#135 - Michael Green - The Benchmark That Broke America

Summary

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Podcast Summary: The Peter McCormack Show

Episode #135 – Michael Green – The Benchmark That Broke America
Date: December 11, 2025
Host: Peter McCormack
Guests: Michael Green, Connor

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Overview

This episode dives into the profound shifts in Western capitalist societies—especially the US and UK—that have eroded economic mobility, squeezed the middle class, and fueled widespread resentment and disillusionment. Michael Green, known for his incisive economic commentary and viral essays, joins Peter and Connor to analyze why so many people feel stuck, the structural flaws in welfare and taxation, the dangers of monopolies, the myth of progress, and the prospects for real reform. The guests discuss both data and lived experiences, connecting personal stories with systemic analysis, and explore what it would take to rebalance society toward broad-based opportunity.

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Key Discussion Points & Insights

1. The Loss of Control and Stagnant Opportunity

Extended Adolescence and Economic Stuckness

• Michael frames contemporary malaise as a loss of agency—the traditional "pursuit of happiness" has become unattainable for many young people, resulting in prolonged dependence and resentment.
  • "They're saying, 'Hey, I'd love to be an adult. I can't afford to be an adult.' And so I'm stuck in this extended adolescence..." —Mike [00:34]
• Growing up means financial independence, but rising housing and childcare costs have kept people at home.
• This feeds generational tensions and pessimism about the future.

Contradictory Signals About Progress

• From a think-tank or academic level, society is told "things have never been better," while many individuals experience insecurity and stagnation.
• Michael notes the disconnect: "Unemployment is rampant, they can't find jobs in their careers, they really don't understand how they're supposed to ever buy a house..." [02:17]

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2. The Gut Punch & The Realities Behind Economic Sentiment

The Power of Viral Dissent

• Michael's turning point was witnessing coordinated mocking of the claim that life was once affordable, even for single-earner families.
  • "Why would you spend so much time and effort trying to extinguish this complaint?" —Mike [04:44]
• He realized that policymakers, himself included, misunderstood the depth and legitimacy of this affordability crisis.

Affordability vs. Inflation

• Even low inflation means nothing if people's incomes are already far below their consumption needs. He offers a clear analogy:
  • "If you are at 100 is your consumption level and 90 is your income level and both go up by 2%... you're further in the hole." —Mike [06:04]

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3. Poverty Line Critiques and Misleading Metrics

Origins and Problems with the US Poverty Line

• The poverty line was based on a 1960s calculation of food as ~1/3 of family budgets, tripled to set a minimum income. But since then, essentials like housing, childcare, and health have grown much faster than food.
  • "The poverty line today is... codified [in] 1969, and then we inflated it by the CPI index..." —Mike [14:51]

CPI and Hedonic Adjustments

• CPI (Consumer Price Index) is meant to adjust for quality improvement, but often reflects the consumption patterns of the wealthy, not the poor.
  • "Poor people don't get to make that choice. So when you adjust the CPI to reflect that... you're capturing the experience of rich people, not the experience of poor people." —Mike [19:08]

Welfare Cliffs

• Government programs create perverse incentives: As recipients earn more and cross eligibility thresholds, benefits are abruptly taken away, trapping people in poverty or lower-middle status.
  • "Once people start beating the thresholds at which those benefits are provided, the benefits are taken away." —Mike [29:21]
  • "Instead of providing people with support that allows them to lift out... we start basically pushing them back down." [30:47]

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4. Shrinking Middle Class and Economic Cliffs

Squeezing the Center

• Rising minimum wages haven’t triggered matching increases up the income scale, leading to wage compression that leaves the lower-middle and middle class increasingly precarious.
  • "People are being dragged from the middle class into the cliff... that’s going to create... people who will never be able to retire." —Connor [32:12]

Multiple Financial Cliffs for Families

• Childcare is a new, massive expense, compounded by regulation and risk management. Loss of affordable childcare can be life-altering for two-income families.
  • "For a two-family, two-child family... the average is about $25,700 a year that is being spent on childcare..." —Mike [39:33]
• Having children or moving out of the family home become huge financial leaps—resulting in collapsing birthrates and delayed adulthood.

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5. Monopolies, Competition, and the "Cost of Participation"

Rise of Private and Public Monopolies

• Both government services and major corporations increasingly behave as monopolies, removing competitive pressures to lower prices or improve quality.
  • "When you create a monopoly, you've... created an entity that... benefits from under supplying." —Mike [33:50]
• Privatization without competition simply converts public inefficiency into private rent extraction.

Regulatory Capture

• Large corporations use their resources to set rules that make it harder for entrants (small businesses) to compete, further entrenching monopolies.
  • "Is it malice? No, they're telling you this is the state of the art of safety..." —Mike [73:46]

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6. Income, Productivity, and the Relative Decline of Labor

Disconnect Between Productivity and Wages

• If wages had kept up with productivity, most families would be financially secure. Instead, wage stagnation combined with asset inflation has funneled wealth upward.
  • "If you actually look at that number again and... what would have happened if wages kept up with productivity gains? We'd be at those levels." —Mike [58:12]
• The "labor share of GDP" has sharply fallen—from 70% to under 60%—while capital's share has soared. Michael emphasizes the distinction between absolute and relative poverty, both of which have grown more acute.

Asset Owner Privilege

• Asset holders (real estate, equities) have benefited from policy and inflation, increasing inequality—something even those benefiting from it often recognize as destabilizing and unfair.

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7. Globalization, China, and Financialization

China Effect and Deindustrialization

• Western policymakers promised access to Chinese consumers, but in practice, capital moved for cheaper labor, leading to the destruction of Western industries without reciprocal benefits.
  • "The capital moved to China to exploit labor that contributed to the continued decrease of the labor share." —Peter [107:29]
• Now, China’s productive capacity threatens global oversupply, and western policy is belatedly returning to industrial tariffs and local investment.

Financialization: Profiting from Leverage and Structure, Not Innovation

• Instead of making things better, financial engineering and consolidation have let speculators and monopolists reap rents, while reducing competition, innovation, and opportunity.

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8. Degenerated Political and Social Discourse

Policy Failure by Incompetence, Not Conspiracy

• Most systemic issues are not due to malicious intent, but to thoughtless policy inertia and regulatory capture by special interests.
  • "I think it's mostly incompetence. ...Never substitute conspiracy when incompetence will suffice." —Mike [30:59]

Cultural Malaise and Societal Fragmentation

• Both hosts and guest lament the decline in social trust and the rise of political and class resentment.
  • "I don't feel happier than I did two years ago, five years ago. Because what we have is chaos around us." —Connor [79:43]
• Even those who are "winning" economically feel little satisfaction amidst so much broader insecurity and tension.

Relative vs. Absolute Poverty

• Michael underscores that in wealthy societies, it’s relative poverty—the inability to participate on equal footing—that most undermines cohesion.
  • "Charitable behavior, altruism, is a function of surplus. If I've got 58 bananas, I'm more than happy to give you one. But if you and I are fighting over the last banana, there is no altruism there." —Mike [82:02]

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9. Pathways Toward Solutions: Policy, Taxes, and the "Rule of 65"

Tax Code as Leverage Point

• Michael advocates for a thorough reform of taxation—raising corporate taxes, closing loopholes for wealthy asset holders, ensuring inheritance is taxed as ordinary income, and smoothing out welfare cliffs. He’s especially critical of financial devices that allow top earners to avoid taxes.

Tariffs and Trade Policy

• Thoughtful reintroduction of tariffs to protect domestic industries and workers, balancing the interests of capital and labor.

The Rule of 65

• Michael’s practical proposal: orient policy around the well-being of the 65th percentile household, ensuring the broad aspiring middle has security and opportunity.
  • "If we build our emphasis in society about making sure that [the 65th percentile] segment... does better and better, and we score our legislation... around those individuals, we're capturing a much broader segment..." —Mike [160:39]

Democratic Participation and Local Reengagement

• Recognizing that change is possible—democracy affords more opportunity than most realize if citizens are informed and engaged.

Guarding Against Backsliding

• Any reform risks reversal; constant vigilance and civic engagement are necessary.

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Notable Quotes & Memorable Moments

• "Why would you spend so much time and effort trying to extinguish this complaint?" — Mike [04:44]
• "Once people start beating the thresholds at which those benefits are provided, the benefits are taken away..." —Mike [29:21]
• "When you create a monopoly, you've... created an entity that... benefits from under supplying." —Mike [33:50]
• "If you are at 100 is your consumption level and 90 is your income level and both go up by 2%... you're further in the hole." —Mike [06:04]
• "Charitable behavior, altruism, is a function of surplus... but if you and I are fighting over the last banana, there is no altruism there." —Mike [82:02]
• "We've squeezed the middle class... and that's going to create this other cliff which... is the people who will never be able to retire." —Connor [32:09]
• "If you build a model that says it's all going to work out in the end, your model is going to tell you it's all going to work out in the end." —Mike [113:47]
• "Asset holders have benefited from this inflationary system. ... It's 100% benefited me, and I don't like the outcome of it." —Connor [96:52]
• "You are going to have to raise taxes on higher income individuals if you want to fix this. But the irony is... our society actually ends up in aggregate, much richer." —Peter [123:02]
• "We're not just failing the very poor—we're failing the productive, striving middle too." —Mike [94:43]
• "We've allowed ourselves to be distracted from the environment in which we can influence it." —Mike [159:23]

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Timestamps for Key Segments

• [00:00]–[04:44] – The malaise of extended adolescence and economic stuckness
• [06:04]–[11:38] – Affordability crisis; inflation vs. lived experience; viral Twitter catalyst
• [14:36]–[26:58] – History and distortion of the poverty line; CPI problems
• [27:03]–[31:56] – Welfare cliffs; traps in the social system; middle class squeeze
• [39:06]–[46:53] – Childcare, cost of family formation, and multiple "cliffs"
• [50:17]–[52:58] – Housing price escalation; loss of geographic social mobility
• [54:30]–[56:47] – Monopolies, regulatory capture, and competition
• [58:12]–[63:55] – Labor share, wage stagnation, and society's relative poverty
• [73:14]–[76:17] – Small business barriers, regulatory garbage, and entrepreneurship
• [94:43]–[101:18] – The Rule of 65, special interests, and union/political pitfalls
• [104:07]–[114:07] – China, financialization, and international system breakdown
• [142:38]–[154:10] – Corporate taxes, inheritance, and the practical politics of redistribution
• [160:39]–[161:53] – Summing up the "Rule of 65" and sustaining reform

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Conclusion: Restoring the Promise of Participation

The episode weaves personal anecdotes, economic history, policy critique, and philosophical reflection into a powerful call for a rebalancing of Western society. The aim is not socialism or punitive redistribution, but a restoration of broad-based opportunity—the pursuit of happiness, not just the defense of property. Michael Green argues that with informed policy (tax, welfare, industrial, and trade) and a clarified sense of social purpose, it's possible to revive the dynamism and optimism that have ebbed away. The solution lies not in burning down the system, but in using the tools of democracy, reason, and honesty to hold power accountable—especially on behalf of those in the middle who, though "invisible," are vital to societal flourishing.

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"It's time for the rest of us to wake up and recognize that the unique feature of democracies is it's one man, one voice vote—not one bitcoin, one vote; not one dollar, one vote; not one pound, one vote." —Mike [159:23]

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Transcript

[Mike]

Look, people get depressed when they don't understand what's going on, when they're not in control of their own circumstances. We want opportunity, pursuit of happiness. Pursuit of happiness. I don't want happiness. I want the pursuit of happiness. Right? Because that pursuit, that life journey towards your fulfillment actually gives you meaning, it gives you pride. There's this perpetual state of natalism, this childhood that is extending further and further. Children are living at home. Why? Because they can't afford it. So what are their expected behaviors?

[Peter]

Should they behave as adults or should.

[Mike]

They expect their parents to continue to do their laundry for them? They're basically saying, well, why don't you act like an adult? Why don't you recognize there's hard choices that you have to make, Right? And meanwhile they're saying, hey, I'd love to be an adult. I can't afford to be an adult. And so I'm stuck in this extended adolescence where I'm living with my parents who may view me bringing home a girl or who may view me going out at night in a manner that makes me look like I'm still 17. And that angers me and frustrates me. And there's resentment that builds up over all of those components, et cetera. But the core resentment is they want to act like an adult and they can't.

[Connor]

This show is brought to you by my lead sponsor, Ayron. The AI cloud for the next Big thing. Iron builds and operates next generation data centers and delivers cutting edge GPU infrastructure all powered by renewable energy. Now, if you need access to scalable GPU clusters or are simply curious about who is powering the future of AI, check out aaron.com to learn more, which is iren.com Mike. Morning.

[Mike]

Good morning.

[Connor]

Good to finally meet you, Peter.

[Mike]

It's nice to meet you in person, Mike.

[Connor]

I think you've written what for me personally is the. Let's group all three as a single article. The most important thing I've read in I don't even know how long.

I'm terrified about the future of what's going to happen to my country, which I think are equal problems for your country. But I think there is a sense of something wrong for some people and there's a knowledge of something wrong for others. And I think you've managed to join the dots so people can make sense of what's going on.

[Mike]

Well, I hope that's the case. I mean, I. This is not what I do for a living.

[Peter]

Right.

[Mike]

I'm a. I'm a rank amateur. It's the sociology framework. But like you, you know, I've been on this voyage of discovery where I'm very happy with my life, right? I'm very comfortable, I've got three children, I've done well. But as I look at what's happening, I get that same sense that this is not going to be a better place. And on the flip side of it, everybody is screaming, this has never been better. This, the, you know, at the, at the court sort of think tank level below that people are telling us I can't get by, right? And I hear from my kids friends that unemployment is rampant, that they can't find jobs in their chosen careers, that they really don't understand how they're supposed to ever buy a house. All the complaints that you hear from everybody else.

[Connor]

Well, I look, I look at what's happened in the politics here. We've had a very sharp move away from the two traditional parties, we which have dominated politics for over a century, maybe longer. Very quickly we've had a new Conservative Party because the Conservatives aren't working for who are traditional Conservative voters. And the Labour Party is projected to go from in the last election, get a parliamentary majority to four seats in the next election. Something isn't working. And then if you look across the different classes, the working class, we have a working poor who rely on welfare to survive in this society. We have a middle class which are being squeezed particularly hard to the point where you used to be able to afford private school for your kids and have a holiday and this has been squeezed out. And then a kind of more wealthier class who are being blamed for everything. And I think people are looking for answers and they're still not coming from politics. And the connections you've made here I think are brilliant. What, what was the like, what drove this and what was the gut punch? Were you like, oh shit.

[Mike]

You know, it's funny because the gut punch was actually an event on Twitter.

I think it was about a month and a half ago now, where a right wing influencer, this is speaking from the United States, right? So somebody who is in the MAGA type crowd posted a tweet that said in 1950 a single income earner could afford this, right? And it was a picture of a house and it was candidly too nice of a house, right? It was equivalent of like a row house in Lond or something, which obviously has never been owned by the working class. But the point was a single income earner could support a family and live a decent life. And the response to it was this insane, coordinated, mocking campaign, right, in which it was subtweeted over and over and over again with various influencers on both the left and the right making fun of it, saying things like, well, in 1950, a janitor could afford a castle and, you know, a peanut farmer could own this house. And it was the White House, which of course did actually happen. Jimmy Carter was a peanut farmer. And so it's kind of funny. But at the same time, it was this intentional, just crushing down of this legitimate, expressed belief that life was better at some point in the past. And I was so taken aback by the people who were commenting and the manner in which they were commenting, because many people I knew who were making these comments should have actually understood the underlying sentiment, right. One, it was an uncharitable read of what he was trying to say. And I've experienced a lot of uncharitable reads of my stuff recently. But the second part of it was legitimately like, why would you spend so much time and effort trying to extinguish this complaint? And that piece led me to write a piece called are you an American? Which technically precedes this, but kind of should be thought of in a four part trilogy so far, right? And there will, I'm sure, be more because it's a substack and I write every week, or I try to write every week if I possibly can. And that event kind of catalyzed me to say, hey, wait a second, I've been part of the institutional side saying things like, look, on a measured basis, inflation has retreated, right? Like these people don't understand what inflation means, right? Inflation means a year over year, change in the general price level. What are they talking about? That's now under control. But as I began peeling back the onion, what I realized was this was actually this affordability crisis that people were talking about. And so inflation of 2% is fine, unless you're already 10% underwater, right? Because then you're purchasing, just to put that in math terms for the audience, right? If you are at 100 is your consumption level and 90 is your income level and both go up by 2%, which is ostensibly painless, you're now spending 102 and making 91.8, you're further in the hole, right? And that expressed feeling we were hearing from everybody, and I, like many others, was looking at it and saying, oh, they just don't understand. And the reality was I didn't understand.

[Connor]

So that drove you towards writing that.

[Mike]

The part one, there's a lead into It. Right. Which, you know, is. As I was reading through this and trying to understand it, I found the formula for how we calculate the poverty line in the United States, which I candidly just never really spent any time thinking about. Right.

[Connor]

Well, I was at a wedding in America about a year ago, and I was in a taxi with somebody I know.

Far wealthier than I am. And this conversation stuck with me because he was talking about his investments and what he's working on. He said, how do you even know when you've got enough? And I remember saying to him quite clearly, oh, I've got enough. He's like, what do you mean? I was like, no, I've got enough. I mean, I don't have to work for the rest of my life, so I've got enough and I can help my kids. And he's like, no. And he started talking about the things he wanted to buy and they're all lumpy things. And it really stuck with me. And I've come back to the uk, we flipped the podcast, and I've been trying to kind of refocus myself into thinking about what is the country we're building for the kids of the future, my kids and other people's kids. And I'm deeply concerned in that.

We have built a system which benefits the asset holders to such an extent that it's going to be so difficult for anybody to ever kind of make it in life in some ways. If you refer it back to America, has the American dream been kind of killed a little bit?

[Mike]

I don't think the American dream has been killed. And ironically, I actually wrote a piece right before the Are you an American? So, as I said, it's a four part trilogy now expanded to a five part trilogy called Mispriced Hope. And it talked about the American Dream in the context of framing it like an option. And you and I have gone back and forth in financial terms before. The work I'm known for is largely in the derivative space or things like pricing options and thinking about them, et cetera. And if you properly formulate it, the American Dream really is a call option. Right? It's a call option. I'm going to have a better life, that I'm going to give my children a much better life. I don't think that dies.

[Connor]

Okay.

[Mike]

I just don't think it dies. But I do think that we have systematically devalued the components that add value to that option. And when you think about what adds value to an option, ironically, it's things like Volatility what people are actually craving. And this is what you see. You and I again have gone back and forth on the bitcoin thing. What the young people are really craving is volatility. That allows them to break out of this pattern.

[Peter]

Right?

[Mike]

They need things to change. Change and volatility are synonymous in finance.

[Connor]

Because volatility is opportunity.

[Mike]

Volatility effectively expands the cone of possibilities.

[Peter]

Right?

