WTF Happened To California?! | Newsom Failures, Insurance Cancellations, & Water Shortages

Summary

Podcast Summary: The Iced Coffee Hour
Episode: WTF Happened To California?! | Newsom Failures, Insurance Cancellations, & Water Shortages
Hosts: Graham Stephan & Jack Selby
Guest: Kevin Paffrath
Release Date: January 12, 2025

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1. Introduction to California’s Crisis

Timestamp: [00:28] – [03:23]

The episode kicks off with Graham Stephan and Jack Selby delving into the catastrophic Palisades fire, marking it as one of the most destructive in Los Angeles history. They introduce Kevin Paffrath, a familiar guest and former gubernatorial recall candidate, to discuss the intertwined issues of wildfires, political failures, insurance cancellations, and water shortages plaguing California.

Notable Quote:

Kevin Paffrath ([00:49]): "It's going to take a massive political shift away from this super majority of Democrats that we have right now in this current leadership."

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2. Political Mismanagement and Leadership Failures

Timestamp: [03:23] – [10:04]

The conversation centers on the perceived inefficacy of Governor Gavin Newsom and the Democratic supermajority in California. Paffrath criticizes the administration for failing to address critical issues such as crime, water shortages, and economic policies, citing specific instances like the inadequate response to fires and infrastructure neglect.

Notable Quote:

Kevin Paffrath ([03:23]): "I'm not saying Democrats are bad, I'm not saying Republicans are good. I'm just saying that the current people that are in office all need to go because they've all failed California."

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3. The Insurance Crisis and Its Ramifications

Timestamp: [10:04] – [35:10]

A significant portion of the discussion highlights the burgeoning insurance crisis in California. Major insurers like State Farm have begun non-renewing policies in high-risk areas such as Pacific Palisades, leaving homeowners either underinsured or without coverage. Paffrath explains the economic inviability for insurers due to rising wildfire risks and stringent regulations, exacerbating the unaffordability and scarcity of insurance options.

Notable Quote:

Kevin Paffrath ([01:26]): "It’s a complete rip off, heavily in part because of our politicians."

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4. Water Shortages and Infrastructure Neglect

Timestamp: [35:10] – [58:57]

The hosts and Paffrath delve into California’s persistent water shortage issues, attributing them to poor infrastructure investments and political gridlock. Despite initiatives like SB148/149 aimed at funding water reservoirs, actual progress has been sluggish, hindering effective wildfire mitigation and everyday water supply needs. Paffrath emphasizes the critical need for timely infrastructure projects to prevent future catastrophes.

Notable Quote:

Kevin Paffrath ([03:49]): "It's a great place to live if you can spend all of your money and not pay the taxes by expensing it all."

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5. Regulatory Hurdles: CEQA and Building Codes

Timestamp: [10:04] – [25:12]

The conversation shifts to the California Environmental Quality Act (CEQA), which Paffrath argues is a significant impediment to necessary infrastructure projects. CEQA allows for extensive litigation that delays or halts the construction of critical fire prevention and water management systems. Additionally, fragmented and evolving building codes across counties complicate reconstruction efforts, making them prohibitively expensive and time-consuming.

Notable Quote:

Kevin Paffrath ([10:28]): "The problem is what's preventing these things from getting done right now? And a lot of that has to do with CEQA, California Environmental Equality Act."

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6. Environmental Policies and the Delta Smelt Debate

Timestamp: [73:19] – [79:53]

A contentious topic discussed is the role of the Delta smelt, an endangered species, in shaping California’s water policies. Paffrath criticizes the overemphasis on protecting the Delta smelt, arguing that it has been used as a scapegoat to block essential water infrastructure projects. He contends that protecting this single species hinders broader environmental and economic stability, preventing effective wildfire mitigation and water distribution.

Notable Quote:

Kevin Paffrath ([75:14]): "So, so yeah, the idea of something being an indicator species exists. It's again same reason we use mice. But that doesn't mean that we're necessarily going to see all of the externalities of all humans getting cancer."

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7. Housing Affordability and Rebuilding Challenges

Timestamp: [35:10] – [46:34]

The discussion moves to the housing market, highlighting how underinsurance and skyrocketing insurance premiums post-wildfires contribute to housing insecurity. Paffrath explains that many homeowners are left unable to rebuild due to inadequate coverage, leading to forced sales to developers and subsequent gentrification. This exacerbates the housing shortage and drives up rental prices, making affordability a persistent issue.

Notable Quote:

Kevin Paffrath ([37:25]): "Terrible. Like rates are going to go up. Because I mean, the way I look at it is, it's a..."

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8. Economic Implications and Future Outlook

Timestamp: [49:08] – [58:57]

The hosts explore the broader economic impacts of California’s crises, including potential declines in property values and the risk of an insurance market collapse similar to the 2008 financial crisis. Paffrath remains skeptical about the government’s ability to implement effective reforms without significant political change, emphasizing the need for a balanced approach to economic recovery and infrastructure investment.

Notable Quote:

Kevin Paffrath ([58:20]): "This whole thing is due to the political failures. It's also the fragmentation of codes and regulations that make reconstruction prohibitively expensive."

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9. Societal and Cultural Shifts

Timestamp: [75:14] – [93:05]

The conversation touches on societal issues, including rising crime rates and the impact of regulatory policies on community safety. Paffrath discusses the defund-the-police movement and its repercussions on public safety, arguing that insufficient law enforcement exacerbates crime and diminishes residents' sense of security. Additionally, they examine the cultural disconnect between California’s diverse population and the evolving political landscape.

Notable Quote:

Kevin Paffrath ([75:32]): "What was the balance? Well, you can protect one life, save one fish."

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10. Environmental Solutions and Policy Recommendations

Timestamp: [93:05] – [101:34]

In the final segments, Paffrath offers recommendations for addressing California’s intertwined crises. He advocates for streamlined regulatory processes, increased investment in water infrastructure, and comprehensive reforms in building codes to enhance wildfire resilience. Additionally, he suggests incentivizing insurance companies through regulatory adjustments to make coverage more accessible and affordable for homeowners.

Notable Quote:

Kevin Paffrath ([101:34]): "The whole premise of building infrastructure is economic survival of the state versus protecting fantasy fisheries."

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Conclusion and Call to Action

Timestamp: [101:34] – [103:13]

Graham Stephan and Jack Selby wrap up the episode by thanking Kevin Paffrath for his insightful contributions. They emphasize the urgency of addressing California’s multifaceted challenges through political reform and infrastructural investment, encouraging listeners to engage in informed discussions and support initiatives aimed at resolving these critical issues.

Notable Quote:

Graham Stephan ([103:00]): "Thank you, Kevin, for coming on The Iced Coffee Hour. We appreciate your insights."

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Key Takeaways:

• Political Shift Needed: A significant change in political leadership is essential to address California's ongoing crises effectively.

• Insurance and Financial Strain: The insurance industry's retreat from high-risk areas compounds housing insecurity and economic instability.

• Infrastructure Investment: Timely and strategic investment in water management and fire prevention infrastructure is crucial for mitigating future disasters.

• Regulatory Reforms: Streamlining regulatory frameworks like CEQA can accelerate necessary infrastructure projects without compromising environmental standards.

• Environmental Balance: Protecting endangered species should be balanced with broader environmental and economic needs to ensure sustainable growth and safety.

Final Thought: The episode paints a dire picture of California's current state, underscoring the urgency for comprehensive reforms and proactive measures to safeguard the state's future amidst escalating natural and man-made challenges.

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Note: This summary excludes all advertisement segments and focuses solely on the substantive discussions and insights shared during the podcast episode.

Transcript

[Graham Stephan]

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[Kevin Paffrath]

Eduardo when the sun came up, we could finally see the scope of the devastation. The Palisades fire alone, the most destructive.

[Graham Stephan]

Fire in LA history. So why has this fire become so politicized?

[Kevin Paffrath]

I don't know how you can't blame the existing government. Literally talking to the President right now.

[Jack]

Can I hear, Can I hear your call? Because I don't believe it.

[Kevin Paffrath]

The entire state is a disaster. Crime is completely out of control. The water crisis is a literal unmitigated hell because Karen Bass didn't fill the reservoirs. So the fire trucks are there. They couldn't pump water. Insurance is a complete rip off, heavily in part because of our politicians.

[Jack]

Some number of private insurance companies have been non renewing policies in the Pacific Palisades area.

[Kevin Paffrath]

It's going to take a massive political shift away from this super majority of Democrats that we have right now in this current leadership. I'm not saying Democrats are bad, I'm not saying Republicans are good. I'm just saying that the current people that are in office all need to go because they've all failed California.

[Graham Stephan]

Kevin, thank you so much for coming on the Iced Coffee Hour. I really appreciate it.

[Kevin Paffrath]

My pleasure. I feel like I've been here before. I think so a few times.

[Graham Stephan]

You've probably been our most recurring guest.

[Kevin Paffrath]

That's amazing. Well, thanks for having me back.

[Graham Stephan]

I appreciate it. Well, thank you for putting this together last minute. This is one of the episodes that were not planning on posting at all. And I think with everything going on, it's really important to talk about what's happening. We wanted to call you in particular because you actually ran against Newsom in his recall in California. You have a lot of insights into the political system, what actually goes on behind the scenes. You're in real estate and we've all been affected by the fires in one way or another. Not a lot of people know this, but my mom actually lost her house in the 2018 fires. Jack, you lost your home.

[Jack]

Lost my home in the Thomas fire, which was like late 2017, early 2018.

[Graham Stephan]

Yeah. And, yeah. And you were in the same location, basically, as. As Jack.

[Kevin Paffrath]

We opened our window. Well, I mean, Lauren, I had like four hours of sleep that night. And Lauren's like, kevin, there's. There's an evacuation order and, and says the fire. I'm like, ah, fake news, fake news. This was back in 2017. I didn't believe it. We opened the blinds above our bathtub and. And we could basically see where your house was and the fires coming in that close. We were in the flatlands under it. But, yes, that was a terrible, terrible day.

[Jack]

It was pretty brutal. We all have experiences we can share, obviously, and how it pertains to the fires that are currently going on in California. So I think we all have few unique insights and I think it'd be an important thing to discuss. So that's why we're recording the podcast.

[Kevin Paffrath]

Absolutely. Well, I'm excited to talk about it and the solutions that hopefully California can implement. And we'll see if the new Trump administration can help with those as well, because Newsom can't get anything done.

[Graham Stephan]

Yeah. Well, this is one of the things I found very interesting technically. Now, this is the most destructive natural disaster in the history of Los Angeles. The fire was moving five football fields a minute. It's one of the worst wildfire episodes in California history, with an economic loss of 135 billion to $150 billion. A question I want to ask you. Do you think California is still a good place to live for the average person?

[Kevin Paffrath]

Oh, great question. Well, I think there are a lot of opportunities in California outside of the political spectrum. Just, we have a lot of jobs. San Francisco Bay Area San Francisco obviously has turned into a disaster under the leadership of people like London Breed, the mayor of San Francisco, and Gavin Newsom, who was the mayor before that and is now the governor. But a lot of jobs, a lot of jobs in the East Bay, a lot of jobs in, you know, farming, the San Joaquin Valley, a lot of jobs in Los Angeles, San Diego. So I think there's a lot of opportunity. The problem is the politics have made it so prohibitive to advance in certain types of businesses, to grow your business, to try to grow your investments in California. Simply make a simple comparison to taxation. What? Out here in Vegas, your top tax bracket is 38%. Your Fed plus your maybe Obamacare tax, 3%. Look at that same thing in California, and you're at 54%. More than half of your money is going away to the government. So I think California is A great place to live if you can spend all of your money and not pay the taxes by expensing it all. Great way to do it because then you get the benefits of California without paying the taxes or you probably want to live somewhere else. It's just gotten so challenging, especially with what you guys had to deal with in Santa Monica. It's. It's so sad seeing what you had such a great video on. What happened to 3rd Street Promenade, the before and after businesses leaving because you can't do business. How are you supposed to start as an entrepreneur in California with the regulation, the red tape, the permitting, the fees that they want to take? I think Lyft is now suing San Francisco for overcharging them in taxes as a percentage of the revenues they were collecting. It's, it's just, it's a cost prohibitive place to do business. But it is a great state and one day it'll be fixed. Politically, it's just not there right now.

