Gen Z Confronts Me On The Economy

Summary

Podcast Summary: The Ben Shapiro Show

Episode: Gen Z Confronts Me On The Economy
Host: Ben Shapiro (The Daily Wire)
Date: December 3, 2025

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Main Theme

In this episode, Ben Shapiro sits down with a 24-year-old Gen Z guest, Madison, to address concerns around affordability, soaring grocery and housing prices, and economic anxieties common among young adults. The discussion spans topics from inflation, supply and demand, and personal financial responsibility, to critiques of socialism and the unintended effects of government intervention. Shapiro aims to break down economic concepts in layman’s terms, challenge the expectations and narratives surrounding wealth and instant success, and offer actionable life advice for young people.

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Key Discussion Points & Insights

1. Why Has Affordability Gotten So Bad?

[01:20–04:00]

• Madison describes her struggle with high grocery prices, as "eggs are like $6 versus the $2 I paid when I was in college."
• Shapiro explains:
  • Basic supply and demand curves determine pricing; equilibrium sets the price point.
  • Egg price spikes traced to supply shocks (like avian disease outbreaks) and remain elevated due to "injection of all of this money into the economy under the Biden administration."
  • Stimulus bills and loose Federal Reserve monetary policy (low interest rates) contributed to high inflation.
  • Tariffs also inflate prices ("tariffs are going to temporarily increase grocery prices because they're reducing the supply").
• Shapiro warns about misreading studies: "Tariffs actually lead to job loss... job loss leads to people not being able to buy things... price goes down because you wreck the economy..." [03:35]

Notable Quote

"Everybody wants the prices to actually come down. If you want the prices to actually come down, you need a deflation rate, not an inflation rate."
— Ben Shapiro [04:38]

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2. Inflation, Deflation, and ‘The New Normal’

[04:00–06:00]

• Inflation rates mean prices keep increasing, not necessarily coming down.
• For prices to drop, “you need to pursue actual deflationary policies,” which Shapiro notes is uncommon except “with radical increase in supply or radical decrease in demand” (which usually “crash[es] the economy”).
• Shapiro concludes: "Get used to these prices... this is the new normal unless you have a DeLorean and you can go talk to Jerome Powell about radically reducing interest rates..." [05:17]

Notable Quote

"There's never been a period in American history that was significantly deflationary...that did not coincide with a significant economic downturn."
— Ben Shapiro [05:34]

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3. Assigning Blame: COVID, Trump, and Biden

[06:00–08:39]

• Madison notes shifting blame between administrations; Shapiro clarifies that Biden "came into office on the back of a[n] already inflationary economy" due to COVID stimulus but continued to "shovel money out the door."
• "Modern Monetary Theory" (MMT) critique: “There was this bizarre idea... that inflation would never happen again.”
• Comparisons with prior presidents' monetary policy: Obama had a "loose monetary policy" but low demand, so inflation was not severe.
• Explains that post-COVID, demand did not drop, and combined with stimulus, prices continued to rise.

Notable Quote

"Money is a ruler, money is not an actual determinant of wealth. What you can buy for the money is the thing that matters."
— Ben Shapiro [08:29]

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4. Life Advice for Young Adults: Financial Anxiety & Career Trajectory

[09:09–13:40]

• Madison seeks advice on overcoming financial anxiety and “just making the bills.”
• Shapiro stresses individualized budgeting; he and his wife started with student debt and low income, emphasizing it's "normal at your age" to struggle.
• Key is planning a "career path that is going to take you from making 70 grand a year or 60 grand a year to making 200 grand a year... Every wealthy person I know was once not a wealthy person."
• Social media perception of instant success is false: "It's fake. It's not real. I'm just telling you, it's totally not real." [15:17]
• Risk-taking is easier when young and without kids; “struggling is a normal part of being 24 years old.”

Notable Quote

"The first path to getting rich is not getting poor."
— Ben Shapiro [16:16]

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5. Critique of Socialism & Government Stimulus Policies

[17:35–21:06]

• Madison asks for Shapiro’s response to Gen Z’s push for “democratic socialism” (referencing Zora Mandani).
• Shapiro warns: “You have to look at the unintended consequences... Everything sounds good on the surface. ... If you give everybody $100,000 check, inflation will obviously be rampant."
• Rent control example from the 1970s (Bronx is burning) to highlight unintended policy consequences.
• Critiques subsidies: "Every single good that government has subsidized, the price goes up. Every single good the government does not subsidize, the price goes down." [20:22]

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6. Student Loans, Higher Ed, and the Devaluation of College Degrees

[21:06–25:46]

• Student loan subsidies lead to higher tuition; private banks would never lend large sums to, e.g., art history majors due to low expected returns.
• Without government intervention, incentives would push more students into profitable, in-demand fields.
• College degrees now serve as IQ proxies; the inflation of degrees dilutes their value.
• Companies (including The Daily Wire) move toward hiring through alternative measures like apprenticeships rather than solely via degrees.

Notable Quote

"The government giving subsidies potentially ruined college education in the sense that people used to go to college to actually pursue things that would provide a career or a better future for them."
— Madison [24:06]

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7. Housing Crisis: Causes and Potential Solutions

[26:03–33:33]

• Causes: COVID-driven supply shocks, stimulus cash, bottlenecks in material supply, high demand, and “sticky” housing supply as elderly homeowners don’t want to lose low-interest mortgages.
• Higher interest rates further depress housing turnover.
• Housing supply increases slowly due to regulatory constraints, especially in cities like New York.
• Capitalism, not socialism, is positioned as the best way to grow housing supply: “The free flow of capital is the way that more things happen.” [32:59]
• Critique of affordable housing requirements and rent control: “The government is filled with inefficiencies. The government is not good at determining prices.” [33:05]
• Reminds listeners that post-war housing was of much lower quality, and that rising living standards mean expectations have shifted.

