses but they are some combination of entertainment and gambling. I don't think that these things are as useful.
Directional indicators. As they are just really interesting businesses that allow people to bet and wager on all kinds of random things. So I would not look to these sites for that necessarily, okay? I think that people like Nate silver do a pretty reasonable job in his specific case. I think he does a very good job of writing together and doing this meta-analysis of poles.
But I think we've learned that the this polling is pretty brutal and not super reliable. So the the betting markets are exactly that. They're just like there's like sports betting but just once again betting Market, we talked about this two weeks ago, Shapiro was like 80% or something. So yeah it's fairly obvious Freiburg. That maybe these betting markets are a little bit entertainment but maybe directionally correct because they also did start to predict the hot-swap, you know. So what do you think Freiburg about these betting markets? Well, I think the markets you and be we keep
Everyone keeps trying to reduce this down to some deterministic, binary system, which is like it works, or it doesn't. And the truth is that the conditions of the world are changing all the time. The news is changing all the time. People are taking action all the time. There's a shift in current events. All the time. As a result, the forecast is changing all the time. And so, what a betting Market or a pole does is provide a probabilistic forecast of the future. There is a
Probability of something happening. It is not trying to say I as a pole, or I as a market, I'm right 100% of the time or not. It is saying here's the estimated distribution of outcomes in the future. So there is a 20% chance or an 80% chance of Shapiro. 20% chance of him, not being the case, turns out that that 20% is where Harris ended up going based on some meeting. She had in some room with some group of people that we aren't privy to, and that the market in that case,
Was not privy to what Nate silver does. And I think people need to understand this a little bit
when you gather polling data that poll has some predictive power based on how the pollsters conduct their poll who they call how they screen candidates for the poll etc. Etc. So different polling companies, it turns out or better or worse at making that directional probability bet than others. And what Nate's models do is they account for the historical performance of different pollsters and weight them differently to create a
Basically a multipole prediction and so that's what his system is set up to. And remember he, similarly doesn't give you one outcome, he gives you a distribution of outcomes. I think this situation model has probably 1,000 or 10,000 simulations that come out of it and those simulations he says look there's a 29 percent chance of this happening 70 reason. He's not trying to say, here's what's going to happen. He's trying to give everyone a point of view on the distribution of things happening in the future. Just like weather forecasting is not perfectly predictable. It's very predictable.
Table for tomorrow is less predictable for three days from now. And it's very unpredictable 12 days from now, and that's how these polls also work out. And that's also how these massive Mega models of poles. And it's also a prediction markets, work and Freiburg. People have a lot of emotion in these models, when it comes to politics, where as if you were looking at gambling or the odds of winning a poker hand, we all would be like, oh, you have a 30% chance of winning, or a 10% or 8%? You're going to hit to outers. There's emotions both wage a cal. So basically, when I read those,
Poles or I read the summary of the poles. I have a bias based on my interest in the outcome that says that thing is BSF things, right? Oh, look at this and everyone points to the stuff for confirmation bias of their opinion. Yeah. And to denounce the other side and so it all gets caught up as kind of a media angle when people use polling data and and also fundamentally when people
Kind of get involved in polls and create polls. There's also the risk of bias and part of what Nate silver and others try and do is figure out those that bias come out in the polling performance, historically. And that's how they kind of weight, whether or not this poll is going to be a better or worse indicator than other poles of the distribution of things that might happen in the future and Sack. If people were to lose, you know, a poker hand that they you know, where 60% to win or 2/3 to win. You know? They would be like, okay, that makes total sense.
Sense. When Hillary Clinton lost to Trump the first time, people lost their mind and he was pretty clear, right? He was I think 6535 and people are like, wait, you said it 65%. Yeah, your thoughts on just the accuracy of poles, generally, and then what you heard here in terms of the betting markets? How do you look at these two things that are taking up a lot of space right now? So
well, I would consider prediction markets to be an additional tool that we should consider side by side with poles and they both have
their pluses and minuses. The advantage of poles is that you're actually talking to real people as opposed to betters, however, they're very dependent on sampling and the getting the sampling correct. I mean, most of these poles talk to maybe a thousand respondents. These are people who are willing to pick up the phone from a known number. That right there is probably a huge source of bias because I don't do that.
And then based on that sample, they're going to predict how millions and millions of people are going to vote well, everything depends on the composition of that sample, which thousand voters do talk to do weight them based on likelihood of voting or demographic characteristics and so on. So the polls can be notoriously inaccurate. We've seen that many times and that's why there's a margin of error, sometimes the margin of error is even wrong.