[Mike]

So if you think about a highly volatile environment, it means I really don't know what the future looks like, but it's going to be very different, Right. A low volatility environment, which is largely what we've enforced for the past 50 years, is one in which the future is going to look very much like the past. Right? You're going to be in the same caste, you're going to be in the same economic class, your children will go to the same school you did, et cetera. School will degrade because nobody's made any investment in it. But there's very little noticeable change, Right? It's almost the reverse of boiling the frog. You slowly freeze the frog to death.

[Connor]

Does that resonate with you, Connor? A little bit. But also, in the past 50 years, we've had the birth of the Internet, computers, and now AI, so stuff is changing.

[Mike]

Well, first, I love the description that you use, the birth, right. These are inanimate things. They aren't born, they're created. They're created by human beings, Right? So one, I think we need to get away from this fetishization of these things as animated. They're not. They represent us as individuals and as a collective. The second thing that I would say is that, yes, those are radical changes to the technology ui, right? Of the user interface, of how we interact with electronics. But behind all of this, and again, this is one of these things that you and I have talked somewhat extensively about is the reality that we're still living in an analog world, right? The mortgage that you sign, while it is an electronic document and it can be traded in financial terms, at the end of the day, that wet signature that you put on that mortgage document is very much analog and hasn't been innovated really in any meaningful way for going on 100 years, right? Stocks of certificates and securities, all the same stuff, right? Many of the trappings of our lives, the clothes that we wear are more comfortable, the seats that we sit in are somewhat more comfortable. Right? All of these things are better in a lot of ways and have represented a pretty meaningful change in how we access information, how we communicate with our family and Our friends and people like you and I that never would have met in a world before this. But that can be used to tamp down volatility as well.

[Connor]

Yeah, I mean, I was listening to an interview with the founder of Nvidia this morning with Joe Rogan. He was talking about when his parents sent him and his son to America. They couldn't afford the long distance calls, so they used to record tape cassettes of what was going on in their lives and send it back. And I was just thinking, wow, we can now facetime from an airplane at 600 miles an hour crossing the Atlantic. But at the same time, we're. Me and my son got the train this morning into London.

I used to work down here in the advertising industry. So when I first started commuting here 15, 20 years ago, there was a first class carriage. I didn't always get to go in it, but when my career got better, I did. You had better seats, you had a table, and there was a car that came around and bought you breakfast. All of that's gone now. And there's so many parts, so many parts of society, I think, that have actually gone backwards in some ways. And I think that is a reflection of the things you've talked about.

[Mike]

I absolutely think it is. And I spoke a little bit about this in the first piece in this, right. The my life is a lie component. A big chunk of that is, if you think about it, the train, that first class train from where we were coming to Bedford was very much a recognition that high class individuals traveled on that train. It wasn't put there for Peter McCormick. It was put there for people who were otherwise extremely well off, certainly by the standards of the day, and wanted a little bit of an upgrade. But at the end of the day, they went through the same public institutions, they went to the same train station, right. They went to the same subway stop, et cetera. There was an overlap in experience. Today the wealthy have effectively retreated back behind the closed gates. Right. You know, you can sit at the gates of Buckingham palace and peer in, but you would never have been allowed inside. Right. We were allowed inside for a brief period of something like 50 years of relative equality. You know, in that time period, from World War II until that time period, somewhere around 1980, 1990, when things began to diverge pretty significantly both in the United States and in the UK from the experience of the rich versus the poor. And now we've gotten to a point where they take private planes, so we don't really need to. They don't need to worry about the decay in the airport. Right. They don't take the train anymore. They likely live in downtown London because they maintain a flat here and they've got a country estate, etc. And there's no reason to be on that train. So why would I invest in the infrastructure of something I'm not using?

[Connor]

I never thought about it like that. Well, we should probably work through. Let's start with the. The first article that I read, the Part one. Not the My life is a lie.

Or is. No, no, that is the first. That's. The first part is. The prequel was. Apologies.

[Mike]

The prequel was Are you an American?

[Connor]

Are you an American? Okay. And we'll. We'll link them all in the show notes. But let's start with the poverty line. And we will get into the criticisms because I think they were ridiculous. But let's talk about.

Why was the poverty line created? What was the measure used for?

[Mike]

Yeah. In the early 1960s in the United States, as we went through a phase where we recognized that there were many inequities that had been left from the 1930s and we had relative surplus in the United States, certainly we began to explore how can we fix it further.

[Peter]

Right.

[Mike]

Some of it was, of course, driven by politics, and some of it was driven by the need to get elected. But the simple reality was we spent a lot more time thinking about it back then. A economist at, I believe it was the Department of Health and Human Services, Molly Dorshansky, was looking for a way to classify families that were in crisis. And what she recognized was that roughly one third of a family budget was spent on food. And so by constructing what the USDA called the minimum food budget, which was entirely composed of food that was purchased at home and cooked at home, et cetera. By tripling that amount, you could effectively articulate when a family couldn't possibly have enough to meet their needs. Right. That's what the poverty line came from. The poverty line today is actually derived from that same level. We actually codified that level in 1969, and then we inflated it by the CPI index on a continuous basis. And that gave us cover, that we were giving people real benefits, that this was the same amount of money in real terms that they were being given in the 1960s. And actually we expanded it so it was perceived as more. This is all good, Right. The simple reality is that most people who are at the lower socioeconomic strata experience a very different inflation rate than is measured in the cpi. And that's because the CPI in The United States and I believe in the UK as well, is adjusted to accommodate a changing purchase basket. Right. And most of those changes in purchase basket is a fantastic expression, Right.

[Peter]

The future is already here.

[Mike]

It's just not evenly distributed. Long before you got air conditioning, wealthy people had air conditioning, Right. And so as air conditioning becomes part of the purchasing basket, it has to be incorporated in some way and we have to reflect how that has improved the experience. Otherwise we're overstating an increase in the cost of living.

[Connor]

Right, but, but is it.

[Mike]

Well, it is an overstatement in the cost of living exactly as we lived then. Right now it's an estimate based on measures of hedonics, et cetera, which is the term used for adjusting for the quality of the experience or the quality of the product. Its and the way that is calculated, if we really want to dig into the details, which I love doing but most people don't.

[Connor]

Yeah, please do.

[Mike]

Is going to be determined by the BLS by basically saying how much do they have to discount last year's model in order to get rid of it so that you don't buy this year's model right. Now, if you think about the implications of that, that's a reflection again of like what would happen if I purchased brand new every single year, Right. How many people, you know that are poor that had brand new televisions or had brand new cars? Right? Now, of course, those are being captured in other components. But that process of going from, you know, high quality luxuries that were totally unaffordable to things that everybody has has to be captured in some way.

[Connor]

Mike, I bought my first brand new car, first ever, zero mile off, off the dealership last year, first time I'd ever done it.

[Mike]

And can I ask you honestly?

[Connor]

Yeah.

[Peter]

What did that feel like?

[Connor]

I shop in a weird way, but it felt like.

Oh, God, it's hard to explain. I'd always thought that buying brand new cars was just such a waste because you lose 20% driving off the dealership. But it felt nice to just go in and choose the spec of what I wanted. So when you're buying secondhand, you're kind of accepting a spec. I got to go and buy a spec I wanted, but it was the first time I was able to buy a car without using finance. First time. And do you know what it felt like? Ah, felt good.

[Mike]

It did feel good, didn't it? That was the point that I was making, is that if you think about that experience, right, you got a lot out of that over and Above, I bought a car, right? You had a personal achievement component to it. You had exactly the car that you wanted. You were in a position in which you were able to feel satisfied in your life because this was something you could do without finance. Those all added to the richness of the experience. And I have to somehow or another, if I'm the government and I'm tracking prices, I have to somehow or another say, okay, that experience that Peter paid for was not really about the car. It was about all those additional components. Poor people don't get to make that choice. So when you adjust the CPI to reflect that type of experience, you're capturing the experience of rich people, not the experience of poor people.

[Connor]

So on this podcast, you are definitely hearing me talk about bitcoin a lot. Well, why? We live in a really strange time with governments driving inflation with their reckless spending and endless money printing. There is a way out of this. There is a way to protect your money, and that is by stacking bitcoin. I've made loads of shows about bitcoin. You can go and research this, you can go and read the books, but the truth is, it is the hardest money ever created. If you are interested in protecting your financial future, it's time for you to get on the bitcoin train. I have. I've been stacking bitcoin personally and through my businesses since 2017. It's protected me, it's secured my family's future, and it also strengthens all of my businesses. So if you want to start stacking bitcoin, where do you do it? Well, for me, it's with Gemini. They're a fully licensed full reserve exchange and custodian. So they give you a secure way for you to buy and own your bitcoin. There's no risks and no funny business. So if you're serious about stacking bitcoin the right way, head over to gemini.com, which is g e m I n I dot com. There are also accusations that there is a dishonesty to the CPI basket in that.

Sometimes is manipulated to, in order to get the, the, the nominal number down.

[Mike]

Yeah, I, I mean this is one of these interesting things because there are products out there like truflation here that is based in the UK or.

Price stats in the United States, which was created by Alberto Cavallo, who was a PhD student from Argentina, where that type of manipulation was extreme. And the Price stats product was created as the MIT Billion Price project that was designed to effectively keep governments honest. Right. And so it was initially targeted at Argentina. It was then expanded to the United States, the UK and various other places around the world. And what we discover is governments are largely honest about this.

[Peter]

Okay, Right.

[Mike]

I mean, the opportunity to create a giant conspiracy that involves all sorts of genuinely good and honest people working at the Bureau of Labor Statistics. Right. I mean, it's not like you put on a pair of horns because you go to work for a government office. You're the same person you were when you were working at the local Marks and Spencer. Right.

But you're being given an instruction to do a very particular thing. I want you to find the most accurate description of the price of TVs. Right. How do we capture the fact that people like new TVs with higher quality better? Well, we got to build an inequality adjustment for it. Right. Otherwise we can't explain why anyone would buy a new tv. And so, like, they're doing honest work and it's fit for purpose. If I'm using it for discounting the growth rate of the, you know, entire purchasing basket of the economy, something like a GDP deflator.

[Peter]

Right.

[Mike]

It tells me something somewhat honest about that. And we can have quibbles around the methodology. Are we over calculating the quality factor, are we undercounting the quality factor, et cetera. But there's no giant conspiracy to try to keep the man down within the CPI itself, because candidly, the people who are doing it would probably raise an outcry.

[Connor]

Yeah, fair, fair. Okay. So what was the year that this.

[Peter]

1963.

[Connor]

Yeah. And so it was about a third for food. The other 2/3 covered everything else. Right, but what that everything else covered was quite a limited.

[Mike]

It was a limited purchasing basket. And it was, you know, broadly accepted that this is, you know, it'll be at a stable level. Right. But to spend a third of your income on food and a third of income on housing, like, you're not getting great housing if those are comparable. Right. I have no idea what your food budget is. I love to cook, I love to eat, etc. And my food budget probably runs somewhere in the 30 to $50,000 a year range. Right?

[Peter]

That's absurd.

[Mike]

I want to be very, very clear on this. But the critical point is that the one third of that doesn't come close to paying for everything else.

[Connor]

Well, I think the point on the food budget is there isn't a budget for the food. I remember when growing up, my mum was a nurse, my dad was an aircraft engineer. I would go with my mum to what is called sainsbury's I don't know if you know them. It's like, yeah, of course. And so we would do. And she'd have a budget, and she'd have to hit that budget until she was done, but it would be a whole trolley for £50. We don't have a budget. You know, we just buy the food we need. And I don't mean that as a flex. It's just we're in a different world.

[Mike]

No, I say the exact same thing. I mean, we are in a different world. And I understand that. And that's part of the reason why I apologize that I didn't fully understand what people were experiencing beforehand. But the simple reality is I don't ever go into a grocery store and say, can I get this right? The answer is, yes, of course I can get this.

[Connor]

But do you ever go in occasionally and come out and go, jesus Christ, I got a bag here. And that was 80 bucks. It blows my mind.

[Mike]

It blows my mind. Absolutely blows my mind over and over again and again. It's not stopping me from doing it, which is different than the experience that many other people have. But it. It absolutely follows that. And in part because I love to cook and because I do this like I do all the grocery shopping. So my wife wouldn't know what the price of, you know, raspberries is, but I can tell you that they're $1.99 at, you know, the local Stop and Go. Stop and shop. I'm sorry, In Maryland. Right.

You know, by the way, it's Giant Foods, not Stop and Shop in Maryland. But just so anyone's checking on me on this. But the simple reality is that I have some transparency on that. And so I do get that experience, which many in the upper income strata simply don't. And some of that's going away, by the way. Right. Amazon is currently cheaper than going to Giant. I'm slowly transitioning my shopping to. It's being bought electronically and it's in a cart, and I have a regular order list. And I'm starting to lose my reference points on those prices. And that's one of the things that happens is when you either have people separated from those prices. Right. Or there's volatility in those prices.

[Peter]

Right.

[Mike]

Think about the experience. I don't know how bad it was in the uk, but in the United States, we went through a period where eggs were $1.99 a dozen, then they were $8 a dozen. Then you were restricted on how many you could buy at 499 a dozen. Then they went to 6.99 a dozen, back to 3.99 a dozen. And should I be happy? Now they're at 3.99 a dozen. Well, that's terrible. Versus 199, but it's a huge improvement versus 799. Right. I don't know what to think.

[Connor]

Yeah.

It'S tricky. I mean, we've seen a huge amount of shrinkflation here as well. And we've seen a combination of the two where we've had products whereby they've raised the price and then they've shrunk the size and it's almost like they're trying to find this sweet spot. But then they've brought in new versions of the product, which is like with the chocolate bars, the double chocolate bar now. But some of the prices of things are just. I mean, they're getting insane.

[Mike]

They're totally insane. Like I actually, you talk about those experiences like the number of times I've walked into a grocery store and looked at food items that are above the minimum wage in the United States, which is absurdly low, by the way. And I want to be very, very clear. I don't like the minimum wage. I think there's trade offs associated with it that people don't fully appreciate and in just the simplest form. But when I go into a grocery store and I realize that a loaf of bread can cost 2/3 of an hour of work for somebody who's working at the minimum wage, the simple answer is no, you can't do this.

[Connor]

Yeah. So if we go back to 1963 you referenced, housing was relatively cheap, healthcare was trivial, and there wasn't really a childcare market because one of the parents would stay at home and look after the children. We go to 20, 24, food is 5 to 7%, but housing is 35 to 45%. Childcare, 20 to 40%. Healthcare 15 to 25%. That. So that. Yeah, here we go. So that got you to a point where you adjusted the formula and it was 16 times.

[Mike]

Yeah. No, I mean literally the 16 times is just saying we are somewhere between 5 and 7% in food.

[Connor]

Yep.

[Mike]

And so the inverse of that, the multiplier, the same thing that Molly Orchansky did, would be 16 times.

[Connor]

Yeah.

[Mike]

Five would be 20 times. Seven would be something less than 16. I settled on 16.

You know, that number is not right. I want to be very, very clear.

[Peter]

Right.

[Mike]

Like, I haven't gone through this and tried to figure out exactly what the poverty line is et Cetera.

[Connor]

But what's the line with the. Based on hers, what would the calculation be?

[Mike]

Oh, in the United States, the official poverty line. So again, like to refer back to those numbers, we just looked at the buildup for a region of the United States, right. It was $136,500 was the point at which you could start saving money.

[Connor]

Start saving money.

[Mike]

That's the point that I was basically working towards. The official poverty line in the United States is 31,200 for that family.

[Connor]

Okay.

[Mike]

Right. So my issue is not like, is 136,500 or 140,000 the right number. Right. The one thing I know is it's not 31,200.

[Connor]

Yeah. So for the people who have 31,200, what is the welfare things that are in place so they can just cope and survive.

[Peter]

Yeah.

[Mike]

So this is part of the policy, right. Is that we have correctly identified that those people are in crisis. And so we provide them with benefits. And the benefits at that level will typically raise the income of that family to somewhere around 50 to 60 thousand dollars. Those are all sorts of non cash supports, things like housing vouchers, things like discounted access to child care, things like SNAP benefits or ebt, which is.

Food supplements in terms of dollars to be spent.

[Peter]

Right.

[Mike]

Those are benefits that you're receiving at that level that raise the effective income that is generated. And in the United States that's captured by something called the supplemental poverty measure. And so what they actually are doing is they're saying if we more accur. Calculate that basket slightly and then we incorporate the components of the government benefit supports, how does this family look now? And that number is very, very low. Right. Relative to that, the fraction that are below those levels. And from the government standpoint, hey, that's a. Okay. Right. Where it becomes a real challenge is once people start beating the thresholds at which those benefits are provided, the benefits are taken away.

[Connor]

It's a cliff, as we have that here in the uk.

[Mike]

In the UK as well, almost all governments have it in one form or another. And it's really a reflection of the fact that if we were to provide welfare to everyone, right. Which is who, who decides what the level is? Let's make it £10 million a year. Right. Then basically everybody except for Richard Branson is going to end up getting some form of government benefit support. And the reality is we can't afford that. Right. And so we've somewhat arbitrarily set the levels at which these behave. And because none of These programs have been through and none of the government budgeting has really been through. A holistic review is a big component of what you see me talking about. All of these programs basically reference that same poverty line or variance of that poverty line sometimes is two times that poverty line. Right. At which we start taking away those benefits. Because those are the levels that the official, you know, calculations have said where people are struggling. And it just means that those people that are trapped in the middle, somewhere between 40 and 140,000 in the United States, see the benefits taken away at basically the same pace that they're making more money. And that's the sensation of working harder and not getting any further ahead.

[Connor]

But it therefore enforces a caste style system.

[Mike]

It basically creates. I mean, what it does is it enforces an element of caste style system in that instead of providing people with support that allows them to lift out of that and supporting them in the process of getting ahead, we start basically pushing them back down.

[Connor]

But there should be a way of creating a progressive way.

[Mike]

Oh, absolutely there is.

[Connor]

But do you think that's malice or do you think it's incompetence?

[Mike]

I think it's mostly incompetence. Right. I almost always fall into the camp that says never substitute conspiracy when incompetence will suffice. And that's particularly true when dealing with government institutions, largely because they don't have an incentive to try to find the solutions to improve the delivery of services. Right. At the end of the day, a government office says we distributed X dollars. Right, Fine, great. Is that good or bad? I have no idea. Were you effective at solving the problem? Well, we're not expected to report that, really.

[Connor]

We just did our job.

[Mike]

We told you what our job was and you told us to spend this much money and we spent this much money. And aren't you proud of us? And the reality is that people that are experiencing that are going, no, we're not really proud of you, but thank you for the money. It is appreciated. People generally do appreciate the help when it's available. But even worse than that is having that help taken away when you start doing slightly better before you're able to stand on your own.

[Connor]

So the cliff itself is a problem and we can talk about that. But also we've got it here in the UK that people are being dragged from the middle class into the cliff. And we've got a squeezing of the middle class, which is really obvious. But we've also got wage compression through because of the rises in the minimum wage. I Mean minimum wage now gets you up to 26,000 pounds, which I think would be about $34,000, something like that. Yeah.