Notable Quotes

"If you can't afford to live in New York... you should really look to move to Nashville or Florida or someplace or Austin, someplace where you have a better opportunity."
— Ben Shapiro [28:12]

"So you would argue that capitalism is the best route because it will always increase the supply for people to meet the demand."
— Madison [33:24]
"Yes."
— Ben Shapiro [33:32]

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8. The True Meaning of Wealth & Progress

[36:27–39:29]

• Shapiro and Madison discuss the fallacy of comparing today’s struggles to past generations without adjusting for vastly improved living standards.
• Shapiro references economist Marian Tupy:
  • Progress should be measured by the “amount of time it would cost you in your life to purchase a particular unit of good,” and that nearly everything takes less work today compared to the past.

Notable Quote

"What you can buy with the dollar is more important [than dollar value alone]... There is an economist... Marion Tupy... [who] developed... basically how much time would it cost you... to purchase a particular unit of good."
— Ben Shapiro [39:11]

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Memorable Quotes & Attributions

• "Get used to these prices... this is the new normal unless you have a DeLorean..."
  — Ben Shapiro [05:17]
• "Money is a ruler, money is not an actual determinant of wealth. What you can buy for the money is the thing that matters."
  — Ben Shapiro [08:29]
• "It's fake. It's not real. I'm just telling you, it's totally not real." (On influencer/luxury culture)
  — Ben Shapiro [15:17]
• "The first path to getting rich is not getting poor."
  — Ben Shapiro [16:16]
• "Every single good that government has subsidized, the price goes up. Every single good the government does not subsidize, the price goes down."
  — Ben Shapiro [20:22]
• "So you would argue that capitalism is the best route because it will always increase the supply for people to meet the demand."
  — Madison [33:24]
  "Yes."
  — Ben Shapiro [33:32]
• "What you can buy with the dollar is more important... [than] dollar amounts."
  — Ben Shapiro [39:11]

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Timestamps for Important Segments

• 01:20 – Gen Z guest Madison asks about the cost of groceries and economic anxiety
• 03:35 – Shapiro unpacks tariffs and inflation
• 04:40 – Why inflation means prices still climb
• 09:09 – Advice for young adults facing economic struggle
• 12:37 – Risk-taking when young, building wealth over time
• 15:17 – Social media perceptions of wealth are "fake"
• 17:47 – Critique of democratic socialism and government giveaways
• 21:06 – College costs, student loans, and the overvaluation of degrees
• 26:12 – Housing supply crisis and market "stickiness"
• 33:32 – Capitalism vs socialism in housing policy
• 36:27 – Comparing the quality of life across generations
• 39:11 – Measuring progress with time-to-purchase, not just price tags

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Conclusion

Ben Shapiro’s conversation with Madison offers an accessible, detailed conservative analysis of why affordability is a challenge for Gen Z, using real-world examples and stories from his own life. He emphasizes personal responsibility, patience, historical perspective, and skepticism toward simplistic solutions like subsidies and socialism. The episode serves as both an economic explainer and a pep talk for young adults navigating a rapidly changing economy.

Transcript

[A]

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[B]

You may notice something about this video already I'm off center. Which means someone is about to roll into frame. That someone is Madison.

Wow, that wasn't awkward at all. She's 24 and apparently has questions about affordability and economics. So get ready for some true excitement.

Here we go.

[C]

Okay, let's talk about affordability. So specifically, why has affordability gotten as bad as it has? And also, what are some ways that we can get grocery prices specifically down? Because that's where I approach the most struggle in my daily life as a young 24 year old. You know, you go there and eggs are like $6 versus the $2 I paid when I was in college.

[B]

Yeah. So the best way to sort of understand in very, very basic economic terms how the price of a good is decided. A typical supply demand curve looks something like this. Okay, so here on the y axis you have the price of a good. Here on the x axis you have the quantity of a good. Okay, so as the supply of a good increases and the demand comes down, then the price decreases. Okay, so here's where your price would be when they meet. Okay. Is when the supply meet. This is called equilibrium is where the supply and demand curves meet. So some of the egg price crisis that had to do with actual like disease among chickens and mass slaughter of chickens, some of that happened a couple of years ago. And. And the egg prices have sort of reduced from where they were a year or two ago. But everything remains incredibly elevated again because of the injection of all of this money into the economy under the Biden administration. There are these huge bills that went forth that kind of spread huge amounts of money. Plus the Federal Reserve was really, really loose in its lending policy. That's why the interest rates were too low. Got it. So they were injecting enormous amounts of money. And again, all of the COVID stimulus that went in in 2020, just free helicopter money to everybody raises the price. So the question is, what are we comparing grocery prices to? So if we're comparing grocery prices to where they were six years ago, they're extraordinary. If we're comparing them to where they were one year ago, then they're slightly higher than they were a year ago. But everybody was freaking out a year ago and they should have been freaking out a year ago. And so I think one of the things President Trump is competing with is where the baseline lies. Does the baseline lie from when he took office, or is the baseline where kind of all of our heads are at five years ago, I could go to the grocery store and spend half of what I'm currently spending as as long. As far as what could be done to bring down grocery prices right now. I mean, he should get rid of the tariffs. The tariffs are going to temporarily increase grocery prices because they're reducing the supply of the products that you wanna buy. He himself is acknowledging this. He recognizes that, for example, bananas and coffee, too expensive. So what did he just do? He relieved tariffs on bananas and coffee, which is a tacit acknowledgement that when you get rid of tariffs, then the prices tend to go down. Now, there is a study that came out recently that suggested that tariff policy leads to deflation, that it leads to lower prices over time. People are reading that study wrong. What that study says is that tariffs actually lead to job loss. Job loss leads to people not being able to buy things. When people can't buy things, demand goes down and so the actual price goes down. So long term prices go down because you wreck the economy with big tariff reserves, which is not exactly what you actually want to go for.

[C]

So scary.