So in any event, it's a tool but it's a tool that almost by definition is going to be wrong because the sampling problems, you look at prediction markets and it's a totally different type of voting mechanism where Bettors are willing to put their money, where their mouth is and they've got real skin in the game and they're able to make a prediction based on their willingness to lose money. Now there can be problems with that too. Number one, the betting Market can be very thin, you know, sometimes there's just not a lot of money that's trading hands. So I think with a lot of those VP picks
You can move the VP Market by putting just a very small amount of money because you have the market wasn't very liquid. So you have to kind of look at how deep and liquid the prediction Market is and then I'd say s the issue of prediction markets is they and this could be an advantage is they move a lot based on small things because people are just constantly updating their forecasts, I would argue that maybe that's an advantage is that you can see the trend more easily in a prediction market. So,
For example, some numbers you have to, if you want to hear them, 653 million dollars in, political bats are currently being placed across the top, 10, betting markets, and all of the markets on Polly Market, which includes things outside of politics, or 320 million. So they are the big fish in this. I think they're the leader, but it's still a very thin amount of money to your point
sex. Yeah, I would mostly use the betting markets as a measure of how sentiment is Shifting. So, for example,
On Election night, the betting markets going to convert to 100% in favor of one candidate or another. Whereas the actual votes are not going to converge to a hundred percent and you could have an election and say Pennsylvania where one candidate gets 50.1 percent of the vote either candidate gets 49.9. The betting markets going to converge to a hundred zero because it's predicting who's going to win. It's a binary yes-or-no as opposed to where the actual vote, totals come out, the polling is trying to approximate where the vote.
You're going to come out right with the huge margin of error. So the polls are just are never going to give you as Crispin decisive and answer as the prediction markets but the bric markets can also be wrong. As we've seen, they're only as good as the people making the bets to Mark. Where do you put the third category here? Which would be the odds makers in Vegas because they're looking at everything. Well what do you think about the oddsmakers in Vegas? Did you give them any
Creedence, I don't even know why any of this matters. So, I were talking about this. Well, I mean, because people are looking at the Tea Leaves about and there are reasons, it matters, you know, the these markets do have an impact on the voting public because the media covers them, donors, cover them voter turnout is impacted by the polls and then there's these like, you know, various psychological phenomenon, like the underdog impacts or
in. So you could have if people perceive at one point Trump is the underdog maybe more people turn out and then people who, you know if Trump was winning versus buying so much, they may become complacent and you get some sort of surprise there. So they do have actual impact on the voting public I suspect though that I suspect that a lot of that is really at the edges.
The, I read an article recently that just talked about the enormity of the investment that built the Democrats and the Republicans are making to get to these critical areas in these five critical States. And if you live in one of these zip codes, that really matter,
I think that there is just no room for anything. But what each side is saying, I don't think you're looking at a betting Market, or a pole, or any of this stuff. And I think the reason why these places have become so critical is that they are very balanced. They are people that have a good way of making sense of the world and they change their minds a lot, right mods. Otherwise
They're they're people that under right Andre underwrite their decisions and to me, that's actually a really wonderful thing to know that there are these call it million people in these ZIP codes in five states that are actually quite thoughtful. And I'm actually okay that in the end that those folks will decide, I would be much more worried if it was hyper partisan and set up in a way where none of these lies, whoever tells them are uncovered.
The way that it's set up today, all of the crazy ideas, get run to the ground, all of the lies, get uncovered. And I think that that's a really healthy place, and I think it's a much better place. So I'm generally, like, really glad that things look like quote-unquote. A question mark, because I think it creates much more pressure for the candidates to be precise and I think that that's very important. So I'd love to talk about some of these crazy policy things as well as yeah.
We'll talk about that. LE C sacks. I wanted to get your take on this. Trump's VP pick. Jade events is now the least popular VP pick in modern history. People said the same thing also about walls and that was a terrible pick, here's your chart on JD and here's the historical chart John Edwards, and I remember him, he was + 2 + net rating. Tim walz +5 Mike Pence plus 5 Kamala when she was VP plus 3. But JD Vance is absolutely, he's below, Sarah Palin.
I guess take several, what's your take on the VP, picks in the impact they're having here because it's a major topic of discussion.