[Mike]

Congratulations. Your minimum wage is above our poverty line.

[Connor]

Yeah. And you know what? But, but at the same time, we haven't seen the wage, the same relative wage increases for people who would in the kind of free, as part of the market be earning around £27,000. So we've got this wage compression here. And what I'm really worried about, there's something when as a kid I always think, why do people worry about the middle class? We should always be worried about the poor. But actually I think it's really important that we do consider the middle class and there's a huge squeeze here. And I think that's the point you're making. I hadn't taken from it the point at which you can start saving. You think of the money as proxy for time and your future. And that's going to create this other cliff which I think is the people who will never be able to retire.

[Mike]

Well, they will retire, they'll retire under reduced circumstances and things won't be as good as they had hoped. Right. And on the path there, they'll be largely shielded from many of the costs that will emerge in their old age that they hadn't even thought about.

[Peter]

Right.

[Mike]

You know, particularly medical care. Right. When you're dealing with the NHS or you're dealing with Medicare in the United States, it's often a shock to discover how many things are outside the system of care. And so if you get something that doesn't fall into a covered area, well, you can choose to die or you can choose to spend your money.

[Connor]

Here it's a waiting list. Or spend your money.

[Mike]

Yeah, I guess.

[Peter]

Waiting list.

[Mike]

Or spend your money. And the waiting list is basically a place to wait while you die. Yeah.

I mean that is exactly what happens every time you introduce monopolies. And so I just want to, you know, go on a slightly separate rant that I cover a lot in part three, which is when you create a monopoly, you've actually created an entity that from an economic standpoint benefits from under supplying. Right. The way they do that is they have a monopoly on supply. That means you don't have a choice of who to go to for those goods or services, therefore there's nobody else to compete and say, hey, they're not meeting your needs.

[Peter]

We'll provide this. Right.

[Mike]

It's the government license thing or it's a patent protected component to it by under supplying in economics terms Producing to the average total cost the point at which their costs would start to impinge their profit margins. They simply say, well, we're just not going to serve that demand. In the UK that takes the form of waiting queues. In the United States that takes the form of denial of service claims.

[Connor]

The same problem. It's the same problem, same outcome. So I want to stick on that point then as monopolies because a lot of the time we talk about and think about monopolies in terms of the private sector, but actually a lot of the state run programs themselves.

[Mike]

Monopolies, absolutely. And those. That's exactly why we experience what we experience. It's also why there's validity to the claim that as much as we can privatize those services, as much as we can introduce competition for them, it's a good thing. Right? But if the introduction of privatization is not replacing monopolies with competitive entities, instead you're just replacing it with private entities, well then you've just converted rent extraction or under provision of services in rent extraction in a government run monopoly into extraordinary profit production in a private monopoly. It doesn't solve the problem.

[Connor]

Colin, can you bring up that chart I retweeted this morning with a bit of commentary? It'll be a chart you will know. It's got the red and blue lines on it.

Because this stood out to me again this morning. I've seen it before but it was quite. You'll know this chart. But if you. I mean the government doesn't provide clothing, really doesn't manufacture clothing, doesn't manufacture toys and TV and yet said to become more affordable. Everything that's become more expensive, it's here in the uk it's primarily stuff which the government provides or supports or subsidizes.

[Mike]

Yeah. Yes, I think there's some truth to that and that is actually part of an economic theory called.

The government price setting is the government effectively is the marginal buyer of the service. I don't think that that entirely captures it. Right, okay. So like hospital services going significantly higher is a reflection of what's called Balmo's cost disease. These are services that have to be done by people and those people have to be paid competitive wages and therefore it rises at the pace of wages or even slightly above because it's a luxury service. Right. When you're really poor, you don't demand hospital services. When you're really rich you demand a lot of them. And so those are areas of the economy we would expect to grow and expect to become more and more Expensive in the United States. Around the debate around the adoption of the Obamacare aca, there were lots of articles written about the fact that it's the most wonderful thing in the world that Americans spend even more money on health care. And that's true, actually. If you get really, really rich, the only thing you really have left to spend your money on is your health. And we see this with the current fascination of living forever, etc.

[Peter]

Those are all, you know, like good.

[Mike]

Things when we have that component coming through. Unless we're not providing those same basic services that people actually do demand and need at competitive prices and prices that people can afford.

[Connor]

Right. Con, can you bring back that list of.

Costs that. Because this is where it gets. This cost of participation is super interesting because yeah, Connor was born in early 2000s. He doesn't know a pre Internet time. But I remember as a kid we had a rotary phone and everyone kind of had about the same around you. Everyone had the same. And vast wealth was something you saw in the distance. We all knew a rich person, but we're all pretty much the same. And the cost of participation of my parents essentially was the house. My dad chose to add schooling into it, but it was the house and the food and you know, clothing. We didn't have health care. We had a crappy secondhand car most of the time.

But I found this super interesting because suddenly you, you put into you, you put into perspective what the cost of participation is in society. And that's suddenly when you realize like, I've got friends. So many, you will know this, so many friends. There's two middle class wage earners and they haven't got a pension, they've got no savings and it's this.

[Mike]

Yeah, well they can't cover that cost of participation. And you have to at that level participate because you still have to buy the absolute necessities, the things that without you would be in genuine crisis. But the real one that I think shocked me was the childcare one. And intuitively I knew this, right? I mean, look, I raised three kids in New York City, okay? Like, trust me, that number's bigger. I know child care expenses and tuition. And for people who are like, you.

[Peter]

Know, well, he's a coastal elite, of.

[Mike]

Course, that seems totally normal, right? I can completely understand that. I was shocked to see it's in the basic standard and recognize that the minute you move into a two income family, you have to actually incorporate that.

[Connor]

What things go into the childcare. Not just like childcare, you think of, you know, a nanny and after school support. But what else goes into this?

[Mike]

Well, for most people, they don't think about nanny. They simply think about dropping their child off at daycare.

[Connor]

Okay.

[Mike]

Daycare in the United States on average is running somewhere around $12,000 per child on an, on a median across the country. Now in this region, and this is one of the complaints that some of my critics made. Turns out that child care is significantly more expensive. But for a two family, two child family in the United States, the average is about $25,700 a year that is being spent on child care for young families with children. A lot of people will also point out, and this is somewhat correct, that that child care goes away once the child gets to school age, because that's one of the key functions of school as it exists in today's world is simply childcare.

[Peter]

Right.

[Mike]

I got rid of Johnny by sending him off to kindergarten.

There's after school support. If you're going to be competitive and really participate in the United States, there's going to be sports programs and tutors and all sorts of money that gets spent in other ways. You might need a nanny to pick your child up from school. If you and your spouse work in a competitive industry or in a region that is remote, you've been forced to return to the office and it's not near your house. Right? These are all things that go into that. It's not extravagance. This is not a nanny.

[Connor]

But there's a trade off where you can't really win because.

You might say, I have two kids in childcare. And you get to the point where there's like, okay, they're maybe seven, eight years old and they're in, you know, whatever do you call junior junior school? A junior school?

[Mike]

Elementary.

[Connor]

Elementary. And okay. So you say, okay, well, I want to go to work. I've got a good job, I need to be there nine to five. I'm going to have to pay for the extra after school support. But you can say, okay, I don't want to do that. I want to be a mum who's around. But you're going to earn less. So there's a trade off either way. You're taking from one.

[Mike]

Correct. There is no easy solution at this point. And I'm not suggesting that there ever were easy solutions. But it is really important to understand that like you and I grew up largely without childcare because we grew up in, you know, relatively safe neighborhoods where many other parents were at home, there were children at home. After school care largely consisted of you playing stickball with your mates in the, you know, in the lane or whatever it was, right?

[Connor]

You'd walk home.

[Mike]

You'd walk home by yourself. All these things were gone.

[Peter]

Right?

[Mike]

Now in the United States, we get regular reports of people being arrested for having their child walk to the store or walk home. Like, come on, this is absurd. Right? And then people want to turn around and complain that the childcare costs are really high. The other issue is you talked about government regulation. Things like child care, understandably and importantly, are very heavily regulated. Right. I don't want to put my child into child care for very good reasons. When I just see a sign stapled on a local telephone pole that says, child care services offered, right? Like, who is this person? Who am I trust, who am I trusting my child with, et cetera. In the United States, childcare facilities are heavily regulated. All the workers have to have be certified. They have to have background checks done. Again, for very good reasons. Right. There are limitations on the number of children that can be taken into any given facility. Oftentimes this is done out of people's homes as a source of income.

[Peter]

Right.

[Mike]

But they'll be limited to four or six children. And so if you just reverse engineer the costs associated with it, you're going to be very. You're going to be forced to charge a lot for it. There's also the litigious component to it. If you're a child care provider and a child in your care gets injured or sick, you're going to get sued in the United States. And so you have to maintain the insurance associated with it. That's another cost that then goes into building that up. So we've got a combination of government regulation, licensing and insurance costs run amok that are driving these costs extraordinarily high, even as there's no choice, as you said. And in a perfect world, I want to be very clear, look, it's a really great thing that women get the.

[Peter]

Choice to go to work.

[Mike]

And I'm not even implying that that's something we should take or give to them. Right. I just want to be really, really clear.

[Connor]

But there are consequences.

[Mike]

There are consequences associated with it. Your child is going to receive almost certainly less good care than you would provide if you were there. For the very simple reason you're bound to that child through oxytocin and life experience. You care about their outcomes in a way that no one else possibly can. Right?

[Connor]

Yeah.

[Mike]

On the flip side of that, we've educated people and we've shared with them how painful to a woman's career that time spent at home with their children are if you take five years off to raise your to the age of four where they can basically get to school. So you now have childcare that is somewhat funded by the state or at least in a lower cost framework because you're getting tuition alongside it in one form or another. Right. The cost to you in your career is significant. You've given up four years of prime productivity gains and prime learning experience in order to care for those children. And society should be recognizing that for the sacrifice that it is. Right. It's an incredible sacrifice. We're creating the next generation of workers and taxpayers and legislators, et cetera, and we're penalizing it.

[Peter]

What a weird choice.

[Connor]

Well, there's a huge cultural shift with it as well. It's come with this. And look, I want my daughter to do whatever she wants, but I have started to open the conversation with her about the idea that if you do want to have children, you need to start thinking about that at some point earlier because there's a lot of people now. I mean, we've seen it. It's a big question globally in western developed nations is the low birth rates. I mean, I think there's a cultural issue. I think there is a. There is a career issue for women. And I think there's an affordability. I mean, who can afford to have four or five kids these days realistically?

[Mike]

Oh, Elon Musk.

[Connor]

Yeah, right. Yeah, Elon Musk. But it's, you know, I'm one of three. You had three, I've had two. My dad was one of 11. No, six. Sorry. Your grandma? Yeah, grandma's one of 11.

We've got this affordability issue with children.

[Mike]

And that's really what it is. I mean, that's the thing that should jump out at people that if you're a young, you know, again, take this exact same example. Keep those numbers up.

[Connor]

Fuel, Connor.

[Mike]

And simply look at what you would, how your life would be if you didn't have the child care and associated child expenses. All of a sudden you're making $136,000 and you're saving 25% of your income. My gosh, that's a pretty good life right now. I look at it and I say, well, do I want to have a child? I've got a pretty good life if you crunch the numbers. I can't possibly afford this right now. The human impulse to procreate and the desire for young couples to have families is a really hard thing to overcome. So it takes a really long time and it has to get really extreme before people are doing these calculations before they have kids. Most people just kind of assume they could and the problem is they largely can't.

[Connor]

So really we are creating multiple cliffs.

[Mike]

We're creating multiple cliffs. The cliff of having child is, my calculation is roughly as a young married couple, you're perfectly fine making $80,000 a year if you don't have children. The minute you have that child though, and then the second child, that creates a cliff of expenditures somewhere in the neighborhood, about $50,000 a year. Right. We all see the government statistics that say, here's how much it costs to raise a child over their lifetime. In the UK or in the United States. In the United States, I believe the number is somewhere in the neighborhood of 700,000 dol. Thousand dollars to raise a child.

[Peter]

Right.

[Mike]

That sounds great in the abstract. Wow, that's a crazy number. Can you believe how expensive it is? We'll just reverse engineer that. Yeah, we're talking about 16 to 18 years, $700,000 per child.

[Peter]

Right.

[Mike]

That works out to somewhere in the 40 to $70,000 range that you're going to be paying when you have two children. Right. Over the course of raising those kids, does that money just magically come with the children? Does it show up in a Christmas stocking?

[Connor]

Does in the uk?

[Mike]

It does in the uk. That's good to know.

[Connor]

But even for someone like Connor, because I've, I've encouraged, I've said, look, you want to have kids young, as young as you can afford it, because it's great being a 47 year old dad, the 21 year old, it's brilliant, it's fantastic, absolutely fantastic. And also you just want to get on that journey. You don't want to wait till you're 35, 40 to have kids. But also if you look at it for somebody like Connor, it's like, okay, I want to, I want to own a home. Well, the average house price in the UK is I assume near 300,000 pound. 220 I think. Is that where we live though? But like say £300,000 just for a reasonable house where he lives? Well, you've got to think about the mortgage on that. He wants to own a car, he'd like to have a holiday each year, he'd like to save a bit of money, you know, he'd like to take his girlfriend out for dinner. The272.272. Now he lives with me at the moment and fine he has a good disposable income. But. And I think that's what attracts people with their families as well, because they have a good disposable income when they live with their family. It's like the COVID period. The cost, the cliff to moving out from your parents house is huge.

[Mike]

It's absolutely huge. And this was one of the funny things in that piece. Are you an American?

[Peter]

Right.

[Mike]

Simultaneously, they're decrying the.

Old belief that you could afford this on a single income. And then one of the individuals actually was very helpful and kind of broke down his view that the problem was that Americans expectations are just too high. Right. If you went back and this was a regular train, right. You know, well, homes today are 2000 square feet and they used to only be 1200 square feet, so of course they're more expensive.

[Peter]

Right.

[Mike]

Well, the simple reality is, is that even if you went back and tried to buy that 1200 square foot house in the same place, there's no way you could possibly afford it on those, those incomes. And one of the amazing lines that came out of this was if you want to live in the same town as your parents, you're asking a lot. Generationally speaking right now, that's absolutely true. When I moved back to California in 2017, I was somewhat surprised to discover that almost all of my classmates had been forced out of the San Francisco area because it had become so unaffordable. Right. There were only a few of us left. Those of us who had been very fortunate and kind of lucked out in the lottery of life were able to afford to live there. But the vast majority of people had been forced out. Part of that is a reflection that San Francisco created extraordinary wealth over that time period. The opportunities expanded dramatically and there were real improvements that were made. But there was also an incredible component of, yeah, we don't want to disrupt what we've got going on.

[Peter]

Right.

[Mike]

I'll give you some idea how extreme that development can be. When I was born in the San Francisco Bay Area, the population of the Bay area was about 2 million people, about 750,000 in San Francisco. And I think San Jose had just passed San Francisco at about 775 and then split in various towns around. Population of the Bay Area today is about eight and a half million.

[Connor]

Wow.

[Mike]

Right. Same geographic area, dramatically more crowded. Housing prices have obviously risen as a result of that. But to give you some idea of how extreme regulatory frameworks can change that, when I moved back in 2017, I moved to Marin County.

[Connor]

Yeah.

[Mike]

No.

[Peter]

Right.

[Mike]

Marin county is gorgeous directly across the Golden Gate Bridge. So, like, you want a quality of life component. Right. Think about it this way. You drive to work in beautiful San Francisco. You drive home, you get to cross the Golden Gate Bridge, you cross a fog filled chasm, and then you stumble into redwood forests.

[Connor]

Yeah.

[Mike]

Right. Well, Marin County's population in 1970, when I was born, was about 220,000. Today it's 288,000.

[Peter]

Right.

[Mike]

Marin county shut off growth just absolutely crushed it.

[Peter]

Right.

[Mike]

And it's maintained an idyllic environment that my children were able to say, gosh, this is the most magical, wonderful place on earth.

[Peter]

Well, of course it's.

[Mike]

That's magical. It's Disneyland. Right. It's completely gated. You got to pay an extraordinary amount to get in. And once you get in, the food prices are way too high.

[Peter]

Right.

[Mike]

But the simple reality is, is that you're surrounded by people who have, quote, unquote, made it, who can afford entry into the gated kingdom. Right. And that's wonderful if you're living there, but it's really disheartening if you're a child who's growing up there and saying, man, I don't see how I'm going to stay here.

[Connor]

Gosh, we, I mean, do you remember going. Do you remember going there? Yeah, we went there, we crossed the bridge and we had lunch in.

[Mike]

It's not a bad place.

[Connor]

No, it's beautiful.

[Mike]

It's really, truly. I will tell you, if you ever get the chance to visit Marin county, go to the Target in San Rafael. The parking lot of the Target in San Rafael literally sits on the edge of the bay.

[Peter]

And it's possibly one of the most.

[Mike]

Beautiful places in the world.

[Connor]

Your sister would love that. No, we went, I think. Did Robin Williams live there?

[Mike]

Robin Williams is from there. In high school. My kids did.

[Connor]

Yeah.

[Mike]

Wow.

[Connor]

Yeah. I mean, look, it's beautiful. I've. I spent a lot of time in San Francisco over the years and we crossed into Marin county, we went and had lunch. Then I was like, this place is awesome. It's just beautiful. But like, like you say, I mean, can your kids afford to live there? I mean, London has that same problem. Can the kids afford to go there? No. And, and again, it's another cliff. It's like. But that's also a different. That's a different cost of participation.

[Peter]

That is.

[Mike]

No, that is absolutely different cost of participation. I want to be very, very clear on that. Right.

[Connor]

Yeah.

[Mike]

I'm not pretending that everybody should be able to afford living in Marin County.

[Connor]

Yeah.

[Mike]

Because among other things that would make.

[Peter]

It way too crowded.

[Connor]

Yeah.

[Mike]

But the simple reality is, is people across America, whether it is Cleveland, Ohio or whether it is Baltimore, Maryland or whether it is, you know, New York City, are increasingly looking at the lives that their parents led and said I can't afford that. And it's the same thing. It's just not as dramatic as being forced to shop at a, you know, Target in inner city Philadelphia relative to that gorgeous parking lot in San Rafael.

[Connor]

Yeah. And that, yeah, we, Bedford, where we live, Bedford is just a nothing town in England. It's a small town.

[Mike]

I'm sure there is thrilled.

[Peter]

You've described it that way.

[Connor]

Well, and what I mean is like I love it. I choose to live there.

[Mike]

I'm very supportive of the community.

[Connor]

Yeah, I support the community. I just, I love being there. And it's just a great little town. But it's, there's no, there's no reason to go there. There will be soon. We're getting a Universal Studios, the first in, in Europe. But historically.

[Mike]

Wait a second. I just want to be clear. You just said Bedford is going to get Disneyland.