[B]

Yeah. So I think that we have an excellent supply chain domestically in the United States for food. The biggest problem is just a generalized problem that we feel mostly at the grocery store, because the most immediate place we spend a lot of money. Again, it's. It's kind of like the clearest place that you see is in the food prices. But everything has gone up tremendously over the course of the Biden administration and is kind of coming down, but hasn't gone down all the way under Trump. When I say gone down, it actually I should correct. The prices went up like this under Joe Biden, and now the price are going up like this under Trump. Everybody wants the prices to actually come down. If you want the prices to actually come down, you need a deflation rate, not an inflation rate. Right. The inflation rate right now is 3%. So that means that everything is now 3% higher than it was one year ago. Well, if last year it increased by 11%, you're adding another 3 on top of that, then that's still really high. When people say they want prices to come down, and this is what politicians refuse to understand, they don't mean that they want the trajectory to look like that. They mean they want the trajectory to look like this.

[C]

Yes.

[B]

Okay. And if you want the trajectory to look like this, you need to pursue actual deflationary policies and deflationary policies. That's a scary thing because deflation very typically exists only with radical increase in supply, which, again, we have pretty good supply chains. So it really isn't a supply problem per se, or radical decrease in demand. And if you want to radically decrease.

[C]

Demand, you have to crash the economy.

[B]

Yes. That's typically the way that deflation tends to occur. So basically, get used to these prices is all I'm saying. Unless you have a DeLorean and you can go talk to Jerome Powell about radically reducing interest rates in a time of gigantic government subsidies pushed by both the late Trump administration, the entirety of the Biden administration. I don't have a time machine. There's never been a period in American history that was significantly deflationary over time that did not coincide with a significant economic downturn.

[C]

So essentially, the state of what we're living in right now, this is the new normal.

[B]

It's the new normal.

[C]

This is the new normal because of how high the inflation was during the Biden administration.

[B]

Right.

[C]

He was, like, handing checks, doing lots of subsidies, doing all these things. And now we're suffering the consequences of that.

[B]

And I think, politically, it's one of the reasons why politicians need to be careful how they talk. So Trump came into office and he said, I'm going to bring the prices back down. What he should have said is, Joe Biden embedded these prices in the economy. Can't undo everything Joe Biden did. It's not possible unless I just suck all the money that he gave you. Go back in time, suck all the money out of everybody's pocket. You could increase supply, but it's hard to see how you increase the egg supply. How do you. How do you triple the. In order to get back to the old prices, you have to, like, increase the egg supply by a factor of two or three. Right. You have to increase the turkey supply by. How are you going to do that?

[C]

Very difficult to see how during Trump's, like, last campaign, when he won in 2024, everybody kept saying that the reason the economy is so bad is because we're living in the economy that Trump created. That was like the agenda that the left was pushing was the reason things are so bad is because of what Trump previously did. But the reality that we're looking at here is that all the government subsidies and Biden, you know, printing money and just handing money to people, I mean, it's monopoly money at that point, because when you print that much money, it loses its worth. Is what we saw the last year of his presidency is when we started to see the repercussions of that. And then when it came in.

[B]

There's always truth to the idea that we're living in the consequences of history. So it is true that Joe Biden came into office on the back of a already inflationary economy that was about to burst, because the last year of COVID was that bad. 2020 was really bad. Now, it could have gone back down if he hadn't continued to inflate it. He used that as an excuse to continue to just shovel money out the door. Helicopter money all through 2020, radically keep those interest rates low. All of that sort of stuff contributed to a heightening of the bubble. There was this bizarre idea, if you recall, all the way back to, like, 2018, 2019. Elizabeth Warren was promoting it. She called it modern monetary theory. And her idea was that inflation would never happen again. That basically you could print as much money as you wanted and that because other countries were going to buy up our debt, then it wouldn't matter. Obama also had a pretty loose monetary policy, and there wasn't tremendous inflation. And the reason there wasn't tremendous inflation is because demand remained low because the economy was stagnating under Trump. What happened is that because it was an artificial crater, it wasn't like a natural crater to the economy. Right? We just all went home and we stayed home for, like, months, and then we all came back to work. But the problem is, in the interim, demand did not go down, Demand maintained. Right? And then demand continued to go up because we just shoveled money at people. And so the prices continued to rise.

[C]

Okay, so that makes sense. Then when everybody jumped back into working.

[B]

And suddenly, yeah, suddenly we all had, like, money up the wazoo, Right? Like, money was flown, and then everyone's, but wait, this money isn't making me more wealthy. Which goes back to the original point is money is a Ruler, money is not an actual determinant of wealth. What you can buy for the money is the thing that matters.

[C]

Yeah. So when things become more and more expensive, obviously money becomes less valuable.

[B]

Correct.

[C]

And so.

[B]

So wheelbarrow money is not making you richer.

[C]

Yeah, exactly. That's so crazy. It's also shifting my mindset because I've always thought of money in terms of like, oh, if I have this much, I'm in a good place, or if we have this house or if we have these things. But that isn't necessarily true.

[B]

Right. It's more about what you can buy for the money.

[C]

Yes.

[B]

And so that's where monetary policy comes in and fiscal policy and economic policy and all the rest of it.

[C]

So here's a question that I've kind of always had. This is more of a life question and you obviously have a lot of life experience.

[B]

I am old now. It's true.

[C]

You're not old. You're not old.

[B]

I have four kids. It's okay.

[C]

Oh my gosh. You have four kids?

[B]

Yeah.

[C]

Okay. Wow.

[B]

So I can, I don't have anything. I can safely say that I'm middle aged at this point.

[C]

So in terms of like what you would do in your life to get to a good place. Now, obviously speaking, you know, me and my husband work very hard and we have to work very hard to kind of be where, make the bills and do all the things. And what would your advice be on how to get out of this stage of like the panic of like, okay, I've got to work hard every single day. I've got to find a way to make it. And there's, you know, barely enough money for the month. Like, what would you suggest is the best life advice to really get?