[Jack]

And in terms of the regulatory environment, I remember when we were rebuilding on the lot that obviously our original house burned down on. It was so complicated and, and dragged out so long to rebuild the house that was burned down because of a lot of the failures of the city. Like, same thing happened where we had the Santa Ana winds. We had over a thousand structures burned down in the Thomas fire. And on top of that, water pressure was basically gone. A lot of the fire hydrants stopped working. People couldn't defend their homes. And so it was kind of a failure on that behalf as well. So it's like continually over time, California has consistently struggled and it's hard to know who's to blame for all of this stuff. And Graham's actually done a ton of research, so he's pretty well educated in that. We're going to get into a lot of the misinformation, which I think should be pretty interesting.

[Graham Stephan]

Yeah.

[Jack]

What we'd like to know from you is what do you think the outcome of something like this will be? The massive California wildfires that are going on right now.

[Kevin Paffrath]

Yeah, well, a lot to unpackage there. So I think it's worth starting with the regulatory because that's going to build into what the answer is. In some sense, you were not lucky to have your house burned down, but lucky to have the rebuilding process happen in Ventura, because even though Ventura is bad, Los Angeles and Palisades is going to be way worse. I mean, there are now rumors, we don't know if they're true, circulating about potential attempts to rezone and we can talk about that in the future. Rezoning to more multifamily for the Palisades, we'll talk about that. But I do believe that between now and the long term future could. It'll be probably five years out. The Palisades will probably be one of the most beautiful places again, just like it was when you had the Palisades Village, which actually survived this fire. All of that will be rebuilt. All the homes instead of being 60s, 70s, 80s homes, will be brand new homes, all the infrastructure will brand new. And hopefully we'll be able to learn from the mistakes that helped contribute to this fire and prevent those in the future. But that's where we get into that regulation side where I don't know if California can pull it off and prevent it again because let's talk about that Thomas fire and those fire hydrants not working. Why is it that in 2017 the state of California gets a heads up that, hey, when you have properties at elevation on a hillside, which we have a lot of hillside in California, fire hydrants might stop working. They might stop working because you don't have adequate water supply or because the power goes off and the pumps stop working to pump water to those fire hydrants. Why is it that that 2017 lesson where hydrants were going dry didn't teach California that, oh my gosh, we should make sure hydrants never go dry again. If that could have been prevented for the Palisades fire and we actually would have had for hydrants, maybe fewer homes would have been lost, maybe fewer people would have died. We're at 10 deaths, but we expect that number to rise substantially. I mean, you just can't find all the people who have died yet, which is horrible. So that's where, in order to know where we go in the future and to sort of answer your question, it comes down to what do you think Newsom can do and what do you think the super majority of Democrats can do in California? I think the best answer is what they have been able to do over the last 10 years. Well, 10 years we passed S.B. i believe it was 148 or 149 to fund about seven and a half billion dollars for six new reservoirs in California for water reservoirs. So we'd have enough water, keep hydrants full and keep tanks full. As of 2021, not a single dime was spent on actually building them. And over the last three years, we finally gotten to where we have engineering approvals to build one of the reservoirs and they might start construction in 2026 on it and maybe it'll be done by 2032. So if you look at that, the answer to your question of what do I think will be done is more 20, what is that? 2014, you funded it to 2032. It's built 18 year projects to maybe get more water and things done better. I don't think it'll be that bad for people rebuilding their homes. But the point is, will California ever get around to fixing regulation, to fixing how our infrastructure is handled, preventing hydrants from going dry and reservoirs from, from emptying out? It's going to take a massive political shift away from this super majority of Democrats that we have right now in this current leadership. I'm not saying Democrats are bad, I'm not saying Republicans are good. I'm just saying that the current people that are in office all need to go because they've all failed California.

[Graham Stephan]

Some of that seems like a bit of a policy issue that it takes that long to get something done. My worry is it's a bit like the LA freeways where they build just enough for demand. So they'll anticipate demand 10 years from now, but it takes 20 years to get done. And then by the time it's done and they expand the freeways, it's still too small because the population has outpaced it. Could it be the same way with something like this where they're anticipating something but it's not going to be enough given that the fires are getting worse?

[Kevin Paffrath]

Well, the problem is what's preventing these things from getting done right now? And a lot of that has to do with CEQA, California Environmental Equality Act. Now Reagan passed this in 1970, which is really interesting because Reagan was, was deemed to be a hero that people loved. I mean he, I think he got the most electoral votes when he ran for president ever against Jimmy Carter. He had over, I think it was over 450 electoral votes, which is a crazy landslide. People say Trump won with a land slide in the low three hundreds of electoral votes. I think it was, but that was a landslide back then in 1980 and he was a governor of California first. But anyway, I think Cequa is a disaster because it allows anybody with any beneficial claim, either pro or con, to sue any developer of solar infrastructure, housing infrastructure, fire infrastructure, water infrastructure, schooling infrastructure, anything, transportation infrastructure, anything. You could sue and basically tie up any project in court until it's litigated. Which let's put it this way, right now, in certain counties, if you evict somebody you win. Okay? You slam dunk an eviction against a tenant. You could sit in court waiting for your eviction notice basically, to get signed off on for months because the courts are so backlogged. So you could win. The tenant is still there, but the courts sit on it for months, signing the final order because they're so backlogged. That's for what should be a slam dunk case. You know, an eviction which is supposed to take three weeks.

[Graham Stephan]

Yeah.

[Kevin Paffrath]

Turns into three months, four months, because they're so backlogged. Now, try that with environmental litigation, where you have experts from all angles on, you know, fish, on wildlife, on salmon, on trout, on the delta smelt, on, on noise, on air pollution, on air quality, on environmental rights, on that person's leg, he shed. That's historic. You know, all of that comes into play now. Newsom and Democrats signed a law, again, it was either SB149 or148, one of those that allows the CEQA litigation process to be shortened to no more than 270 days only for projects that Newsom signs off on. So now what you've actually done is you've made the governor of California even more powerful, where he's control of the whole Democratic legislature and now his signature can approve which projects get the shortcut for ceqa. So the amount of power that the Democratic machine has, I mean, we started with the media control they have out here, but the power that they have is, is unmatched. They are the most powerful political body, I would argue, in the world, because there's just, there's no counterbalancing force. And it's ironic, and I'll stop talking for a moment, but it's ironic that now you have this media talk about Democrats saying, well, you know, it's. If Republicans weren't standing in the way of climate change, we could have done something. There is no Republican standing in your way in California because you have a super majority of votes in the legislature. Even Arnold Schwarzenegger didn't, you know, have that problem when he was governor as a Republican in California, super majority means literally a Republican can't do anything. They've got over 70% of the legislature. You've got the Democratic governor. So Democrats are 100% and entirely at fault for whatever happens in the political process because there is nothing a Republican can do to balance it out in California.

[Graham Stephan]

So why has this fire become so politicized? Why has it become a left versus right issue?

[Kevin Paffrath]

Well, I mean, everything becomes a left versus right issue, right. I Mean, look, do, do I think that if tomorrow we had all Republicans in charge, this, this would flip? Not necessarily. Unless they actually fulfilled the promises. I mean, every politician makes promises. But, you know, when I ran for governor against Newsom, one of mine was that we were going to build a water pipel make sure that our rivers, like the Colorado river especially, were always full of water so our reservoirs don't go dry. Like the Santa Ynez Reservoir, which is vertically and physically north. North and up the Palisades. 117 million gallon reservoir. That's bone dry because of a crack in the concrete that politically nobody was able to get around to fix. Which again, is sad and there should be no excuse for because you have full control of the process. So it blows my mind because the Palisades were fed with three tanks of water, 1 million gallons each. Yeah. There was so much demand which drained those tanks, but they could have been replenished by a reservoir with 117 million gallons, 30 to 40 times the capacity of those tanks. But it was bone dry before this fire because of, again, mismanagement by a political atmosphere. So why does an issue become politicized? Well, I mean, social media helps, but I actually think it's a good thing because the more politicized this becomes, the more attention comes the problem, and hopefully it drives change. But mass shootings get politicized too. And then the question is what? What ends up happening? Do we ever spend a dime more on mental health?

[Graham Stephan]

It worries me that it seems like politicians are really just trying to sling crap at each other. Of course. And they're using this as a way to make themselves look better.

[Kevin Paffrath]

Absolutely. I mean, that's like the. See, the job of a politician is just to get reelected, in my opinion. I feel like so much of me is like, every politician should only be allowed. Forget about term limits. You get one term and then once you're in office, you never have to worry about having another election. Well, now all of a sudden, stuff could get done. So Gavin Newsom In 2021, when Biden took over, said, oh, this is great. Biden has taken over. He's on video saying this at a press conference. Biden has taken over. We can now work in coordination with the Biden administration and finally conduct land management, forest management, wildfire prevention work. We could do it all because we're all working in unison. We have a Democratic legislature and you know, in California we've got the Democratic governorship, but now we've got a Democratic Congress and presidency at the federal level. Nothing can stand in our way of solving wildfires in California. Except they did nothing except cut the budget for Cal Fire for the LA County Fire Department. Because when budget complaints come up, their pet projects don't get killed. Like the high speed Rail to Nowhere or Homeless Prevention, which we spend, you know, $6 for every $1 on homeless prevention that we spend for fires. So again, to clarify that $6 goes to homelessness, $1 goes to fires. Yet the homeless problem is, people would argue, worse than ever before, but different topic. So I. I don't know how you can't blame the existing government. I don't care who they are. Democrats, Green Party, Liberals, Republicans. I don't care who it is. Whoever's in office right now sucks. That's.

[Graham Stephan]

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[Kevin Paffrath]

The fact that who's it? The Department of Water and Power lady earns $751,000 as a salary $751,000 salary to a tractor from private work. Yet can't keep the reservoir filled.

[Graham Stephan]

Now what do you say to people who say that this was simply a perfect storm? Where have brush that broke out after 15 years of a drought. You had two years of excessive rain, a lot of shrubbery grew from that. And then you had after that another two years of drought. A lot of that shrubbery died off. You have a perfect storm of record Santa Ana winds happening at the same time as something sparks up in somebody's backyard starts a fire that like even if the reservoir were filled, a lot of people say that that wouldn't have made a difference. That even if we had the water that we needed when it's moving five football fields. What was it? Was it a minute fields per.

[Kevin Paffrath]

Yeah.

[Jack]

It's crazy.

[Kevin Paffrath]

Yes. Right? Yeah.

[Jack]

And on top of that, also at winds that speed, I heard that you also can't have the air support because they would just go. It would be way too dangerous. And on top of that, you see videos of people with their hoses trying to put out fires, and it's like.

[Graham Stephan]

Five football fields a minute.

[Jack]

At what point can you say, and this is a super unpopular opinion, it's a nuanced opinion, and people on the left want to point at people on the right, and people on the right want to point at people on the.

[Kevin Paffrath]

Left, and I have the answer for it.

[Jack]

But at what point can you just be like, look, like this was a crazy calamity, a natural disaster, in the same way that Florida has them on occasion? It's like, you can't really stop a hurricane that.

[Kevin Paffrath]

Well, I feel like.

[Graham Stephan]

Or a massive earthquake.

[Jack]

Or a massive earthquake. It kind of is just something that happens.

[Kevin Paffrath]

Sure.

[Jack]

What do you think?

[Kevin Paffrath]

Well, let's break it down. So California has always had fires for thousands of years. To where plants in California, like California, lilacs, manzanitas, these plants have evolved to thrive through fires. That's how we know California has just always been on fire. Right. And the way they really work is that the plants expect to burn down. They've evolutionarily, you know, evolved to survive in their root systems and they sprout back up and now they can actually flourish because there's no competition for resources. On top of now, burned land was actually kind of brilliant. These plants, like. Yes. Burn everything down. Kill all my friends and enemies. Exactly. Yeah. They start the fire. It's the lilacs. So, okay, so. So we know that fires have always occurred. Okay, so what's different? Well, obviously we're going to talk climate change as well, but one of the things to think about is when fires always happen, what do they do? Well, they destroy all of the dry brush that's there. And in history, fires have always occurred. They burn the brush, the fires go away. People don't lose their lives because they're no humans yet at this point. Right. Okay, so what's different now? Well, every low wind fire that we have is just a brush fire and we put it out. So we actually firefight the vast majority of the natural fires that occur. That would do the land clearing for us. So now what's happening is all of that unburned fuel, the dead brush that you're talking about stays all over California. Because nobody's doing nature's job of the smaller burns, which we as humans now we call controlled burns. So you know Berkeley, I love using them as a reference. I got into Berkeley. I never went to Berkeley though. But Berkeley, obviously a left leaning institution. They are big fans of controlled burns because they work you low wind days, when you have the water and the staff in place, you pick an area, you torch all the brush and you burn it all down to the ground. You do what nature used to do naturally.

