Massive jobs revision, Kamala wealth tax, polls vs prediction markets, end of race-based admissions

do we have freeberg is he did he drop off oh here he is okay free Berg's back okay three two I just had to take a leak I just I go outside my office and then I come back oh you like a nature PE you're a nature PE guy me too I love a great nature I have this great office at home which is like a building outside of my house so I like to go in the garden take a breath of fresh air and just yeah you don't sit down to pee no I'm I'm serious I'm not joking around you guys I have so many jokes I'm not going there that's a soy estr point joke is no we can cut this out but my pediatrician said hm I think it's really important to teach your boys to pee sitting down and even for for you as you get older I what are you talking about it's good for the it's good for the prostate and there's like a materially different percentage in terms of prostate cancer rates when you pee sitting down because you expel all the pee that just kind of gets caught there what the little the dribble swear to God bro I swear to God you about wait wait what about Shake Nick you can cut all of this no the shake doesn't do this is great sitting while urinating AIDS and muscle relaxation benefiting men with tight pelvic floor muscles or symptoms of an enlarged prostate sitting to PE enhances stability rces the risk of Falls oh God and minimizes messiness especially sa SX has a urinal whenever sax gets a new home he puts urinal in that's how much of a man he is he how does your staff how does your staff hold your body while you pee like do they hold you history of the world Mel Brooks this study is like the vasectomy truck at the DNC I mean it's meant to emasculate men that's the only interpretation of it it's total nonsense let your winners ride Ravid and in said we open source it to the fans and they've just gone crazy [Music] with all right the labor department has revised down the job growth numbers as a number of members of this panel predicted the uh BLS updated its nonfarm payroll stats downgrading actual job growth to around 30% versus what was originally reported this means the US economy created around 818 th000 fewer jobs over the 12 months leading up to March 2024 number was originally reported as 2.9 Million new jobs created and it's more like 2.1 one uh the labor department updates and revises its stats frequently it gives disclaimers but this is the largest and most significant revision since 2009 after the great uh recession and so the biggest downgrade came in the field not surprisingly of professional and business services with 358,000 jobs lost over the last year we see that in all the stats of different tech companies and businesses finance companies doing layoffs other fields that revise their numbers Leisure Hospitality manufacturing retail makes sense and a little bit in transportation here's a couple charts for you before we go and get some feedback civilian unemployment rate seasonally adjusted as you can see since the great financial crisis we went from 10% all the way down to well below four and that's where we sit Today USA Today chart here of gains and losses since 1980 obviously that massive drop you see there of minus 9.3 million jobs was covid with the big quick rebound of 7.3 so overall the country is in great shape saak your thoughts on the revision you obviously made note of this when we went through the numbers well yeah I mean I predicted this this would happen and I didn't know exactly how we would get the correction but now it's come out by the way it's not just the this 88,000 jobs if you look at the last 12 months and add up all the restatements it's been something like 1.2 million I can share the chart on that but this is quite remarkable about a year ago I tweeted really fairly casually that there was a hot jobs report this was around June of 2023 that I I didn't know where they're finding all these jobs I mean all I see is layoffs that was my reaction based on not just what what I was seeing in Tech and all of us you know especially last year we seeing nothing but layoffs in Tech it was also feedback from Real Estate Investors that I knew I mean all new real estate projects that basically stopped because the cost of borrowing was so high and there was a credit crunch so new construction projects had stopped refi were very hard to get it's just that everywhere I was looking in the economy and the feedback I was getting from people things looked pretty dismal and yet the media was continuously putting out stories about hot jobs reports and we've been getting this now for roughly a year and then what happens is that there's a revision and the revisions have always gone in One Direction there always a revision down I mean if the revisions were completely sort of neutral and arbitrary you'd expect it to be like a coin flip you know you might have 10 revisions and five would be up and five would be down but they've all been down yeah so what I saw was a pattern of revisions down and now we've seen the biggest one so it's not altogether surprising to me and in hindsight you know when I tweeted that a year ago I got this like hysterical reaction I mean like it was one of these tweets that all of a sudden everyone was like quote tweeting and telling me to stay in my Lane I'm a VC and I don't know the numbers and it was like I hit some sort of nerve and you know whenever that happens you're usually over the Target in some way yeah and it's generating it's triggering people is what you're saying yeah yeah so the question is like why were they so triggered and I think the reason is that on some level people were intuiting that the numbers didn't really make sense it didn't really match up with what we're seeing in the economy and now a year later we have the proof of that so chamat let me go to you next because you you pointed out that these numbers seemed a little fugazi fugazy but we have 162 million people record employed in the country this number if it's 162 you take out 800 it's 161 this is what the Fed was been trying to do to cool off inflation right we needed to see a little bit less employment and that's part of it so I guess the Silver Lining here is if we are revising these numbers down that would give more of an indication that we've slowed the economy correct yeah I mean I think the economy is a lot slower than what people thought which to your point the Silver Lining is that it probably Now tips the balance of action in September to a cut and if it was 25 basis points there's probably going to be a lot of folks lobbying the FED to cut 50 and I think that they probably have enough numerical justification now to cut 50 I think the bigger problem though is if you don't have an accurate sense of where employment really is and and sax did mention this you will also then have an inaccurate sense of where GDP is and I think the one two punch could be very problematic I think what we're learning more than anything else is we have a very sophisticated economy we have a very sophisticated Capital Market System we have very sophisticated actors in those markets all of us included who can react to realtime data and make the right decisions the problem is we have bad data and the bad data I think is something that is fixable but we need to make an effort to do it because it's insane that the largest and most sophisticated economy in the world is this unpredictable and I think that's like the big question that I have which is how is it possible in 2024 that we haven't just made this a priority to fix this and with all of the systems that exist and all of the SAS tools that exist and everything that's used to like hire and fire and pay people we don't have an accurate sense of this number and it could easily Cham that's a real head scratcher to me this could easily be crowdsourced or we could pull data from a lot of different places obviously they pull some data from employment roles but I remember you had a startup I can't remember the name of it but you had crowdsource people were going around and taking pictures of the price of tomatoes in different places and then putting it into a database and organizing it I think funds and other folks yeah yeah so what that company did was it was an agent that you would download on your phone and we would task you to go and collect certain kinds of information and yeah there was some socioeconomic data that was collected a lot of it now is with three-letter agencies and the like so without getting into details that company's doing quite well but it's just moved in a different direction if you just created some kind of like a a darp a challenge like equivalent to this give it to stripe give it to Gusto give it to a handful of these Smart Companies to give it estimate and see who accurately predicts this number over the course of a year or two that's more reliable and frankly more useful to the market than what the BLS is doing my first job out of college by the way was not in Tech but it was in finance I was a driva as Trader and what was so incredible is I remember sitting at my desk in front of my terminal on the trading floor when non-farm payrolls would hit and people would just go crazy there would just be literally tens or hundreds of billions of dollars that would start flying back and forth based on what that number was and now to think about that much velocity in a totally random way because those numbers are unreliable seems just crazy okay freeberg here's a chart for you to comment on maybe we open the aperture here total employment and unemployment here in the United States as you can see you know since the 80s population has grown and the number of people employed has continued to grow labor participation it kind of peaked in the '90s in the Clinton era and it's come down a bit since then but overall what do you think of the health of the economy and employment I mean I think the fed target is 4% which is kind of where we're at I think we're at 4.2 or 4.3 now and so the FED tries to balance inflation unemployment and rates that's kind of