[Connor]

We're getting Disneyland.

[Peter]

Okay.

[Connor]

A four minute drive from our house.

[Mike]

Okay.

[Connor]

It's unbelievable. It's the most incredible thing for to live there and see this come in the excitement. But historically there's no real reason to. There's no tourists. There's no reason for tourists to come and there's no real industry. It is just a small town. But the point you make is still relevant. We've done the house. I bore people to death because we've talked about this. We've done the house pricing. The first house I bought was 100,000 pound. What's it now? 353. Yeah, 3. 350,000 pound. So. But the, the price, the increase in. Sorry in wages has been like. What was it? 47%. So even there for Connor to be able to exist there, he can't buy the house. He might be able to buy a one bedroom flat, but it's a squeeze and that squeezes get them more obvious. And so I'm seeing that everywhere.

Okay, so what does this mean and why is this happening? Because there is this cost of participation that creates choices and sacrifices we have to make. But what's really going on? What's the underlying plumbing of all of this?

[Mike]

No, I mean the underlying plumbing is that we are being told that we have a competitive capitalist society. And we don't.

[Peter]

Right.

[Mike]

Competitive capitalism relies on competition. To force firms to make that marginal production that lowers prices to the point that marginal revenues equals marginal cost. Right. We're getting into economist speak here. I understand, but competition forces monopolies to compete, right? It forces them to provide more goods and services, it forces them to lower prices, it forces them to raise quality. Right. If we pretend that we've got competitive systems then we'll constantly be under supplied these things, right. At the same time that we comfort ourselves with, oh well, I've got access to all these things. The reality is you're going to a single provider for them. If you want an iPhone, I understand that's a brand, but if you want to have, I don't even know if it's blue text or green texts on imessage so that you can fit in with all the other kids and you have a monopoly provider of those services. And any parent who has gotten their kids signed up for an iPhone knows that it's not just buying the iPhone because then you've got the Apple services charge. It shows up and it shows up every single month or not every single month. I literally think like every other day I get some notification that says something has just been paid through Apple pay for some services that I have, whether it's more storage on Gmail or whether it's my kids access to, you know, a beauty and makeup consultant thing on Apple pay. I have no idea what is going on for the most part and all.

[Peter]

That sort of stuff.

[Mike]

But those charges add up and they reflect the fact that I'm captured in terms of the provisioning of goods and services. One of the things that's so crazy is the courts in the United States have actually ruled this, right? They've said that Apple is behaving like monopolists and should be broken up or components of their control should be broken. Google was just found as a monopolist across multiple cases. And the conclusion was there's all sorts of remedies. Well, what were the remedies? Yeah, basically nothing, right? Keep doing what you're doing. That was really the conclusion that came out. Now I have no idea what the provenance of that is, why those decisions came out, but they're just wrong. They're simply wrong. And we have decided in part because.

[Peter]

Growth is so weak that we have.

[Mike]

To protect these national champions, that we have to protect these companies. If we were to challenge them, if we were to raise taxes on them, if we were to force them to increase investment and raise wages in one form or another through competition for workers as well as for the end markets, then we'd somehow be.

Choking off growth because the innovation sits at that top end. That's just garbage. It's just not true.

[Connor]

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Mistakes that have been made because people should be at that 130, 150.

[Mike]

Yeah. I mean, if you actually look at that number again and you just reverse engineer effectively, what would have happened if wages kept up with productivity gains? You've seen these charts in various forms. We'd be at those levels. Right. People would be able to be living the decent life that they're affording. Again, this is one of the real challenges if you live in the economics world. You use phrases like the production possibilities frontier. And I'm sure many of your listeners eyes have glazed over the minute I start talking about these things. But the production possibilities frontier is a really critical thing to understand. It's this basic idea that there is a absolute maximum that can be produced through any combination of labor and capital.

[Peter]

Yep, right.

[Mike]

If labor is hugely available, you're going to use less capital, you use more humans to produce the same output along that production possibilities frontier. Keynesianism is great in many ways. It was an incredible breakthrough and insight and I'm very thankful that you guys shared Lord Keynes with us.

[Peter]

Right.

[Mike]

At the same time, its real problem is that it works in aggregates because we didn't have the computing power, we didn't have the capability to do anything other than large scale aggregates. Remember, Keynes is largely doing calculations on the back of a Napkin, for all intents and purposes, he didn't have calculators. So when you think about that production possibilities frontier, it's not that the entire nation has a production possibilities frontier, it's that every individual has a production possibilities frontier.

[Peter]

What could you be if you had X?

[Mike]

Well, the simple reality is for most of us there's a point of diminishing returns where we have so much money that our next step is hookers and blow. But the reality is many of us are under resourced and deprived in that context. And there are many children and there's many individuals who, if they just had just a little bit more, right, that concept of micro grants in East Asia.

[Peter]

Et cetera, if they just had a.

[Mike]

Little bit more, they could be so much more productive and they could have so much more capability. All I'm doing is basically saying that's actually the factor that's limiting us right now. It's that so many at the lower end of society and across that middle are spending so much time trying to figure out how do I make ends meet that they don't spend time thinking about what the last piece in the series is called the Pursuit of Happiness. What does it mean to capture life?

[Peter]

Meaning?

[Mike]

What does it cat, what does it mean to optimize for myself and in the process raise the production of everybody else?

[Connor]

It becomes, see, then you flip it back to the young people, it becomes even more concerning. Especially at a time where, I mean, I bumped into a girl I used to commute with on the train 20 years ago when he's come work in the advertising industry and I haven't worked in advertising for a long time. And I said to her, how, how's it going? She works in Media Buy. And she said, oh yeah, I mean, I don't think I'm gonna have a job in five years. And she said, talked, I won't name the accounts, but she talked about the account. She worked on a big global account and they've asked for 20%.

Reduction in costs based on AI. And she said, we are just not taking on any graduates anymore. We're just not taking anyone on. She says there will still be coordinators and business directors and account handlers, but we're just not taking on young people to do the graduate entry job because it's all being done by AI.

[Mike]

Yeah. And unfortunately, if you think about that dynamic.

That is a hollowing out of the next generation of talent that we don't yet know what the implications are. Yeah, right. So you have experience in advertising as it used to exist. Many of your peers have facilitated the process of automation, of that moving to things like Google, you know, where the ads are automated, where AI is creating the ads, et cetera, those are all actually good things. I want to be very, very clear that those can largely be very, very good things at the same time, because the monopoly, Google controls the end market for the advertising, the amount of space that's there. The limit is no longer the creative capability of the advertising firms.

[Peter]

Right.

[Mike]

If anything, they've been enhanced by AI and the number of people that are coming through. And so what you actually have is the potential for supplying a nearly unlimited number of creative ads and a limited number of places to put them that are controlled by that monopolist that is controlling basically the actual placement of the ads. And so that surplus of production capability shows up as extraordinary profit margins for the provider of those spaces.

But are we as consumers any better off? Well, the way we should be benefiting is the ad should be so damn funny or so compelling that we're getting the perfect information for us at the perfect time. And it's making us feel wonderful about our lives. And because we bought new cars, we get served up ads that say, as a new car buyer, you're a remarkable, remarkable human being. Right. And you feel even better about your car purchase. Right. Now, I'm being facetious in that analysis, but that would be consumer surplus that is broadly shared, ridiculous as it might be, because of the monopolist component, we're actually seeing it show up as extraordinary.

[Connor]

Profits for Google, which is why, I don't know if you've got this in America, but we can't. We kind of think our country's depressed.

[Mike]

Well, the country. So the United States. We absolutely have it. And in one of the last piece I put, I actually shared a proper analysis of sentiment in the United States. And I think the technical term was it'd be in the loo. Right. It is absolutely terrible. We are depressed. You are depressed. Even more so. Right. Among other things, you lost a war with us in 1776-1783.

[Connor]

We're over that bit now.

[Mike]

Are you sure? Really sure. You were over that.

[Connor]

We kept our tea.

[Mike]

Yeah.

[Connor]

And our keg.

[Mike]

Well, we threw your tea into the. Into the bay.

[Peter]

Right.

[Connor]

Such a waste.

[Mike]

It was a waste, wasn't it?

[Connor]

You still not got good tea. But no, I mean, look, I think we're over that. But I think what's a different point that we tend to look at? Liz Truss talked about this, is that we've got relatively Poorer over time. When I first went to the US it was $2.50 to the pound. Now it's like $1.30.

[Mike]

Do you know what it used to be?

[Connor]

What's that? What?

[Mike]

The highest, when the American dollar is created is 8 to 1.

[Connor]

Wow. Yeah. I mean, yeah, we've got poorer. We have so many other issues here that we would.

[Mike]

In the uk I would say that what you're really suffering from, what I sense more than anything else is actually a component of this inequality. What would have been the complaint that you would have levied against the English Kings in 1630? Right. It would have been. Well, they're not really English. They're controlled in. In one form or another from European monarchies. They don't really represent the interests of the UK people. We didn't call it the UK at that time, as you know. But, you know, your complaint would be that they're unaligned. The elites are unaligned. The nobility is unaligned. They are separate and distinct. Right, but what are they now? Who are your elites?

[Connor]

Separate and distinct.

[Mike]

They're separate and distinct. They're global. They're wealthy globetrotters who tie allegiance to no country. And anytime you talk about taxing them, what do they say? Well, I'm just gonna leave.

[Connor]

If you read the complaints from the colonies in the Declaration of Independence, they almost perfectly align to the complaints of our nation right now.

[Mike]

That is why people are like, look, people get depressed when they don't understand what's going on, when they're not in control of their own circumstances. Right again. This was part of the genius of Thomas Jefferson and the Declaration of Independence. Or of Madison and the Constitution and the preamble to the Constitution of the United States. These are expressions of we want opportunity, pursuit of happiness. Pursuit of happiness. I don't want happiness. I want the pursuit of happiness. Right. Because that pursuit, that life journey towards your fulfillment actually gives you meaning. It gives you pride. Right? Right. Conor, We've referenced him many, many times. I'm sure he is very proud of what you two have built together. At the same time, there's an awareness that he couldn't have done it without you. And there's a gratitude associated with that. But I guarantee you, because I see it in my own sons, there's a degree of envy. Right.

Well, he's nodding, by the way.

[Connor]

Envy might have. To him or to me? Because it's both, actually. Yeah. But I think Connor's envy is a very interesting one.

I won't answer. I will answer because I want to. But he can expand. It's when we watch films which are kind of like, what was that? The one mid-90s, mid-90s. He looks at the life we had then and thinks, there's no mobile phones, there's out skateboarding. He says, was that what it's like? I was like, yeah, Friday night, used to meet my friends, we'd go to the car park, we'd go skateboarding and we'd go to a bar. There was no mobile phones. There was a lot of freedom. The bit he doesn't miss, the bit he misses, he doesn't see, is that the world felt like yours to go and grab. There was so much opportunity, like, you felt like, I can start a business and I can be successful. And we were in that weird period of time where that didn't exist for my dad. My dad was like, you have to go get a job. Very few people got to go and create a business, but anyone could create a business in the late 90s, early 2000s.

But he's. He's envious of what we had from there. I. My envy for him is I think there is so much opportunity for young people now that they can't see it.

[Mike]

I. I think there's a component of that, but I think part of that is because we have basically treated them like the underwear gnomes from the cartoon show South Park.

[Peter]

Right.

[Mike]

You know, step one, you know, collect underwear. Step two, I don't know, step three, massive profit. It, Right?

[Connor]

Yeah.

[Mike]

Like, we've given them none of the instruction set for how to navigate across it. And that's part of the reason why people are often blind until they experience it. Many of the components of the benefit cliff, or as I described it, the valley of death. Right. And a lot of young people, as you talk about the advertising industry, if they're not hiring new people, how are they supposed to figure out that part in the middle?

[Connor]

Yeah.

[Peter]

How are they supposed to figure out.

[Mike]

How to navigate it? Are they just going to be born fully formed, like. Like Aphrodite from the forehead of Zeus and, you know, come forth and be successful human beings when they turn 35?

[Peter]

That's absurd.

[Connor]

Well, there'll be more nepotism. This is when we went down, we went to see Balaji in Singapore and we had a walk around with him and he talked about a return to the farm. He said, essentially, Connor working for me is like a return to the farm. He's half my DNA, so he half understands me. And he has a 50% stake in their Achievements, business, half a stake in the achievement. And I'm essentially this whole process, him first having a mic and is grooming him that if he wants this, this is his to take over. And now for my daughter, the conversation we had recently wasn't which university you should go to. If you want to go to, you can, but you're also welcome to just come and work with me. And it's. And I think there's going to be a lot. There's going to be a necessity for more of that.

[Mike]

I think there, I think there's some truth to that.

[Peter]

Right.

[Mike]

The general idea that the solution is going to be corporatism is probably just as flawed as the idea that we can all become urban farmers. Right?

On the flip side of that, while that sounds really great, it also is locking in a component that I talked about in the second piece, which is cast. If Conor is not born into an affluent family that has a respectable degree, respectable career, like podcasting.

He doesn't have an option to become respectable.

So we're locking in systems that we have historically taken for granted that mobility goes away. If you're only going to hire your son now, I know you have other employees and if your business is successful, it'll go well. There's also something really interesting that Connor just said. He has a 50% interest in the success of the business. I don't see how he doesn't have 100% interest in the success.

[Connor]

Well, it was 50% as in I'm 50% genetically.

[Mike]

I understand the point.

[Connor]

Oh, I thought you meant 50% because of your sister.

[Mike]

Well, both are true. First of all, right? One is the introduction of DNA into this DNA does a lot of things. It determines your height, it determines components of your intelligence, it determines your eye color, et cetera. It doesn't determine your worth. All men are created equal. And too many people in the world are basically now using DNA and IQ and various other components to explain the outcomes. The other thing I just want to emphasize is that the system that has been set up is actually creating the outcomes. In many cases, it's not the DNA of the individual, it's not their iq. IQ is a threshold concept. You either can do something or you can't. And there are very few societies around the planet or communities around the planet that have IQs that have one, been properly measured and two would suggest that those individuals are incapable. The difference between a 104 population IQ and a 100 population IQ is completely meaningless on an individual basis. Likewise, my job being a portfolio Manager probably requires an IQ that is one or two standard deviations above the normal. But you know what happens if you get that much further beyond it? Nothing.

[Peter]

Right?

[Mike]

You just find yourself bored and writing things about poverty lines as compared to doing your actual job.

[Connor]

So can we just focus back in on how we've got here?

Because as I mentioned to you previously, I'm at the kind of retirement point, this is a retirement job now. If I lose my sponsors, I still make this. This is what I do every day. And I am deeply concerned about the future of our country, but not so much for my kids, more for everyone else's kids and the instability that comes with that, because there is instability which leads to, can lead to violence. So I am very worried about that. What's become very obvious to me as I tweeted this thing out the other day, we were going to open, we'd like create little local businesses where we are. We were going to open a pizza restaurant and we pulled out of it recently. And the reason we pulled out is the hurdle rate to actually make any money is too high. Now that, that we have to take out a 10 year lease. If it doesn't work, we're stuck with the 10 year lease. There's a refurb cost, there's the equipment we have to buy, there's the money in for the cash flow, the staff. But what the government have done, they've taken away all the benefits, they put all the risk onto me, 100% of the risk is onto me. And something like over 70% of the benefit goes to the government. We've got new employment laws, we've got minimum wage hikes. And it just got to the point I was like, this is too hard. I can just leave my money in assets and forget about it for the next 10, 15, 20 years, write out any volatility and that's just a much easier decision. They've disincentivized the entrepreneurial spirit for certain people like me.

Do you think this is again, malice or just organic?

[Mike]

Look, there is a mixture of the two and I would say put almost none of it under the malice category. Okay, if you are a government bureaucrat who is in charge of licensing pizza shops? Who are you going to consult for? What are the necessary steps for safety and cleanliness of pizza shops? Are you going to go talk to people that are in health care? No, you're going to talk to people who run pizza shops. Who are you going to reach out to?

[Peter]

You're going to reach out to the.

[Mike]

Local pizza Shop for their expertise in matters of health and human services? Or are you going to reach out to the large pizza chain in response and get their experts who. They actually do have somebody there who's like, okay, let's make sure we have a fully devoted safety department and health department. Right. Well, those individuals are inevitably going to introduce regulations that favor large business over small business. And so is it malice? No, they're telling you this is the.

[Peter]

State of the art of safety. Right.

[Mike]

We want to make sure nobody gets sick from pepperoni.

[Peter]

Right.

[Mike]

The local pizza shop recognizes, hey, you know what if the pepperoni sits on the back step for, you know, four hours, that's in violation of the healthcare standards. The odds of something actually going wrong are impossibly low. By the way, if you know how pepperoni is made, you know that that's actually true and you really shouldn't be eating it, but it's delicious, so I eat it anyway. Yeah, but you know, when you think about that standard, it's been set by the large chain that can afford all the expenses and afford to always have somebody there to take delivery. And there's refrigerated containers that make sure that nothing is exposed to room temperature for more 30 minutes, where the, you know, salmonella could begin to develop.

[Peter]

Right.

[Mike]

All makes perfect sense. That local pizza shop can't do it. That hurdle rate is set now at the large pizza shop level. And the regulator is doing the right thing. Right? They really are. They want the safety, they want the health.

[Peter]

Right? Absolutely. The case.

[Mike]

They're not bad people, they're just captured.

[Connor]

But that again, that's a new cost.

[Mike]

Of participation, 100% for the new business person. That is a cost of entry that has increased. That then reinforces the monopolies that we were talking about. Right. Because existing pizza shops can go out of business, new ones can't come in. Therefore, we're left with the monopoly.

[Connor]

And you have four Starbucks in a small town triangulating the customer base.

[Mike]

Exactly. Correct. And they're all coordinating and they're able to share information and they're able to say, okay, you know what, at this hour, this sort of crowd comes through and so they can then equalize their staffing across the four locations while a local coffee shop can't afford that optimization. That's efficiency gains.

[Peter]

Right?

[Mike]

That's awesome. I like that. That's really, really good.

[Peter]

Right.

[Mike]

But it is an efficiency gain that comes from scale as compared to innately inventing a better business model that would.

[Peter]

Serve us more delicious coffee at cheaper prices.

[Mike]

Which is what the new entrant is expected to do. And they can't do that in the regulatory environment in which the new entrance is. This new entrant is discouraged from entering.

[Connor]

And this new regulatory environment itself is. Is anti competitive and competitive, and we need more competition. So how do we deregulate?

[Mike]

Yeah, and this is. And by the way, when you turn for, you know, how do we deregulate?

[Peter]

Right. Who is the resource do you go to?

[Mike]

Do you go to the person who didn't start the pizza business because they couldn't make it past the regulatory barriers that prevented them from starting the business? You have no idea who that person is. You go to the chain pizza shop that has all the expertise, and they say, oh, here's how to deregulate the business.

[Connor]

And the same problem, same problems.