[B]

So I'm not sure that it's actually like a one piece of general life advice. I'd actually sit with you and your husband and go through your bills. Honestly, like, this is the best way to do it, is to actually sit down, see how much you're earning, how much you're paying in tax, what your bills are, where you can cut, where you can save. It's an individualized thing. But fiscal responsibility and financial responsibility at home, there's no one size fits all other than you actually just have to sit there with a pocket calculator, not your phone. And yeah, I'm showing my age and like an actual Excel spreadsheet and see where you can minimize your expenditures. I mean, again, I've been your age when I was. You're 24. I got married when I was 24. My wife was 20 at the time. And we had to absorb her education costs, we had to absorb her medical school costs. We had to still pay off some of my Harvard student loans. Like there was all this stuff. There was a point maybe a year into our marriage where we were down to the point of, do we need to take out a second credit card to shift debt from one credit card to another for lower interest rate? It's kind of normal at your age. And then the question is, how do you achieve an income trajectory? What is your career path that is going to take you from making 70 grand a year or 60 grand a year to making 200 grand a year? And that can take some time. Every wealthy person I know was once not a wealthy person. And those people had to work and toil in semi obscurity until they sort of hit a trajectory. So my wife and I had a very good life for sure when we were first married. Because a good life doesn't require a big house and it doesn't require a huge income. You can have a great life just living in a small house or a condo like we did when we were first married. And it can be wonderful. But if you want that trajectory, that economic trajectory, it's all about how do you transition from sort of phase one of your career to phase two? And do you invest in yourself? How wealthy do you realistically want to be or need to be? Because those are different paths, right? You can be intentional about this stuff. If you're working for a salary, then you have to look at your company and say, okay, does. Where does the salary path take me? Maybe it caps out at, you know, 100 or 120 or 150, whatever it is. Or is it, do I have an idea for a business? Can I start a business? It's riskier. Do I have the. Do I have the safety net that if I fail, I can try again? These are. These are all sort of decisions that you have to make. But I think everybody wants the overnight. How do I get from barely being able to pay my bills to being in a mansion? And the answer is struggling is kind of. I mean, again, these are. These are hard things to just deal with. Struggling is a normal part of being 24 years old. Okay, I was 24 years old and I struggled when I was 24 years old.

[C]

Especially when you get married, because it's like, oh, my goodness, I'm learning how to be married. I'm learning how to build a career. I have a business myself. So it's like, oh, I'm building a business, my husband has a business. So we're both just like taking risks constantly, right?

[B]

Exactly. Like being young means being uncomfortable. That's also why you can afford to take some more risks, is because when it's just the two of you and you're just. And you don't have kids yet, then you can take more career risks they wouldn't be able to take if you already had a bunch of mouths to feed, for example.

[C]

Right.

[B]

And so, yeah, I mean, I think that the biggest thing to take away is, you know, good, sound financial decision making. Take a look at your bills, take a look at your earnings, see how you can get from point A to point B. Try to have a plan to get from point A to point B. Yeah. And just recognize that this is normal. It's totally normal. There's nothing unnatural about feeling financially uneasy when you're young. There's nothing sort of terrible about you. It doesn't mean that the system is. There's never been a system in human history where 24 year olds felt economically comfortable. There is no system where that exists. And you can say people in Norway feel more economically comfortable because they have all of these financials.

[C]

Oh, no, I have lots of friends. They do not. They can't get a house.

[B]

Correct. No, that's right. Homeownership in these places. You want to talk about home ownership and ability. Home ownership in Europe is almost a non existent thing.

[C]

You never get an apartment for the rest of your life.

[B]

Correct.

[C]

Yeah.

[B]

So the idea that like the American dream is somehow equivalent to the Norwegian dream is just not true.

[C]

Right. It's different perspectives, different ideas. I think as well, it's very encouraging to hear from someone, especially at your stage of life and like how successful you've been able to be, that it takes time. I know there's a little bit of hate for my generation. Just a little. I think one thing that my generation has been lied to about specifically, especially because our quality of life has gone up so much, is just that, you know, it's instantaneous.

[B]

It's instantaneous again. People get tired of hearing people my age talk about the travails. When you're young, it sounds like your parents walking both ways uphill to school. But the reality is that like, I remember when my wife and I were first married and like a great day was I would have a speech at like a local Republican club 30 miles away. We drive there in our shitty 1986 Honda Civic that was literally our first car and we would. We would drive out there, and I'd have, like, a couple of books in the back that my publisher had given me for free. I'd be like, I have 30 books, and I'd sell them at, you know, 15 bucks a pop. And if I may, if I walked away with a couple hundred bucks by selling, like, you know, 15 or 20 copies of the book. Yeah, that was, like, a great day. That was, like, an amazing day. For years. Okay, like. And everybody does that for years. Oh, yeah, Everybody does that for years.

[C]

We're always selling stuff on Facebook, Marketplace. Like, we just moved into a new house, which is totally a God thing, because we're gonna get to own our first house.

[B]

That's amazing.

[C]

Crazy.

[B]

That's awesome.

[C]

Literally cannot believe it. But we moved into a house, and we were, like, selling all our furniture because we were like, okay, we want to get new furniture, so we have to sell it and then get the new things on Facebook. Marketplace. It's life. And I think with the social media age, especially watch all these, like, influencers and people online just have this overnight success all the time.

[B]

And it's fake. It's not real. I'm just telling you, it's totally not real.

[C]

It's not. I've been there. I was an influencer for a few years. All of it's fake. It's all Monopoly, and then it goes away in an instant, you know? So, I mean, I made the choice to get married young, and so when.

[B]

You get married young, it's a good choice. Good for you.

[C]

It was great. I love it. But we didn't have anything. Like, we were like, oh, like, my husband, you know, was a missionary kid, so it's like he had that. I had student debt, so it was like, what are we doing? But it's nice to hear that it takes effort and it takes work, and you will come out in the end okay. And I love the kids.

[B]

Your grandparents did. Most people on Earth today kind of do. Certainly in the west, they do. It will be okay is the first thing to recognize. And it'll be especially okay if you just make good decisions. There's a natural progression to life, and you'll be living in 15 years in a bigger house than you currently live in if you just don't make. I'm trying to remember who said this. I wish I could remember who said it, but it's a wise line. The first path to getting rich is not getting poor.