the three things that they're looking at so they make adjustments to rates obviously if you take rates too low too fast you have an increase in inflation so they're targeting inflation's 2% they're targeting unemployment 4% so if you take rates too high you can certainly reduce inflation but then the economy can contract or slow down and job Cuts start to come through so now with inflation kind of supposedly approaching 2% and unemployment over 4% the market if you look at the the trading markets are now estimating a 100% chance of a 3 quarter of a percent rate cut by the end of 2024 and a 70% chance of a onepoint rate cut by the end of 2024 so the question is are they going to do three quarter point cuts by the end of the year or are they going to do a 50 basis point cut and then a 25 or a 50 and a 50 the next couple of weeks will determine which direction and then obviously chairman pal has his big speech happening on Friday freeberg what are the what do the betting Market say for specifically for September 50 or 75% chance of a quarter point cut 20% chance of a 50 basis point cut and then 6% chance of no cut which is kind of strange because the the trading markets this is a obviously a prediction Market but the trading markets are showing effectively 100% chance of a three4 point cut by the end of 24 and uh saaks here is the dramatic fed we always talked about them kind of getting on this a little bit late but you can see here man what a ramp up in uh 2022 where we were basically at a quarter point and they just added a quarter point or 50 bips all the way up to 5.33 where we've been flat inflation obviously we have the two- handle now so now we start the process of going down and I think people generally believe 25 bips at a time will be their pattern coming down you think that seems wise well I think the FED isn't sure that inflation is a solved problem I mean I think that pal is a little bit reticent to start the rate cutting cycle because he doesn't know for sure if inflation could tick back up this First Cut is in a way the most important one because it signals a regime change that we're beginning the rate cut cycle and what he doesn't want to do is cut any amount and then be proven wrong and we get a bad inflation report and then all of a sudden he has to raise it again so he doesn't want to be caught in that position but I do think that the economy is obviously showing significant weakness inflation is not completely solved but it's down to 2.9% at least it has a two handle on it now and so yeah I think the the market is pricing in these rate cuts for a reason so either mission accomplished or we'll see if we have a soft Landing or hard Landing or something in between most people feel like it's going to be soft with a little bit of bumps seems direct I think we're already in I mean now that we know that the jobs picture was inflated by 1.2 million jobs over the last call it roughly a year or 14 months I think we know that this is not like a perfectly soft Landing I mean I think that the economy is a little bit shaky and it's being propped up by massive amounts of government spending like we talked about on a previous episode we're running unsustainably high levels of deficit and debt we're running what $2 trillion year Deb deficits right now and what are we getting for that we're not getting a super robust economy we're getting an economy that's narrowly staying out of recession so it's a little bit of a scary picture I think that the economy is is so shaky and we're spending so much money to profit up uh we'll just have to see what happens yeah and it doesn't seem like either of the incoming administrations really cares about spending seems like we're going to be in still big money spending mode independent of who wins we'll see how long that can last as a country and then uh we talked a little bit about the Supreme Court decision last year around affirmative action and it turns out now MIT has released their data it's getting a lot of Buzz online here's a chart basically what you can take from this chart and this is people self-identifying at MIT and the buzz uh is that asian-americans have gone from 41% to 47% and those gains came uh on a percentage basis from a decline in the number of black and Latino students coming in here's the chart as you can see so people are wondering about I guess the fairness of this and I guess you could have either one of two positions chth Asian students were being penalized for a long time or now I guess you could believe that Latin and black students are being impacted negatively about this so I'm not sure what your take is but it's obviously moving to more of a meritocracy according to the people at MIT it's not even clear how they were making decisions before nor now but you know I tweeted about this yesterday I think the thing that matters more than anything else is to make sure that the people that they are letting in are in love and obsessed with the things that MIT is supposed to be great at so if you are a great creative thinker designer architect you should be at Ry I'm just I'm giving an example if you are a great musician you should be a juliard you should not be going to MIT because you think it's a check mark you should be going there because you think that there are professors in organic chemist istry in physics in these disciplines that are really important who are experts in their fields that you can learn from and become an expert yourself and I think the problem with all of this other stuff is once you make it a credential there are some folks that are only going to MIT because they could get in and because it's a great credential in their minds and they shouldn't go there either so I think the thing is you have to get back to what matters which is there are all of these industries that have not progressed that much and in order for those Industries to advance you need really talented young people who can learn an apprentice and then take over and I think MIT is one of these rare places that focuses on this part of the physical world that hasn't had as much progress and so I just want to make sure that the people that go there actually want to be there for that reason gender race all that other stuff shouldn't matter and that is uh what the Supreme Court decision did you cannot take race into account Harvard had some weird thing um freedberg where personality was one of the vectors uh and hard I would say no no offense to everybody at Harvard but like Harvard is more of a pure credential like MIT I buy more that you go there for certain kinds of specializations Caltech you go there for certain specializations sure if you're really into wine you go to UC Davis my point is is these schools exist for reasons other than just as a a collector coin that you put in your pocket H I'm not sure Harvard is really known for anything other than for being quote unquote Elite but even that's questionable now but in the technical areas I really do think that that MIT was an important place where people would go to train and I just want to make sure whoever they're letting in actually cares about the thing they're studying what's your take on this you know moving back to a meritocracy and a color blind application process not being able to use race in admissions I don't think that someone's genetics should determine whether or not they go to a a school and I think that their socioeconomic background experience set values uh successes failures are the things that they could have affected or that I think probably better define whether we want to take a moral stance on giving other people opportunity so I think that that's a a kind of good and reasonable place for us to end up sax any thoughts for you from you on this well I mean I I support the idea of color blind meritocracy I mean I agree with jamath and freeberg that the traits that you're born with are not skills or qualifications they're just the accidents of your birth and what we should be trying to create is a is a society where those things don't matter and everyone has the same ability and opportunities for advancement based on how hard they work and their skills and this concept of Merit and I think that Supreme Court decision gets us closer to that remember that the reason why that Supreme Court decision happened or or what the plaintiffs were arguing is that the previous regime on College es was unfairly discriminating against asian-americans because whenever you try to engineer the classes to a certain proportion of the population somebody has to win and somebody has to lose and the students who were losing were asian-americans and in many cases the these asian-americans were first generation immigrants or they were coming from disadvantaged backgrounds and yet their population was engineered to a smaller number than Meritt would otherwise suggest and now you're seeing it in this new class at MIT the percentage of asian-americans has increased somewhat so I think it's good I mean we're reducing um a form of discrimination that discrimination may have originally started for good reasons to try and create a remedy against a different kind of historical discrimination nonetheless it discriminated against talented Asian students and I think now that that's been that's been fixed what do you guys think about creating a leg up for people that came from a disadvantaged socioeconomic background so put race aside but an you know an individual that grew up in a difficult circumstance that didn't have the privilege of going to a good school or having a good education worked hard tried but didn't end up with the best test scores or didn't end up with the best GPA because of the conditions they were born into do you think it's appropriate to give those individuals a leg up in the application process putting race aside but just call it socioeconomic disadvantages to some degree I do I mean look if you have a student who gets a for let's call it a 1450 on the SAT but they've got tutors and classes yep and they're growing up in envir school in they went to school in Atherton right they're