You receive. So when the article came out, I saw it just everywhere. So everyone's sharing it. I read it and I messaged you straight away. And I said, this is brilliant. And it provided some clarity that I needed just as a normal person trying to get by in life. But there were some criticism.

[Mike]

Oh, absolutely.

[Connor]

But was that the system trying to reinforce itself?

[Mike]

Yeah. I mean, that's my interpretation that if you really think about what I did, I offended the two power groups on the left. I offended. The group is like, no, we really have to take care of the poor. And by saying, wait a second, there's this middle that needs to be identified and we need to recognize the challenges that we're creating for them. Their concern is you're distracting from the.

[Peter]

Real issue that I care about, which is the truly poor. Right.

[Mike]

And on the right, they just don't want to have a discussion on taxes. Right. They want to continue to pretend that the story is all about the largesse and how much they pay in taxes. And we're constantly reminded in the United States that the top 1% pays 50% of the income taxes.

[Connor]

Is it that high in the U.S.

[Mike]

Oh, it's extraordinarily high. But did you notice I used a specific qualifier there, Income taxes.

[Connor]

Okay. Okay.

[Mike]

Right now, this is a really critical trick that is played.

[Peter]

Right.

[Mike]

Income taxes are taxes on the net income that you receive, not on the benefits you have to pay for. And so in the United States, Social Security and Medicare are paid through what.

[Peter]

Are called FICA taxes.

[Mike]

Those are not income taxes. That's actually about a third of the US Government, and it's paid exclusively by people who are making less than $167,900.

[Peter]

That's the official level.

[Mike]

So when we actually break down the share of taxes that are being paid, taxes, not income taxes for the rich, it's never been lower.

[Connor]

Huh. That's interesting. So of course they're not going to like it.

[Mike]

Of course they're not going to like it. They don't want to have the discussion.

[Peter]

Look, this is why you see people.

[Mike]

Who are, quote, unquote, traitors to their class, like an fdr, et cetera. It's why the system gets fixed. It's why Joseph Kennedy was put in charge of the creation of the SEC in 1933. Right. The reality is it takes somebody to actually come in and say, here's how the system actually works before it gets identified. And you're seeing that. You're seeing more and more people defect from the halls of power where they're saying, wait a second, this is not fair to the children of my friends. My children are probably going to be fine. My children are all employed. Right. My children went to great schools. My children have great jobs. Their careers are ahead of them and they have the bank of mom and dad that are going to always be there to make sure that they never face true precarity. It's Connor having a job built into his trajectory by working with you. It's the same underlying phenomena.

[Connor]

But there's another thing going on. Like I said, I mentioned, the country seems depressed and life's okay for us.

[Peter]

Right.

[Connor]

But I don't feel happier than I did.

Two years ago, five years ago. Because what we have is chaos around us.

[Mike]

Yeah. That component, that quality of life. You and I are both at a point where we can live our lives and we can have relatively high quality outcomes for ourselves and our children. Children. But you know what we can't control? We can't control that our daughter takes the subway and gets set on fire.

[Connor]

Yes.

[Mike]

Right now there are people who can control that. Right. They just make sure that there's a private driver to whisk their children off to various locations and there's a private plane that takes them on their vacations and they're completely insulated from that. Right. The Archduke Franz Ferdinand is insulated by his driver in a, you know, chauffeur driven vehicle as he's driving through the mountains of Albania. It doesn't last. Right. That breaks. If we allow the safety and quality of life of our communities to continue to deteriorate, we're going to find those sorts of acts of random violence creeping into our lives.

[Connor]

Yeah. But I think there's more to it than that. And I think it comes down to kind of.

[Mike]

Well, that's my. To be very clear, that's my plea to those at the upper income to understand what is happening is we are creating chaotic conditions for those underneath.

[Peter]

Right.

[Mike]

Who are desperately want the same things in life that we want. Not Rolex watches and Lamborghinis.

[Peter]

Right.

[Connor]

Because we have it. You know, we're quite protective over my daughter, his sister, she's at the age she wants to do things and she can't do. She hasn't got the freedom we have because of the fear in society. But there's more in it. There's like a. I don't know, like a deep part of your soul whereby.

Yes, money can buy you certain, you know, privileges that you can go shopping and buy the food you want, not think and have a holiday each year and do those things. But when there's chaos around you or other people are struggling, there's no way you enjoy it. You want everybody to be winning as much as possible. And at the moment, it feels like the majority of people are losing. And I feel, you know, most conversations I have now with people outside of making a podcast, just, just friends, whatever, everyone feels like they're losing.

[Mike]

Well, I. I think there's truth to that.

[Connor]

Yeah.

[Mike]

Right. And in the, the second piece in the series, I addressed some components of that. Right. And in the first, I referred to it as, well, look.

Charitable behavior, altruism is a function of surplus.

[Connor]

Yeah.

[Mike]

If I've got 58 bananas, I'm more than happy to give you one. Right. But if you and I are fighting over the last banana, there is no altruism there.

[Peter]

Right? We're starving.

[Mike]

We need that banana.

[Peter]

It's all that's left.

[Mike]

That's the feeling that people have, and we've identified it for the poor. We understand why that exists. There's government supports that come in and make their lives better than they otherwise would be. Not good by any standard. And I want to be very clear on that. Those in the middle, we're telling you.

[Peter]

Just got to work harder, but your.

[Mike]

Life quality is kind of terrible.

[Peter]

And those that have made it out.

[Mike]

The other side are actually encountering something slightly different, which is they're now competing for caste placement. They're now competing not to be able to afford the drink, but can they get into the exclusive club with the velvet rope with the unknown cover charge and the bouncers who are evaluating you not just on the basis of can you hand over a hundred pound note, but also, are you wearing the right clothes? Do you have the right affectation. Is your makeup as a female put on in the manner that suggests that you're high class and posh, Right. These are all things that are the next step in that process. And there you're competing for a limited number of opportunities. And it's those that are in that 150 to $400,000 range, I would argue, that are kind of sitting there going, all right, well, I can see into the club, but I can't actually get into the club.

[Connor]

Oh, it's kind of gross though.

[Peter]

It's terrible. The language is awful, right?

[Mike]

And I understand that. And it's part of the reason why I frame it in that manner is that like, nobody really defines their life by could they get into the high end dance class club, right, with the bottle service and the vip, by the.

[Peter]

Way, if that is how you are.

[Mike]

Defining success in your life, you're either in your 20s or you need to get a better definition, right?

[Connor]

You need a wife.

[Mike]

It's.

[Peter]

You need a wife, right?

[Mike]

And by the way, now we're right back to the same discussion. You need a wife and you need children so you can get perspective, et cetera. There's this perpetual state of natalism, this, you know, childhood that is extending further and further. Children are living at home. Why? Because they can't afford it. So what are their expected behavior?

[Peter]

Should they behave as adults or should.

[Mike]

They expect their parents to continue to do their laundry for them? I know which direction my children would go if they were living at home.

[Peter]

They'd love to have somebody do their.

[Mike]

Laundry, by the way.

[Peter]

I love to have somebody do my laundry, right?

[Mike]

But I can afford to pay for services. I actually don't, I don't mind doing laundry. But the simple reality is that they're doing the exact same thing we would do if we were at that level, right?

[Peter]

We would behave as if we were.

[Mike]

Children in a more serious route.

[Peter]

And if you think about the criticism.

[Mike]

That people are leveling at this, this, they're basically saying, well, why don't you act like an adult, right? Why don't you recognize there's hard choices that you have to make, right? And meanwhile, they're saying, hey, I'd love to be an adult. I can't afford to be an adult. And so I'm stuck in this extended adolescence where I'm living with my parents.

[Peter]

Who may view me bringing home a.

[Mike]

Girl or who may view me going out at night in a manner that makes me look like I'm still 17. And that angers Me and frustrates me and there's resentment that builds up over all of those components, et cetera, etc. But the core resentment is they want to act like an adult and they can't.

[Connor]

And this is all downstream for just getting the economic policies right.

[Peter]

Well, look, that's the tragedy, right?

[Mike]

At the end of the day, there's a famous American money manager named Dan Ox who said once, if you're not doing macro, macro is doing you.

[Peter]

Right?

[Mike]

The simple reality is that this has been expressed as sentiments throughout history, right? Keynes, you know, practical men who fancy themselves exempt or slaves to some defunct economist. We're all trapped in a world in which we're trying to live out some Milton Friedman libertarian fantasy, right? It's really good for people to understand libertarianism and the limits of government and.

[Peter]

The importance of social behavior.

[Mike]

The problem with libertarianism is it presumes social behavior, right? It presumes that everybody is going to behave rationally in their economic and social best interest.

[Peter]

A lot of the theories that are.

[Mike]

Built behind this are built in the same way we're talking about the poverty line. They're built off of mathematics and understanding that was created in the 19th and early 20th century when we didn't have the capacity to fully understand how these systems played through multiple games. Right?

[Peter]

Most of your listeners will be familiar.

[Mike]

With game theory like the prisoner's dilemma. The solution to the prisoner's dilemma is just that, criminals are supposed to defect, right?

[Peter]

It's more rational to defect. Well, what does every criminal say?

[Mike]

I'm not a rat, I'm not going to tell. Why do they say that? Because they understand that life is a repeated game.

[Peter]

Repeated games are much harder to model.

[Mike]

Using the old tools and techniques. We have the techniques to run repeated games today and it actually turns out that much of our understanding of economics.

[Peter]

Is radically different when you run repeated.

[Mike]

Life cycle games as compared to a single static period where what's called a dynamic generals, a systematic equilibrium model is arriving at. Here's the solution for this one round. Turns out that economics is much richer and that what we think we understand, we often don't.

[Connor]

So what are we getting wrong so wrong?

[Mike]

Well, I think what we're getting wrong is exactly that social component to it, right? The fantasy that I can retreat into Disneyland and behind walled gardens to protect myself from the deterioration that the riff raff has experienced. I think about every zombie movie you've ever seen, right? What do the initial group of survivors do? They hide in some estate somewhere where there's a walled component to it and they're safe and there's some soldiers that are there to protect them. And what ends up happening in every situation, the dynamics of that small community break down. The soldiers decide to take over or somebody decides that they want to go out and try to find their child. And inevitably the zombie disease makes its way inside the compound found you can't escape it. It's just a question of do you actually take the steps to make sure.

[Peter]

That people don't become zombies in the first place.

[Mike]

But.

[Connor]

Okay. But this is going to require enough people to recognize this, care enough, be influential enough to start having radical changes.

[Mike]

Ostensibly, we live in democracies in the United States.

[Connor]

Yeah.

[Mike]

We have a constitutional republic in which people vote for elected representatives. If you're not being served by those elected representatives, if they don't speak in a language that speaks to you in the same manner, change them.

[Connor]

Sure.

[Mike]

You don't have that much time to do it is the point that I would make.

[Peter]

But.

[Connor]

But it's what are the options on the table? Like.

Do they keep to them? Yeah. I mean, we, you know, we just had a labor party come into power that's not kept to any of its manifesto promises pretty much. Or they're manipulating the policy changes that they've put in place. But once they're voted in, in the uk, we're stuck for five years. There's no way really to hold. And we can protest on the street and complain, but all they'll do is change the leader and they'll carry on. And then we get another election. There's a new set of manifestos and we vote based on those and the same might happen again. And so I think we have, personally, I think we have a deep structural issue within our, our politics, within the way our politicians are held to account for the decisions they make. And we talked about it. It's like four.

Manifesto. The manifestos aren't delivered on is a generation of decline.

[Mike]

Yeah. Look, there's this general sense that we aren't empowered.

[Peter]

Right.

[Mike]

And that's part of the reason why.

[Peter]

People are depressed is because they look.

[Mike]

At it from this perspective and say, what are we going to do about it? You're describing something that's bigger. Me. The only thing you can do when you're faced with those situations is talk openly about things that are going on. Use language that pushes people forward. I've tried to do that with my articles. I think that's one of the reasons they're resonating with you, is that they're tying pieces together and giving an explanation that people can then say, okay, so what do we do? And I actually try to provide some of those.

[Peter]

A huge component of this, when we.

[Mike]

Talk about, like government waste, etcetera, we talk about spending, but actually the single biggest spending line item is the manipulation.

[Peter]

Of the tax code.

[Mike]

It's the special interest groups that get the special break that get the money that they don't have to pay to the government that everybody else has to.

[Peter]

Right.

[Mike]

People should be understanding this and they should be taking the time. And one of the things I do.

[Peter]

On my last piece is I actually.

[Mike]

Created the code that allows you as.

[Peter]

An individual to run my proposals through an llc.

[Mike]

Right? We have the tools, we have the information. I'm not suggesting that we should go pitchforks and shovels and, you know, go storm the castle. I'm simply saying find your voice, take control of your life. Articulate what's really going on. Don't just adopt slogans that say living wages.

[Peter]

Well, what does that mean? Right?

[Mike]

What does that actually mean when you talk about living wages?

[Peter]

Well, I've articulated in the framework of.

[Mike]

Here'S what it means for a family with two incomes and two children in the United States. What is that actual level at that would allow us to feel this? And now it becomes a question of.

[Peter]

Are we actually going to listen to that and are we going to come up with solutions?

[Mike]

One of the things I was so surprised by, beyond things like the poverty line, and it's one of my frustrations with many of the attitudes that I see, particularly amongst young people, which is it's all stuffed, right? The entire system is messed. We should just burn it to the ground and start again.

[Connor]

Noticed, right?

[Mike]

Well, I've got bad news for you, right? Like you can complain about Israel and burning it to the ground, but the.

[Peter]

Simple reality is Gaza and the west.

[Mike]

Bank is what happens when you burn.

[Peter]

It to the ground.

[Mike]

Ground. Hundreds of thousands, if not millions or billions of people die in that process.

[Peter]

We can't all live the artisanal farmer.

[Mike]

Lifestyle when there's seven and a half billion people on the planet. Burning it down has consequences in the same manner that maintaining the status quo has consequences. The thing that's so frustrating to me, and it's outlined in this third piece.

[Peter]

Is how little we actually have to change.

[Mike]

Just stop and think about the that I created a totally meaningless, poorly thought out program that simply says, here are.

[Peter]

Some changes that could be made.

[Mike]

And the result that comes back is this is dramatically better than anything we have. I'm not an expert in these areas. I don't know what I'm talking about half the time.

[Peter]

Right.

[Mike]

But I do make sure that when I go through stuff that I'm doing so in a manner that considers the.

[Peter]

Second order effects, that thinks about what.

[Mike]

The actual game theory and play is across repeated, you know, rounds, and the.

[Peter]

Fact that we've got all these experts.

[Mike]

That can't do something similar. And I challenge them, by the way. If you want to run the program and you want to actually see what it produces and you want to push back on the inputs and the design that I put towards it, I would love that discussion.

[Connor]

But there's a deeper issue here, Mike, in that this is fantastic. A group of people will watch this interview and they. They will say, this is amazing. Mike's great. I've run the model, I've run the prompts. I completely agree with him. But if I make a show with Mandami talking about why the system has let you down and why we need socialism, that's going to do 10x20x the numbers. And what we have here in the UK, similar to the US we have a very large socialist share of voice. I mean, we had this guy by Zach Polanski who's the leader of the Green Party. I don't know if you know much about him. He's very much a Mandami type character and he's talking about some of the same issues that. That you would talk about. But he was interviewed recently. He was asked who is kind of economic inspiration. Was one was a Marxist, another one was a guy with an undergraduate degree and. But he is there on TikTok of rest selling to young people. And the flip side of that, we have the Reform Party doing very well, but they are traditional conservative. Suit and tie sound very mean. And that's the level of discourse we have. It's not this. It's not real solutions. It's what sell this. There's a couple of levels of sales. There's what sells in the media and then what sells at the ballot box. And none of this is selling at the ballot spots because it's nuanced.

[Mike]

I actually don't think that's true.

[Connor]

Really?

[Mike]

Okay, you actually just said something that's really, really important. We're not having that discussion. No, we are having that discussion. That's why I got on a red, I flew to London, came to do your podcast. Not because I'm running for office in the United States. Just to clarify, I'm not running for office in the United States. If anything, I'm trying to identify candidates that could be amplified under the framework that I refer to as the rule of 65, which is our governing principle, should always be let's identify the 65th percentile household and let's make sure they're doing great.

[Peter]

Yeah, all right.

[Mike]

It's an aspirational middle class level. If they're doing great, the rest of.

[Peter]

The country is going to be doing great. There's no question about it.

[Mike]

Right.

That should be our standards. We should be having this discourse and it starts when people speak honestly about what's going on. I can't turn around and constrain a solution set that says we can never have rich people pay more in taxes. Because the simple reality is that we currently are under provided for because of the monopoly nature of government and because.

[Peter]

We'Ve allowed many of the services that.

[Mike]

Are required, things like licensing, child care, etc.

[Peter]

Etc.

[Mike]

To be dictated by the government in the state. It's not focused on the output that we needed to be focused on. Right. It's not focused on how do we make more childcare available. What we hear from Mandami is we're going to run free state sponsored institutions.

[Peter]

Well, what do free state sponsored institutions do?

[Mike]

They drive the small business out of business because it's not free. Right.

[Peter]

And is there anything that you can.

[Mike]

Complain about when you're getting a service for free, about the quality of the service? Well, welcome to the NHS Us.

[Peter]

Right.

[Mike]

It's not a good solution to have to grant yet another government monopoly or drive other businesses out of business. And this is where the socialists fail, Right. It's a wonderful utopia that they inhabit. The process of getting there once again is very underwear gnomish. Right? We want everybody to be happy and safe and equal.

[Peter]

How do we do it?

[Mike]

I don't know, but boy, it's going to be wonderful when we get there.

[Connor]

Let's. Okay, let's work through that. We can skip the mockery machine. We've kind of covered that. I want to jump forward to this. Okay, so the rule of 65, essentially what you're saying is we need to even the system out a bit better. We've distorted in the wrong way. And so a couple of the things which I think the socialists say, there's an acorn of truth in there, the texts are written, which there's a number of truth in that.

In that I know, for example, me as an asset holder, I've benefited. That's what I talk about. I've benefited from this inflationary system.

It's 100% benefited me, and I don't like the outcome of it. Actually, let's bring up the labor chart because this hit me hard this morning. I was like, oh, no, this is not fair.

This is a system that is engineering unfairness.

Yeah. So, I mean, look, there was already kind of like a downward trajectory from. When was that? From 47?

[Mike]

Well, actually from. I mean, one of the things to remember is that this chart does not.

[Peter]

Incorporate simply because we don't have the.

[Mike]

Data to accurately do it. But if I were to use things like the Angus Madison data series or various others, I could extend it back further. But remember, the 1920s are a period of extraordinary income inequality as well.

[Peter]

So really that period, from give or.

[Mike]

Take 1929 until roughly 1960, is a period with constantly rising labor share workers reasserting their rights.

[Peter]

And that's one of the reasons why.

[Mike]

I flag the Kennedy allows public unions.

[Peter]

Right.