I think what history shows the VP pick doesn't matter that much. People vote for what's happening at the top of the ticket. And I would argue the reason why JD has the Poli does is because there's a couple of reasons. Number one is just media bias, and there was an interesting report showing that the media's coverage of the Harris campaign was Eighty-Four percent positive, whereas the coverage of the Trump campaign was 89% - that actually,
It seems to understate the bias that I see out there, but look, this is the number one reason why JD has a negative rating is because the media is defining him. I'd say, furthermore, JD is out there talking about ideas and I give him credit for that, but because he is an idea, man. And he's also a writer. And he said, interesting things in the past and also, sometimes occasionally, a sarcastic thing or two in the past, the media has been table to take those things out of context and harp on them relentlessly. On the other hand you take
Someone like Tim Waltz and he's out there, he's not really talking about ideas. I mean, every time he goes up there and speaks it's like a pep talk. I mean, if I wanted to hire a guy to give the halftime speech to my team, he'd be the guy, you know, if I wanted him out there, puffing up a team talking about. We gotta all give 110%. He's the guy for that, but he's not really talking about ideas. He's not going on the Sunday shows. You look at JD, I mean, I've watched a couple of his campaign stops, I mean, the guy is
Really sharp. And when he goes on the Sunday show, they are pitching nothing but fastballs at him and he's hitting it out of the park every time and Harris. And Waltz are just not doing that, they're not even appearing on those shows. I don't think they could survive 20 minutes of harsh. Questioning the way that the the media pitches at JD. Every time he goes on a campaign stop and takes questions, or he goes on a Sunday show.
I love the JD Pickett. You know, venture capitalist business guy? Well, written. Well spoken.
You're picking up on something that I think is really important that I think has been under reported. It really is a tale of two different tickets.
The Republican ticket whether you like them or not, are very financially, astute actors. And if you look at the Democratic ticket, they are under invested to not invest it at all in anything that would normally resemble the United States economy. And I find that very odd
Distinction. Meaning.
The way that I would think people would want to see their candidates is folks who have a very sophisticated understanding of the parts that they are going to govern. And in this case, if you're going to sit Atop The Economy, one would hope that you're invested in the economy in some way so that you know how it works and it's a little surprising to me that nobody's really questions. How underinvested the Democratic ticket is
And it's almost as if the the Republican ticket for their financial sophistication is looked down upon to unpack what you're saying here there was a report Tim Waltz has no Financial Holdings. He has no stocks, no bonds. No mutual funds. Don't really wish they'd nothing. No, cryptocurrency. This is what you're referring to Yakima. Yeah, the level of like, literally owning nothing and I guess Freiburg to your let you take it from there. So, I think it's
Actually a step a little bit deeper than that Kamala Harris. And Tim Waltz have only ever worked for government.
Trump and Vance has worked in Private Industry. It's not just their perspective being colored by the the lack of participation in the private economy, but the lack of employment in the private economy. They've never worked for a private business. They've never been employees of a private business. They've never built a private business. I'm not trying to be disparaging, but I do think I'm just trying to underline the point here to mouth, which is the voters choice is
Do you want candidates that are not typically government operatives or do you want candidates who have spent their whole career as government operatives and that is effectively what the voters are going to be voting for? And they're going to make a decision. They may want to have someone that's going to lead the biggest government in history because they've spent their whole careers in government or they're going to say, you know what, the biggest government in history needs to be significantly. Altered. And we want to bring someone in from the outside that's worked in Private Industry. And that is the voters Choice, that's one way to view.
The voters Choice here, that's an interesting Framing and another framing might be free bird. I love that. Hey I love that's an interesting framing. Here's another framing.
I don't you're a young person. I can't own a home, they're too expensive. I don't have any Equity. I'm getting ground down. I own a bio, a bunch of student loans. Tim walz feels more like the experience. I'm having as a millennial where I can't afford a home where I don't have Equity where I'm constantly trying to pay off my bills and the finance what we'll say is like, hey, this guy's not very financially astute, but that ignores don't cause he's never, it could be because he's never
Maybe it, maybe it's because he's never had a private sector job while he's been a teacher, right? So maybe people say, you know what I feel, I identify more with Tim walz and I think that's actually what might be happening here. Public school teacher, right? Yeah. But yeah, he traffic, which is a noble thing to be. And I think there's probably a large percentage of the country who feels like. They're not part of the equity economy, they don't own a home, they don't own equities and they have been shut out from this and all these rich people like Trump and JD Vans. And venture
Running the table on them. And I think that might be why we're seeing even if, the four of us disagree with it, we might be seeing someone like Tim walz actually featuring. It might be absolutely should not and and I think that there's a perception of experience in government that is deemed to make a government leader, more appropriately suited to be a government leader because they're wanting politician cook. Yeah, well, not even a politician just career experience started their being employed.