getting the best teachers the best schools the best environment then you take a kid who grew up in I don't know like a dangerous part of the inner city where there's shootings happening or a rural district with no education appala both both are kind of equivalently disadv or different differently but both disadvantaged y right they don't have access to the the best schools best or best funded schools best teachers and let's say that person gets a400 on their sat which one is better I mean yeah if certainly if they got a 1450 and you're comparing two equal scores it's really clear that the disadvantaged student probably has more Raw Talent totally I 100% agree and I I feel like I feel like we've used race as heris for that conditional background and that's what makes it hard because race is not necessarily it certainly there's a correlation but it's not necessarily indicative of the socioeconomic disadvantage that someone may have faced and had to overcome in order to perform and succeed at the level that they could have given their conditions and so I I certainly think that the incorporation of one's socioeconomic background should should be a critical part of the application process and certainly in the same in the job setting ultimately I think I think what would be much more valuable than all of this is for companies to hire from a whole bunch of different schools than they do today and to break the back of this elitist culture we have around certain schools all of the things that you guys are talking about to me sound kind of crazy and the reason is because you could go to Iowa State or you could go to Harvard and you could make a claim and I would buy it that in some random social science maybe there's an advantage in the people that you meet but there's not necessarily an advantage for studying physics at any of these two schools it's not like one's teaching you that gravity goes up and the other teaches you that gravity goes down so I think the bigger problem is that we don't value enough the fundamentally important skills that we need for Humanity to evolve and then number two we have fallen to this trap of saying that these schools these highly credentialed schools that cost 60 and 70 and $80,000 a year graduate the best kids and I don't think that that's true either so the thing that we could all do because we're all hirers we hire thousands of people is we should be going to all kinds of different schools today I just gave an offer to a guy that went to Virginia Tech and this kid seems awesome kick ass and when we put out job postings for 8090 we Veer towards these schools that are like hardcore technical places where none of all of this random credential nonsense gets in the way and so they're hungrier as a result they're more Earnest and you can cut through the BS the other thing I would say is that it's even more capable now of getting through the filter of these credentials and knowing the quality of a person you can look at GitHub reos if you're a developer you can look at all of these things that allow you to understand so I don't know I disagree with your guys's thing of like let's go figure out all these other things how about we stop hiring and valuing random non-specific degrees just because they come from a good school well I think long way because we do still have a college application process jamat so there are still going to be a set of criteria used to determine whether or not our kids end up getting into a specific school if we and they all kind of say hey it makes sense if your son or daughter were to go and study computer science at North Carolina State the biggest thing that that you could do is be okay with it another example of a school that does a great job of recruiting from non-traditional places why would I not be okay with it no no this is my point I think it's a decision I'm I'm saying that I'm not saying that you are but I'm saying that if you make it a big deal that North Carolina state is somehow worse than some other credential school because our social cohort says that those other schools are better we're part of the problem well in my work cohort North Carolina State's a great school we hire a ton of people from there so that's a great school actually to be honest I think schools like that are better I mean I think probably Virginia Tech is better than Harvard and the reason is because they're less infected with the whole woke Dei ideology that now pervades these like top schools so the students are more likely to learn something but you should stop saying top they're not top schools they're not top schools anymore they're not the smartest kids they're not the hardest working kids so we should stop saying top schools these Ivy League schools are not the top schools I agree with that yeah there might be the most notable schools historically but they're not necessarily the ones that are they're the biggest brands and they're not new brands they're old Brands and we've seen that these old Brands depreciate over time and people read way too much into them I think the the the structure Monopoly is that they then get and have the most Capital which they can then use to build and facilities and support staff that can come and do core research and so you then get all these research staff in particularly in technical fields in science and medical fields and so on that want to come and be on campus and that then creates the network effect of undergrads getting a better uh education because they're getting exposed to the best talent in the kind ofar I don't H think that benefits the undergrads I mean first of all these campuses tell us about your experience at Stanford I think you're the only IV leager here wait Berkeley's ivy league you went to Berkeley that's St technically is not in the ivy league the ivy league is like an East Coast Club whereas Stanford was kind of the West Coast disruptor look did you get exposed I mean I know when I worked when I went to Berkeley I worked at Lawrence Berkeley labs I got to be exposed to Nobel laurates it was actually like I think a particularly my field like I majored in astrophysics and phys physics like that was a great school to get exposure and you actually had that opportunity I think that's part of the challenge schools with really great graduate programs and research uh that goes on on campus actually can give a better educational experience to the undergrads it's almost like you're getting these internships and these fellowships uh and these Tas and professors well that's that's a different thing I I actually think what America needs is what I benefited from at the University waterl which is an active and vibrant Co-op program yeah that's great yeah I really disagree with you I don't think that there is a incredibly better way to teach thermodynamics I think that's a bit of a joke thermodynamics okay I think that that's that's a why tell our talking about applied work J so I'm talking about you go up to Lawrence Berkeley lab and you work in an actual lab that does really interesting research okay so my point is if we both agree science definitely yeah yeah yeah that's what I'm pointing out yeah so then like the universities in America that have these co-op programs I think are incredible institutions again they're not the typical ones they're places like Drexel and other places but now you allow these kids to be in the trenches with people building things and I just think that that's an incredible gift for them but it's also an incredible opportunity for these organizations to understand the quality of the person Beyond some credential well I do think in a digital era core education has commoditized and I think most people can get most of the way there without necessarily paying 60 to 80,000 a year and then being partnered in some way with that on the ground internship or integrated kind of program where you get actual hands-on experience so I don't know like I mean the university model maybe does not make sense for most Fields jcal what do you think yeah it's very interesting the where did you go to school J I don't even know I went to forom University at night I got in three weeks before did you get an undergrad degree from forom yeah forom I was going to either I had taken the New York what was your degree in what did you uh psychology I was going to go into the NYPD I had was about to get accepted at 18 years old 17 years old 18 years old and then I decided the last minute to go to forom at night I had to work in order to pay for it so it took me four and a half years but I did like almost a full credit load at night and then I was going to go into John J for Criminal Justice and um get my forensic degree and then join the FBI so I was in the process of applying to the FBI and then the internet happened and I started a magazine about the internet and it went in a totally different direction but the co-op stuff I remember when we went to waterl uh we did a speaking gig there years ago jamath and I was very taken with the students there and like their like drive and so I think that's the key piece and what I did in Venture Capital because I needed to have a team of about eight people screening all the companies we get and the application so I just made my own training program and I hire a lot of people in Canada to do it and basically they do five meetings a day they write up coverage I made an entire framework and I'm doing professional development because I found a lot of the top people from these brand name schools were entitled they didn't want to do 25 35 meetings a week with Founders and I just found these other students from waterl and other colleges like that and I've trained them in my framework for these are the 13 qualities we look for in investing in a startup and these are the 25 red flags and I've now got seven people we did 110 120 meetings one week recently and so it's just much better to train them ourselves and make your own training program I believe and so it's even didn't Malcolm didn't Malcolm Gladwell write something which was roughly the equivalent of like you're better off