[C]

Ooh, that sounds like a Dave Ramsey quote.

[B]

Yeah, it's gonna sound like Dave Ramsey sounds like something that's really is it. It's like to avoid the worst decision and that's like half the battle. We'll get to more on this in a moment. First, you think a fresh start means things will be different. But it's the same system. Banks keep winning. Sometimes you're stuck paying the price. Fees stack up. Collection calls won't stop. Every month it just gets worse. Here's the thing. You don't have to keep playing that game. PDS debt has already helped hundreds of thousands of people slash their debt and take back control of their money. That cash should be staying in your pocket where it belongs, not lining the bank's pockets. Like if you're dealing with credit card debt, personal loans, medical bills, piling up, PBS debt actually takes the time to understand what you're going through. They don't just look at the numbers. They get that every family situation is different. They'll work with you to create a plan that fits your life. The best partners. There's no minimum credit score required. They're not going to turn you away when you need help the most. Their whole focus is helping you save money, knock out that debt faster. Finally get some breathing room in your budget so you can take care of what matters. Your family. And they've got the track record to back it up. A plus rating with the Better Business Bureau. Thousands of five star Google reviews. Perfect rating on trustpilot. That's because they've helped hundreds of thousands of people break free from debt. They can help you as well. I have friends who've gotten into debt. It ruins your life. But you can take your life back. Take back control. In 30 seconds, get your free personalized assessment. And the best option for [e-mail] Shapiro that's pdsdat.com Shapiro pdsstat.com Shapiro to people.

[C]

In my generation, what would you say to them when they're kind of pushing these ideals that Zora Mandani has where he's kind of pushing for socialism or as he calls it, democratic socialism.

[B]

All I would say is that when we make public policy, you have to look at the unintended consequences of the policies you're making. Okay, Right. Everything sounds really good on the surface. Right? Okay, fine. I'm just gonna throw a check at you. Oh, my life is better because I have a check now. Okay. That may be true for you in the moment. And I'm not gonna deny that. If I got a $2,000 check today or 5,000 or $100,000 check today I'd feel better about my life than if I didn't get a $100,000 check. But that's not how you make public policy. Because if you give everybody $100,000 check, inflation will obviously be rampant and then the $100,000 and the hundred thousand dollars goes and everybody else's savings are degraded. It's very easy to make a political argument where you say, I'm going to just drop a benefit on your head. It's the free ice cream argument from third grade, right? You have some kid who's running for class president. He says, free ice cream for everybody. There's no real way for that to be fulfilled in a way that actually is useful to kids. There are downside effects of all of that. So when you look at the policies, the long term policy ramifications of these sorts of policies, you actually do have to look at what is going to happen not the moment you get the check, but what's going to happen over the course of the next six months or the course of the next year. And so many of the policies that Zoramdani in New York wants to try were tried in the 1970s and were disastrous. I mean, wrecked the city. So for example, he wants to do a bunch of rent freezes and rent control. They tried this in the 1970s. And you can go back and you can watch on tape the 1977 World Series, which was played in the Bronx because the Yankees were in the World Series. And there's a very, very famous video of Howard Cassell, who is commentating the Yankees game. They pull out, there's a helicopter shot of Yankee Stadium and there's fires everywhere. And so he says, the Bronx is burning. Why was the Bronx burning? Because apartment owners were burning down their own apartment complexes for the insurance money because the rent control had made it less lucrative for them to continue to operate the apartments than to watch them burn down and take the insurance money.

[C]

Oh yeah, and the price of operation goes up over time. So if it's stuck there.

[B]

Correct. All these things have unintended consequences. Everybody wants like an immediate solve. There's a sugar high, I'm sure, for people who receive this in the immediate term. But if you want to make New York more livable over anything like the mid to long term, you actually have to change seriously the underlying policies and prevent people from building extra supply rather than stimulating demand with subsidies and also restricting supply with regulations.

[C]

When you're talking about handing people a check doesn't really help. It makes me think about In Covid, when they started handing out all these stimulus checks.

[B]

And for a moment, it felt great. For a moment it was like, oh, cool, I can buy a bunch of new stuff. And then it turns out you go on Amazon and everything costs five times what it once did. Right. A Thanksgiving dinner is now $1,000, where a Thanksgiving dinner was 300 bucks, like five years ago. There's a great chart showing the price of goods in the United States over time. And what it shows is every single good that government has subsidized, the price goes up. Every single good the government does not subsidize, the price goes down. When the government subsidizes the demand for a particular product. Let's say college education. Colleges just adjust the price to go up with the. With the increased demand.

[C]

Got it.

[B]

Right. Meanwhile, if the government stays out of it, then the prices tend to find their own level. My TVs have gotten better and cheaper because TV companies look at you. They look at me and say, oh, those people want cheap TVs. Great. And if I can make a better TV, then I will be able to make more money.

[C]

That makes sense. So when the government steps in and gives money to people to go to college, as it would be, then they raise the prices just because, oh, well, look, these people are going to college. The government's giving you money. We'll just charge more money now because we can.

[B]

Exactly. And not just because we can, but also because unless they're about to hire a bunch of new professors. Yeah. Then they still have a limited number of slots at the college or university. When I was at Harvard Law, for example, there were like, 500 people per class. I think there's still about 500 people per class. They have not. They've not actually radically increased the number of enrollees at Harvard Law School. And so what does that mean if you have 10,000 applicants as opposed to 2,000 applicants? Well, now I know that I have a big pool of people who really want that. And so the price is going to go up. Yeah.

[C]

And I think in the conversation of education as well, when all these subsidies are happening, it doesn't really push people to look for the cheaper options.