[Mike]

So there are really three key components along this that I think have explained.

[Peter]

Largely what we've experienced.

[Mike]

In the 1960s, labor unions were incredibly powerful. That labor share of income was above.

[Peter]

70, was nearly 70%. I don't know if it was quite above it.

[Mike]

And as a result, labor was a very powerful force.

[Peter]

Right.

[Mike]

Public unions didn't exist in any meaningful way.

[Peter]

What did the AFL CIO want in.

[Mike]

Order to recommend Kennedy so that he can defeat Nixon in a tightly contested election?

[Peter]

We want you to expand the reach of unions into public unions. Now, when Kennedy did this, it was.

[Mike]

Partly fulfilling campaign promises, partly addressing the.

[Peter]

Realities that it was moving this direction.

[Mike]

Partly recognizing the reality that a government.

[Peter]

Job in 1960 was a pretty poor substitute for a private sector job. And among other issues that you faced is who was working in those roles, Was it various forms of. Of unfair treatment across stuff he didn't have benefits packages in the same way, et cetera. When Kennedy introduced public unions, he did so through an executive order. And that was actually quite smart because it preserved elements of control that might have failed if it had gone through the legislative process. So he was somewhat heading it off at the pass, and I'm thankful, quote, unquote, for that.

[Mike]

But in that environment, all of a.

[Peter]

Sudden, we created conditions under which labor kind of hit its peak peak, and then it began a managed decline because.

[Mike]

That monopoly provider of government was suddenly.

[Peter]

Met with a monopoly provider of labor. We combined monopolist with monopsony, which is the term for a single supplier of labor. And what you end up there is a complete collapse in the provision of cost Efficient services to the public.

[Connor]

Right. We've got a. At the moment in the uk, we've got a Labour Party are putting forward new employment laws which will require private. Private sector companies to promote union membership.

[Peter]

I mean, look, the interesting thing about unions in the private sector is they can represent an important balancing of power. Right, sure. Local factory owner versus a worker. The worker is hugely disadvantaged versus all of the workers. The owner is not nearly as empowered. It's much harder to replace all the workers, as any number of strikebreakers from the 19th century could tell you.

The laws for unionization simply recognize that workers had the right to organize in the same manner that owners had the right to operate in a unionized manner. That we could call things like corporate stock ownership.

[Mike]

Right.

[Peter]

Where we're pulling the resources of capitalists together. Not everything that happens in unions is good. Not everything that happens in unions is bad.

[Connor]

Sure. But the, the problem we have in the UK is there's such strong ties between the unions and the Labour Party themselves.

[Mike]

Oh, absolutely.

[Connor]

Up to 65, 70% voting block. And there is a distortion where they are doing deals with the government that we will provide you with a voting block as long as you provide this legislation. That's what I don't like about it. I don't mind collecting bargaining, but that to me is no.

[Peter]

And I think that's really critical. Like that is where things get wrong. Right. The union effectively becomes yet another corporate special interest.

[Connor]

Yeah, exactly. Yeah. Yeah. Okay. And then the Bork Doctrine.

[Peter]

Yeah, that's an exciting name for those of you who have followed US jurisprudence, which I would guess is slim. Robert Bork was a nominee for the Supreme Court in the United states in the 1980s under Reagan. He failed to make it through in part because of his inflammatory writings in the 1960s and 1970s.

[Mike]

But in 1978, he wrote a really.

[Peter]

Influential book called the Antitrust Paradox that basically said, look, there are situations in which two firms combining creates efficiencies that allow them to lower prices.

[Mike]

And so by using antitrust to prevent.

[Peter]

Horizontal or vertical integrations that result in lower prices, we're damaging consumer welfare. So we should move away from the antitrust philosophy that existed from basically.

[Connor]

The.

[Peter]

Sherman Antitrust act and the Clayton act in the United States.

[Mike]

I don't know what the equivalents are.

[Peter]

In the U.K. i apologize for that. But basically, from about 1894 until give or take 1980, the operating regulation around antitrust was one of we are going to enforce competition. And it is presumed under a free market system that if we Enforce competition, consumers will be better off. Bork's insight, and it's a legitimate one, is that you can have a merger that lowers costs and therefore allows prices to fall, which should theoretically leave consumers better off. And the Bork doctrine was an establishment that the only thing we cared about in antitrust was not actually the structure of the industry, but basically the promise from the business to focus on lowering prices and making things more attractive and appealing to consumers. And that works really well initially because it is true. If you have fragmented industries, there are economies of scale that can be created that allow you to lower prices. The problem is when you get to the point that we are today. And in my last piece, there's a series of charts that highlight, among other things, that 75% of what Americans buy is largely at the grocery store is largely from five companies. We've gotten to the point where the degree of competition is immaterial, such that one company deciding to engage in shrinkflation while simultaneously introducing a pumpkin flavored variant.

[Mike]

Right.

[Peter]

Is viewed as contributing to consumer welfare. Right. Prices didn't go up very much. Yes. The packaging shrunk, but the higher price is actually explained by the pumpkin flavor under hedonic adjustments.

[Connor]

That's so interesting. Okay. And then the China piece, which was kind of interesting because I, I text you about China, but that I hadn't seen it how you'd seen it.

[Peter]

Yeah.

[Connor]

Well, and it also puts brought me to the point, I'm going to ask you about Trump and tariffs.

[Mike]

Yeah.

[Connor]

Is that a rebalancing of this? But you should probably explain what happened first.

[Mike]

Yeah. So the last red line here is.

[Peter]

What I call China and financialization. And I hit financialization first. So let's actually do it in this order and that way we can, we can come to China last. Which is, as you know, I just joke. I keep promising people I'll get to China.

Financialization is basically the process of acquisition or horizontal acquisition in which there is no methodological improvement in the performance of the underlying companies. You're basically just using financial leverage to speculate that. And that speculation in turn engenders wealth. Right now a lot of people are like, oh, it's just about inflation, et cetera.

[Mike]

Right.

[Peter]

What I actually do in the piece is I break it down and I note that really what drives that is not the interest rate of the government as much as it is the revealed interest rate or the after tax interest rate of the speculators. If nominal GDP growth is above that cost of financing, as it has been for most of the past 20 years.

[Mike]

Statistically, the odds are with you if.

[Peter]

You simply buy something, do nothing with it other than use leverage and wait. Right. And that's by and large the process that we've seen. If there's been any form of financial improvement associated with these entities, it has been. And through the horizontal consolidation or vertical consolidation that manifested itself in pricing power in what we called greedflation in the aftermath of COVID and I walked through in exhausting detail, it's not that companies suddenly got greedy or that we suddenly discovered the profit incentive. It's that we enabled the profit incentive when we introduced the chaos of COVID into concentrated industries in which you had no idea what the right price of eggs was. But you know, who figured out the optimal price of eggs to maximize margins?

[Mike]

The egg monopoly.

[Peter]

Right. Or oligopoly, to be more fair. Right. The, the second part of this is the China component. And the China component I think is really important to understand because one, remember, we were sold the China story.

[Connor]

Sure.

[Mike]

Right.

[Peter]

As workers, as producers, we were told there is this untapped $1.2 billion consumer market.

[Mike]

We're going to sell the them so.

[Peter]

Much stuff, Everybody's going to be incredibly happy. We're all going to have the most incredible jobs and life is going to be great. Right. Less than before, the ink was dry on the signatures, what we actually saw was western manufacturers doing the exact opposite. Relocating their production facilities to China, shutting down domestic facilities. The example I use is the North Carolina furniture industry, which over the course of, give or take, five to 10 years, just completely collapsed after a century of it being in existence and creating, you know, certainly not glorious outcomes for people that were working in furniture manufacturing in North Carolina, but at least a sense of stability.

[Connor]

But did they get lower prices?

[Peter]

Well, this is the irony, right? Of course they got lower prices because they were buying products that were produced at what would be thought of as near slave wages.

[Connor]

Right.

[Peter]

And that's the component of it that's so frustrating, is just that if you actually dig into it, what really happened was the capital moved to China to exploit labor that contributed to the continued.

[Mike]

Decrease of the labor share.

[Peter]

We simultaneously told people, don't worry about it. We're going to provide you with financing or we're going to provide you with benefits that you can buy this new, cheaper furniture from China produced by the former manufacturer that made it in North Carolina, China. As part of that process and investment in China, China required technology transfers. Right. Whether that was genuine innovation or whether that was simply production, know how doesn't really matter, Right? Once you've taught them how to do it, their incentive is to then enter the industry under their own name, compete at lower prices versus the American manufacturers that were outsourcing production to China. People move away from caring about the brand name because they no longer have to go to the store called Ethan Allen to buy Ethan Allen Furniture. They can buy it on Amazon. This is just an example, and I don't even know if it's true, but we separated people from that process. And then the Chinese manufacturers, like, okay, well, the rules are in place.

[Mike]

They put these rules in place helpfully.

[Peter]

To facilitate the movement of capital over here for labor arbitrage. But those same rules are in place, and now we're just going to replace those American brands. Right. And that's exactly what you've ended up seeing, is that process.

[Connor]

Is that kind of what's happening with the automotive industry right now?

[Mike]

Oh, absolutely.

[Peter]

It's what's happened with the automotive industry. By far the biggest investors in the Chinese automotive industry were Western auto companies that were trying to access, quote, unquote, access that 1.2 billion person Chinese market.

[Mike]

Right.

[Peter]

That.

Technology transfer that was required, where.

[Mike]

They were all required to take on.

[Peter]

Joint venture partners, et cetera. So it's joint venture partners that are now coming back over here and saying, oh, guess what? We can do this really cheaply and we're going to undercut you. And this is where it does get interesting. Because what the United States recognized far before the Europeans was the risk that was created by China moving into this model code. Europe and the UK to a certain extent, continued to see it as a 1.2 billion consumer market, even though it had largely not paid off. If you were Germany, it made some sense because you were selling the machine tools. But once you sell them the machine tools, what do they do? They reverse engineer them. They make their own machine tools at lower prices, and then they come after the Germans. And so China had a model that is tried and true. We will suppress the wages of our domestic consumers. We will not allow our, our currency to appreciate as you would expect to do under comparative advantage. Right. That depresses the purchasing power of the Chinese and means that their production is subsidized as it flows to the rest of the world. The United States was so bizarrely blind to it that we allowed our trade deficit with China to explode and basically pretended that this was a good thing, even as many, many Americans were experiencing loss of employment in manufacturing, et cetera. And I want to be really clear like all else equal, I would love to have 32 varieties of bookshelves in various flat pack packages that I can assemble myself and avoid all the labor content in the United States that's created by drop ships of flat pack furniture to my front door by Amazon. I think that's awesome. I really, really do. But the consequences of it in terms of the deindustrialization of America, the reliance on debt to continue to finance consumption, those are direct outgrowths of that process.

[Connor]

And when China suppresses their own currency, they're not coming back and buying from you guys. Which was what we were sold. Right?

[Peter]

Exactly. And then the last thing I would say about this though is that unfortunately, China, by following this model, it has an end to itself. China now has productive capacity that it can basically serve the entire world. World, which means the entire world either needs to accept Chinese production and the loss of all jobs in those areas, or they can turn around and say, yeah, it's kind of your problem now in China. And that's what's actually happening on the global stage is the western country after western country and even developing countries are increasingly looking at China and saying, n, it's a really nice thought that you're going to send me super cheap microwaves, but you're going to do it under my terms, not yours.

[Connor]

Well, but it's handed them so much more power, power we've allowed and the.

[Peter]

Chinese much power, you're saying. I think that's true, but it also with great power comes great responsibility. And so they have a responsibility to their domestic economy to keep it going. But as productivity continues to march in the manufacturing sector, there's less and less opportunities for people to follow this model in China. And they've got a demographic issue in terms of aggregate demand that makes ours look tame.

[Mike]

Right.

[Peter]

They have been shrinking in population, labor force since about 2011. Population, my understanding, is since about 2019. That means that all else equal, their aggregate demand is only going to grow with the income increase and any inflation, et cetera, cancels that out. There's no way China can consume what it's producing. Right. At this point, they're an auto manufacturer who has filled the warehouse with inventory needs to continue producing because they've got a union contract that says we have to maintain the number of jobs and the only thing they're left with is, all right, well we're going to discount and we're going to eat some of these cars costs or we're going to play a really big game where we say we're not going to sell to the United States anymore and we ship it through Mexico into the United States or we're going to dump it into Europe. And that really has been the opportunity set for the Trump administration. If we had handled it more gracefully, perhaps we could have been able to say to the Europeans, look what's happening to your domestic markets from this.

[Connor]

But is this, there is some sense to the Trump tariffs with this?

[Mike]

I think there is.

[Peter]

At the end of the day, if you as a country are not controlling your trade policy and your industrial policy to some degree. Articulating. Here's where we want to get to, right? If you engage in unfettered free trade and you're trading with entities who don't do so, who behave in a manner that is, quote, unquote, strategic or trying to reach certain objectives, if the full law of economics doesn't apply in the manner that you imagine that it does, because you've got a, you know, a DGSE model model that says it's all going to work out in the end. Right. Well, first of all, that's a tautology. If you build a model that says it's all going to work out in the end, your model is going to tell you it's all going to work.

[Mike]

Out in the end.

[Peter]

What we're discovering is that there's incredible frictions and I would encourage your listeners, as I do in my piece, to read works by Michael Pettis or others on this. If you're not controlling your industrial policy and you're trading with somebody who is controlling their industrial policy, they control your industrial policy policy.

[Connor]

I mean, look, this, this, this was a gut punch this morning because.

I, I think most people outside of your psychopaths want a fair society. We want a fair you, you want to be able to earn a fair income.

[Peter]

And yeah, want a fairer society. They just have a different definition of societal fairness.

[Connor]

Yeah, but this, this, this was a gut punch. It's like this is so people listening. It's the labor share of GDP and it's dropped from 47, about 70% to 2003, about 65%. But now we're 57. Yeah, 57. Yeah. And, and you know, even me as somebody who's not somebody like you, I don't study markets, I don't trade, I don't invest. I just run local businesses. I can, I can see the correlation between that and what's happening in the breakdown in our society at the moment. The squeeze in middle class. That's just telling you that the rich are getting rich, in the middle are getting poor.

[Peter]

Well, you know, this is the great irony is this chart has been shown time and time and time again, right? For me, it's almost one of those things very much like I wrote about with the poverty line. It's like, I understand why this is happening, right? Companies are getting more efficient, the ability to control pricing is getting greater. We're moving towards time of use pricing.

[Mike]

On more and more things.

[Peter]

When you pay surcharge data taxi at exactly that time, that absolutely is a recognition that you are saying there is a consumer surplus that exists. I'm willing to pay 50 quid to get home because I'm drunk and my wife is going to be really angry if I'm 30 minutes later. Yeah, right. Consumer surplus all over the place, right? But capturing that shows up as higher profit margins, which then translates to less income that is delivered to the workers themselves. More of it shows up effectively in monopoly profits. And that seems like not a big deal when you're somebody like myself or yourself who's operating at a level of surplus where it just really matter all that much. But the crazy thing is when you look at this chart, you're immediately struck by what you said, which is, well, this can't possibly be fair. And then there's the question of what are the implications of it. And what this chart really is showing, just very quickly here is inequality. And the reason that this matters, when we talk about poverty, there's two different types of poverty. There's absolute poverty, which is you inhabit a cave as a hermit somewhere and you're eating roots and vegetables that are barely cooked over, you know, the charred stumps of trees that are near you, right? And then there's relative poverty, which is the kid who goes to school, didn't have a particularly good breakfast and therefore can't pay that much attention, gets into an argument with somebody, is punished, doesn't get to go out for recess, they aren't put into the advanced placement classes, et cetera. That type of poverty is relative poverty, right? That's the lack of ability to get to that point participation line in a manner that doesn't create extraordinary feelings of deprivation, right? That relative poverty is a very different condition. And many of my critics were like, you don't know what poverty is, Go to Guatemala and see what poverty is. Well, if I'm an American, I don't care as much about poverty in Guatemala, all else equal, I'd like to eradicate it. But poverty in Guatemala only affects me in America or.

You know, various Venezuela, etc. Those only affect me when people from those communities are imported into my community and suddenly is perceived that, you know, safety is deteriorated, et cetera. Now, the political aims for that sort of stuff. Who cares, right? But the experience of relative poverty is that feeling of chaos and societal breakdown where you're basically saying, okay, these people don't have enough to fully participate. And therefore, even though their living standards are high by world standards, they're so extraordinarily low by Western standards that they don't even bother to participate. Those are the people that are below the true poverty line, where the government's like, okay, let's just pay them to make the problem go away.

[Connor]

But it, but it does end up.

[Peter]

Affecting you in absolutely affects your quality of life.

[Connor]

But it affects. Also affects in a different way in that the socialists have an argument, they have a fair argument they're wrong on their solution, but they have a fair argument when they talk about inequality.

[Mike]

Well, this is where I was going.

[Peter]

Going with this, and I apologize, I'm long winded.

[Connor]

No, no, this is great.

[Peter]

Okay, so there's all sorts of measures of absolute poverty and relative poverty. Yeah, Right. An economist, Lawrence Eppered, literally just produced a piece that one of my.

Critics actually flagged and said, oh, this is interesting. Right? Now, the piece that that Lawrence Upper wrote is about this difference between absolute and relative power poverty. Right. And it turns out that the measures that we use for measuring absolute poverty. Do you have $2 a day to buy XYZ? Right. Do you, you know, where are you on an income adjusted basis?

[Connor]

We call it material deprivation here.

[Mike]

Right.

[Peter]

Okay, so material deprivation is meaningfully different than relative poverty. Right. Relative poverty is that feeling of precarity that you're not making advancements, that you're, you know, you're struggling and you don't fully feel like a member of society. Right. You are the downtrodden and poor. You're not absolutely poor, but you're downtrodden poor. Right. It turns out that all of the metrics that we use for measuring absolute poverty do a terrible job of describing relative poverty. And most of the measures of relative poverty do a terrible job of measuring absolute poverty.

[Connor]

I also think most people consider relative poverty is absolute poverty.

[Peter]

I think that's correct. They confuse the key differences between the institutional reaction to my work and the household reaction to my work. I got to tell you, you know, I've been very fortunate in many ways in life, but this has been an extraordinary experience to have people reach out and tell me in I Literally received something like 10,000 emails and an unbelievable number of comments. Etc. The comments that struck me most were the ones particularly with the first one where people said, you know what, I printed this out, I made eight copies and everybody at Thanksgiving dinner sat down and read it together.

[Mike]

Together.

[Connor]

Sorry.

[Peter]

Read it together. And we had a conversation as a family who we've never been able to have before.

That's an extraordinary gift and I can't say thank you enough for it.

[Connor]

Well, I. Look, I mean, I wrote to you because I think it's the most important article I've read this year.

But I mean, I think probably in the last few years because I haven't been able to connect the dots of why I've been able to create a great life for myself. I hit that point where I could buy the car.

But my general happiness has gone down. And I think it's because.