[Jack]

Where do we practice that? Like in California? And do they just like completely avoid or ignore that in Southern California, like an LA area?

[Kevin Paffrath]

Oh yeah. Well, it's not, it's not. Nobody likes controlled burns in their areas because, oh, it's gonna affect the air quality. This is why you want to do it on low wind, fund for it. That's probably the biggest factor is they don't fund for it because the fire department, Cal Fire, does control burns. And we also want to remember that the vast majority of land in California is owned by the federal government, federal parks. But again, these, these controlled burns need to happen in the Palisades. But you have to have the political appetite as well to actually do that. You don't want to go to the Palisades village and oh, what's that? There's a fire over there. It's a controlled burn. We kind of have to get used to that. But this all leads to your question of why do we have these mega fires. Well, in part it's because of all the fuel that's there there. Yes. California's fire season has gotten longer. California has gotten drier. And the east winds, Santa Ana winds, the Diablo winds, they have gotten stronger over time. So whether we can attribute that to just the natural evolution of climate or human caused climate change, it could be either of them. We don't know the answer with certainty. But to say that, oh, climate change is absolutely what is making the fires worse, confused is that, well, we have actually interrupted the natural clearing process and by not clearing out dead brush or doing what the Getty did, we increase the likelihood of worse fires. In fact, you mentioned that your house that was rebuilt was built much better than, you know, before the podcast here than the 1960s homes because it's built with, you know, stucco or concrete tiles, it's fire hardened. You don't actually build as much brush around them anymore. That is useful. But also what the Getty did is useful. So the Getty's historic museum, how did they not burn down few little things? One, they trimmed their brush so much that they were interviewed and they said the brush that caught fire by the Getty was like rosemary on top of a hot pizza in an oven. It burned and it looked like a large fire, but it was more like a flash. So it burned up and then it was gone. There was no more fuel. The rosemary was burned. They had their shrubs trimmed so far down that when their shrubs caught fire they basically self extinguished. There was nothing to catch fire. Their tree canopies were higher. They again they cleared any of the dead mulch or debris along the floor. And of course it helps that you know, firefighters are there as well who have water, which is why it's important that our fire hydrants work. But all of these things together actually save the Getty despite those 200 mile an hour gusts which are really bad. You're right, you're not aerial dropping in those winds. Some luck probably plays into that as well. But when you put those things together it goes huh. Okay, interesting. Maybe we should be conducting controlled burns. Maybe we should pre deploy firefighters when we're expecting 200 mile an hour gusts. And maybe we should crisis test our water infrastructure and actually spend the money to make sure our hydrants don't go empty, that we have backup generators to pump fire hydrants.

[Graham Stephan]

How much do you think that would have mattered in this case though, with the Palisades fire?

[Jack]

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[Graham Stephan]

How much do you think that would have mattered in this case though with the Palisades fire?

[Kevin Paffrath]

A lot. So look, once you have a massive fire and you've got these five football fields, 200 mile wins. Yes, obviously at to some extent there's nothing you can do do right? To some extent it's a moving inferno. There's nothing you can do. But if every home is built the way you said, fire hardened and you have fire crews deployed and you have land that's being irrigated because people have enough water and it's in many, you know People are building in drought tolerant manners. You reduce those risks. So the Getty irrigated all of their landscaping the same morning of the fire. They purposefully drenched everything because they had the availability of water. They were trained in how to prevent a fire from burning down the Getty. It goes to show that you can prevent, even in those winds, destruction.

[Graham Stephan]

Do you think LA did the proper thing by notifying residents enough ahead of time to warn them for stuff like this? Because I feel like if a lot of people had maybe a little more insight into what might happen or maybe the risks associated with this, they would be watering their plants more. They would have taken more precaution ahead of time. Because to me this seemed like it almost came out of nowhere.

[Kevin Paffrath]

Yeah.

[Graham Stephan]

Where we kind of heard about this, maybe like the day is before as like, hey, there's a high wind advisory, high chance of fire, just be prepared. And that was about it.

[Kevin Paffrath]

Well, there, I mean a few things. So yes, number one, I, I honestly, I don't think I would argue that 99% of people don't know the best way to fire harden their home. And that's, that's an education failure by the government, by the state. Right. If it's sort of like, do you recycle styrofoam or not? Okay, well, the answer is no. But people still throw Styrofoam in their recycling bins all the time. Guilty of it because, because, you know, especially when, when the shippers stick the Styrofoam to the side of the package, it's like, this is freaking annoying. Right. But anyway, so yeah, I mean like you, you, you can only blame the government. A failure of education. Same thing like with shootings, A failure of mental health education. It's, it's, it's, it. All the buck stops with the government. So education helps, building codes help. But as far as notice education around what high wind advisories mean would be useful as well, because first of all, it shows you how stupid I mean the, the mayor of Los Angeles, Karen Bass, is in Ghana to celebrate the inauguration of the president of Ghana. The reason I bring that up is because even the mayor of LA didn't take those wind advisories seriously. Because if. Lauren, I just became a pilot, by the way, my wife. Thank you. My wife is like, yeah. And I never thought I would do it. My wife is like, please do not go fly Sunday, Monday, Tuesday, Wednesday, Thursday, Friday of this week because A, she's deathly afraid of me flying and B, she's like, it's going to Be windy.

[Graham Stephan]

So, like, people have known that the.

[Kevin Paffrath]

Winds are coming, but apparently nobody cared enough to work again. Even the point of the mayor of LA deciding, oh, yeah, let's go on a trip to Africa and be Ghana. And Ghana.

[Graham Stephan]

Well, I'll tell you my perspective. I never thought that area was that big of a risk. It's not that State Farm, new it, but it's not that hillside like a lot of the residential area. I'll give you this, the Highlands, when you go up the mountain, I understand that. But when you go to the residential parts down below. Yeah, I would never think that those were a significant risk.

[Kevin Paffrath]

Okay, It's. It's tough because. So I like to use this app. It's called Windy. And I've only ever started using it since I became a pilot. But it's really cool because you can sort of for it not sponsored. You can sort of forecast what's going on with winds and where they're moving at different elevations, different locations, different wind speeds. You see it all. It's really cool. And when you play around with it, you. You actually end up seeing how the wind funnels between all of the mountains and the ranges we have. And as I was looking over the last few days of the fire, the Palisades were the perfect funnel for all of that wind. And I would venture to say, I mean, I'm not an insurance actuary. It's one of the licenses. I don't have actually insurance out of all the licenses. But I would imagine the reason State Farm canceled 70% of their policies in certain regions in California, specifically the Palestinians, aids, was because they knew the wind patterns and could basically paint on a map and say, okay, this is where the funnels are. This is where our risk is. This is where we don't want to be. Now, I'm not here to defend insurance companies at all, okay? Insurance companies have a lot of problems. But I can tell you what the Wall Street Journal just said today, which is that insurance companies in California spend $1.09 per. $1 they collect in California on just claims, which doesn't account for all their operating expenses, which could be another 30, 40 cents, 50 cents. Who knows? Maybe a dollar. I don't know.

[Jack]

So then net losing in.

[Graham Stephan]

Yeah.

[Jack]

So why do they continue to operate?

[Kevin Paffrath]

They don't.

[Graham Stephan]

Don't.

[Kevin Paffrath]

That's exactly why they leave.

[Graham Stephan]

I'll tell you an insurance comment here, but about a year ago, I wanted to bundle all of my insurances together between all the properties in California, the place here in Vegas, all the under one policy. And I went to so many places and they say, oh, we'll insure everything, but we're not touching California. And I was like, okay, because this had never happened before. So I started calling other companies just to shop around, just to get an idea. Am I paying a fair rate? No one is writing new policies. And so I talked to my. My guy with my current insurance company. He's like, yeah, man, your grandfathered in. You got in at like, you know. Because I started working with him in, like, 2011 when I bought my first property, the same company.

[Kevin Paffrath]

Wow.

[Graham Stephan]

And because I have a long standing history with them and just keep adding to policies. Never filed a claim, no, nothing. They're keeping it for now.

[Kevin Paffrath]

Yeah.

[Graham Stephan]

But, yeah, you can't find a new insurance policy. See.

[Kevin Paffrath]

Yeah. You know, part of that, too, is just so the. It goes back to this political thing, too, of politicians want their votes again to get reelected. And so, well, what's been unpopular last three years? Well, inflation. Okay. So the costs of things have gone up. We all know the cost of things have gone up. So of course the cost of insurance is going to go up. But when insurance premiums go up because they have higher costs to pay, that's very politically ugly for politicians. And so politicians try to fight it, so they put caps on it. And what happens anytime, and this is Macroeconomics 101. What happens every single time we put a price ceiling on something? Shortages. And so that's what we have, a shortage of insurance options in California. And so California decided, okay, okay, okay, well, we'll solve that problem by creating the California Fair Play Plan. So the California Fair Plan gives you temporary insurance for a catastrophe. It gives you no liability protection. So it's like a scam of insurance. Because now if somebody trips and falls on your property, they're like, oh, no, no, we don't cover that. They've got about 700. You got about $750 million in the California Fair Insurance Fund right now. That'll cover about 350 homes in the Palisades. And then you're out. Well, we just lost 9,000 structures. They're not all under California Fair Plan, but a lot of them are because State Farm just canceled a bunch of.

[Graham Stephan]

Fair play does have a 2.5 billion reinsurance on top of that.

[Kevin Paffrath]

Okay, so here's the funny thing about reinsurance is reinsurance is coming from the private sector, but reinsurance. Up Until December of 2024, insurance companies were not allowed to add to the premiums that they collected. The Fees for reinsurance. So put a different way. Yeah, if let's say it costs a hundred dollars, you know, in calculated risk for an insurance company to insure your asset, whatever it is, $100, and then they go to the marketplace and say, okay, we're going to take this and we're going to sell that and basic or get insurance on this bundle of properties that we're insuring reinsurance. We'll keep a portion of the risk, we'll keep 25% of the risk, but we want to sell 75% of the risk. Well, if it costs them a hundred dollars to sell that, that now they're taking 25% of the risk, but zero of the money, they keep $0, which is obviously bad. Again, why they're losing money. So normally insurance companies say, okay, well, we need to sell this for more. So we add to the premium the cost of reinsurance. That has not been a possibility in California until December of 2024, when so many insurance companies were threatening to leave. That California insurance commissioner finally u turned and said, okay, okay, okay, we will let you add reinsurance costs, two premiums, so you can actually survive in California. So again, politics.

[Graham Stephan]

So what's the impact going to be on the average person with home insurance in California?

[Kevin Paffrath]

Terrible. Terrible. Like rates are going to go up. Because I mean, the way I look at it is, it's. Nobody thinks that the politicians are going to change. Nobody thinks that how now magically, California is going to build more reservoirs, have more water, have working fire hydrants. So, like, you have to ask yourself, if Gavin Newsom tells you for 10 years, we're going to be better at fires, we're going to be better at fires, we're going to be better at fires. And let's say he runs an island called the Smith island. Okay. And you're like, yeah, I want to consider doing insurance for the Smith Island. And Gavin Newsom runs it. It's a town of 30 people. An island of 30 people. You want to offer insurance there, Are you going to trust Newsom to actually have water in the fire hydrants or the people that, you know, know, operate under him, Fire chiefs, whatever it is? Well, the answer for most insurance companies is no. They can't trust them because for, for not just years, decades, they've been told, oh, we'll be better at water infrastructure. And it just never happens.

[Graham Stephan]

What happens if someone's underinsured? I'm really curious what's going to happen with a lot of these properties because 2/3 of people in California are underinsured and the average person is underinsured by 20 to 60%.

[Kevin Paffrath]

Wow, that's worse than I thought.

[Graham Stephan]

It's really bad because I did a whole video about this about a year ago ago and it forced me to actually call my insurance company and up.

[Kevin Paffrath]

The limits, up your limits.

[Graham Stephan]

Because I realized like, wait a second, I'm covered like 800 grand. Rebuild.