[B]

Right. Or even the best options. So one of the things that's happened in the public markets with regard to student loans, for example, is let's say that there were no public market. Let's say there were no FISA loans. The government wasn't involved at all. Okay. So you get out of school at 18, you decide, I'm gonna go to College. So you look around and you say, I really want to go to, you know, University of Iowa, and I want to major in art history. So now you have to go to a bank, and the bank is going to look at you and say, why would we possibly loan you without any collateral money to major in art history? There's no way you're not going to make that money back. Yeah. And so the art history major at University of Iowa is going to have a real tough time unless there's a donor subsidizing it, getting anybody to come. Instead, if you say, I want to go to University of Iowa and I want to major in geoengineering, and you go to a bank and the bank says, okay, well, it looks like the trajectory for your income path is pretty good. So I will give you a decent educational loan because I think there's a good shot you're going to get paid back. So this is what happens, for example, when I went to Harvard Law, the impression that banks. I wouldn't need a publicly subsidized loan to go to Harvard Law. The salary coming out my first year, when I was coming out was $180,000. And so they knew that if they lent me 100 grand a year to go to Harvard, that over the course of the next 10 years, there's a very high likelihood that I was going to pay off my loan. So the private markets are very good at determining their risk, and that's particularly true in education. In education, bizarrely, the only area where there's no collateral. Right. They can't seize your degree if you don't pay. They can't take your degree back. What are they gonna do with it? So the question is, why would they loan to you? And the only answer is, because they believe you're going to earn out and then you're gonna pay back your education. But the government doesn't care. The government has an interest in making you feel better by going to college. Governmental actors took the wrong lesson from the 60s and 70s. So in the 60s and 70s, a major income gap began to emerge between college grads and people who are high school grads.

[C]

Yeah.

[B]

And the reason, obviously. Of course. Of course. Just as there would be a major income differential between people who graduate high school and people who don't graduate high school.

[C]

Yeah, of course.

[B]

So what the government said is, well, the way to solve this is by getting more people to go to college. Okay. Well, actually, all that did was it created a striation in college grads. Right now there's a New striation, which is if you go to grad school, better income trajectory than just college. And there's a huge striation in majors. So if you're an ed major at Harvard, you're gonna earn way less than you would as a STEM major at Harvard. Of course, of course.

[C]

I've never thought of it that way. So this is very much blowing. My mind is that the government giving subsidies potentially ruined college education in the sense that people used to go to college to actually pursue things that would provide a career or a better future for them. Like, I'm going to go to law school. You know, I'm going to become an engineer. And now we have all of these random majors, like I'm going to major in philosophy of kneecaps, like something stupid.

[B]

That's right. And not only that, it also screwed up the employment market. So, for example, you want to work as a barista at Starbucks. Why do you need a college degree to work as a barista at Starbucks? You shouldn't have to. Right? Or as a hairdresser or whatever. Like, there are a million jobs in America, millions and millions of jobs that should not require a college degree. The problem is if everybody goes to college, then it turns into graduating from high school. Right. It's just like the next level. And so if you didn't go to college, there's now something wrong with you. And then to make things even worse, basically what college degrees have become is an effective IQ test. So we look at the degree that's on your diploma, or we look at the degree that's on your resume rather than. And we say, okay, you went to Harvard. That means you're smart. You went to, you know, juco. That means you're not as smart. And so we'll give you an advantage if you went to Harvard as opposed to you went to juco. Well, why did. Then why. Why do we make the guy who's going to juco pay $200,000?

[C]

Right.

[B]

In order to. In order to compete with the guy from Harvard. What would be better is if we actually didn't have that system at all and employers hired without regard to college degrees. So you're seeing people now like Peter Thiel or like Alex Carp or like we do at this company, actually try to look at the underlying performance in either prior jobs or apprenticeships instead of just looking at the college degree as sort of the be all, end all, heuristic shortcut.

[C]

Yeah, I really appreciated that when I applied to this company because I ended up dropping out of college because two.

[B]

Of our three founders did not finish college. Yeah, right. I'm the only one with higher education. Really?

[C]

Well, you're the smartest, obviously. I'm just kidding.

[B]

Caleb, don't. Yeah, don't take it that way. But yeah.

[C]

Okay. So I want to better understand what happened with the housing crisis and how we got to a point where houses are as expensive as they are.

[B]

What we're getting right now is the impact of a few things. One, massive inflation of the currency. So that, that is, you know, putting a lot of money in people's pockets. Like just cash money in people's pockets. That's what happened during the Biden administration. And so they're taking that money and they're saying, where do I put that? So you're seeing it go to the top end of the stock market. Right. Nvidia and the rest. But you're also seeing it go into real estate. People taking that money and saying, I want to buy a house. Okay. Simultaneously, because the inflation was so high, because people had all this money in their pocket, the government is trying to bring the inflation down. And so the Federal Reserve increased the interest rates. Okay. That is a way of making it harder to borrow money. Yes. Because they don't want people to borrow more. If you can borrow more money, you continue to have this inflationary price spiral. So what does that mean for people who own houses? If you wanted to increase the supply of houses, then you need to do one of two things. Either get people who own houses to sell them. Yep. And move into a different place, or you need people to build houses again. There's a delay effect on the building of the houses. You'd have to relieve the regulations. They haven't really done that. So what you end up with is a bunch of people who are older who are not moving out of their houses. This was a big problem is that you'd have high prices. It was sort of a bizarre, sticky real estate situation. In places like Florida, you would have people who are 80 who don't need a five bedroom house.

[C]

Right.

[B]

But they don't want to sell their five bedroom house. Why? Because if they sell their five bedroom house, which they have a 30 year mortgage on at 2%, they now have to get a new mortgage. And their new mortgage is at 7%.

[C]

Yeah. Which is a lot.

[B]

And so they don't want to sell, so they just stick in that house and they stay there. And then that's not new inventory on the market. So the price doesn't come back down. So the price. So the housing Market's been very sticky.

[C]

Yeah, I noticed as well in 2020, it felt like so many people were buying homes just because the interest rates were so low and it was so affordable. Did that cause a lot of the issues as well?