By or working within the government within a government, local state or federal and remembers Kabul, has started her career at the DA's office in Alameda County before, moving over to San Francisco DA's office. And then she was DEA of San Francisco and then attorney general and so on and so forth. Sex, what do you think of this framing? You have two candidates who are career civil servants who have dedicated their life to that but who in one case has doesn't known as home doesn't own? Any equities in the other case commonly does have a bunch of equity and some private.
Alf versus the capitalist. It looks like this actually is an interesting framing, socialism versus capitalism. What's your thought on that frame?
Well, I think just because someone has served in Government, doesn't mean that they truly even understand what the problems are or that they're even the master of government. I mean, you saw this over the past week, we talked about the eight hundred eighteen thousand jobs that didn't exist, they asked Gina raimondo the Secretary of Commerce about this and she just said, that's a trump lie and they said no actually it's a Bureau of Labor Statistics report that
Like is under US Secretary of Commerce. She said, I'm not familiar with that. So you have people running the government who don't even know what their own departments are doing. Hmm. Now I think it's just a function of the fact that government is so big and out of control that no one even understands what it does. I think it's more important to have someone who at least, has some experience, the private sector. Who truly understands, how jobs are created. How wealth is created? What causes inflation. Okay. We've talked about this before. Yeah. What causes inflation is that printing of too much money? It's government spending too much.
Shocking. It is not corporate greed because corporate greed is a constant. It's not price
gouging and how the free market incentivizes, the creation of improved productivity which over time translates into improved prosperity for the society within which that is taking place, that is so critical. And we saw that happen. Even in China in the last 30 years, when the government allowed entrepreneurship to flourish in certain parts of the country, as a result, there were
Significant productivity gains and they brought a billion people out of poverty. They created a middle class. They created ever had thoughts, never had a middle class. I think it's important to not color this as because you worked in government. You can't be invested or you can't own a home where you can't actually have built a nest egg, right? Because that's also not true and we have, there's some extreme examples of people who've been Pelosi essentially. Yeah, career civil servants, essentially and it built multi-hundred million dollar. Perfect. Now we can we can question
And in specifically, in the case of all House Representatives, whether they're getting access to a kind of information that other people don't get access to. But taking that off the table, I think that there are people in all kinds of jobs.
Who are able to save and invest and then acquire things that they believe will give them security for themselves and their children in the future. And I don't think that it is because of a kind of job that you do. I think it's a kind of mindset that you have and I think it's very important to make sure that whoever we pick
We understand the mindset. I really believe that like, you know, there are a couple things that are really critical to thinking about the future and wanting to make the future better. I think one obvious, one is when you have kids, when you have kids, you're making sacrifices every day. You know, you're you're forgoing things today because whether it's saving for college, saving for school, saving for a class saving for a sports thing that you want kids to go to music, whatever it is, you're always finding ways.
Of thinking about what is better for in the future for that. Other person not me and the second is I think being an investor actually makes you care about the future in a really productive way. Because you're for going off, in cases, when we all invest, we're forgoing short-term gains on the hope that we can help shape a much longer term outcome in the future. That makes all of that worthwhile.
And so I like it when I can see people that have those things at play and that they even in whatever small way they can are manifesting that.
And I always have a question mark like how is it possible that at no point you have tried to be invested in your own and your children's future that way. It's just it's just a question mark for me. Yeah, 58% of Americans, own equities and that includes, like, retirement accounts. It's not like they're actively day trading and so, you know, that that does actually sacks paint an interesting picture where maybe the Democratic party and in which they referred to themselves. Bernie and Elizabeth Warren is socialist as socialist Democrats.
Maybe this is, like, part of their feature, is to appeal to that large swath of people who don't own their homes who don't have kids. And, you know, to JD's point about cat ladies and to, you know, who don't own homes. Don't have kids and don't have equities. What are your thoughts on that sex? Is that may be how these parties are starting to shape up in the modern era? Yes. Yeah, I think I think that's right. I mean I think that Elizabeth Warren and Bernie Sanders are now the thought leaders and really the Beating Heart of the Democrat Party. I think what's
Is the Republican party has moved to right-wing populism. And the Democrats in response to that have concluded that they need to basically move to left wing populism in order to compete with that is, if both parties are becoming fairly populous now, what is what is left wing. Populism. Mean it basically means soak the rich, right? It's it's a strong element of class Warfare to it. We're going to make the rich pay for everything in the rich or the problem. It's this fundamental unfairness of the economy, that's causing all these problems. And I think you've heard that over and
And over again at the DNC. I mean, just the clips that I've seen this has been a recurring theme is the hatred towards, you know, billionaires and and
rectangles the reaches a recurring theme. And that's actually a great jump off point here because the big news in our circles this week and on social media was and some of the group chats is that Harris has reportedly backed some of Biden's really out their tax plans which include a proposed 25% wealth tax.