[Kevin Paffrath]

Yes.

[Graham Stephan]

For a property that I'm gonna have to probably spend 1.3 on maybe. So I got the limits increased a little bit. Yeah, but it's wild and, and it, it's not going to keep up.

[Kevin Paffrath]

No, it doesn't.

[Graham Stephan]

An insurance company is never going to remind you, like, hey man, you know, you might be a little underinsured here. They're going to keep it as low as possible.

[Kevin Paffrath]

Positive, right? Exactly. Well, one of the reasons homes are typically underinsured is because codes evolve over time. A fire codes, naturally this is fair, but also because of the fragmentation of codes in California. So when I ran for governor of California, I said we should have one building code for the entire state. So that way a furnace that's approved in the San Joaquin Valley is also approved for Ventura County. Now you could have little modifications because I understand climates are different, but let's be real, 90% of building should have the same building codes throughout the entire state. We could have little different paint schemes and designs or whatever, but simplify the building code. Once you simplify the building code, it's easier for contractors to bid and actuaries to evaluate their risk because they're not dealing with, you know, oh, this has to meet this city and then that county's overlay and blah blah, blah, it's a disaster. So fire codes are one also earthquake codes. And a lot of the homes that were rebuilt in California or in Ventura county, they had to build in expensive earthquake retrofit pylons for, for new construction, especially on fill lots that, that were rebuilt after the fires. And people spent 400 grand on pylons for a 1 million dollar build that they were only insured on up to 600k because now they have $400,000 of pylons in they have to build, which was never underwritten in the first place again because the standards change for every city and every county. And nobody tells you, hey, by the way, if you ever have to rebuild your house, these codes just all changed and it's going to be a lot more expensive. So that's one of the reasons people are underinsured. A second factor is really just usually the the bump in insured value is, you know, maybe 1% a year or whatever, but appreciation and inflation in building materials is much more than, than the 1% labor too. Oh, my gosh. Yeah, especially in California. So that's also funny you mentioned that, because if you look at, if you want to get through the CEQA exemptions, you have to use prevailing wage labor, which is like, instead of market rate labor, you're paying maybe two times market rate labor for contractors to actually do work on your, your properties. And I'm not saying that people shouldn't be paid what they're worth, especially with their skill sets and all that.

[Graham Stephan]

That.

[Kevin Paffrath]

Just saying insurance companies, look at that. Oh my gosh, we have to get through CEQA and the prevailing wages and all these scattered building codes. Of course, it doesn't make sense to do business in California. Now, I'm not saying insurance companies don't suck. They definitely suck because they leave a lot of people hanging at the worst times in their lives. But frankly, I think a lot of that starts with the political environment and the failures of Gavin Newsom, local county officials, local political appointees, and so on.

[Graham Stephan]

So what does someone do if their home is underinsured, though? Let's say they lose their home in this sort of case. What happens if they have a lot that's valued at two and a half million dollars, but they have 600 grand worth of structure coverage?

[Kevin Paffrath]

Yeah, they can't rebuild. Most, unfortunately, most of them sell. Most of them will sell their lots to then developers who come in and they build. So they sell to spec builders. What I found that lot owners will do is they'll kind of get together in like consortiums almost. They'll be like, none of us are going to sell unless we all sell for a higher price. So you see that, that. And so usually what happens is land developers, they try to get in early before people start connecting with each other. And developers, I guarantee you, developers are already calling everybody, everybody.

[Graham Stephan]

Twitter are posting already. They've already got offers.

[Jack]

Oh yeah.

[Kevin Paffrath]

Oh, for sure. Oh yeah. Because the earlier they, they, they start this process to buy these lots, the better deal they're going to get. Because let's be real, this real estate, and I'm talking about the land, not the structures. This is some of the most valuable real estate in the world. World understand fires suck and they can happen again, but people want to live there. It's the best weather in the world. You have the best proximity to jobs. You have the Los Angeles International Airport, minutes away from the Palisades like that all the celebrities live there. You know, that is the place for, for, for wealth and, and living. And so it will get rebuilt and it will be beautiful so that that land is very, very valuable. But it's just going to suck because a lot of people, people who live there now, they might get forced out because they're underinsured. They can't afford the difference and they'll end up having to.

[Graham Stephan]

Yeah, that's a nuance that I think a lot of people are missing when it comes to exactly that is they think, oh, it's all these rich people. They, they have the money. Like, let's not feel sorry for not ever. I know so many people whose parents bought their house there in like the 1980s generational, and they spent maybe 300, $200,000 on the house, but they've kept it ever since. They've owned it the entire time. So now it's off. Sure, it might be worth $4 million on paper, but they didn't have that money. I mean, it never existed. They were living in the home. They never expected that.

[Kevin Paffrath]

Right, right. So now they get their underinsured payout of say 600k to rebuild their home, and then they've got a $2 million lot. They've got to pay off whatever loans that they have. They might never live in the Palisades again. It's really sad.

[Jack]

How long do you think it's going to take to actually rebuild all of the, that area in la? Because I know specifically with the Thomas fire in Ventura, our house took about three and a half years to build. And a lot of the insurance companies, the kind of standard rate is that they'll float you for temporary rent.

[Kevin Paffrath]

Not that long.

[Jack]

Two years.

[Kevin Paffrath]

Yeah, exactly.

[Jack]

Yeah, two years is how much they'll do. And, and very, very few people, especially if 10,000 plus structures are burned down, every contractor is going to be spread thin. They're going to be like trying to work multiple sites at one one time. You have all these subcontractors that are going to be busy. All of the permitting process, like that's going to be super, super.

[Kevin Paffrath]

Yeah.

[Jack]

I have no idea how this is going to get resolved. How do you, how long do you think it's going to take for it to get back to normal?

[Kevin Paffrath]

20, 30.

[Jack]

2030.

[Kevin Paffrath]

Yeah. Yeah. Because LA is notoriously slow with everything and the magnitude of this damage is so much that I think probably what will happen is they're going to try to rewrite building codes first before they get anyone through to try, hopefully to mitigate the issues of these, these, the way hydrants are built, the way reservoirs are built and hopefully they figure all of that out. Out. Hey, I'm Ryan Reynolds. Recently I asked Mint Mobile's legal team if big wireless companies are allowed to raise prices due to inflation. They said yes. And then when I asked if raising prices technically violates those onerous two year contracts, they said what the are you talking about? You insane Hollywood. So to recap, we're cutting the price of mint unlimited from $30 a month to just $15 a month. Give it a [e-mail] Switch $45 upfront payment equivalent to $15 per month. New customers on first three month plan only taxes and fees, extra Speed slower above 40 gigabytes. Details right this time, correctly this time. But yeah, I mean I think to what you're saying, the market demand is going to be insane. Not yet for contractors, but in two years it's going to be good business to be a contractor there.

[Jack]

And on top of that, we noticed during our rebuild process that it probably cost between 35 and 50% more.

[Kevin Paffrath]

Sure.

[Jack]

During the fire rebuild because in the Thomas fire it was like a thousand structures I think burnt down. But in this, this so far it's 10,000, 10 times the email. And I just think like overwhelmingly people are going to really struggle unless if Biden says or I guess eventually Trump helps and bails him out. Because there have been, you know, I mean he did say that he was going to help and float for like six months.

[Kevin Paffrath]

It's not going to do anything. Yeah, it's, I mean I, I wish the Biden administration was already doing more. It seems like Trump is talking more about what's going on in California than Biden is. I mean I think a lot of people, I'm not trying to sound anti Bide. I know it already does sound that way or I definitely anti Newsome. I will say that definitely anti Newsom. That's why I ran against him for governor. But yeah, the government can help. But unfortunately I don't know that government will be able to muster it just because trying to take this, what's going to be a five or six year process and try to streamline it, line it. It's going to get tied up in all of the red tape that people like Gavin Newsom say they consult and they just never do. So it's unfortunate. But I want to talk about another byproduct that you just brought up. It's not just contracting prices that are going to go up it's rents that are going to skyrocket. For all the normal people in LA now, there are fewer apartments available, there are fewer single family homes available. So anybody who wants to renew their lease now or move into LA because they got a job, I wouldn't be surprised if you see rents go up 20% in, in all valley. Heck, that could hurt our international or our nationwide inflation numbers.

[Graham Stephan]

It was interesting. Jason Oppenheim shared a story on Instagram that a client showed up to a rental listing. Just an average listing, nothing special. There are 20 people outside. Oh yeah, 20 people are outside.

[Kevin Paffrath]

Yeah, well, people.

[Graham Stephan]

Every one of his listings, he has a listing for 13,350, you know, $13,500 a month. Got offered $20,000 a month for it, six months up front. The owner wants more.

[Kevin Paffrath]

More. There you go. Yeah, so, and that's, that's gonna, well, every single person who's like, okay, my house is either burning down, going to burn down or burn down over the last two or three days. The first thing they do is, okay, where am I gonna live? I'm not gonna live out of a hotel on a suitcase. So Zillow.com look at the rentals or Redfin, whatever, right? And exactly what you're saying is what you would expect. Now then, this is where things get interesting because then the political idea is, okay, well all those people are price gouging, they're being greedy. Or then the flip side of the argument is, well, there's a shortage of available housing. What does that go back to? Oh, well, it goes back again to politics. We just don't build enough. So yeah, prices will skyrocket, although really quick.

[Graham Stephan]

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[Graham Stephan]

Now this is interesting. The Senate Budget Committee recently said this is predicted to cascade into plunging property values in communities where insurance becomes impossible to find or prohibitively expensive. A collapse in property value values with the potential to trigger a full scale financial crisis similar to what happened in 2008. What are your thoughts on this? Might be a bit extreme.

[Kevin Paffrath]

So which Republican wrote that? Yeah, that's that I would say that is, is far fetched. Mostly because at some point when, when insurance becomes impossible to get, at some point the political leash, if you will, will loosen and people will enter the insurance market. It's always how it works. The price goes up high enough for insurance that insurability becomes like an option again. I mean look, you could literally start an insurance company today. Hey, we'll do all the insurance in la. Whoever is having trouble getting insurance, we'll do an insurance company. And you just securitize the risk by selling it on the market. Hey, who wants 10 yield on a bond for this high risk insurance company company people will buy it as part of their portfolio.

[Graham Stephan]

Yeah, they're calling them catastrophe bonds. Have you seen these?

[Kevin Paffrath]

There you go.

[Graham Stephan]

Yeah, it's already, it's already a thing now.

[Kevin Paffrath]

There you go. Exactly. So, and, and that. So people will get, people will be able, people will always be able to diversify away their risk. So I don't see property values plunging. In fact, and this is this.

[Graham Stephan]

But this is in areas that you can't get insurance or insurance is so expensive.

[Kevin Paffrath]

Yeah, well, I mean some of those areas like the coastline of Malibu, Those are know 10, $20 million home, sometimes even more. Of course insurance is going to be prohibitively expensive there because they're either going to fall into the ocean or going to burn down again potentially. Right. But people want to live there so somebody will pay those exorbitant fees and then again people will risk it.

[Graham Stephan]

Well, this also says many residents of the Pacific Palisades are reporting that they had no property insurance because insurance companies no longer provide coverage for real estate in the highly priced and high risk areas.

[Kevin Paffrath]

Right? Yeah. Because even the California Fair plan has a limit of how much they'll cover. I think it's $3 million per home is the limit that they'll cover. Some homes are $8 million homes. So yeah, that's possible. That people have just entirely Dropped their coverage. State Farm announced their non renewals in March. Correct. Which means March is 10 months ago. Which means 10 out of 12 probably. What is that over 80%, 85% of insurance policies have probably lapsed. Assuming you know, an equal amount of dispersion there that not everybody's renewing in lumps. So in England most of those policies, the State Farm ones have lapsed. If they couldn't find other coverage, they've gone to the California Fair or have been uninsured. Yeah, they're screwed.

[Graham Stephan]

In this case it was 69.4% of the Pacific palace got dropped.

[Kevin Paffrath]

Yeah, it would be funny.

[Graham Stephan]

69.4.

[Kevin Paffrath]

Yeah, yeah, exactly that State Farm was dropped. Yeah, yeah. So exactly. So their choices are you either go to a different carrier if you can get it, pay the higher fees or you go to California Fair or you self insure. Self insure obviously would be catastrophic at this point.