I think there's a myth around being successful and wealthy, that happiness comes with it. I think there's absolute. Like being poor and not being able to buy things and worrying about your mortgage. I've been there, it's rubbish. But most people just want to be able to buy a house, go on holiday, look after their kids, go to the pub on the weekend. I don't think most people want too much. And when you get to that stage where you can maybe buy a car or Rolex, all those things, it doesn't really buy your happiness. But at the time you're doing it with everyone else is struggling, actually. It sucks.

[Mike]

Sucks.

[Connor]

It really sucks. I don't care about making any more money now, Mike, I want to, if you offered me, say, look, wherever you are now, I guarantee you'll be in the same position when you retire. I'll take it. I'll take it. And then you can go and work on the important things. And this quantified a lot for me. And this is why I wanted to talk to you and do it in person, have this conversation, because I want to understand this to a level that I can get this communicated to everyone else. It's also, by the way, shifted my political thinking a little bit because I think I'd gone so far down the libertarian Austrian route. And everybody said to me, look, there's other ideas you need to think about. I said, no, no, no, the Austrians are right that I'm like.

Something is deeply, deeply unfair in our society at the moment and we need to shift it, because we don't. My worry is if the socialists win, they'll actually make it even worse. And they're right on the symptoms, but they'll make everything worse. And I'm deeply worried about it.

[Peter]

Well, I mean, look, that's actually part of the.

Political angle that you're already seeing take place with Mandami in New York, right?

[Connor]

Yep.

[Peter]

Any number of wealthy individuals said, I'm going to leave if Mandami is elected.

[Mike]

Right.

[Peter]

Same thing we hear every time. I'm going to go to Canada or I'm going to, you know, go to Scotland or wherever people go in the UK when they want to get away, I guess creek islands or Spanish pain.

[Connor]

The.

[Peter]

The simple reality is they don't leave. Right. But what they do is they silently sit there on the sidelines and say, I told you so. Told you so.

[Connor]

Some leave, some leave, we've had it, we've had it here. But they're quite high profile cases. I think the big point is people don't want to leave.

[Peter]

They don't want to leave, they don't want to make that choice and all else equal, they'll recognize that it's better. I mean, that's one of the things that I end my piece with is like, like, look, you are going to have to raise taxes on higher income individuals if you want to fix this. But the irony is, is if you do so, our society actually ends up in aggregate, much richer. And that reduced share is higher quality for you. Yeah, right. If you're competing as the same way, we're talking about relative versus absolute poverty.

[Mike]

Right.

[Peter]

Just like there's relative and absolute poverty, there's relative and absolute weight wealth. People in the top 50% in the United States, in absolute terms, are extraordinarily wealthy. On a global basis. Right. We have nothing to complain about. On a relative basis, we're feeling increasingly, you know, disenfranchised from the system for all the reasons we've spent an hour plus talking about now.

[Mike]

Right.

[Peter]

People at the extreme end need to recognize wealth can be described in absolute or relative terms as well. And the party that you compare yourself with is extraordinary ordinary. I think one of the things that candidly you and I share in common is we both have enough. Would I like to have more? Of course. Do I want to have more safety and security for my children? Would I like to have a newer car? Would I like to have a bigger house? Not really. But, you know, the simple reality is I want more just like everybody else, but I don't need it and I know it. And I'm close enough to my children and their friends that I recognize that there are other things that need to take priority. I'd rather get a house for my kids kids than a house for myself. Right. And I understand that that makes me sound absurdly, you know, entitled as it relates to my children, et cetera. They're deeply appreciative of it. I'm very fortunate. I fully understand that. But that's kind of where we need to get to as a society. And that's one of the reasons why you see the language being fanned of. Well, they're not like us. Their IQs are lower, their skin color is different, their culture is inferior. It's et cetera. There's truth to all of those things, right? There is truth. IQ is correlated with income. Certain cultures have behaviors that are more endemic to success than other cultures in a modern context.

[Connor]

But it's not the problem.

[Peter]

But it's not the problem.

[Connor]

It's not the problem.

[Peter]

The problem is that we have constrained a segment of the population against any reasonable outcome while unlimitedly giving away to another group that we think magically has the solution. It's effectively a priesthood cast. We're going to give you everything and in exchange you're going to pray for rain. Right. Were they any good at delivering rain when it was the priesthood? No. Are they any good at delivering rain when it's the capitalist entrepreneurial class? Actually the crazy information is not really. We actually have the capacity to run analyses now today, looking at the outcomes in our society. Are they due to skill or are they due to luck? Right. Ole Peters, who's here in London, run at the London Institute of Mathematics, is one of the key proponents of one of the growing schools of economics. This idea of ergotic versus non ergotic systems.

OL's work would tell you that the distribution of outcomes has actually negative skill associated with it. Right. When we run the analysis of the current layout, is it more skill or more luck? It actually exists exhibits negative skill. Right. So this system is not delivering what we're being told is delivered. Giving more money to the priests is not going to bring more rain. What we actually need to do is build the irrigation that brings more rain from other places to the crops where they currently are.

[Connor]

Let's talk about the last article that came out and try and get to. And get to a place where kind of just normal people can understand. Yeah, what we need to do because I think there's, there can be political influence and things like this. But I thought this is very interesting, this kind of 40 year drift, how America optimized for property not Pursuit. And then you talked about the pursuit of happiness and such. And obviously, as a. An Austrian, I'd be like, well, property is the most important thing and property rights are important, but, oh, incredibly important. But the pursuit itself is super important. And that place we've got to where it's easier just to hold assets than actually do stuff is distorting everybody, everything.

[Peter]

Absolutely.

[Connor]

So, yeah, so, so, so just very.

[Peter]

Quickly to outline that the, the. The last piece so far, right, is called the Pursuit of Happiness and it identifies the difference between John Locke's original treatise on natural rights, which identifies life, liberty and property.

[Connor]

Yes.

[Mike]

Right.

[Peter]

To him, property meant that which you had produced, that which belonged to you.

[Connor]

You.

[Peter]

Right. Your rights to that were part of being a human being, which kind of.

[Connor]

Made sense when it was a house.

[Mike]

Well, first of all, remember, Locke is.

[Peter]

Actually writing for the aristocratic class. And so when we think of the aristocracy, we tend to think of it in the context of like, well, those are the rulers. No, the aristocracy in England, by and large, was a series of barons and dukes, et cetera, who were subservient to the king. So oftentimes rights were really about, well, what original rich people. Rights. Right. Not that serfs had true rights.

[Mike]

It morphed into that.

[Peter]

And that's what was unique about the American Revolution. And England had its.

[Mike]

With the glorious, et cetera.

[Peter]

Right. There is an entire period of basically human franchising or enfranchisement, in which we.

[Mike]

Said the individual rights are really what matter.

[Peter]

And that is an outgrowth of the Enlightenment. It's a recognition of the potential that's embedded in every human being. And much of the story of the period from give or take 1492, and I'm picking that very intentionally, until the period of give or take 1950, was largely built around that idea of flourishing of the individual human being. What could we do to increase their rights? We can introduce democracies, we can introduce bankruptcy reform so people don't die in debtors prison. Right. We can introduce universal education so that people actually have a voice and an understanding of what exists and how things can be changed or how things are. Those were all periods of enfranchisement and they were largely created. And the reason I spoke, I focused on 1492, is that was the first time we actually introduced the new world, which solves the land scarcity issue that existed in the old world. Right. The Black Death was a really inelegant and unfortunate solution to land scarcity that was discovered in 1340. I'd rather not Repeat that experience. Although Covid was interesting in terms of that component, the 16th century was really that recognition that, wait a second, you know what? People who want to get out of here suddenly can. What America really represented to Europe and Asia was the opportunity for the commoner to look at the noble and say, screw you, I'm out of here, I'm going to America where I have the opportunity to change my life. That simultaneously developed the American continent. And I understand all the, the ramifications and concerns about Native American populations and there's some truth to that, but let's just be entirely honest. People have conquered people over and over and over again, right? It's not going to stop, it's not going to change. But for the Europeans and the Asian commoner, the development of the New world suddenly created surplus land that allowed them to say to their rulers, treat us better or we're out of here. And as more and more people took that exit voice, the nobles were ultimately forced to respond. Most extreme version of this is in places like Scandinavia, which today we think of as a labor paradise, even though that's retreated significantly as well.

[Mike]

The reality is those were the most backward.

[Peter]

Surf like countries in existence. Russia has another example of this, right? In the late 19th century or over the course of the 19th century, something like 30% of the adult males in Scandinavia emigrated to the United States.

[Connor]

States.

[Peter]

If you're nobles who have lands to work or factories to run, what's your reaction to that? Please stay, don't leave. We'll give you rights, we'll give you income, we'll give you safety, we'll represent you in governance, etc. That's what it was. It wasn't given to them. It was a function of people having a place to go.

[Connor]

But that's kind of in some ways what's happening now in that we have a brain drain of people leaving.

[Peter]

Yeah, that I think is part of the opportunity set for the UK is the simple reality is if people turn around and say, I have a choice, I can either leave or I can stay. And if I'm going to stay, I want this to be a better place.

That was what the Americans did with the revolution. We're not leaving, we're staying and we're taking it. Now. Everything about the American Revolution was different than almost every other revolution that was done. Among other things, both Alexander Hamilton and George Washington were worked to rectify public opinion and reduce the impact on the loyalists.

[Connor]

Right.

[Peter]

People forget that somewhere around 30% of the US population wanted to remain with King George, I'm sure many people were.

[Mike]

Ready, were happy to get rid of them.

[Peter]

Another fraction was. Was significantly less happy about it. But we worked on national reconciliation. We worked on making sure that people wouldn't be punished by having their property taken away, that they were able to reintegrate into society. And if they felt that they couldn't do that safely, they moved to Kansas, Canada. Right. Or move back to London. Right. Or to England. I'm sorry.

But that was a very intentional choice. I'm already seeing people in my comments say something along the lines of, we should hang the rich, we should tax them. You know, the numbers that you have here in which you are restoring some degree of fairness to the tax code, that's not nearly enough. They abused us. We should take 90%.

[Mike]

Yeah.

[Connor]

We don't want friends, fresh revolution.

[Peter]

You don't want the French Revolution. You don't want to burn it to the ground. You don't want to be punitive. Right. Yes, people made bad choices, but at every step in this process, when confronted with the. Is it malice or is it incompetence? By and large, it's just a flawed worldview.

[Connor]

Well, it's just some complacency.

[Peter]

Well, across multiple components of it.

[Mike]

Right.

[Peter]

I mean, like, look, did John D. Rockefeller really figure out economics in terms of oil refineries, et cetera? Absolutely. Absolutely. Did Nelson Rockefeller, who ran for President of the United States, naturally genetically inherit that gift? No.

[Mike]

Right.

[Peter]

Like, it's just absurd to think about. These things are somehow genetic endowments that need to be reinforced. The reality is, is that we have the language to talk about this. We are at a point of rebirth. Right. There's a famous expression. The old world is dying. The new world struggles to be born. This is one of the areas where you and I have banged heads on things like. Like bitcoin, et cetera. Right. That new world is literally there. It is right there for the taking. But unless we change our behaviors like Moses, we will not be allowed entry into the promised land.

[Connor]

But.

It'S like a readjustment back to fairness.

[Peter]

Yeah, well, look, things have always been unfair. 1950s America was terribly unfair to minority population. It was terribly unfair to women who faced restrictions in the labor force. It was terribly unfair to handicapped soldiers coming out of World War II who found themselves incapable of participating in the economy because they lacked arms, legs, eyes, et cetera.

[Mike]

Right.

[Peter]

All of those are areas in which extraordinary improvements have been created. There's also extraordinary costs associated with some of those. And as we increasingly target enfranchisement of minority groups. Right. People with purple hair, you know, orange nose rings and, you know, a background that's colored by experience in Southeast Asia and Northern Australia. Right. Like, that's a special interest group that I'm completely making up. But as we talk about enfranchising that group, we have to make sure that we're not disenfranchising the majority group. And it's that majority group that has largely been disenfranchised.

[Connor]

And whenever you get a large majority group disenfranchised, you do get a revolution. And the shape of it you cannot predict. Predict.

[Peter]

Well, you cannot predict the shape of it, which is one of the real components to recognize the other thing to recognize. And this is one of the reasons why I actually side with my critics on some of this stuff.

[Mike]

Right.

[Peter]

Your risk is that you run into people who want to seize power. Revolutions are not actually led by peasants. They're led by elites who are disenfranchised from other elites or want to change their relative state.

[Connor]

And they can weaponize a, and they.

[Peter]

Can weaponize a group of individuals.

[Connor]

This is happening right now.

[Peter]

It's absolutely happening in the UK and the United States. This is the conflict that exists within the MAGA community. Are we about, you know, cultural standards or are we actually about economic outcomes? I don't know which direction it's going to go. And I want to reiterate, I'm not running for office. I don't want to have an elected office and I will not accept one if I get it right. This is not about power for me, although I am extremely happy that we're having this conversation, that I was able.

[Mike]

To play a role in it.

[Peter]

The simple reality is I want to educate people so they know the fight that is actually out there.

[Connor]

And so, so break it down step by step so people really understand what, what are the shifts? And by the way, I, I'm going to keep it here because I ran it through, I ran the prompt through.

AI instead of just for the uk.

Have you got access to mine? So it is.

Run CBO style, tables. Yeah, I'll find it. So we've got, we've got the UK version because some of it's quite interesting.

But I, but I will add some UK context as well because some of the things, there's some things I don't think will be palatable, some things will be, but.

If you're not in power because you don't want to be, but if you are, what are the first things you would do?

[Peter]

Well, look, the most important thing is the tax policy.

[Connor]

Tax code.

[Mike]

Yeah.

[Peter]

The tax code is the mechanism for spending at the federal level. For American viewers.

[Mike]

You've watched the disaster that was DOGE.

[Peter]

Over the last year. Right. This idea that we could reinvent government. As we also talked about under the Clinton administration. Administration. The simple reality is the federal government doesn't really have much spending. It's largely a transfer mechanism. I pay my Social Security taxes. Those flow out as Social Security income to another beneficiary. Is it possible that there is some segment of beneficiaries that are committing fraud in order to receive those?

[Mike]

Yes.

[Peter]

Is it possible that people are collaborating with members of the federal government in order to drive the.

[Mike]

Those.

[Peter]

That's really hard, actually, because most of these programs are administered at state level. And that's where you discover things like the Miss Minnesota, current immigration scandals.

The power of the purse doesn't really reside within the federal government. It does reside within the federal government is the power to tax. And it's there in a complicated tax code where we have made any number of exceptions and carve outs and special interest components that have changed the character of tax. We have misrepresented taxation to the American public. I'm sure any number of our listeners have heard the canard that the 1% pay 50% of the income taxes. All right, well, when you're looking at your tax bill as an American, when you compare the gross versus net in your tax, you're going to notice this thing called FICA taxes, which is roughly 12% of your total income up to $168,000.

[Connor]

National Insurance here.

[Peter]

It's the national insurance component. Right. Well, that's not considered income tax taxes.

[Connor]

I don't pay hardly any because I pay. I paid in dividends. Okay.

[Peter]

So that would be a perfect example. You're wealthy and you are not paying those taxes now. You pay lots of other taxes. I appreciate that and I respect it and I'm sure you're listening.

[Connor]

But as a percent of income.

[Peter]

As a percent of income, we've radically changed it. I don't know what you've got here.

[Connor]

This is the translation for the uk. Yeah. So but if you talked about the different points, I can, I can reference them anyway. I kind of can reference them. Yeah.

[Mike]

So the, you know, things, things that.

[Peter]

Are really important for people to understand is that we are actually sitting in a relatively unique period of history.

[Connor]

Yeah.

[Peter]

We have reintroduced tools that can be used to capture capital. And John Maynard Keynes wrote extremely eloquently about this. He recognized that if you were going to have free trade, you could not have free capital mobility because capital can be sent with a keystroke. Bitcoiners will often tell you this, right? From one region of the world to another. That means that capital has mobility that labor does, does not. That creates arbitrage. And that's really what has been exploited is, as we talked about with China, the capital moving to China, exploiting the labor arbitrage, generating extraordinary profits at the expense of American workers who were then offered debt as the alternative. The UK had the exact same story.

[Connor]

And it's a privilege for those who can access it.

[Peter]

It's a privilege for those who can access it, Right? And so when you reintroduce tariffs, you're actually doing something really important. It's the equivalent of putting gates up around a city and saying, if you want to sell stuff inside, inside this city, you have to pay a toll to get access to the people who live here. Right. We've done this since time immemorial. We have charged people for access to cities because we recognize that cities themselves are relatively inefficient production centers. You don't want to have somebody taking over a giant plot of London to grow vegetables, right? You want to have that done outside, and then you want to charge people who are bringing it in.

That's all tariffs do. And what it does is it creates and captures capital. If you want to have access to the customers, you got to pay the toll.

[Connor]

Right.

[Peter]

The reintroduction of that. This is the first time in 70 years we're having honest conversations about these things. Right. It allows us to freeze capital. And this is one of the reasons why I would argue that there's a degree of intentional misinformation around these things. Right. There's this focus on, well, you know, customers can't afford higher prices. That is true. Right. But they also can't afford the current prices. So it's really somewhat irrelevant. What we need to be focused on is increasing their income in part by producing hair. And yes, they will consume less because it will be more expensive and it'll be harder.

[Connor]

Temporary.

[Peter]

I think it's somewhat temporary because honestly, the way I would focus all these things is on increasing the automation, right. So that we get higher productivity alongside it. The capital stock in the UK and the United States is relatively dated and old, certainly compared to places like China. There's absolutely no reason that the reintroduction and reinvention of the manufacturing bases and supply chains to incorporate the domestic economy economy can't use State of the art components to reduce the labor content and therefore make things ultimately much cheaper going forward.

But all of that is somewhat of a side note to the idea that the threat to move is suddenly ameliorated or prevented when you have tariffs. Right. This is a unique opportunity that can be seized.

What are we hearing? Well, people can't afford this.

[Mike]

People can't.

[Peter]

You know, people don't want to pay this. That nobody actually asked us, would you rather have a job? And slightly higher trinket, you know, costs. Fidget spinners from China, you know, cost 99 cents. Fidget spinners from the UK would cost $1.99, twice as expensive. Do you actually care? I really don't care about the price of fidget spinners. I do care that my neighbor is treated decently.

[Connor]

Corporate. So you talked about raising corporation tax. What is it currently in the US.

[Peter]

So it's currently 21% in the United States. There are adjustments that are made for payments of international taxes, et cetera. The effective corporate tax rate for many of the large multinationals in the United States is well below that 21% level. And that's because of things like Irish tax.

[Connor]

Electronics, they play. They play the games.

[Peter]

They play the games.

[Connor]

Yeah, we have it here. So whatever profits Amazon makes becomes a license, which is.

[Peter]

Which.

[Connor]

Sends the money back to whichever jurisdiction they're in. To me, it's such an obvious unfair benefit that they have.