People with over 100 million dollars in assets, important to note that this would be very hard to pass because getting these tax increases, you'd have to get the Congress etcetera. But let's just talk about what the proposal is, because it's out there.
In Biden's 2025 tax plan, which the campaign has said to semi, for which is a Jewish, publication, like a newsletter company that and I'll just give the quote in a little notice portion of its Friday analysis of Harris's, New Economic plans, the committee for a responsible federal budget wrote that. Her campaign said it endorsed the suite of Revenue options included in president Jose recent budget and that's the frb report said quote
the campaign has communicated to us that vice president Harris continues to support all of the revenue, raising Provisions in the president's 2025 budget. So there is continuity confirmed between Harris and Biden's plans. I'll just explain as simply as I can. What this extreme plan says and then I'll get trim off your take on it. Biden's proposed 2025 tax plan. Includes the following 25%, unrealized cap gain tax on those with over 100 million.
Assets, 28 percent corporate tax rate right now it's 21. Trump had proposed a 15 percent rate and quadrupling the stock buyback, tax 24 percent. That's when a company buys their own shares as opposed to putting it to work in the Market stock buyback tax was created as Biden's inflation, reduction act 2022. It's just one percent. If you want to buy back, your shares like apple and some other companies do. But let's unpack the 25% unrealized cap gains because that seems to be
You know, the most let's say I don't see triggering but the one that's triggered the most number of people. There's 5,000 people who fit into that category. What do you think? Trim off of this proposal Fair, unfair?
Crazy social workers inside American, it's less about fair or unfair, but I think that we are in the part of the cycle where enough people don't feel the positive aspects of capitalism that they want to push back against it. I just put a little image in here. Nick, if you want to, just throw it up in the chat, but white, when you look from 1913 on to today, the reality is we've had
How many different forms of political philosophy that have governed the country. And what you can see is that tax rates have varied wildly at the federal level.
And I think it's because that at certain times there was the political will to go to extremes and this may be a moment where we are going to explore.
The extremes that we had in the 40s and the 50s. And I think the reality is that, if that does happen, you're going to see people behave in ways that weren't possible in the 40s and 50s in the 40s and 50s. Everybody was more geopolitically. Constrained. I don't think that that's the case anymore. And the way that people start companies, where they start companies, the flexibility of citizenship have changed really dramatically. So if it's the will of the people that
they want to explore these mechanisms, I think other people will react in kind and you know, the die will be cast. So you know, I don't have much experience. You removing your I think you're implying. People might be able to move to other places and create companies. There is that what are we going to just put it this way? We have a, we have a small microcosm of this going on within the 50 states which is if you said California was the United States and
Texas and Florida were I'll make up to different countries, Malta and Dubai. Well, what happens when taxation goes beyond the pale, and what happens, when budget deficits in spending, go beyond the pale and when the government plays too, large of a hand in the economy people leave what their feet companies. The so we don't need to guess what's going to happen. Because if it can happen between California and
Texas. It probably stands to reason that can happen between the United States and the UAE as an example. Yeah.
You already have a bunch of hedge fund managers moving over there. Rachel mob they have people are starting to buy apartments and there's no borders, there's golden visas in some great countries, Portugal has a golden Visa. The UAE has a golden Visa Italy, has a golden Visa, the UK had this great program what was called non Dom's for a long time. So the point is that all of these took advantage of countries that went to extremes and they lost citizens as a
alt and I suspect that if what the u.s. voting population wants to do is explore that extreme. These policies will get enacted and then people will act in kind. The only thing that I would just again reinforces unlike when taxes went to 90% in the 40s and 50s. People are much much more mobile than they were then. And that was during World War Two in the post-war era about Freiburg. Your thoughts on this proposal specifically, which impacts a very small number of people,
Well, there may be a high percentage here. Yeah. So just just to give a little more detail to it. Jake Al please and you can actually see it. I think if you want to pull up the page 82 83 in the document, so the wealth tax is 25% of your unrealized capital gains. If your net worth is above 100 million and the first time this happens you can split up the payments over nine years. You have nine years to kind of pay down the assets or sell the assets or borrow the money, you need to make those tax payments.