[Graham Stephan]

Oh absolutely. Yeah. Allstate too announced plans. This was in November of 2022. Pause. New homeowners, condo and commercial insurance policies in California to protect current customers.

[Kevin Paffrath]

Yeah.

[Jack]

What about tens of millions of dollars homes that, that are not insured at all. Like I saw there was like a 30 million dollar home listed on Zillow that burnt down in the 5 buyer. All these crazy expensive homes that are not insured at all. What is there?

[Graham Stephan]

They're probably insured at that level.

[Jack]

That level. You have to. You think.

[Graham Stephan]

It's not like you have to. It's like when, when you have a 30 million dollar home, your net worth.

[Jack]

Is probably so yourself.

[Graham Stephan]

250 million dollars plus they're having insurance. There's no way those people wouldn't have insurance. My understanding is if you're, if you're that high net worth, you could basically have anything under written because insurance companies can cater to what you want. Like very customizable policies because you're spending so much money they might spend 200 grand a year on insurance. An insurance company will make that happen.

[Kevin Paffrath]

Well, I'll give, I'll give an example just to, to make an insurance comparison. So you know, I own a plane. The cost to ensure my plane is $30,000 a year with two professional phenom rated pilots. I am a brand new pilot. I've got 100 hours, I've landed a plane, you know, 300 times, a little single engine cirrus with a parachute. In order to be the second pilot with a professional pilot who's flown for 2,000 hours or whatever. My insurance policy goes from $30,000 a year and 10 companies want to offer us insurance to. One company wants to offer us insurance, and that'll be $130,000 a year. Wow. Yeah. So like you say, and like I was. You. You can. Sure. Anything. How much you want to pay. So. Yeah.

[Jack]

And what about the insurance companies? Are any of them going to, like, go bankrupt over something like this or what's. Yeah, what's the. And what's the ripple effect from something like that?

[Kevin Paffrath]

Oh, yeah. I mean, that's good. I mean, they're, they're massive insurance funds. Like, I think there was just a headline. I wish I read up on this one. This was. I think it was BlackRock or Blackstone one. Insurance funds just tanked in the stock market today after these fires because, yeah, I mean, there's, there's loss, but that's, that's why a lot of these insurance companies want to trade publicly because what you're really doing is diversifying the risk to the public, you know, to retail trades. Oh, yeah, I have Allstate Insurance. Let me swipe up on Robinhood, buy some shares. They're the ones holding the bag. Right. So, yeah, it's, it's, it's all been thought of. But can they go bankrupt? Yeah, totally. Because when California Fair plan fails and as you said, they send that reinsurance risk back to the private market, it. Absolutely. There could be bankruptcies, but bankruptcies just turn into some other insurance company buying the dip on that and, and taking over those companies like Spirit Airlines. Somebody's going to buy those planes and somebody's going to buy those routes, some other airline as they're in bankruptcy now. I mean, JetBlue tried to. Yeah. You know, and then got stopped by Lisa Khan and people like, oh, Trump's going to replace her. And who knows, maybe then the merger will go through and maybe Spirit still be alive.

[Jack]

Yeah.

[Graham Stephan]

Know, a lot of this for insurance companies really caused by Prop 103.

[Kevin Paffrath]

Ooh.

[Graham Stephan]

Now, this was passed in November of 1988, and according to this, insurance companies must get approval from the California Department of Insurance before implementing any rate change. They have to argue why they need to charge more money. This, this process could take more than a year, so rapid increases can't happen. California is one of the only states that allows outside groups to participate in the rate review process. That is why insurance companies are unable to go and say, well, our risk went up from last month. We need to raise our rates.

[Kevin Paffrath]

Yeah. This again, it always seems to come back to politics. And yeah, I want to just be clear that Insurance companies are no angel. And so many people get left hanging. Because I do think it should be incumbent upon insurance companies to say, like we talked about earlier, hey, you know, there are new building codes, you're under insured. Hey, here's how you should fire harden, Whatever. Hey, maybe you should have an extra policy for all the. In the insurables inside your home. Whatever. So communication and, and the service they provide, insurance company claims processes, they're all designed to be a pain in the ass. It's, it's kind of like what happened with Luigi. What, what were on the shell casings. Deny, defer, defend, defend and decline. Depose, depose. Okay, perfect. You know it better than. There's so many of these D phrases. Dick. Insurance companies suck. Okay, so. And that was inspired by the book that was written, I think in 2010 or so on how insurance companies basically try to make your life miserable. Like, why is it so hard to get a customer service rep on the phone? Because maybe you won't put the claim in if we make it hard for you. Right? It totally makes sense that insurance companies are scummy and doing this because it props their bottom line. When their bottom line gets propped, all the people who get stock based compensation make more money and they get to go buy bigger homes and cars or whatever they want. The game is obvious. Like it reads like a book. It's obvious why they do it and it's scummy. But again, a lot of the problems do also point at politicians. It's funny, I was walking, I was on a walk with Lauren yesterday and there was a guy walking around. I've never seen the shirt before, walking around and I told Lauren, I go, that's a great shirt. Defund politicians. Like, that's a good one. That's a great one. That's why I'm saying if, if you can never get reelected as a politician, you, you can't. You don't really get all the outside funding anymore because you have an expiration. So that's why I thought it was so funny when I was running for governor of California. I'm like, look, I, I'm not trying to pull a newsome where he's trying to do his eight years of damage here and then try to go on to the presidency because I was born in Germany, I can't be the president. So it's like, let me just do the governorship and that's it. There's no, it's not like I'm go now, I'm going to fundraise for the presidency. Right. Let me actually take. Because this is what I would do. Emergency control. I mean, look, Newsom declared a state of emergency, but he doesn't build with a state of emergency. Deploy the National Guard. Not to protect against looters. You could do that as well. But also the Army Corps of Engineers to start building, start building the reservoirs that we need, or repairing the Santa Ynez Reservoir under emergency powers. Build now.

[Graham Stephan]

Yeah. In terms of insurance companies, Allstate made the statement that they would resume selling new policies in the Golden State should regulators adopt proposed regulatory changes to make it easier for insurers to raise rates.

[Kevin Paffrath]

Right. Which it sounds also very unpopular because, again, nobody wants to hear that rates are going to go up. So it's like, oh, Allstate's greedy. They just want. They just leave, and then prices go up anyway because there's so little competition. So it's hard. Hard. I think it's not just the regulation, though. It really comes down to if you built out infrastructure better, the reservoirs, the. The. You dealt with the delta smelt, you know, and the fish.

[Jack]

Yeah, let's talk about that.

[Kevin Paffrath]

Yeah.

[Graham Stephan]

Is there a water shortage in California and what's causing it?

[Kevin Paffrath]

Okay, so this is an interesting one to answer. At any given moment in time, there is usually a water shortage. But of the amount of water that goes into California, there is a massive excess of water. That's because when the snow melts or when it rains off the Sierra Nevadas, the snow melts and the water comes down, or when it rains, most of it just washes into the ocean. This is why Donald Trump argues, oh, California is diverting all their water into the ocean. Well, not quite, Donald. The water naturally flows into the ocean. Because if you look at a topography map, we have a lot of mountains, and it just makes sense. Water goes downhill and into the ocean. That's just the natural flow of it. So it's not California on purpose dumping into the ocean. It just naturally all goes into the ocean. It follows the San Joaquin river, the Sacramento River. They come together in a delta and they just flush out into the ocean. That's just geography. Okay, but what is California not doing? Well, they're not building dams or reservoirs that could actually divert this water down to SoCal, keep the Colorado river filled up, build more reservoirs so that we have enough water pressure for our firehouse hydrants. California, specifically, Gavin Newsom, have actually bragged about closing down dams and bragged about how, yay, now we have more of a salmon population. And so really, what they've done is they've bowed to environmentalists who say, well, you know, the steelhead trout population or the delta smelled or the salmon populations have declined because of damming or rivers. And the byproduct of this, because every action has a reaction action. The byproduct of this, the externality is houses burn down in SoCal because we don't have enough water in fire hydrants. It's also partly because people actually steal water from our fire hydrants and California doesn't do anything about it.

[Jack]

What do you mean people steal water?

[Kevin Paffrath]

Oh, have you heard about the marijuana farms?

[Graham Stephan]

Oh, yeah, they pop up and they just take water from the fire hydrants.

[Jack]

No. Explain to me this.

[Kevin Paffrath]

Yeah, so they're, they're basically. You could just drive up to a fire hydrant with a water water truck. People have private water trucks and they just steal water. They fill up their water trucks and then they drive them to their illegal marijuana farms often and they irrigate all their crop with the water they stole from the fire hydrants. That became such a problem. You can Google this. That became such a problem that instead of California enforcing these problems, because when they tried to, they would raid the farms and they'd be like, oh, no, no, no, okay. They wouldn't prosecute them and they would just set up shop again the next day, day and just get back to illegal marijuana farming. California's solution to this rapid issue was not penalizing people stealing the water, it was removing fire hydrants. So they just removed more fire hydrants in California, which has fire problems. So that's California's government for you. And, you know, if you had somebody who was in power who also had full legislative control, they probably would be able to do something about it if they had the willpower to do it. But Newsom doesn't.

[Graham Stephan]

How do you go after those people? What were they doing? Just letting them off, the people that growing the plants or it's, it's.

[Kevin Paffrath]

That gets pretty complicated and I don't know every detail about it. But from what I've heard, as with any almost crime in California, the district attorney is so buried that they just have to choose the highlighter of what they want to go through. They're so underfunded. The police have essentially been underfunded, defunded almost. And so you just don't have the money to prosecute all these crimes. So you have to come up with plea deals or just don't do it again. Pay little fines, whatever, and you just never get through the process. So to where it actually just becomes a cost of doing business. So these farms would pay the legal fines, you know, after prosecution lasting for, you know, usually they just defer their prosecution, waive their right to a speedy trial, and then they just litigate this for, you know, a year maybe, and then they come up with a settlement. Okay, we'll pay a $5,000 fine. We won't do again. That's a. If you're running an illegal marijuana farm, you're making a whole lot more than that. It's just a cost to a business.

[Jack]

Why do you think California citizens are so divorced, let's say, like on the ballot, from the reality of their environment, like, as their environment continues to get worse. I mean, I grew up in Ventura, which is a California city. I mean, you, you know, you live there. Graham grew up in California. I have watched the state continue to get worse. Every single time I go back to visit Ventura and see my family, I'm so excited. I'm like, I love this. I love going back to visit Ventura. Two times ago I saw someone get. I'm going to bleep this out. And outside of a bar.

[Kevin Paffrath]

Are you downtown Ventura?

[Jack]

Saw it happen. Yeah, Right there. It was gang.

[Graham Stephan]

Did you tell me about this?

[Jack]

I don't know if I told you that.

[Kevin Paffrath]

You didn't.

[Graham Stephan]

You did not tell me about this.

[Jack]

Yeah, well, I mean, I, you know, I don't particularly love talking about it. It was pretty. It was pretty.

[Graham Stephan]

You saw it?

[Jack]

Yeah. It was pretty gnarly. It was gnarly.

[Graham Stephan]

Wow.

[Jack]

Yeah. So, I mean, he basically. There was like a scuffle outside of a bar car. And I think it was either gang related, it's most likely gang related behavior from a neighboring city. And yeah, you got one insertion right into his heart. Oh, yeah. And he was like a 20, 24, 25 year old guy.

[Kevin Paffrath]

That's terrible. That's.

[Jack]

Yeah.

[Kevin Paffrath]

You know, I, I don't feel safe out anymore in California either. No, I feel, I, I feel like. And then I do. I won't go outside without a gun sometimes because I'm just like, I don't feel safe in California anymore. Now I'm licensed, so it's okay day. But it's gotten to that point.

[Jack]

There is definitely a strong difference between what it was like when I grew up there and what it's like now. I'm continually, every single time I go back, I'm like, yikes.

[Graham Stephan]

It's their approach on crime. I feel like, oh, yeah. Even it's because I got a camera in the back of one of my properties which is facing the alley.

[Kevin Paffrath]

Okay.

[Graham Stephan]

The amount of things that I've seen back there, I could make a tick tock. I have someone sending me, sending me go to this timestamp right here and I go. And it's awful like because he doesn't prepare me usually for what I'm looking at. But I saw a guy come up on the bicycle and injected stuff in his leg and you just see him just nodding out there and yeah, it, it, it. Or just passing out in the middle there. I've seen so many times like urination, defecation on the can.