[B]

Yeah, I mean, as soon as you have a lot of people who have the money in their pocket, your demand has gone up. Yeah. Right. So if the supply doesn't go up to meet it, then you have a problem. So one of the things that happened is that because of the worldwide shutdowns from COVID for example, all the materials coming into the United States came in slower. Right. We had these gigantic bottlenecks. It became very expensive to build. Right. The tariffs are making it more expensive to build. Right now, if you talk to contractors, they're having a tough time getting the materials that they need at an affordable price. So the price of building has gone up. And so you have all of these things kind of meeting in the middle and making it very, very difficult to buy houses. And that's particularly true in places that are already very pressured in terms of space. Yeah, that's really true in big cities and their surrounding suburbs. Again, this is why I got myself in some trouble by making the, I think, eminently obvious suggestion that if you can't afford to live in New York, I'm not talking about, should we shift policies in New York? Of course we should. I'm talking about you as a 24 year old. You should pursue the best opportunities available to you. Right. If that opportunity is not available in New York, just a piece of life advice, then you should really look to move to Nashville or Florida or someplace or Austin, someplace where you have a better opportunity to do that particular thing. And that's always been a hallmark of economics is the fluidity of, for example, labor. You lose your job, you don't sit around saying, I want my old job back at the same exact factory. You try and find a new job at a different place. If you can't afford to buy a home in one particular place, typically what we would do in the United States is we'd try to find a better place to live. And so you get population movement. Fewer Americans are moving now. And because fewer Americans are moving, that means that again, there's a lot of stickiness in the, in the markets, in places like New York or Los Angeles or Seattle.

[C]

So you mentioned a little bit ago that the tariffs are causing a lot of bottlenecks in the buildings. So did that start during Trump's presidency? At the start of that, all the policies he was putting in place.

[B]

No, it's exacerbated a little bit in things like lumber. But it really started during COVID So during COVID because the global markets basically shut down and because all the ports were closed and it created these massive supply chain bottlenecks all over the world that meant that materials just were not available to build. And then it took a long time for global shipping to restart. And there were empty ships that were arriving on shores because the ships keep going whether or not they're loaded up. And so you ended up with this huge supply chain bottleneck, which did in fact contribute to the Biden inflation. It wasn't just that Biden had bad economic and fiscal policy, which you did. It is true that Covid did create massive supply chain bottlenecks that led to inflation. Because again, if you have bottlenecks in supply, less supply, same demand, higher price.

[C]

So how long approximately do you think it would take in order for the demand to actually reach the place that it needs to be to lower housing prices?

[B]

So demand has to go down or supply has to go up?

[C]

Yeah, I mean, supply.

[B]

Yeah, yeah, right. So how long would it take for supply to go up? Yes, it depends on where you are. So again, in New York City, the answer is it's going to take while you can't really build it out. There's no place to build it out, so you have to build up. It's very expensive to build New York City. The regulations there are really, really exorbitant. Even if you got rid of most of the really onerous regulations, the taxation, the difficulty in building, it would still take, I would imagine, you have to talk to a builder route, I would say three, four years minimum before you start getting a real alleviation in the housing supply in a way that dramatically would lower the prices anyway, in, like in Austin, where you can build out, it's a lot easier. Right. You can just get some developer. Everybody's yelling at the developers right now, how dare the developers buy up housing in Austin? Well, the developers are buying up housing in Austin because what they are, they're frequently doing is they're taking older houses, making them over, and then reselling them at a higher price to people who want the houses. And if that continues, then the developer moves on and does that to, to another neighborhood. And that's actually how you increase the housing supply. Yeah, let's say that somebody is buying up a whole block of single family homes that are 900 square feet from when your grandparents were there, and they're flipping Those all into 2,500 square foot or 3,000 square foot homes because they're on big plots of land and now they're selling them to somebody who's upper middle class. Okay, well, I would say that's a good thing because you will increase the housing supply. Why? Because those developers are now going to take that money and they now know there are a bunch of people who wanted those houses, who weren't able to get those houses and now they're going to go build new houses if they have any brains at all. And if they don't have any brains, what they'll do is they'll take that money, they'll put it in a bank and that bank will then lend out the money to another developer to take out the money to go build those houses. If you want more supply, then the incentive of demand creates supply. Right. So the reality that, you know, a number of people who are willing to buy those crappy houses, then somebody will build the crappy houses. The basic assumption of classical economics. Now the only reason that wouldn't happen is overregulation. Right. Prevention of people from building those houses. But there is this sort of assumption that. But you want that house. Okay, well there's no right in economics to that house. Right. There's no right in America to quote unquote, that house. You know, this happens all the time, that there'll be bidding on empty land. Forget about the house. There's bidding on empty land. Yeah, okay, forget that. There's a house already there. You'd like the piece of empty land to build a three bedroom house. That's going to be 1400 square feet. I want that piece of empty land to build a 10,000 square foot house. I have more money. I'm going to buy that piece of land.

[C]

Yeah.

[B]

Okay. Does that mean that I deprived you of that piece of land or does it mean that I was able to pay a higher price and that the person who received that payment for that empty piece of land, which Maybe they bought 100 years ago, they're not going to take that money and they're going to put that money in a bank. That bank knows that you still want to buy a piece of land to build that house. And so if you're a good credit risk, they will lend you that money to go out and build that house. Free flow of capital is the way that more things happen.

[C]

So you would argue that capitalism is the best route because it will always increase the supply for people to meet the demand.

[B]

Yes.

[C]

To meet the demands.