After that, you can actually make those payments over five years. Those payments are ultimately treated. As prepayments on taxes, that will be due. When you realize the capital gains every year, you have to report to the IRS separated by asset class the cost basis and the estimated value of every asset you have, you then have to determine your taxes that you owe. Because of the difference from last year, you start out with tradable assets of stocks, those are just valued at the end of year.
Illiquid assets like private companies or real estate, you don't have to get a valuation if there is a financing event or some other sort of major revaluation you have to use that value. And if there isn't the number goes up every year, by some nominal rate that will be set by the treasury. So the treasury's, basically, going to tell you what they think, the value of your company has gone up on an annual basis and that's the determination evaluation, you can file an appeal. So for all the entrepreneurs and startup,
Listening, there's a process that they're proposing that is basically the government saying, if you didn't get a new financing round done, the price goes up. And if you disagree with the price going up, you go back and you appeal it, let's pause there for a second Freiburg because this is super important. I think to the audience here, somebody has a startup company, it becomes worth 10 billion dollars. It has 100 million in Revenue. It's doing well, it's losing money for our nine. Valuation comes in founder, owns 25% co-founders own. 25%. Each they owned two or three billion.
Dollars in stock. Now, you've got an illiquid founder who owns three billion dollars in stock companies, not going public. There's no secondary Market. What would happen to that founder with? So they have addressed this and that's the final provision. And what they said is that if a taxpayer is treated as what they're calling a liquid, meaning that their tradable assets, the stocks that they own, or the cash that they have is less than 20% of their total wealth.
Zendaya may elect to include only the unrealized gain in their tradable assets to determine their tax liability. However, if you do this, you will actually have a deferral charge, which means you'll ultimately pay a higher tax on the capital gains on your illiquid asset. When you do, have a realized capital gain on it. So they're trying to cover the fact that people might have all their assets, tied up in real estate or other assets tied up in private Company stock. And again, I feel like we're kind of shy
Shouting into an abyss here because this is only going to affect such a small number of people. But they've really tried to write this in a way that ultimately covers the kind of pushback that you're highlighting. I'll say one other piece of pushback that's been received and tested in the Supreme Court. A lot of people have said that
The sixteenth amendment prohibits this taxation ruling from the Supreme Court was published June of this year and in that particular case there was a repatriation tax for folks that left the country. It's the more versus United States Tax case and when people left the country, the government under the tax and jobs act, which was passed under the Trump Administration, the government had a right to go after people's assets and tax them on their unrealized gains. Even after they give up their us,
And rate this was challenged in the Supreme Court and there was a number of amicus briefs filed. On this case that said, the government does not have the authority in Congress, doesn't have the authority to actually tax on unrealized capital gains. And at the end of the day, the Supreme Court agreed to hear the case. And they did not overturn on the position that the government actually did not overstep their authority, to be able to tax unrealized capital gains. So there is some Supreme Court case precedent here, that indicates that this will not get through.
Thrown out on an unconstitutional ground basis. So there is a lot of conversation that this might actually become a real case. I'll pause there. And I actually have a theory. I want to talk about in a minute but it's a little bit of an extension from this point. But Sachs is this summer P seizure of Assets in your mind? Is it constitutional in your mind? Two questions there?
It's certainly a confiscation. I mean basically this this tax is directed at send a Millionaires and billionaires to basically take 25% of what they have. I mean that's basically what this is about. There's a good reason why realization is one of the Core Concepts of our tax code. What real realization gives you two really important. Things. Number one, you have a sale price, right? Your realization means that you sell the asset. So we know exactly how much you made. Number two, you have the liquidity to pay the tax.
All because you just sold the asset. The problems in unrealized gains tax is both those issues. Number one we don't know what the assets really worth. You know. It's easier to put a value on a publicly traded asset but a private asset. It's very hard to know exactly how much it's worth the valuations bouncing around all the time what this bill would do is create, I guess a whole new process and bureaucracy to try and put a value on that. But it's going to be really complicated to comply with all of us are going to need to hire a whole new.
Ian of lawyers and accountants. So I mean you're talking about a whole new essentially tax bureaucracy that's going to spring up around this concept on the liquidity part you're being taxed a huge amount without having the cash to pay the tax bill and you know yes they've tried to mitigate that by creating this installment plan but you're still going to need to go out and sell large chunks of your company. Every time you get an up round in order to pay the tax bill and that means that you're losing ownership of your
Company. All these assets are going to be dumped on the market and you're basically starving the market of capital actually. Right? Because all these people who who are owners that our company are gonna have to go out and sell a big chunk of
them. This is going to put so much cold water on the entrepreneurial Market. It's going to make people just have less liquidity to invest in things. I think this is going to be disastrous, cause a lot of people to retire early because they just don't want to deal with all this. Will free. Brooke, what's your theory? Okay, I've got a theory.