[Peter]

Oh, it's completely unfair.

[Mike]

But we know exactly how they got it.

[Peter]

They can hire legions of accountants and attorneys who are going to navigate the very limits of it. And by the way, they have a responsibility for that. That's one of the reasons why we need effective governance, is that the rules, just like Joseph Kennedy with the sec, need to be written with the awareness of the shenanigans that go around to avoid it. And the objective should be to establish fairness. It should not be to obtain funds for re election.

[Connor]

So the corporation tax in the UK is 25%. That's actually seen as quite high at the moment. And one of the things is that it's seen as a barrier to getting people to invest in the uk. So there's a challenge to that one.

[Peter]

Yeah, no, I think that's absolutely right. And the UK has a much more difficult situation than the United States. Your domestic market is a fraction of the size of ours. Your resources on a natural framework are far less than the United States. Your access to energy, etc. Is dramatically reduced. You've largely squandered the benefit associated with The North Sea. Yes.

[Mike]

Right.

[Peter]

These are all things that make it more challenging for the uk.

[Connor]

But we could capture more from meta, Google, Amazon.

[Peter]

It's not even so much as you need to capture more from Google, meta, et cetera, as much as it is that you need to capture more from the people who are the real resource and opportunity within the uk. Adam Smith had a fantastic expression. There's a lot of ruin in a country or ruin in a nation. Right. When you have a country as large as the UK, you know, 120 million, I think, is the population.

[Connor]

No, no, we're like 70 million.

[Mike]

70 million.

[Peter]

I'm sorry, I'm thinking Germany. 70 million people. People, right. Compare that to any small village that would have existed in pre Norman times. Right. Like, it's just an incredibly robust system now. Lots of things can go wrong in that system. But because it is so large and because it has so many innate resources, when you've got 70 million people working together, your capacity to recover from that is far greater than the local village, which, if it loses its doctor, basically has no healthcare alternatives.

[Connor]

Right, okay.

[Peter]

But you aren't as resourced as the United States. You don't have the same riverways, you don't have the same natural resources, et cetera. But what you really do have is you've got an educated and thoughtful public that speaks the international language of English. Right. You spread that around the world. You've got a system of governance that, by and large was adopted by every modern country on the planet. These are incredible innovations that emerged from the United Kingdom that in many ways defined the experience that we have. And for some reason or another, you've completely lost the plot.

[Connor]

Yes, I know.

[Mike]

Like, it's just absurd.

[Connor]

We know.

[Peter]

You're spending your time prosecuting people for things that they say in tweets.

[Mike]

Right.

[Peter]

And nobody's actually arresting anyone for raping young girls. I mean, come on. This is zero.

[Connor]

We know. And do you know what? Actually, this current labor government's become very authoritarian and we're sleepwalking into it. There's this. Only in. Under this government, we. We've got money in the. So they talked about the budget recently. We had. I don't know if you saw this and talked about the billions here and the billions there. There's 1.8 billion hidden there for digital ID. David Lammy's come out with a proposal to remove all jury trials, apart from anything but say, I think, rape and murder. We've had. What are the other things on the list?

[Peter]

Con.

[Connor]

Free speech, law, Yeah, I mean, we've talked about people arrested for speech. We've had a massive growth in surveillance, like in every direction. Online safety bill. Oh yeah, the online safety act, like. And by the way, look, I'm not opposed to the idea of trying to stop 15 year olds accessing hardcore pornography. I actually think that's kind of like a good thing. Yeah, I think it's a good thing. But at the same time, every single direction there's like this slow creep of authoritarianism that people are just kind of going, yeah, okay.

[Peter]

I don't think they're going, yeah, okay.

[Connor]

I think some are cheering it on.

[Mike]

Well, well, okay.

[Peter]

So again, another gift to the world that you provided us with was George Orwell. Right? Yes, George Orwell. If you have not read his works, please, I implore you, stop reading my stuff and go read George Orwell. Understand that the quotes in Animal Farm are not about socialism or totalitarianism. They're effectively the same thing where they're saying the pigs were more equal than others. It's the same thing we're talking about with the Capital Elite class who say, saying those people, there's really no hope for them, let's just pay them to make them go away. We don't need to think about the 65th percentile household in the United Kingdom and their outcome in life for the very simple reason that we don't care. We don't need to think about them.

[Mike]

It's those people who are at the.

[Peter]

Extreme end who are worried that they don't actually have any tie to the system, that they might start to riot, that they are that seven and a half meals out of the nine towards eight anarchy.

[Connor]

So we get in all, well, not only from government, but we're getting it from the rich elite. Well again, remember, I mean, they're the same thing.

[Peter]

Animal Farm is a private institution. Yeah, right. It is, it is collectively owned by the animals, but the pigs are in charge. They're the managerial class. He's really talking about the business executives just as much as he's talking about totalitarian leaders. Right. We ignored that portion of it. Ayn Rand I used in the last piece and it was found horribly offensive. I used the example of Balf Eubanks to describe an intellectual in Ayn Rand, which is the objectivist libertarian fantasy literature, as the intellectual thought leader for the status quo, whose basic message was, well, the problem is the poor aren't moral. Right. It's their moral failings that are causing the outcomes. And so what we really need to do is Educate them about how they should be better human beings. Things and the deprivations that they're facing are actually going to make them better human beings. Right, Squealer in Animal Farm.

[Mike]

Right.

[Peter]

The hard work or Napoleon? I think it actually was the hard work and deprivations that you experience as an animal are really what creates the character that makes you a citizen of Animal Farm.

Right. Like the language flows through over and over again. Because it's the same language. It's not us, it's to you, you're the problem.

[Connor]

Okay, so in terms of the tax code, one of the ones you've mentioned in here is inheritance tax.

[Peter]

Yeah.

[Connor]

What is it in the US at the moment? It's 40%.

[Peter]

Here it depends on how you structure it. But in many situations you can create generation skipping trust exemptions that allow you, through dynasty trusts to never pay taxes.

[Connor]

Yeah. So the rich people have ways of escaping this. Well, look, there's loads of rich people benefits. There's also rich people who get paid in dividends or they take out big loans. Where, you know, are you talking about re engineering the tax code to capture all of that into a fairer way?

[Mike]

I think that that's important.

[Peter]

I think the estate tax is a super simple one. Right. Like the reality is, is that there are two separate issues within estate taxes. There are estates like farms, for example, that are owned by individuals and they are largely illiquid wealth. It's not reasonable to expect to have an estate tax process that forces people to liquidate their farm in order to pay the estate tax.

[Connor]

Do you have that in the US because we have it.

[Mike]

Oh, absolutely.

[Peter]

You have, and we have it in the United States. That's the claim that is used to fight things like the estate tax. Right. My actual proposal would basically say, look, we should establish a government resolution reconstruction corporation that effectively is willing to finance illiquid estates at roughly 50% of the value. You put a tax that's at ordinary income, you could pay up to 50% tax on that. We'll finance it for you. We'll do it at low and somewhat subsidized rates. Because candidly that's not our objective.

[Mike]

Objective.

[Peter]

But the reality is that inheritance is ordinary income to the heirs. Right. Why should you, Peter McCormick, have to pay a much higher income tax on income that you generated for yourself through your hard work, contributed to by these sacrifices that your parents made to send you to a private school education? I think that was.

[Connor]

That's true.

[Peter]

Right. And so that process us is actually the same thing. Your inheritance was Gifted to you in the form of your schooling. Right. Why should the product of that be treated any differently than the inheritance that comes from me taking over? You know, Fox, to pick something.

[Connor]

I think with the farms, the fear is the farms end up being owned by your black frogs. Right. And so again how do you keep them in families? Right.

[Peter]

So one of the ways is you can address that. That is to eliminate, and this is another one of my proposals, eliminate the bias towards debt financing that exists within the tax code. It's completely absurd that the government treats interest expense differently than it does or as a pre tax expense because the simple reality is it creates the conditions that you're describing. I can borrow against my fortune to spend as compared to having to pay taxes from selling pieces of it or recognizing the income associated associated with it. Likewise, you know, firms like private equity firms, you know, that have acquired property are able to deduct the interest expense associated with that in a general purpose corporate loan. That gives them the flexibility to step in and buy things without having to apply for an individual mortgage on each individual piece. The reason the farms are being bought is largely because the farms are, are uneconomic enough that you can't possibly borrow at current market rates to pay for the, to pay the estate tax if it was done at fair market value. There's two answers to that. One is you address the financing that drives up that fair market value, things like the deductibility of interest. And then the second one is you recognize our objective is not to take the farm. Right. Our objective is to make sure that fair taxes are collected. And so we're more than half happy to finance it for you. Right. If the issue is you don't have the cash flow associated with it because it's something like a farm that isn't cash rich, why is the government stepping in and trying to make that like uniquely bad for people as an outcome? That's the fear. And I would argue that part of it is also exploitation. Right. I mean you are being fed that message by people who don't want to pay the, the estate tax.

[Connor]

Sure. But also at the same time it's. When I think of say my kids inheritance, a lot of the time I spend with Conor and eventually I will with Scarlett is the responsibility of an inheritance. How do you grow it? How do you share it? Do I really want to give this to the government? Do I think it's better for society in Connor and Scarlett's hands than in the government's hands? And I obviously think it's Better in their hands, but they do have a genetic benefit.

[Peter]

Well, that's again, it's not genetic. If they were not your natural children, yeah, you'd be more than happy to do it regardless. But that familial tie as we talked about earlier, can either reinforce caste or we can recognize that it is exactly as I described, it's income to your children and taxes should be paid on it.

[Connor]

So. So you talk and. Because I think we already have them at 40% in this country and when I ran it through the AI, it said up to 60% now that it would be a very unpopular change.

[Peter]

Yeah, yeah. And I want to be actually really, really clear on this.

[Mike]

Right.

[Peter]

The entire point of putting it in this form was to have people do this and run it and say, what could I change that would make it slightly different? But at least we're starting to have an educated conversation on a fact based component.

[Connor]

What would you do say on the income tax level? Because I think.

I think the people at the lower end of the spectrum pay 2 higher tax.

[Peter]

Well, what they pay, right. Is their taxes are not necessarily higher on a percentage basis. In a static sense.

[Connor]

Yeah.

[Peter]

Wealthy people, as you transition those benefit cliffs, the effective tax, effectively the cash that you get to keep, experiences much higher marginal tax rates than wealthy people. The last component is, is candidly that we've just concealed the amount of lack of taxation that wealthy people have. Right. We present it in the context of, like in my piece, I gave a perfect example of this, right. If you use AI to say, as the American tax code gotten more or less progressive, the AI will sift through all the evidence and say it's gotten significantly less progressive. But if you actually do a traditional Google search and you look at the articles that are available to you, half of them say it's gotten more progressive and the other half say it's gotten less progressive.

[Connor]

So one's propaganda. They're both propaganda, but they're both propaganda. But AI can sift through it.

[Peter]

There's an element of AI sifting through it, at least for. For now.

[Mike]

Right.

[Peter]

But that's because AI is competitive and people reacted to Google, you know, gaslighting them about what Vikings look like and forced good behavior on them. So they're now largely truth telling.

[Connor]

Yeah.

[Peter]

If we continue down this path, by the way, there is absolutely nothing that prevents a future monopoly from modifying the truth so that the only thing we're presented with is their version of events.

[Connor]

This is the conversation we had with Justin. My friend does a lot of work in AI at the moment. He, he, he said the, the next election is going to be the AI election and how and what strategies will political parties use to influence the AI to give you the answer it wants. Which is kind of interesting. I mean I, I, yeah. In a utopian world where the AI isn't being manipulated and is just trying to give you the best and the, the most accurate answers. I think we live in a world where we can sense check the things the politicians are saying to us. Like you said put it, is it more or less progressive? And he's come out and said that there is a world where AI hopefully does give us better information and we can be a bit more honest. I think that's actually happening quite a bit now with you see it when politicians are putting up random bullshit on Twitter. I can tell people are going to AI and sense checking them. That's a good, good thing. I hope we can maintain that.

[Peter]

I hope we can too. And again that like, you know, recognize that the revolutions that we experienced in, you know, the period from give or take 1600 + were a byproduct largely of people getting access to information and revolutions can be bloodless. We're still at a point where I'm convinced that we can have largely bloodless coups where we change the behaviors of the system in a manner that is constructive for all, as I've prescribed presented. Yeah but if we keep going down this path, then it's not going to end that way.

[Connor]

This summary.

Corporation tax raised by 10%, National Insurance lowered high is going to create a big lump sum more of money at the end for the government. It does feel though like a little bit of a plaster in that.

[Peter]

A little bit of a what? I'm sorry?

[Connor]

A plaster. Like, you know, if you've got a cut, you put a plastic band aid.

[Mike]

Yeah.

[Connor]

In that.

This is hoping they redistribute that in the right way. But then how do you stop afterwards just going back to the same way and then we go redistribute again.

[Peter]

So the quick answer is that is a natural process. Right. There's nothing I can do to prevent backsliding in the system or further corruption at some point in the future. The future other than doing the same thing. And this is one of the great ironies. Right. So Peter knows a little bit about, you know, what I'm normally known for in the United States, which is my criticisms of the manner in which we invest investing passively.

[Connor]

Yeah.

[Peter]

What we're describing is we've been passively managing our Society, Right. We've been going through this process of sleep. We're not picking individual securities, we're not picking individual behaviors that we know actually lead to better outcomes, candidly, because we're tired and we're exhausted and maybe we're a little bit hungover from the pub the night before. Nobody really wants to get down to the business of social reinvention if they don't have to. Right. Nobody wants to monitor this stuff. We've allowed ourselves to be distracted from the environment in which we can influence it. One of the things I try to highlight in my piece is that's in the same way that the target of the targeted vector at the federal level level is the tax code, because that's really where money is made and spent.

[Mike]

Right.

[Peter]

At the local and state level. There you have genuine corruption. The traditional envelopes filled with cash, et cetera. How many local newspapers do you have in the UK today versus what you used to?

[Connor]

Very few. And it's a lot of people. It's their second job.

[Peter]

Right, right. How many people vote in local elections versus voting in national elections?

[Connor]

Terribly low.

[Peter]

Right. Change that. Yeah, right. And the only way you can do that is by telling people that there is. If you actually do this, if you spend the time to become an educated voter, if you spend the time to be an educated consumer of government services and you understand how these things actually work, you can influence outcomes in your favor. The rich have been doing that for a very long time. It's time for the rest of us to wake up and recognize that the unique feature of democracies is it's one man, one voice vote, not one bitcoin. One vote, not one dollar, one vote, not one pound, one vote. Right. The fact that you have many more pounds than I have doesn't mean you should get more votes. We need to reclaim that.

[Connor]

And so if we accept government generally is a bit shit, a bit inefficient, bit incompetent, if we just had a standard rule that we kept to like a rule of 65 at least that would have that fair distribution of labor.

[Peter]

Absolutely.

[Mike]

So this is.

[Peter]

I mean look, it's. To me it's a catchy title. I think to many people it won't mean anything. But I propose in the piece the rule of 65, not the rule by gerontocracy, not 65 year olds telling us what to do, which is by and large what we've experienced for the past 20 to 30 years, but instead govern our society on the basis of we want to make sure that the 65th percentile household, right, that aspirational middle class component, you're not the median. You're not 50%, you're not 40%, you're not 20% the poor poor, and you're not rich, but you're doing pretty well, right? If we build our emphasis in society about making sure that that segment of society does better and better and we score our legislation and our rule making and our regulatory frameworks around those individuals, we're capturing a much broader segment of society than the special interest components that we have. Nobody at the 65th percentile represents any meaningful special interest. And this has always been the thing that we've been aware. Capture by special interests the ability of people to use wealth to elevate their voice over those of others. And candidly, the ability of people to use outrage to elevate their voice over others, right? We want that devalued. We want that voice for the 65th percentile.

[Connor]

Amazing, right? Last, last thing. Complete curveball. Complete different direction. Michael Burry's rage quit resignation letter. Is that him upset that he hasn't been able to short the market how he wants in certain categories, or is he totally on the money? Is he right?

[Mike]

That so there are things.

[Peter]

So Michael Burry for those. Most of you guys would be aware of who Michael Burry is, but he's a famous investor from the big short. I don't know Michael personally. Michael and I have a very similar diagnosis around things like passive investing, which by and large creates a mindless robot designed to buy up securities at whatever price is available. That creates much of the momentum that we've seen and it creates components of the outperformance in the American stock market, which is further down this path than most other stock markets that we call American Exceptionalism then largely allows our society to look and be like, oh, look how great America is doing, right? That's one of the reasons why things are perceived as worse in the UK and many other regions is you don't have these national champions you can point to with pride and be like, oh, look at Bristol, or look at United, Manchester, Manchester United or whatever. Look at the New England Patriots, whoever they are, right? These are national champions.

[Mike]

Champions.

[Peter]

Look at Google, look at Nvidia, et cetera. I'm cheering for the home team, right?

That process, that trans. That transfer of control from individuals to systems is something that Michael Burry and I see very, very similarly. I don't know his motivations. My sense of Michael is that he's like me, except probably slightly wealthier. And he is in a position in which he cares about. About fairness and justice.

[Mike]

Right.

[Peter]

Like, it's very clear he's presented himself as autistic or Asperger, et cetera. Those are individuals who tend to operate under the framework of saying it's not fair. Right. This isn't the way it's supposed to work. And so I think there's an element of crusader there. I honestly don't think Michael Burry cares whether he shorts another stock in his life. I don't think he actually cares at all. I certainly don't.

[Mike]

Right.

[Peter]

And it's my day job and I have a fiduciary responsibility to do that as efficiently and effectively as possible. And I've done reasonably well at doing.

[Mike]

Doing it.

[Peter]

But the simple reality is I'm not out here because I want you to.

Bemoan my loss of control in financial markets. I'm just really intellectually curious about what is actually going on. And I got, as we'll say over and over again, I got lucky that I was born with a skill set that allowed me to take complex financial and economic topics. And as crazy as it may sound, for anyone who's listened to us talk for almost two hours. Hours, this is the simplified version.

[Connor]

Yeah. And it could have been a lot simpler for me. I mean, look, I appreciate you so much coming, taking a flight to do this, because it's a different conversation in person and it's real. And for somebody like me and Connor, just try and understand the world, a lot of the listeners. This is important stuff to understand. And we're at a moment in time where there's a great battle in our country between those who want a socialist takeover and those who don't give a shit about everyone else. And I think the answer's somewhere in the middle.

[Peter]

I agree.

[Connor]

And this has been really helpful to me. I know this trilogy is going to have another part, so I'm going to look, look out for.

[Peter]

It's much like Douglas Adams.

[Connor]

Yeah.

[Peter]

We'll probably eventually have five books in the trilogy or something like that.

[Connor]

Yeah. But I really appreciate you coming over, Mike. Truly I do. And great to finally meet you.

[Peter]

It was really nice meeting you in Persevere.

[Connor]

Thank you for having me and thank you to everyone for listening. We will see you soon.