getting the top 10 student at a non- Ivy versus like the 50th student at an ivy or something I don't know there was like something like maybe maybe it was like a chapter and what was his reason because of motivation yeah it's like these kids are excellent when they're when they're achieving and they're excelling in things that are not subjective you want to go get those kids yeah you know well they've performed yeah I mean I think one of the one of the problems with the whole Dei policy and whether you want to do it based on race or socio economics or or whatever it is that you're doing is it keeps happening at every layer of the stack and at some point you just need to say look we've made up for whatever came before and now it just has to be about that person's performance we need to stop putting our Thumb in the scale and just hire the best person my view is you could probably do that after undergrad like there's no need to keep artificially adjusting the weights of how you hire people after undergrad but yet you have all these like programs that trying to make the decision based on something other than Merit and I think that that's the part that needs to stop I mean we had Coleman Hughes on and you know I think he had a very good perspective on it which is like maybe starting with earlier education is where you could probably solve some of these problems a little bit more effectively I will say I I feel like my experience in the workplace is that one's college or university is completely decoupled from one's performance or ability to succeed in the workplace in an amerit workplace and when I say meritocratic I mean excluding nepotistic workplace settings and excluding demographically biased workpl and if you if you exclude those two it honestly does not matter what school someone went to they could be brilliant they could be hardworking they could be passionate they could be a leader the school doesn't matter and in fact perhaps the coral are is true which is the people that went to the schools that determin success generally have a very hard time succeeding in the workplace because anytime they face failure it is a challenging circumstance for them that they are unable to overcome and that's particularly true in entrepreneurship that's been my experience perhaps in the broader workplace setting they could work well where they're told all the time if you do this then you get that they do this they get that they feel good they succeed in that model but in the in the real world that's not the model and I think that that's a like a really important fact that's colored my point of view on how the higher education system actually does perform with respect to improving the quality of our Workforce the US separate of that I will say that in technical Fields the research environment on certain college campuses can be incredibly to chim's point opportunistic for getting exposure to to Hands-On work that you might not otherwise get in technical field so and a lot of this comes down to motivation you know at a certain point a person has to be motivated to put in a lot of hours and become excellent at whatever their chosen profession is I think I talked about it previously when we started talking about macro economics here I took a macroeconomics course at MIT on their website or on YouTube rather right like there's incredible that this stuff is all out there and anybody can take any of these courses for free that's what I mean by like the Bas The Base education has been commoditized you know it's the hands-on experience that one gets that makes a huge difference MIT 1401 principles in microeconomics uh supply and demand I mean it was like incredible and you know this is stuff I just didn't ever get exposed to and I was able to do it for free I listen to the course actually twice and I took notes on it I really got a lot out of it all right listen more stuff on the docket anybody else have final thoughts here before we go into the election stuff and taxes let's all commit to hiring as many people as possible from non-traditional schools absolutely I mean that's what I do already I mean it's it's working all right decision 2024 uh get ready for a bit of chaos here folks the DNC is underway as we tape we tape on Thursdays as you know I think kamla we'll give her acceptance speech tonight DNC pulled out all of their All Stars Michelle Obama Barack Hillary Bill Clinton Oprah and uh Tim Walls spoke last night most people felt he had a pretty strong showing our guy Nate silver friend of the Pod has the election as essentially neck and neck we're in coin toss territory here I think it's going to be come down to the debat so I'm interested to hear what my besties think here is the silver bulletin his new publication he's not at 538 anymore just comma at 47 Trump at almost 45 and uh this all will come down to the swing States I think as we all know he's got a really great interactive chart over there he's got Harris with clear leads in Pennsylvania Michigan Wisconsin Arizona and Virginia I think those were about 68 Electoral College votes votes Trump with clear leads in Georgia and Florida my Lord Florida is 29 or 30 electoral votes that's a lot the toss up States Nevada with the Tipping and no tax there but that's only six North Carolina is been flip-flopping back and forth from Harris to Trump those two are worth 24 so we swung from many paths to Victory basically a certain victory for Trump with versus Biden to now a toss up this is an interesting chart here sax I want to get your take on which is the polling averages I think you said last week or the week before that we would see the Harris bump reverse and that's exactly what's happened the month over Monon change is dramatic as you see in this table but the week over- week change so in the month change you have Democrats from running the table in all the swing States then you look at the weekly change the opposite in the last week the Republicans have not caught up but made significant gains all between a half a percentage point and a point the exception of North Carolina which as I stated earlier is a toss up your thoughts on the um on the election right now sax before we get into the uh issues just on the numbers here well the the the election is going to be on nailbiter and it's going to really come down to a few thousand votes or a few tens of thousands of votes in swing States I think we've we've known that now for a while I would say since Biden abdicated and they did the hot swap I think the most interesting poll numbers over the past week is if you look at Poly Market that it has swung back to Trump being in the lead over the past week as opposed to Harris last week I think Harris was favored to win by quite a bit and you have to ask the question well how does this happen during her own Democratic invention which is supposed to be you know nothing but a 4-day infomercial for the Democrat candidate yeah it's a coronation yeah it's a coronation so she should be getting nothing but a bump and instead it's to be the opposite and I think the reason is is because the more substance her campaign puts out the more policies it reveals the wor she does first they had her give that economic speech last Friday on price gouging and price controls and we spent a lot of time last week talking about why price controls would be a disastrous Economic Policy subsequent to that there were stories that came out about her campaign supporting these huge tax hikes that were in the the original Biden Harris budget including a 25% unrealized gains tax which we can talk more about yeah but I think just to boil it down I think the more the public learns the more we learn about what she would do as president the wor she does and they've now got to run out the clock for another I don't know what 70 80 Days in terms of running a campaign that's substance free that's just completely on Vibes that's about Joy without answering any question questions without doing any press interviews and I think we predicted some time ago that that just was not going to be sustainable that at some point they're going to have to tell us what they think and as they do that the more they do that I think the more her polls will correct what do you think Cham you trust these betting markets because there's so much at stake at this election right I mean people are pouring money into both campaigns it's really contentious people see it as existential on both sides and then you have you know these prediction markets that you know have low tens of millions or hundreds of millions of dollars being bet could these not be you know influence do you trust them because we are seeing this is the first time these prediction markets have become a major discussion point because they're businesses obviously but people are really getting into them and I wonder if they could be manipulated or if you think you trust them I guess is the way I'm asking you because we've had this discussion a bit offline I mean I think these are really good businesses but they are some combination of entertainment and gambling I don't think that these things are as useful directional indicators as they are just really interesting businesses that allow people to bet and wager on all kinds of random things so I would not look to these sites for that necessarily okay I think that people like Nate silver do a pretty reasonable job in his specific case I think he does a very good job of threading together and doing this meta analysis of polls but I think we've learned that the that this polling is pretty brittle and not super reliable so the the betting markets are exactly that they're just like it's like sports betting but just wasn't the betting Market we talked about this two weeks ago Shapiro was like 80% or something so yeah it's fairly obvious freeberg maybe these betting markets are a little bit entertainment but maybe directionally corrected because they also did start to predict the hot swap you know so what do you think freeberg about these betting markets prediction markets you and we keep everyone keeps trying to reduce