[B]

Correct. Exactly. Because if you're a capitalist, then what you want to do is get your product to the market and take advantage of the fact that people want that product in return from you. You can talk about sort of a mixed economy and then you can talk about socialism proper. So socialism proper would be the government just seizes the entire housing supply and then redistributes it as it sees fit and then decides the price of houses and essentially builds ground up by forcing people at the point of gun to build. And what you end up with is terrible workmanship. You end up with a completely unwieldy market. You end up with the ugliest housing available. I mean, go look at the Soviet Union or the ugly people who are living the ugliest places by dint of the government. The government decides where you live. Right? That's full communism. That's typically not what people are talking about today when they say socialism. What they really mean is confiscating wealth from wealthy people and then subsidizing particular people in order to build, quote unquote, affordable housing. Right. So what they're going to do is they're going to go to a developer and they're going to say, okay, in order for you to build X number of luxury units, we're also going to force you to build X number of affordable units. It does have unintended consequences. So for example, why does the government need to do that? Right. The idea would be that you have to force somebody who is a luxury builder to build a certain number of affordable units. And the affordable units are going to be, I assume, rent control. It's going to have to be the government telling you what price you can rent at. And so it's basically a subsidy from the government to the developer. And you now have to pay the developer to do that. Okay, well, the government is filled with inefficiencies. The government is not good at determining prices. What would be better is to just let the developers build as many luxury units as they want. People who are in these sort of mid range will then have a better supply of luxury units. They can move from their mid range apartments to the luxury apartments. Their apartments are now empty. The price of those goes down because you have a higher supply of mid range apartments. And then all the places that are, you know, affordable housing, those people move up. Like this is how housing has gotten better over time. So one of the things people miss is they assume that the housing supply is totally static in terms of quality. Right? They assume. This is why you see these Memes online. My grandpa used to live in 1950 on one salary working at the Ford factory and grandma wasn't working and they could afford a house. The house they could afford was shit. It was terrible. If you go back and like, seriously go back and look at a house built in 1950, oh yeah, I lived.

[C]

In one of those houses.

[B]

Yeah, they're not good. They're not nice. I mean, they're really bad. They're like 950 square feet. They typically are not particularly well insulated. They don't have central air very often. Like they're not houses that anybody wants to live in. So when they say I can't afford the same thing my parents could afford, that's not true. You can't afford the exact same thing your parents, your grandparents could afford. You just wouldn't want to live there. Right. It's like saying, you know, back in the day, my grandparents, they could afford to live on a 1 salary in 1955. Okay, well if you want the rotary telephone back and you wish to have a clunker that gets 10 miles to a gallon, and you don't want a microwave and you don't want an oven, you don't want any, you don't want any of the nice things that we typically enjoy, we could do that. I mean, we could do that right now. But that actually is living more like some places in like Central and Eastern Europe than it is like living typically in the United States.

[C]

This is finally clicking in my mind for the first time how it works because my parents, they bought, you know, their first home was $50,000 and it didn't have a dishwasher or heat or any of those things. And they were able to move into a better house over time. But even then it took, you know, 10 years, 100%.

[B]

So this is my parents story too, right. So I grew up in an 1100 square foot house, something like that, in Burbank, California. Two bedrooms, one bathroom, six people. Right. And no like amazing amenities. It was fine. It was like a nice middle to lower middle class house in Burbank. It was a great place to grow up. But my first apartment that I got with my wife, our first condo was like 1,400 square feet. That was like our first one. So it's bigger than what my parents had when they were, you know, when they were getting married. It's bigger than what they had. And then we've been able to obviously work our way up to like a really, really nice house. But that's true for my Parents also. So, you know, when people talk about the wealth gap and they look at various groups, one thing that happens is people change their wealth status over time. One of the ways people have traditionally built up wealth in the United States is by going and buying a house in a particular area, holding it for a particular period of time, and then. And then selling the house. I mean, that. That's been one way that people have made money. That's. Buying and holding stock is another way that people have made money. But yes, I mean, the quality of life that your grandparents had or your parents had is so much lower than kind of the normal quality of life that we all take for granted. Everyone's grandmother could buy. Go down to the local store, and for a cent, you could buy a candy bar.

[C]

Yeah.

[B]

Okay. Does that mean she was wealthier than we are? Well, no. She was living in 1920. So actually, the stuff that she had availability to would be absolute poverty level. Like below poverty level crap today. Yeah. Right. Like, every poor person in America has a cell phone. Okay. Not one of our grandparents had a cell phone. Right, right. Like, it's a magical piece of machinery.

[C]

Some of them didn't even have landlines.

[B]

Correct.

[C]

They were expensive.

[B]

If you go back to, like, the early 1900s, a huge number of houses in the United States didn't have toilets and they had houses. So trying to compare by simply looking at kind of like dollar amounts, what you can buy with the dollar is the thing that's more important. There's an economist who I like to cite named Marion Tupy. And what he has developed is a measurement that I think is much better than just looking at dollars. What he has developed is basically how much time would it cost you in your life to purchase a particular unit of good. If you go back to 1800, it would cost you multiple days of work to buy basically an hour of light because you had to buy a candle. So the candle had to come from somewhere. Sometimes it came from whale oil, sometimes it came from wax. Today, it costs you zero time to buy an hour of light. Right. You flip on your light, it's done. You literally can just do it for free. Okay. So that is why it's better to use sort of time value and what we have to invest. And that's why if you look at your life right now and you compare it to how long would it have taken you to get. Let's say you order a table from Amazon. It takes two days to get there.

[C]

Yeah.

[B]

It took you one click of a button, and it cost you whatever. $100. Okay, so how many hours would you have to work in order to earn $100 to pay for that table and to have it shipped and to put it together? And the answer is it's a lot cheaper now than it was even 30 years ago.

[C]

Yeah. Well, thank you.

[B]

Thank you.

[C]

I feel like you covered everything and I really understand kind of where economics are and why the increase of demand and supply kind of affects the economy and also why socialism doesn't work.

[B]

Thanks.

[C]

Which I never knew.

[B]

Good times.

[D]

Limu Gamu and Doug.

[B]

Here we have the limu emu in its natural habitat, helping people customize their car insurance and save hundreds with Liberty Mutual. Fascinating. It's accompanied by his natural ally, Doug. Uh, Limu is that guy with the binoculars watching us. Cut the camera. They see us. Only pay for what you [e-mail] Liberty Liberty Liberty Liberty, undertaken by Liberty Mutual Insurance Company and affiliates, excludes Massachusetts.

[D]

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