[Jack]

Syringe is also just on the ground. Sometimes like he'll be walking around and it just exists. So sad it's not being picked up. You don' that's infected with something. Especially when you're walking on the beach. That's the scariest thing. When I'm walking on the sand, I'm like going out surfing. Imagine just stepping on something, a needle and getting some sort of disease or God knows what.

[Kevin Paffrath]

Yeah, hiv, whatever, you know, that's terrible.

[Graham Stephan]

Now I will say police presence has stepped up recently and that. Yeah, recently we had to make a call for something and they came within like two minutes.

[Kevin Paffrath]

Wow. Yeah. Yeah. I think Santa Monica is really trying because I think they've seen the devastation that happened especially on 3rd Street Park Promenade. And there is also this shift away from the defund the police and progressive movement that we had in during the COVID era. Really. And this is happening around the world. I mean you're seeing this with the AfD in Germany, you're seeing this in Canada. You know, Trudeau is now resigning. Right. Who would have thought Trudeau was going to resign three or four years ago? Right. So you're seeing this shift away from Democrat voting basically in part because of inflation, because of the lack of enforcement of crime and. And to some extent people have become very upset over prioritization of diversity equity and inclusion funds or priorities. Like take LA county for example, or the LA Fire Department. Adam, have you seen the Adam Carolla clip?

[Graham Stephan]

Yes.

[Kevin Paffrath]

Okay, that was great. Red 7 year wait to become a firefighter because he's a white dude and a woman applied the Wednesday before and in the same place. Crazy. Crazy. This was obviously wrapping up his, his story on that. But. But basically a lot of companies are now you turning away from that. John Deere was one of the first meta just announced yesterday, maybe today that they're ending their DEI program. Amazon's ending their DEI program. They're all getting rid of these DEI programs now because I think they're realizing, like Elon Musk says, that diversity, equity and inclusion is not getting the best out of us. It's getting potentially inferior candidates into positions of being doctors or being leaders simply because either they're black or they're Hispanic or they're a woman when potentially their scores are worse than others. Now, I talked to Lauren about this and she's like, well, you know, the reason they do this is because, you know, if, let's say you grew up underprivileged or you were discriminated against in an inner city or whatever, as a young black person in a school that was underfunded, it, it's, it's hard for you to compete with somebody who's going to a, you know, prestigious high school in a very expensive area. So it makes sense why they do it. But the resolution we came to, which is the same one that I ran on when I ran for governor, is, well, then fix those schools. The problem is how is that politically popular to fund and make all the schools great and actually prioritize our funding for schools when it's going to take 20 years for those benefits to come out? Or longer? Yeah, you know, you fix elementary schools in inner cities now or, or any underprivileged schools throughout the entire state. The politicians might even not even be alive anymore who funded those schools and, and improve the schools of the state. So they don't care.

[Jack]

So what do you think are some of the main things that are holding California back right now?

[Kevin Paffrath]

Water, crime, development, the impedance to being able to build in California and schooling, mental health. These should be no brainer, apolitical issues that a government with all the power in the world should be able to solve, yet they don't.

[Jack]

And, and why do you think that people still continue to vote a certain way in the environment that is continually getting worse?

[Kevin Paffrath]

Well, part of it is the existing government's power over the media in California. Most Californians, I would argue, aren't on X every day. They're turning on their local news, their ktla, their, you know, Fox LA or whatever. They're, they're KCRA in Sacramento, whatever. They're turning on their local news stations. And who knows, this could be wrong. But this is what I was told, told by an anchor who's still on TV today in California. He asked me never to tell who he is, which is fair. And he sat down with me at a coffee shop during the election. He said, kevin, there are times that we look at what we are told to say. And we want to scream at the script because we know it's a lie, but we have to do it because otherwise our reporters won't get invited back into the Newsom press briefing and we have to be there to cover it. Otherwise people will go to a different news station. If we don't get invited in, we don't get the coverage of their grand new plan. So really you don't get exposure to the problems in California through the mainstream television. And I'm not talking about nationwide, cnn, Fox, ms, all of the local stations. I think it's bad, the censorship we saw with the Twitter files or at Meta. The same thing is happening at every single news station throughout the entire entire state. I mean, Mark Zuckerberg was just talking on Joe Rogan about how as soon as they started saying no to the Biden administration that they weren't going to remove certain posts, they started getting a bunch of agency inquiries and lawsuits against Meta. Well, imagine getting sued if you're a small local TV or radio station in California by the governor. You're screwed. You know, after I ran for governor, Governor I, you know, we joke that the Department of Financial Protection and Innovation came after me conveniently right after the election for a fundraising video that I made when I was running for governor saying, oh, you were collecting donations while talking about stocks. You were giving unlicensed financial advice, basically extorted me for $5,000. Just find a settlement number, whatever. But, but we think that specific election video was targeted to send a message that we will come after you if you are a political noise in or fly in our ointment, if you will.

[Jack]

What other impediments did you come across when you were running for the opposition?

[Kevin Paffrath]

Oh, yeah, well, I mean, a lot. I think the most interesting was that the Democratic regime during the recall election, which was a very unique election, it's an election where you have a, a two parted ballot. One is, do you want to recall Gavin Newsome? Yes or no? If Gavin Newsom is recalled, whom should be the replacement? Who should be replacement? And the Democratic strategy was we are not going to allow any candidate to get any airtime in pretty much any debates or coverage or whatever. Although I was in one debate. Thanks, Casey. But we will give no credence to any other Democrat. The Democratic Party would not support any other potential contender against Newsom because their thesis was we're going to defeat the recall vote no on the recall, literally leave the second part of the ballot blank. So the thesis, the Democracy aspect of the Democratic Party of California is leave half the ballot blank because we're going to win anyway. That's, that's a huge impediment right there. So what does that mean? Well, that meant when I was running for governor, I couldn't get any Democratic campaign staff. So even though I was running as a Democrat to replace Newsom, and my pitch was a JFK style, like, reasonable Democrat, even though that was my pitch, I couldn't get any Democratic campaign staff, lawyers, you know, donation platforms, marketing platforms, couldn't get anything. I had to hire Republicans who wanted to fight Newsom to help staff my campaign because I couldn't get Democrats because they all said, well, we will never be able to get another Democratic job if we work for you. So that's an example.

[Graham Stephan]

Wow. What about the Delta smelt?

[Kevin Paffrath]

Back to, back to the water issue? Yeah. Well, Berkeley has a piece on this. You know, I don't know so much about the Delta smelt, but I do know that Berkeley says you can conduct what's called hatch and replace release, not to be confused with catch and release, like catch and release illegal immigrants, or catch and release fishing. This is hatch and release where you, you actually just, in a lab or whatever, you, you hatch a bunch of delta smelt and you're like, here you go and you replenish the populations. What happens with the delta smelt is when, when you build a dam or you divert water and there's not enough water flow coming into the delta, that the argument is that you're killing fish population relations. But look, every action has a reaction. So yes, in nature, when something changes, or even when a geography naturally shifts, when there's an earthquake and, and a new river is formed, well, duh, some habitats are going to get destroyed, but others will be created. It's not like the new, you know, rivers or canals or whatever that are formed are all of a sudden going to be devoid of fish or wildlife or whatever. But because a species that is deemed endangered, the delta smelt or, or a protected affected species, environmentalists have been able to fight and drag on litigation that prevents the establishment of basins, canals, or dams to enable more water flow to Southern California, which then enhances wildfire risk in Southern California or wild. Or reduces wildfire mitigation, and hence we get Los Angeles basically burning down because of a fish that we could hatch and release police. But because of that fish, I honestly don't even think the environmentalists care about the fish. Because of that, they are able to fight in courts and preventing all this.

[Graham Stephan]

So let me tell you my understanding with this because I did a lot of, because I love fish.

[Kevin Paffrath]

So this is, you have a beautiful fish tank, by the way.

[Graham Stephan]

I really appreciate that. So the delta smelt has a lifespan of about one year. And because of that it's seen as a, a bit of a canary in a coal mine, so to speak. If there's an issue, issue with the ecological habitat in that area, you see it first in the delta smelt. There's about seven or eight different species of fish that live there. Where environmentalists say, hey, if it's not the delta smelt, it's going to be any one of these other things. It just happens to be the delta smell because that's a very short lifespan. So we look to that. What's interesting about the delta smelt is that it thrives with the salinity of 02, basically. So it's when the fresh water mix, it mixes with salt water. It's got to be just the right combination for this fish to live. And so if you drain too much water from that, there's too much salt that goes in. But now in a way, it almost helps farmers to make sure there's not too much salt that's going into their crops. So there needs to be that area in between where this fish could live. So they're saying that they could tie this up as long as they want to, not because of the smelts, but because there's a whole bunch of endangered species. But that even if the delta smelt smelt weren't there, that wouldn't have prevented anything going on. Los Angeles still gets the vast majority of its water from the Sierra Nevada and from groundwater. And that this delta smelt water mostly goes to help farmers in Central California. That's my understanding of it, yeah.

[Kevin Paffrath]

So let's break that down first. The, the argument specifically on the delta smelt smelt is a perfect example of what we call the slippery slope fallacy, which is let's start with the smallest problem and then let's assume that problem continues five iterations further. And then let's argue the worst case scenario, all the fish are dead. Okay, so let's go through the thought experiment. Kill every living animal in the San Joaquin Sacramento River Delta. Just kill all of them. Okay, they're all dead now. So what do you do? Well, now you can divert as much water as as you want. There's no risk to life anymore because you've killed them all. Okay, so what do you have now? Well, now you have A Colorado river that's potentially filled up, canals that are filled up, dams and reservoirs that are filled up. And then you have to ask yourself, at what point are you investing in protecting Southern California from losing, as you mentioned earlier, $120 billion potentially in economic damage, which is like 0.4% of the entire United States GDP. GDP that you just literally lit on fire, which is bad. That's a loss. It's a net loss to society. At what point do you say, wow, you know what? Kill all the living organisms in that delta to prevent even half of that from happening? Because if you prevent half of it from happening, then you have 60 extra billion dollars. So what if now we take a slice of that and now you build new estuaries or, you know, larger pools or ponds or lakes or whatever. Whatever. And you let this fish that would have been endangered or died there or whatever live there. Right. So basically relocate the fish or the animal and animals. That can all be done with money. And that's to say that a small investment into water infrastructure can save hundreds of billions of dollars, as we're seeing now, but it could also save human lives. That's really important, too. So unfortunately. Unfortunately, the desire for saving these fish, which we can save in another way, as the liberal institution Berkeley says we can save the delta smelt in another way, there is no shortage, by the way, of salmon. Okay, we can save salmon in another way. Then we should really start thinking about bettering California's infrastructure and saving lives and saving hundreds of billions.

[Graham Stephan]

Now, with the delta smelt separate from that, I do find it interesting that they do certain surveys and they see how many smelt are in this area. The last time they did the survey, they could only find one.

[Kevin Paffrath]

Oh, wow. Yeah.

[Graham Stephan]

And so regardless of this, it seems like rising temperatures are killing them off. And so.

[Kevin Paffrath]

And either way.

[Jack]

Either way, it's kind of like a feeble, you know.

[Kevin Paffrath]

Well, that's the thing.

[Jack]

If you're just gonna say they live one year.

[Kevin Paffrath]

One year.

[Jack]

But.

[Graham Stephan]

But that's a good point.

[Kevin Paffrath]

That's a really good point.

[Graham Stephan]

That's the one. But that's how they become an indicator species for the entire area because of such a short lifespan.

[Kevin Paffrath]

Yeah.

[Graham Stephan]

You know, very quickly, if something's up, and that affects everything else. So it could balloon from that to other fish, to other salmon, to other birds to eat the fish, to, like this.

[Kevin Paffrath]

Which is where the argument is that at some point you have to make the. The decision at what point is hundreds of billions of dollars of harm to gdp, which we could reinvest to saving more fish lives and human lives and property. Right, yeah. At what, where's the balance there?

[Jack]

It's just a priority.

[Graham Stephan]

Well, so far it seems like for California the balance is if something goes extinct because of human life.

[Kevin Paffrath]

Yes.

[Graham Stephan]

It's California's responsibility to at least keep the lineage going. And so you do have some of these fish and some of these insects and things like this that are still going in captivity.