this down to some deterministic binary system which is like it works or it doesn't and the truth is that the conditions of the world are changing all the time the news is changing all the time people are taking action all the time there's a shift in current events all the time as a result the forecast is changing all the time and so what a betting Market or a poll does is provide a probabilistic forecast of the future there is a probability of something happening it is not trying to say I as a poll or I as a market am right 100% of the time or not it is saying here's the estimated distribution of outcomes in the future so there's a 20% chance or an 80% chance of Shapiro 20% chance of not being the case turns out that that 20% is where Harris ended up going based on some meeting she had in some room with some group of people that we aren't privy to and that the market in that case was not privy to what Nate silver does and I think people need to understand this a little bit when you gather polling data that poll has some predictive power based on how the pollers conduct their poll who they call how they screen candidates for the poll etc etc so different polling companies it turns out are better or worse at making that directional probability bet than others and what Nate's models do is they account for the historical performance of different pollsters and weake them differently to create a basically a multi-pole prediction and so that's what his system is set up to do and remember he similarly doesn't give you one outcome he gives you a distribution of outcomes I think his simulation model has probably a thousand or 10,000 simulations that come out of it and those simulations he says look there's a 29% chance of this happening 70% he's not trying to say here's what's going to happen he's trying to give everyone a point of view on the distribution of things happening in the future just like weather forecasting is not perfectly predictable it's very predictable for tomorrow it's less predictable for 3 days from now and it's very unpredictable 12 days from now and that's how these polls also work out and that's also how these massive Mega models of polls and it's also how prediction markets work and freeberg people have a lot of emotion in these models when it comes to politics whereas if you were looking at gambling or the odds of winning a poker hand we all would be like oh you have a 30% chance of winning or a 10% or an 8% you're going to hit two ouers there's emotions both way jcal so basically when I read those polls or I read the summary of the polls I have a bias based on my interest in the outcome that says that thing is BS that thing is right oh look at this and everyone points to the stuff for confirmation bias of their opinion yeah and to denounce the other side and so it all gets caught up as kind of a media angle when people use polling data and and also fundamentally when people kind of get involved in polls and create polls there's also the risk of bias and part of what Nate silver and others try and do is figure out does that bias come out in the polling performance historically and that's how they kind of wait whether or not this poll is going to be a better or worse indicator than other polls of the distribution of things that might happen the future and Sack if people were to lose you know a poker hand that they you know were 60% to win or two thirs to win you know they would be like okay that makes total sense when Hillary Clinton lost to Trump the first time people lost their mind and he was pretty clear right he was I think 65 35 and people are like wait you said it's 65% yeah your thoughts on just the accuracy of polls generally and then what you heard here in terms of the the betting markets how do you look at at these two things that are taking up a lot of space right now so well I would consider prediction markets to be an additional tool that we should consider side by side with polls and they both have their pluses and minuses the advantage of of polls is that you're actually talking to real people as opposed to betters however they're very dependent on sampling and getting the sampling correct I mean most of these polls talk to maybe a thousand respondents these are people who are willing to pick up the phone from a unknown number that right there is probably a huge source of bias because I don't do that and then based on that sample they're going to predict how millions and millions of people are going to vote well everything depends on the composition of that sample which thousand voters do you talk to do you wait them based on likelihood of voting or demographic characteristics and so on so the polls can be notoriously inaccurate we've seen that many times and that's why there's a margin of error sometimes a margin of error is is even wrong so in any event it's a tool but it's a tool that almost by definition is going to be wrong because of sampling problems you look at prediction markets and it's a totally different type of voting mechanism where betters are willing to put their money where their their mouth is and they've got real skin in the game and they're able to make a prediction based on their willingness to lose money now there can be problems with that too number one the betting Market can be very thin you know sometimes there's just not a lot of money that's trading hands so I think with a lot of those VP picks you can move the VP Market by putting just a very small amount of money because the market wasn't very liquid so you have to kind of look at how deep and liquid the prediction Market is and then I'd say second the issue with prediction markets is they and this could be an advantage is they move a lot based on small things because people are just constantly updating their forecast I would argue that maybe that's an advantage is that you could see the the trend more easily in a prediction Market so for example I have some numbers here too if you want to hear them $653 million in political bets are currently being placed across the top 10 betting markets and all of the markets on poly Market which includes things outside of politics are 320 million so they they are the big fish in this I think they're the leader but it's still a very thin amount of money to your point sex yeah I would mostly use the betting markets as a measure of how sentiment is shifting so for example on Election night the betting Market is going to converge to 100% in favor of one candidate or another whereas the actual votes are not going to converge to 100% you could have an election in say Pennsylvania where one candidate gets 50.1% of the vote the other candidate gets 49.9 the betting Market's going to converge to 100 Z because it's predicting who's going to win it's a binary yes or no as opposed to where the actual vote totals come out the polling is trying to approximate where the votee tools are going to come out right with a huge margin of error so the the polls are just are are never going to give you as crisen decisive an answer as the prediction markets but the prediction markets can also be wrong as we've seen they're only as good as the people making the bets chamat where do you put the third category here which would be the odds makers in Vegas because they're looking at everything what do you think about the odds makers in Vegas would you give them any Credence I don't even know why any of this matters why are we talking about this well I mean because people are looking at the Tea Leaves there there are reasons it matters you know the these markets do have an impact on the voting public because the media covers them donors cover them voter turnout is impacted by the polls and then there's these like you know various psychological phenomenon like the the underdog impacts or bandwagon so you could have if people perceive at one point Trump is the underdog maybe more people turn out and then people who you know if Trump was winning versus Biden so much they might become complacent and you get some sort of surprise there so they do have actual impact on the voting public I suspect though that I suspect that a lot of that is really at the edges the I read an article recently that just talked about the enormity of the investment that both the Democrats and the Republicans are making to get to these critical areas in these five critical States and if you live in one of these zip codes that really matter I think that there is just no room for anything but what each side is saying I don't think you're looking at a betting Market or a pole or any of this stuff and I think the reason why these places have become so critical is that they are very balanced they are people that have a good way of making sense of the world and they change their minds a lot right because otherwise they're they're people that underwrite and rewrite their decisions and to me that's actually a really wonderful thing to know that there are these call it million people in these ZIP codes in five states that are actually quite thoughtful and I'm I'm I'm actually okay that in the end that those folks will decide I would be much more worried if it was lies whoever tells them are uncovered the way that it's set up today all of the crazy ideas get run to the ground all of the lies get uncovered and I think that that's a really healthy place and I think it's a much better place so I'm I'm generally like really glad that things look like quote unquote a question mark because I think it creates much more pressure for the candidates to be precise and I think that that's very important so I'd love to talk about some of these crazy policy things as well yeah policy sxs I wanted to get your take on this Trump's VP pick JD Vance is now the least popular VP pick in modern history people said the same thing also about walls that that was a terrible pick here's your chart on JD and here's the historical chart John Edwards man I remember him uh he was plus two in net rating Tim Waltz plus five Mike Pence plus five Camala when she was VP plus three but JD Vance is absolutely uh he's below Sarah Palin which