They're here we go. I was trying to figure out why we seem to be like embracing social with principles. Like why I keep seeing more of this stuff become mainstream and almost become normalized. And I was looking at the total GDP of the United States, is twenty five trillion dollars. The federal budget. For next year is proposed to be seven point two trillion and state and local budgets. Combined is about 4 trillion.
So if you look at government spending it's about half of GDP. Now State local and Federal which roughly equates to about half of people in the United States, are employed directly by government or indirectly because the government is the primary revenue source of their business. And I think that that's why this set of policies and I'm not talking about the tax on the center millionaires, as much as a simple disregard for
For the fact that the United States over time, the prosperity that we've realized has been driven by a free market economy by enterprising, individuals going out and saying, there are people that are asking for things. I'm going to figure out a way to build those things and make it for them and sell it to them. People will pay for it, they will work hard to do it. And the incentive structure in a free market has enabled productivity improvements and enabled, ultimately Prosperity, but we've reached a Tipping Point and the Tipping Point is when half or more of the population
Chelation begins to be employed by the government at which point that concept is lost because now it is the government that is the employer, not one's own individual liberties and ability to go out and be enterprising. And so I think that the budget of government tipping to fifty percent of GDP is the reason why these policies become mainstream that's my theory. And so it's a relationship of government spending as a percent of total GDP which translates into employment. You guys are reasonable.
Airy but
reasonably, well, you know who said something, similar back when Mitt Romney ran for president, he was caught on tape saying something to the effect that 47% of Americans were net government. Recipients. Yeah. And if that number ever got to 51 percent, then basically the free market system would be finished because it'd be
more. We are that's what teachers than makers tipping. More takers are
makers, and he was forced to apologize for that, but there is a fundamental logic to
it, I wouldn't use the term.
Taker sacks because there are hardworking people that work for the government. It's so it's not necessarily about just taking a free check or there's certainly an aspect of that to some degree, but it is about the government, becoming the primary supporter of individuals in this country through employment, or through subsidies or three checks or through. What have you?
Yeah, I think that's fair. I think that's totally fair. I'm not disparaging the efforts of legitimate government workers because you
do need a government and
some are private company workers that just happen to have the government as their only customer, right?
But the point, the point is that when you become a government employee, you have a vested interest in government, you should have a vested interest in the private sector, as well, because that's what generates the tax revenue to fund the government. But as a practical matter, government workers, vote massively in a block for the Democrat Party. And in many ways, the Democrat Party is the party of government workers. You look in California, for example, the
Various government workers. Unions are the most powerful players in California
politics, political affiliation of like, has there ever been surveys done of employees, at the federal level and what their political affiliations are? Oh
yeah, that vastly vastly more Democrat. I mean, is it really like the Democrats are the party of government? Absolutely,
I'm surprised by that because I would think that within the ranks of the military,
you look at the enlisted military. There's a lot of Republicans in there. A lot of military families, especially
Republican, but you look at his government workers.
Vastly more Democrat. I think there's other things happening as well. I mean, look, American capitalism requires a robust middle class and in many ways I think, globalization has hollowed out the middle class or used to be a large middle class in this country of blue-collar workers who worked with their hands. They were not knowledge workers and they worked in factories and they did kind of blue collar work and they could still make a middle-class living. And I think that over the last twenty to thirty years,
Hers. As a result of globalization millions, and millions of those jobs went away and millions of factory shut down. So the middle class of America that's not. You know the again that's not knowledge. Workers were really pressured by basically throwing open American markets to foreign Goods. Now, you could argue that that lower prices and that created consumer surplus and the benefits of trade
you supporting Trump tariffs as a solution, their sacks because those are fundamentally going to be inflationary, which is going to make the cost go up for everyone.