[Kevin Paffrath]

Sure. And fine, great. If that could save lives. Give them, give them a paradise. Give them the, the, the bigliest, largest paradise pool reservoir ever. All for the delta smelt. They could have the greatest population ever in the world. World. I've built a museum around the delta smelt. There's so much that money can do to solve these issues. But unfortunately, I mean look, with, regarding indicator species, it's very interesting. There's a reason we use mice for drug discovery and research because obviously they, if, if a rat is going to get cancer from pumping them up with 10 times the normal human dose of a certain drug, well then maybe there's a risk of cancer in a human. Human or at least once you spread it out over population, a higher incidence of cancer by using a certain drug. So, so yeah, the idea of something being an indicator species exists. It's again same reason we use mice. But that doesn't mean that we're necessarily going to see all of the externalities of all humans getting cancer. If some of the small indicators come up in mice, same thing with the smell. Doesn't mean that all of the other ones are going to die. Save the smell, put them in captivity. Captivity.

[Graham Stephan]

Save Southern California Jackson indicator species actually.

[Kevin Paffrath]

Oh, for what?

[Jack]

For plenty of things.

[Graham Stephan]

Yeah, Jack's the indicator.

[Kevin Paffrath]

Okay.

[Jack]

I am an indicator like the, like.

[Kevin Paffrath]

The pro indicator or the inverse indicator.

[Graham Stephan]

Inverse.

[Jack]

Yeah. Just let me know if you want something to go up or down and I'll just do the opposite.

[Kevin Paffrath]

Yeah, there. Okay. Well there you go. The Jim Cramer effect. I've had my Jim Kramer moments.

[Jack]

We have actually had, you know, not the greatest market recently and I did increase my auto invest pretty heavily.

[Graham Stephan]

It was the day Jack was like I invested a lump sum in the market that day. It went down. But there was also a very specific stock, I'm not going to name it Jack that Jack bought into because it was like on the up and up quantum. How's that doing?

[Jack]

No, no, it's, it completely plummeted and this was maybe within the past few weeks. It wasn't, it wasn't a lot. Usually the Heavier I buy, the more it, you know, goes down. But this one, fortunately, I didn't put in a lot. It's still going down pretty heavily, though. Yeah, it's okay. I mean.

[Graham Stephan]

Jack, can you pass me a Magic Mind?

[Jack]

You may, yeah.

[Graham Stephan]

Kevin, have you tried these before?

[Kevin Paffrath]

Oh, no, you don't. You don't. That's why you got three. I am not an indicator.

[Graham Stephan]

Have you had these?

[Kevin Paffrath]

Is there alcohol in it? I. I don't drink anymore. Did you hear that?

[Graham Stephan]

There's.

[Kevin Paffrath]

I'm at, like, three months of no drinking.

[Jack]

You don't drink, period.

[Kevin Paffrath]

I haven't had a single drink since September 20th.

[Graham Stephan]

Yeah, I knew this.

[Jack]

I didn't know that.

[Graham Stephan]

Yeah, I think it's fantastic.

[Jack]

How. How did. How do you feel?

[Graham Stephan]

There's no, like, there's no alcohol. It's just. It's like a.

[Jack]

Graham loves these. They have like a tiny, tiny, little, teeny, tiny little burst of.

[Kevin Paffrath]

I've worked. I worked at Jamba Juice. People come in for these matcha shots. I always thought it was so disgusting, but I'll take it. No, I'll take your mystery magic mind.

[Graham Stephan]

They sent us a whole bunch of these. They sponsored the podcast, and I honestly, I like them a lot. They help with focus attention.

[Kevin Paffrath]

Fine. Cheers to your sponsor.

[Graham Stephan]

I love some people to say the taste is not their favorite. I love it. So I sip on it.

[Jack]

Yeah, Graham, when he. When we go on our, like, work trips, he always likes a little caffeine burst, like midday.

[Graham Stephan]

I take these on trips.

[Jack]

He'll bring them and, like, try to slide me Magic Minds, like, throughout the day. It'll be like 4 or 5pm we'll be like, on some random flight, going somewhere. He's like, hey, man, take mine.

[Kevin Paffrath]

Yeah, they're local.

[Graham Stephan]

I mean, yeah, I. I love them. Yeah, I take them with me I trips because I could put them in my backpack. And TSA doesn't give me any issues with them because it's under the liquid limit.

[Kevin Paffrath]

Nice. Yeah. Two fluid ounces. That's hilarious.

[Graham Stephan]

Sometimes if I, like, I can't get a coffee in the morning or something like this, I'll drink a Magic Mind.

[Kevin Paffrath]

Yeah. Organic olive oil in there too. See, that's brilliant.

[Graham Stephan]

It's really.

[Kevin Paffrath]

Actually not that bad, but.

[Graham Stephan]

Yeah, I mean, you were sponsor the podcast, so. Thank you. Magic Mind.

[Kevin Paffrath]

Yeah, man. I mean, I'd rather have this than shots of tequila. I always used to be two shots of tequila. Always. It was crazy. It was like. It was like daily. And I thought that was normal when.

[Jack]

Yeah, like, time throughout the day.

[Kevin Paffrath]

Four. Four o'clock.

[Jack]

And what would that do for you?

[Kevin Paffrath]

All my anxiety would go away.

[Jack]

What were you anxious about?

[Kevin Paffrath]

Don't know. But it turns out when I stopped drinking, all my anxiety went away. Yeah, people told me it was coffee or caffeine that was creating anxiety. But I think what happened was I got used to using alcohol as the method medicine. So that way, like every day around 4:00, I'd get anxious because I was waiting for my medicine. I don't know if that's true, but that's. That's what it felt like for me.

[Jack]

And you do two shots, tequila, you just go back to back, and then you'd feel better.

[Kevin Paffrath]

Back to back, man, that's like one little swig.

[Jack]

Okay, this is.

[Graham Stephan]

Would you enjoy it or is it.

[Kevin Paffrath]

Hell yeah.

[Graham Stephan]

Just like.

[Kevin Paffrath]

Oh, no, I looked forward to it.

[Jack]

You like the flavor?

[Kevin Paffrath]

No. It tastes like ass. No, Tequila sucks. But I didn't care because to me, I was like, my medicine was what I thought.

[Jack]

And it just made you feel like, emotionally, like more mental clarity.

[Kevin Paffrath]

No, it just. It just took the anxiety away. Less mental clarity? Actually.

[Graham Stephan]

Yeah.

[Kevin Paffrath]

Probably become an idiot.

[Graham Stephan]

Probably. Two shots for you wouldn't. Like. Like two shots for me, I'd be on the floor. Oh, but I'm guessing for you is just like enough to take the edge off.

[Kevin Paffrath]

So I could do two shots and then we would. We would always play games like, oh, who would breath a lies the most? It'd be like 2.5 or what was it? 0.025? Yeah, yeah, yeah, yeah. Dead. That's dead. Yeah. See, I don't even remember the measures anymore. Yeah, no, it was. I'm telling you, it was bad. It would probably be like, I think to hit the limit, I'd probably be five or six. I mean, then. Then you're pooped. It's just. It was just bad. But it became so normal for me. It was normalized for me. And it all started with anxiety, which I started having anxiety when I went to college. I'd get like. Like lumps in my throat and pain in my chest. And went to cardiologist, ear, nose, and throat specialist. Like, I thought it was dying of cancer. And like, I was like, no, man, you're just. You're just stressed out. You're anxious. I'm like, okay, got it. Stressed, anxious. Oh, alcohol cure.

[Jack]

And it started as early as that. As early as college where you'd start. May maybe taking like a shot or two per day.

[Kevin Paffrath]

It was wine back then, but yeah, kind of gross over time. It was. Wine was the wage.

[Graham Stephan]

So.

[Jack]

So then what made you then realize that you should wean off of alcohol and that that could actually, like, be the solution?

[Kevin Paffrath]

I. Well, I didn't. I was just. I. I think what happened is you. You get enough point. You hit enough occasions in your life where you're like, man, I don't remember what happened last night. What did I say? Did I offend someone? Did I do something stupid? And then, like, you're going around to the people you were like, was I okay last night? Did I say something stupid? You get enough moments like that where you're like, oh, man, this is dumb. And. And. And so then, yeah, the. The last one that did it for me was going to Napa. When you go to Napa for drinking, you go drink all day.

[Graham Stephan]

What happened to Napa? I don't remember really.

[Kevin Paffrath]

No. So. But yeah, the whole.

[Graham Stephan]

The whole trip.

[Kevin Paffrath]

I mean, it. Like, I guess the what. What I remember of it is, like, you know those memes where people, like, they're like, oh, look at my kids. And they. They open up this, like, book of. And all. All the pictures come out of their wallet, the dad wallet, which I have a dad wallet now, too, which is kind of funny, but that's kind of what it feels like for me, like somebody's playing a slideshow that's kind of the slideshow of the trip.

[Jack]

Well, I appreciate your transparency. That's cool to. It's cool to hear. I'm. I'm happy that. That it's been working out well for you. I've been seeing a lot of stuff online. Online. Tons of different people. Like Brian Johnson, the guy who's optimizing for, like, longevity.

[Kevin Paffrath]

Oh, yeah. He says he's never gonna die.

[Jack]

Well, as long, you know, he's a smart guy. Like, I'll lend him some credit there. But a lot of other people that are, like, the fitness health guys, like, I think Huberman also might agree with this, that you should never have alcohol.

[Kevin Paffrath]

Oh, it's like poison.

[Jack]

They just say, like, it only ever does bad things. And some people argue that one glass of red wine per night is, like.

[Kevin Paffrath]

It'S a good thing.

[Jack]

I think the data now shows that it. It's not. You know, don't quote me on it, but my general sentiment is it's not a good thing to be drinking a whole lot.

[Kevin Paffrath]

Yeah, there's a. There's a new study every day tells you something's good, something bad, you know, But. But you're right. That is the sentiment lately. And you know, people are like, oh, there's Resver Veritrol, antioxidants in it. Yeah, well, there's antioxidants in a handful of blueberries too. But yeah, I think it's a personal thing. Like I don't blame anybody for drinking. I. I wish I could just have one or two drinks and feel good, but for me, I don't feel anything for one or two drinks. So I'm like, ah, let me just see how long I can go without drinking. So that's where I am right now.

[Jack]

Interesting.

[Kevin Paffrath]

Yeah. I'm not saying I'm never going to drink again, but for right now I've. I've seen good benefits from it and I feel more productive too because I'm not like crashing with anxiety at 4 anymore. I actually feel like I can get more stuff done. So. Kind of crazy. Yeah. I can learn more about Delta Smelt. Yeah. And how to beat Gavin Newsom.

[Graham Stephan]

In terms of Rick Caruso, why do.

[Kevin Paffrath]

You think he lost Republican?

[Graham Stephan]

You think that was the only reason? You don't think people were just like anti rich guy?

[Kevin Paffrath]

Oh, sure they were that too. But Republican. The California is, is it just votes Democrat. That's just the way it is.

[Jack]

Why is that?

[Kevin Paffrath]

California has just. After the 70s, it's. It. You know, California went through this 70s and 80s, this, this golden era. It just had so much money, so it just had so much to give. And, and it actually ran a good budget in the past. So what's happened is after generations of having basically the riches, they just got really bad with managing everything from infrastructure to water to. I mean think about the 1960s. They're like, we need dams. State water project. Boom. They built 10 dams in 10 years. 10 dams in 10 years. We've been trying to build six reservoirs since we funded it in 2014. 14. And we've done nothing in 10 years. So it just shows you that like how different things are now from then when. Wow. California could actually get things done. So I don't know if it's like entitlement or what has occurred, but eventually there will be a shift either to a more conservative Democratic platform or just Republicans entirely.

[Graham Stephan]

Yeah. I do find it interesting. All of his buildings were intact. Palace.

[Kevin Paffrath]

Yes. Okay. So yeah. Which does that sort of like enhances this conspiracies.

[Graham Stephan]

I know the conspiracy that I've seen.

[Kevin Paffrath]

Tell me about Facebook.

[Graham Stephan]

Oh, gosh. There's one that, that this entire thing was. Was the doings of Rick Caruso to be able to buy up land I've also heard the same thing, that Blackrock was behind this, that it was a satanic ritual. I hear a lot of stuff. The most plausible thing is that simply his buildings were brand new construction, I believe. Metal roofs, every. He didn't have shrubbery that was touching his buildings either. Everything was very well manicured, very well watered.