I guess takes ever what's your take on the VP picks and the impact they're having here because it's it's a major topic of discussion I think what history shows the VP pick doesn't matter that much people vote for what's happening at the top of the ticket and I would argue the reason why JD has the polling he does is because there's a couple of reasons number one is just media bias and there was an interesting report showing that the media coverage of the Harris campaign was 84% positive whereas the coverage of the Trump campaign was 89% negative that actually seems to understate the bias that I see out there but look this is the number one reason why JD has a negative rating is because the media is defining him I would say furthermore JD is out there talking about ideas and I give him credit for that but because he is an idea man and he's also a writer and he's said interesting things in the past and Al sometimes occasionally a sarcastic thing or two in the past the media has been been take able to take those things out of context and harp on them relentlessly on the other hand you take someone like Tim Waltz and he's out there he's not really talking about ideas I mean every time he goes up there and speaks it's like a pep talk I mean if I wanted to hire a guy to give the halftime speech to my team he'd be the guy you know if I wanted him out there puffing up a team talking about we got to all give 110% he's he's the guy for that but he's not really talking about ideas he's not going on the shows you look at JD I mean I've watched a couple of his campaign stops I mean the guy is really sharp and when he goes on the Sunday show they are pitching nothing but fast balls at him and he's hitting it out of the park every time and Harris and Walt are just not doing that they're not even appearing on those shows I don't think they could survive 20 minutes of harsh questioning the way that the the media pitches at JD every time he goes on a campaign stop and takes questions or he goes on a Sunday show I love the JD pick you know Venture capitals business guy well written well spoken you're picking up on something that I think is really important that I think has been under reported it really is a tale of two different tickets the Republican ticket whether you like them or not are very financially astute actors and if you look at the Democratic ticket they are underinvested to not in invested at all in anything that would normally resemble the United States economy and I find that a very odd distinction meaning the way that I would think people would want to see their candidates is folks who have a very sophisticated understanding of the parts that they are going to govern and in this case if you're going to sit a top the economy one would hope that you're invested in the economy in some way so that you know how it works and it's a little surprising to me that nobody's really questions how how underinvested the Democratic ticket is and it's almost as if the the Republican ticket for their financial sophistication is looked down upon to unpack what you're saying here there was a report Tim Waltz has no Financial Holdings he has no stocks no bonds no mutual funds no real estate nothing no cryptocurrency this is what you're referring to yima yeah the level of like literally owning nothing and I guess freeberg to your I'll let you take it from there so I think it's actually a step a little bit deeper than that kamla Harris and Tim Waltz have only ever work for government Trump and Vance have worked in Private Industry it's not just their perspective being colored by the the lack of participation in the private economy but the lack of employment in the private economy they've never worked for a private business they've never been employees of a private business they've never built a private business I'm not trying to be disparaging but I do think I'm just trying to underline the point here chth which is the voter's choice is do you want candidates that are not typically government operatives or do you want candidates that have spent their whole career as government operatives and that is effectively what the voters are going to be voting for and they're going to make a decision they may want to have someone that's going to lead the biggest government in history because they've spent their whole careers in government or they're going to say you know what the biggest government in history needs to be significantly altered and we want to bring someone in from the outside that's worked in Private Industry and that is the voter's Choice that's one way to view the voter's Choice here that's an interesting Framing and another framing might be freeberg I love that framing I love that it's an interesting framing here's another framing I don't you're a young person I can't own a home they're too expensive I don't have any Equity I'm getting ground down I own a I owe a bunch of student loans Tim Walls feels more like the experience I'm having as a millennial where I can't afford a home where I don't have Equity where I'm constantly trying to pay off my bills and the finan what we'll say is like hey this guy's not very financially astute he because he's never it's because he's never maybe maybe it's because he's never had a private sector job well he's been a teacher right so maybe people say you know what I feel I identify more with Tim Walls and I think that's actually what might be happening here public school teacher right yeah but right which is a noble thing to be and I think there's probably a large percentage of the country who feels like they're not part of the equity economy they don't own a home they don't own equities and they have been shut out from this and all these rich people like Trump and JD Vance and venture capitalist are running the table on them and I think that might be why we're seeing even if the four of us disagree with it we might be seeing someone like Tim Walls actually being a feature it might be a feature to to their and I think that there's a perception of experience in government that is deemed to make a government leader more appropriately suited to be a government leader politician yeah well not even a politician just career experience either being employed by or working within the government within a government local state or Federal and remembera started her career at the DA's office in Alam County before moving over to San Francisco DA's office and then she was Da of San Francisco and then attorney general and so on and so forth sex what do you think of this framing you have two candidates who are career civil servants who have dedicated their life to that but who in one case has doesn't own his home doesn't own any equities in the other case comma does have a bunch of equity and and some private wealth um versus the capitalist it looks like this actually is an interesting framing socialism versus capitalism what's your thought on that framing well I think just because someone has served in Government doesn't mean that they truly even understand what the problems are or that they're even the master of government I mean you saw this over the past week we talked about the 88,000 jobs that didn't exist they asked Gina rundo the Secretary of Commerce about this and she just said that's a trump lie and they said no actually it's the Bureau of Labor Statistics report that like is under US Secretary of Commerce she said I'm not familiar with that so you have people running the government who don't even know what their own departments are doing now I think it's just a function of the fact that the government is so big and out of control that no one even understands what it does I think it's more important to have someone who at least has some experience in the private sector who truly understands how jobs are created how wealth is created what causes inflation okay we've talked about this before yeah what causes inflation is the printing of too much money it's government spending too much yeah shocking it is not corporate greed because corporate agreed as a constant it's not price gouging and how the free market incentivizes the creation of improved productivity which over time translates into improved prosperity for the society within which that is taking place that is so critical and we saw that happen even in China in the last 30 years when the government allowed entrepreneurship to flourish in certain parts of the country as a result there were significant productivity gains and they brought a billion people out of poverty they created a middle class I mean M never had a middle class I think it's important to not color this as because you worked in government you can't be invested or you can't own a home or you can't actually have built a nest EG right because that's also not true and we have there's some extreme examples of people who've been essentially yeah career civil servants essentially and it built multi hundred million dollar portfolio now we can we can question in specifically in the case of all house Representatives whether they're getting access to a kind of information that other people don't get access to but taking that off the table I think that there are people in all kinds of jobs who are able to save and invest and then acquire things that they believe will give them security for themselves and their children in the future and I don't think that it is because of a kind of job that you do I think it's a kind of mindset that you have and I think it's very important to make sure that whoever we pick we understand the mindset I really believe that like you know there are a couple things that are really critical to thinking about the future and wanting to make the future better I think one obvious one is when you have kids when you have kids you're making sacrifices every day you know you're you're forgoing things today because whether it's saving for college saving for school saving for a class saving for a sports thing that you want your kids to go to music whatever it is you're always finding ways of thinking about what is better for in the future for