Well, I don't know, but I'm
guess I'm just pointing out that there was a real price. In terms of having this free trade that led to huge trade deficits, which is this vast American middle-class, people worked with their hands got put out of work and I think that removes a huge incentive for people to be invested in time of us interested in the free market system
detects, let me ask you one more question. Do you think that the Biden administration's bills, the inflation reduction act in
Chip stack both of which were meant to revitalize that middle-class kind of industrial economy through Government, funding of developing new facilities in the US to onshore manufacturing is that not a good reasonable solution to that
problem. Well those are two very different bills. I mean the inflation reduction act, just the name itself should tell you that it
doesn't do little, can you get a bit of the inflation? Maximization
look who benefited from that? Our friends, who are energy investors?
ders, who, you know, who I'm talking about,
when our John see, straight
everywhere that they've ever seen, he says he's getting these guys were running around, like, you know, it was like The Beverly Hillbillies, where they struck a gusher and they're running around with Dan's trying to collect the
Oil. That's right. Basis of this was it was a bunch of energy
investors at some time in by
exploding. The man I was coming down from heaven and there was like collect as much of it. That was a huge boondoggle and payoff for these green energy investors. That's where it went to. It did not benefit. What about the chip stocks at all? Got a chance that this ship dock is more complicated because it does create incentives for a Manufacturing in America. And moreover, there is a national security. Oh, yes! Yes, because we need these Advanced chips. We can't be
totally dependent on chip makers want who are in foreign places within 100 miles of the Chinese Mainland, right sitting right? That one's a little more
complicated. Meanwhile, Intel is imploding. You know, they can't really facts are so
well just to finish the thought. I mean, the the the issue with the chips Act is that there's a lot of good reasons to believe that, even if we incentivize this, we're still hopelessly behind. And the chip Fabs that we're building are just they're still years behind what they have in Taiwan, for example. So,
Clear. It's going to work as my point but but I think the motivations make a lot more sense.
All right everybody this has been another amazing episode of the all in podcast socialism is garbage and it turns into communism. Now I'm exacerbated. I mean if Kamala doesn't get out there and start doing some interviews and explaining herself I'm out, I mean I'm yeah.
Very differently. Dollars is very different.
No. I mean I
just we need to get my mom a lot on this program here face the music. Let's go. You want to run for president, come on all in and let's talk about it if she's not going to answer. Basic questions is disqualifying for me. Who's trying to get her? Is anyone trying to get my hands on it? I mean transmitted but I mean, we love to have her on, we'd love to have JDR, we'd love to have Waltz on. Let's go, let's have some real conversations about
this stuff because make one final Point little hole is gains tax is fasting Mysterio.
Do what the CBO estimated is that would raise about 400 billion a year for all these toxic. Right. That's only 20 percent of the deaths that were running right now. We don't get anywhere close to closing the deficit with all these tax hikes. What that means is you have to cut spending. Moreover, she's got a bunch of new programs to increase that deficit. And we know that that 400 billion number is an optimistic scenario because like your mouth was saying, the rich people are going to flee their going to try and move their wealth into.
Jurors or places where it's hard to
tax. I think it's actually more than that, I think what will happen is funds governments etc for the right, entrepreneurs with the right assets, will help you pay the exit tax so that you can just leave the United States and that's going to be an investment class that's going to emerge in my opinion, which is these organizations that will pool Capital Sovereign wealth, fund specifically. And when an entrepreneur shows up and they have, you know, 50-100 a billion dollar tax build
to expatriate from the United States. They will pay it for you. And the reason is, they will bring the jobs and they'll bring the know-how and they'll bring the future capital investment into that country. It's a very easy investment to underwrite actually. So I would I would just pay you a lot of close attention to the fact that Capital flows are very fungible in 2020 form and they'll only become more fungible over time. When Osiris anyways, eautiful beautiful is happening by the way, this happened in France, I mean happen, if they did, they live
Did this. They tried it. A lot of French citizens. Also became citizens. Always question. Well tax, I think it's important though. You have to now go to the logic. If this is what people want, I think it's important for people to see the impact of it and then for them to have to change their mind or stay with what they're doing because it's working. Yeah, it's not going to
work your ijkl in France, and Norway. This was tried there every time well taxes get tried it. What happens is the wealth fleas and you never raise as much as you think you're going to. And then what happens is in order to
to raise that money and have to apply to more people. Elizabeth Warren already wants to apply it to Americans with a net worth of 50 million, not a hundred million. So, this whole idea that, well, this won't affect me, because I'm not one of those rich people in the IRS was created. And they, when they created the income tax, it was originally only supposed to apply to less than the top one percent. Okay, I gotta go. Love you
guys. So, everybody, thanks for coming to the all in podcast episode 193. We'll see you next time. Bye bye. Take care bills.
Rain Man gave its
eyes.
Because they're all just like this, like sexual tension that they just need to release yourself
your feet
to get. Merchants are
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