[Kevin Paffrath]

It's like dis.

[Graham Stephan]

Right.

[Kevin Paffrath]

Yeah.

[Graham Stephan]

And now other people were saying too that. That his buildings were like sprayed down the day of or something like this, which is possible.

[Kevin Paffrath]

I don't know. He's got staff there.

[Graham Stephan]

Exactly. But it's not surprising to me that a new construction like that would be much more resistant to fire.

[Kevin Paffrath]

Right. Because right across the street, Starbucks in 100-year-old building burned down, whereas the newer construction. Right, right. I mean, this goes to like what you were saying, which is, hey, we're. We're building our homes much better now. So hopefully, hopefully that's what it is because then that gives you hope about the future that you don't have.

[Jack]

I think.

[Graham Stephan]

I think in the future for any homes that are going to be constructed in that area probably have to have metal roofs.

[Kevin Paffrath]

Oh, yeah.

[Graham Stephan]

They're going to be really strict on plant life and which plants are able to like overhang across something. And then all the roofs should have that sprinkler system that will come up in the event of a fire. The sprinklers come out. Any new construction here in Vegas, they have that now.

[Kevin Paffrath]

That's interesting. Oh, wow. Yeah. I think probably plant life is the biggest, which is unfortunate because, you know, plants make everything kind of lush and pretty. Right. I mean, I think at your Santa Monica, one of your Santa Monica, you got one of the most beautiful, lush gardens. Right.

[Graham Stephan]

Dreading tearing that up.

[Kevin Paffrath]

Yeah.

[Graham Stephan]

Because I have a feeling. I don't want to put it out there, but I have a feeling that's not going to be there forever because of how dense that plant life is.

[Kevin Paffrath]

It's gorgeous.

[Graham Stephan]

It. It sucks because that's what attracted me to that home, is walking in and just like it felt like a tropical forest. Beautiful.

[Kevin Paffrath]

Yeah. That. That is the definition of pro. A problem for fire. I know they should just put your house up. This is what we don't want.

[Jack]

But it was built in like the twenties.

[Graham Stephan]

It's just very picturesque, you know, just a 1920s Spanish surrounded by green.

[Kevin Paffrath]

Still have the saltillo tile inside everything. Yeah, yeah. It's nice.

[Graham Stephan]

I loved it. I loved it. But yeah, in terms of that or a fire. I mean, it's fire's dream. Yeah, that's what it is.

[Kevin Paffrath]

Well, I mean, I think you could look at a lot of. Actually look at newer construction in Vegas. It's a lot of glass and metal and stucco. And they look good, but they're much more fire resistant.

[Graham Stephan]

Yeah, yeah. The other thing that I am shocked about is that LA is not as strict about plants touching fire lines. Like when they. When they really look at the cause of this thing, they. They say it's, you know, from a person's backyard. Now, we have no idea if that means that someone was barbecuing, if a homeless person snuck in and made a fire, if it was vandalism or. What I think is probably most likely is that in a lot of those areas you have these power lines, trees growing over the power lines. And in the wind, when you have that much wind, it sparks. Probably that's what's most likely to happen.

[Kevin Paffrath]

I agree with that. Power line snaps, falls down. Sure.

[Graham Stephan]

And I've seen a lot of real estate in Los Angeles where, I mean, this is obviously overgrown over the power line for like 10 years.

[Kevin Paffrath]

Oh, yeah.

[Graham Stephan]

No one ever trims it back. And no one ever forces you to trim it back. No one mentions anything. It just is what it is.

[Kevin Paffrath]

Again, infrastructure.

[Graham Stephan]

And. And that's one of the things. And it's very expensive to put the power lines underground.

[Kevin Paffrath]

Oh, God.

[Graham Stephan]

I think it was like $4 million a month.

[Kevin Paffrath]

Well, yeah. And that's where it comes to like, well, if the brush were cleared, maybe you don't have to worry about putting the lines underground. But then again, how often do we get 200 mile an hour gusts, which is crazy, too. So in fairness, that's crazy. But hey, you know, at least somebody's being paid a $751,000 salary to think about those things. Over at the Department of Water and.

[Graham Stephan]

Power now, Karen Bass. Karen Bass promised affordable housing.

[Kevin Paffrath]

Oh, God.

[Graham Stephan]

How could you promise cheaper housing?

[Kevin Paffrath]

That's the most political. That's the biggest political lie. The only way you can increase housing affordability is by building much more housing. This idea that you're going to come into a very expensive area and say, we will have affordable housing here is very stupid because it simply exacerbates the housing shortage. So I'm a big fan of just build more and let the market decide. But the idea of affordable housing restrictions, they're complicated to get through planning. They become a negotiation contention for developers. They slow down the building process. And quite frankly, from an economic point of view, they do the opposite. Affordable housing actually makes housing Less affordable because you have massive wait lists for those affordable housing units. So very few people actually benefit from them. And everybody else is left now enjoying less real estate to pay higher prices for.

[Graham Stephan]

Do you think it's ever a possibility California could enact a price control on landlords right now from gouging rent?

[Kevin Paffrath]

Oh, yeah, sure. Well, I, I mean price gouging already exists policies for that. So those are probably, you don't even need to pass a. For that. That probably already exists. This would be a perfect case where that those sort of laws will come into effect. Like, hey, like your place is listed for 13,000, you're getting an offer for 20k. No, you're not going to rent it out for 30k. But let's not even talk about those numbers. Let's use like a, a townhouse, for example. The townhouse was renting for. It's a two bedroom, one bath, a townhouse. Let's just say, let's say it's renting for 3500 bucks a month. Hey, look, you can't raise the rent more than 20% or whatever. I imagine those sort of policies already exist, but it's probably gonna happen anyway and people will be willing to pay it because they want to live somewhere. People want the certainty that they can sign a lease right now for the next two years while they go rebuild. I would, I would. I mean anybody who, who is capable of will, who get screwed are like you mentioned earlier, the people who've been there since the 80s, they can't pay above market rents. They can't afford to rebuild their homes. What happens? They get squeezed out of California. That's, that's the real loss is that sort of culture and diversity that that once was and the character or whatever that, that all gets exported.

[Jack]

What do you think about that wildlife crossing in Thousand Oaks?

[Kevin Paffrath]

Oh, I don't know about this.

[Graham Stephan]

Oh, you pass by it all the time.

[Kevin Paffrath]

It's a wildlife what?

[Graham Stephan]

Yeah, they built an overpass over the freeway.

[Jack]

It's for, I think mountain lions. Right. It's for mountain lions and deer to be able to cross from one side to the other. Beautiful. If I'm not mistaken, it brings it from like the mountainous region.

[Kevin Paffrath]

Yeah.

[Jack]

To the residential reason. So it, it also, it makes me wonder like, okay, why do the mountain lies need to be over in the residential.

[Graham Stephan]

Well, my understanding they're crossing anyway. So it's like either they get hit by a car.

[Kevin Paffrath]

Right.

[Graham Stephan]

And somebody maybe crashes into them or they just pass.

[Jack]

I'm pretty sure the budget though, for this is like $100 million. Did you hear about that?

[Graham Stephan]

No, I didn't know about the budget. It's a, it's a beautiful overpass. I will say you pass by it and it looks like you're going underneath.

[Jack]

Well, they haven't finished it yet. It says online that the budget is $90 million for the bridge and 60 million is publicly funded and 30 million is privately funded.

[Kevin Paffrath]

Yes. That's dumb.

[Jack]

So $90 million to make something for a golden eagle to be able to cross a freeway. I'm joking. That's. Obviously I'm being a little bit exaggerated right there, but there is, you know, bobcats and other things. But still, I mean, that is $90 million, which is.

[Graham Stephan]

Would you rather be spent on that or homeless?

[Jack]

Well, the. Like if it actually went to solve the homeless issue, that. But the problem is they have a long track record of allocating funds to that and nothing being done. And I know you know a lot about this because you talk about like these shelters that are built and they're just sitting vacant while they're still paying, like the, the lease.

[Kevin Paffrath]

I think one of the things that you find in California is California is very much about feel good policies. In fact, Germany did this as well. Germany was building, you can look this up. German spent over $20 million building bike paths in Ecuador for climate change. So these are, I just call them like the feel good pet projects that politicians get to put their names on. But again, they do that so they could get reelected. The whole premise of look at this beautiful park I built or whatever. This is why when you see those 1500 page bills and they have all the pet projects in them, politicians put their names on it so they can get reelected. It's always to get reelected you need DOGE in California. You need somebody to implement Doge C, you know, Doge California or the California Doge and just rip this budget to shreds heads and start over. You know, Vivek always tells, he says start at the bottom and add in what you need as opposed to starting at the top and cutting what you don't need. Reverse the order. Like this might sound unpopular, but, but I, look, I was looking at the budget of San Francisco and if I remember correctly, the budget of the libraries alone in San Francisco could probably solve the entire homeless problem in San Francisco. Francisco. I'm not saying we don't need libraries and books, but we are also in a digital age where it makes me wonder how much we can reallocate resources and actually solve real problems that are Killing people, needles on the ground, people getting stabbed, crime, safety, like actual life issues, while not losing the context of books and research and reading, which we could do digitally now. And so the prioritization of the government budget in California is what the ultimate problem is of all of it.

[Jack]

But it's not even the prioritization, but it's also just how effective they use their dollar. Oh, like $1 for that library. I'm sure they could do both at the same time. Yeah, that's. If they just, like, were a little bit more conservative with their. With their. Tight. With their wallet.

[Kevin Paffrath]

Sure. I mean, it's the. It's the argument of the. Oh, what was it? It was the 100. This just came up. It was the $150 Boeing Military Contractor so dispenser.

[Jack]

Why?

[Kevin Paffrath]

Oh, yeah. You know, why is the US military paying $150 for a commercial soap dispenser in a Boeing plane for the military when it's available in the commercial market.

[Jack]

For $5 or the $2 million public bathroom that was put, I think, in, like, San Francisco or New York, something like that?

[Kevin Paffrath]

It's endless. It is endless waste and spending. And usually. Usually it's because the person making the purchasing decisions gets taken to dinner by a lobbyist, gets handshake, gets gifts, you know, they get a new toaster that shows up at their door, you know, whatever. Or their wife gets tickets to whatever, the Broadway show or whatever. And we're going to write them in because we're going to do them a favor.

[Jack]

Did you get approached by any lobbyists when you were running for governor?

[Kevin Paffrath]

Oh, no, no, no.

[Jack]

And why is that? Because they didn't want to, like, seem like traitors to the incumbent.

[Kevin Paffrath]

It. Well, I think there are a few potential reasons. I think that's probably the biggest reason is, like, okay, no, nobody support the competing Dems against Nome. That's probably the biggest reason. But there's also a chance that they're like, oh, man, if we go talk to Kevin, he's gonna make a YouTube video about us. Oh, that's funny.

[Jack]

That's funny.

[Graham Stephan]

Yeah.

[Kevin Paffrath]

Which I. I would do.

[Graham Stephan]

They were right.

[Kevin Paffrath]

They were right.

[Graham Stephan]

Got it. Okay.

[Jack]

I think that's. I think that's pretty good. I mean, we.

[Graham Stephan]

We kind of hit everything.

[Jack]

Yeah, we were kind of spitballing with this one, guys, so forgive us, obviously, if it, you know, any of the information is inaccurate. I'm going to do my best in fact checking. This episode is also incredibly fast turnover. So I'm basically going to devote my entire life tomorrow to editing this entire thing, making it look good for you guys. We're doing our best out here trying to report the news.

[Kevin Paffrath]

Yeah.

[Jack]

Thank you Kevin, for My pleasure.

[Kevin Paffrath]

You know, we'll have community notes in the comment section where people can community know everything we said. I'm curious to read it because I, I profess to know everything and I don't think anybody knows everything but it's healthy to have that discussion about it and so the comment section will be very entertaining.

[Graham Stephan]

Yeah. Well, thank you.

[Jack]

Comment about the Delta smelt.

[Graham Stephan]

Please let us know what you think down below. Make sure to hit the like button. Subscribe Kevin will link to your info down below in the description.

[Jack]

Also, I'm going to do some research and find some really good funds that you guys can contribute to for victims of the California War wildfires. We will be living Leaving those links down below top lines of the description if you're interested in helping that would be absolutely incredible. Thank you guys for watching. Till next time.

[Kevin Paffrath]

See. Yes.