that other person not me and the second is I think being an investor actually makes you care about the future in a really productive way because you're foregoing often cases when we all invest we're forgoing short-term gains on the hope that we can help shape a much longer term outcome in the future that makes all of worthwhile and so I like it when I can see people that have those things at play and that they even in whatever small way they can are manifesting that and I always have a question mark like how is it possible that at no point you have tried to be invested in your own and your children's future that way it's just a it's just a question mark for me yeah 58% of American own equities and that includes like retirement accounts so it's not like they're actively day trading and so you know that that does actually Sachs paint an interesting picture where maybe the Democratic party now which they referred to themselves Bernie and Elizabeth Warren as a socialist as socialist Democrats maybe this is like part of their feature is to appeal to that large swath of people who don't own their homes who don't have kids and you know to jg's point about cat ladies and to um you know who don't own homes don't have kids and don't have equities what are your thoughts on that sax is that maybe how these parties are starting to shape up in the modern era actually I think I think that's right I mean I think that Elizabeth Warren and Bernie Sanders are now the thought leaders and really the Beating Heart of the Democrat Party I think what's happened is the Republican party has moved to right-wing populism and the Democrats in response to that have concluded that they need to basically move to left-wing populism in order to compete with that and so both parties are becoming fairly populist now what does what does left-wing populism mean it basically means soak the rich right right it's it's a strong element of class Warfare to it we're going to make the rich pay for everything and the rich are the problem it's this fundamental unfairness of the economy that's causing all these problems and I think you've heard that over and over again at the DNC I mean just the clips that I've seen this has been a reoccurring theme is the the hatred towards you know billionaires and and rich people tax the rich is a reoccurring theme and that that's actually a great jump off point here because the big news in our circles this week and on social media was and some of the group chats is that Harris has reportedly backed some of Biden's really out there tax plans which include a proposed 25% wealth tax on people with over a $100 million in assets important to note that this would be very hard to pass because getting these tax increases you'd have to get through Congress Etc but let's just talk about what the proposal is because it's out there in Biden's 2025 tax plan which the campaign has said to semi for which is a a niche publication like a newsletter company that uh and I'll just give the quote in a little notice portion of its Friday analysis of Harris's New Economic plans the committee for a responsible federal budget wrote that her campaign said it endorsed the suite of Revenue options included in president Joe's recent budget and that cfrb report said quote the campaign has communicated to us that vice president Harris continues to support all of the revenue raising Provisions in the president's 2025 budget so there is continuity confirmed between Harris and Biden's plans I'll just explain as simply as I can what this uh extreme plan says and then I'll get chath your take on it Biden's proposed 2025 tax plan includes the following 25% unrealized cap gain tax on those with over 100 million assets 28% corporate tax rate right now it's 21 Trump had proposed a 15% rate and quadrupling the stock buyback tax to 4% that's when a company uh buys their own shares as opposed to putting it to work in the market the stock buyback tax was created as Biden's inflation reduction Act of 2022 it's just 1% if you want to buy back your shares like apple and some other companies do but let's unpack the 25% unrealized cap gains because that seems to be you know the most let's say I don't want to say triggering but the one that's triggered the most number of people there's 5,000 people who fit into that category what do you think jamath of this proposal Fair unfair crazy socialist anti-American it's less about fair or unfair but I think that we are in the part of the cycle where enough people don't feel the positive aspects of capitalism that they want to push back against it I just put a little image in here Nick if you want to just throw it up in the chat but when when you look from 1913 onto today the reality is we've had many different forms of political philosophy that have governed the country and what you can see is that tax rates have varied wildly at the federal level and I think it's because that at certain times there was the political will to go to extremes and this may be a moment where we are going to explore the extremes that we had in the 40s and the 50s and I think the reality is that if that does happen you're going to see people behave in ways that weren't possible in the 40s and 50s in the 40s and 50s everybody was more geopolitically constrained I don't think that that's the case anymore and the way that people start companies where they start companies the flexibility of citizenship have changed really dramatically so if it's the will of the people that they want to explore these mechanisms I think other people will react in kind and you know the die will be cast so um you know I don't have much you're referring to removing you're I think you're implying people might be able to move to other places and create companies there is is that what I'm reading let's put it this way we have we have a small microcosm of this going on within the 50 states which is if you said California was the United States and Texas and Florida were I'll make up two different countries Malta and Dubai well what happens when taxation goes beyond the pale and what happens when budget deficits and spending go beyond the pill and when the government plays too large of a hand in the economy people leave with their feet companies leave so we don't need to guess what's going to happen because if if it can happen between Califoria and Texas it probably stands to reason it can happen between the United States and the UAE as an example yeah you already have a bunch of hedge fund manners moving over there right Shaman they have people are starting to buy apartments and there there's golden visas in some great countries Portugal has a golden Visa the UAE has a golden Visa Italy has a golden Visa the UK had this great program what was called non-doms for a long time so the um the point is that all of these took advantage of countries that went to extremes and they lost citizens as a result and I suspect that if what the US voting population wants to do is explore that extreme these policies will get enacted and then people will act in kind the only thing that I would just again reinforce is unlike when taxes went to 90% in the 40s and 50s people are much much more mobile than they were then and that was during World War II in the postwar era uh freeberg your thoughts on this proposal specifically which impacts a very small number of people although maybe a high percentage here yeah so so just just to give a little more detail to it jcal please and you can actually see it I think Nick if you want to pull up the page 8283 in the document so the wealth tax is 25% of your unrealized capital gains if your net worth is above 100 million and the first time this happens you can split up the payments over n years you have n years to kind of pay down the assets or sell the assets or borrow the money you need to make those tax payments after that you can actually make those payments over five years those payments are ultimately treated as prepayments on taxes that will be due when you realize the capital gains every year you have to report to the IRS separated by asset class the cost basis and the estimated value of every asset you have you then have to determine your tax that you owe because of the difference from last year you start out with tradable assets so stocks those are just valued at the end of year illiquid assets like private companies or real estate you don't have to get a valuation if there's a financing event or some other sort of major revaluation you have to use that value and if there isn't the number goes up every year by some nominal rate that will be set by the treasury so the treasury is basically going to tell you what they think the value of your company has gone up on an annual BAS bis and that's the determination valuation you can file an appeal so for all the entrepreneurs and startup people listening there's a process that they're proposing that is basically the government saying if you didn't get a new financing round done the price goes up and if you disagree with the price going up you go back and you appeal it let's pause there for a second freeberg because this is super important I think to the audience here somebody has a startup company it becomes worth $10 billion it has a 100 million in Revenue it's doing well it's losing money 409 valuation comes in founder owns 25% co-founders own 25% each they own2 or three billion dollars in stock now you've got an a liquid founder who owns $3 billion in stock company's not going public there's no secondary Market what would happen to that founder would so they've addressed this and that's the final provision and what they said is that if a taxpayer is treated as what they're calling illiquid meaning that their tradable assets the stocks that they own or the cash that they have is less than 20% of their total wealth then they may elect to include only the unrealized gain in their tradable assets to determine their tax liability however if you do this you will actually have a deferral charge which means you'll ultimately pay a higher tax on the capital gains on your illiquid asset when you do have a have a realiz capital gain on it so they're trying to cover the fact that people might have all their assets up in real estate or all their assets tied up in private Company stock and again I feel like we're we're kind of shouting into an abyss here because this is only going to affect such a small number of people but they've really tried to write this in a way that ultimately covers the kind of push back that you're highlighting I'll say one other piece of push back that's been received and tested in the Supreme Court a lot of people have said that the 16th Amendment prohibits this uh taxation a ruling from the Supreme Court was published June of this year and in that particular case there was a repatriation tax for folks that left the country it's the more versus United States Tax case and when people left the country the government under the tax and jobs act which was passed under the Trump Administration the government had a right to go after people's assets and tax them on their unrealized gains even after they give up their us citizenry this was challenged to the Supreme Court and there was a number of amicus briefs filed on this case that said the government govern does not have the authority and Congress doesn't have the authority to actually tax on unrealized capital gains and at the end of the day the Supreme Court agreed to hear the case and they did not overturn on the position that the government actually did not overstep their authority to be able to tax unrealized capital gains so there is some Supreme Court case precedence here that indicates that this will not get thrown out on an unconstitutional ground basis so there is a lot of conversation that this might actually become a real case I'll pause there and I actually have a theory I want to talk about in a minute but it's a little bit of an extension from this point but that is this a seizure of Assets in your mind is it constitutional in your mind two questions there it's certainly a confiscation I mean basically this this tax is directed at C Millionaires and billionaires to basically take 25% of what they have I mean that's basically what this is about there's a good reason why realization is one of the Core Concepts of our tax code what real realization gives you two really important things number one you have a sale price right realization means that you sell the asset so we know exactly how much you made number two you have the liquidity to pay the tax bill because you've just sold the asset the problem with an unrealized gains tax is both those issues number one we don't know what the asset's really worth you know it's easier to to put a value on a publicly traded asset but a private asset it's very hard to know exactly how much it's worth the valuation is bouncing around all the time what this bill would do is create I guess a whole new process and bureaucracy to try and put a value on that but it's going to be really complicated to comply with all of us are going to need to hire a whole new Legion of lawyers and accountants so I mean you're talking about a whole new essentially tax bureaucracy that's going to spring up around this concept on the um liquidity part you're being taxed a huge amount without having the cash to pay the tax bill and you know yes they've tried to mitigate that by creating this installment plan but you're still going to need to go out and sell large trugs to your company every time you get an upu round in order to pay the tax bill and that means that you're losing ownership of your your company all these assets are going to be dumped on the market and you're basically starving the market of capital actually right because all these people who who are owners of their company are going to have to go out and and sell a big chunk of them this is going to put so much cold water on the entrepreneurial Market it's going to make people just have less liquidity to invest in things I think this is going to be disastrous this caus a lot of people to retire early because they just don't want to deal with all this well freeberg what's your theory okay I've got a theory oh Theory here we go good I was trying to figure out why we seem to be like embracing socialist principles like why I keep seeing more of this stuff become mainstream and almost become normalized and I was was looking at the total GDP of the United States is $25 trillion the federal budget for next year is proposed to be 7.2 trillion and state and local budgets combined is about four trillion so if you look at government spending it's about half of GDP now State local and Federal which roughly equates to about half of people in the United States are employed directly by government or indirectly because the government is the primary revenue source of their business um and I think that that's why this this set of policies and I'm not talking about the tax on the senta millionaires as much as a simple disregard for uh the fact that the United States over time the prosperity that we've realized has been driven by a free market economy by enterprising individuals going out and saying there are people that are asking for things I'm going to figure out a way to build those things and make it for them and sell it to them people will pay for it they will work hard to do it and the incentive structure in a free market has enabled productivity improvements and enabled ultimately Prosperity but we've reached a Tipping Point and the Tipping Point is when half or more of the population begins to be employed by the government at which point that concept is lost because now it is the government that is the employer not one's own individual liberties and ability to go out and be enterprising and so I think that the budget of government tipping to 50% of GDP is the reason why these policies become mainstream that's my theory and so it's a relationship of government spending as a percent of total GDP which translates into employment you guys very reasonable scary but reasonable well you know who said something similar back when Mitt Romney were in for president he was caught on tape saying something to the effect that 47% of Americans were net government recipients y and if that number ever got to 51% then basically the free market system would be finished because it' be more where we are than makers more takers than makers and he was forced to apologize for that but there is a fundamental logic to it I wouldn't use the term taker sax because there are hardworking people that work for the government it so it's not necessarily about just taking a free check or there's certainly an aspect of that to some degree but it is about the government becoming the prim supporter of individuals in this country through employment or through subsidies or through checks or through through what have you yeah I think that's fair I think that's totally fair I'm not disparaging the efforts of legitimate government workers because you do need a government or private company workers that just happen to have the government as their only customer right but the point the point is that when you become a government employee you have a vested interest in government you should have a vested interest in the private sector as well because that's what generates the tax revenue to fund the government but as a practical matter government workers vote massively in a block for the Democrat Party and in many ways the Democrat Party is the the party of government workers you look in California for example the the various government workers unions are the most powerful players in California what's the political affiliation of like has there ever been surveys done of employees at the federal level and what their political affiliations are oh yeah vastly vastly more Democrat I mean look the Democrats are the party of government absolutely I'm surprised by that because I would think that within the ranks of the military if you look at the enlisted military there's a lot of Republicans in there a lot of military families especially Republican but you look at just government workers vastly more Democrat I think there's other things happening as well I mean look American capitalism requires a robust middle class and in many ways I think globalization has hollowed out the middle class there used to be a large middle class in this country of bluecollar workers who worked with their hands they were not knowledge workers and they worked in factories and they did kind of blue collar work and they could still make a middle class living and I think that over the last 20 to 30 years as a result of globalization millions and millions of those jobs went away I mean millions of factories shut down so the middle class of America that's not you know again that's not knowledge workers were really pressured by basically throwing open American markets to foreign Goods now you could argue that that lowered prices and that created consumer surplus and the benefits of trade do you support the Trump tariffs as a solution there Sachs because those are fundamentally going to be inflationary which is going to make the cost go up for everyone well I don't know but I'm just I'm just pointing out that there was a real price in terms of having this free trade that led to huge trade deficits which is this vast American middle class people who worked with their hands got put out of work and I think that removes a huge incentive for people to be invested in to have invested interest in the free market system sax let me ask you one more question do you think that the Biden administration's bills the inflation reduction Act and the chips act both of which were meant to revitalize that middle class kind of industrial economy through Government funding of developing new facilities in the US to onshore manufacturing is that not a good reasonable solution to that problem well those are two very different bills I mean the inflation reduction act just the name itself should tell you that it doesn't do I was joking it should have been the inflation maximization act the IM yeah look who benefited from that our friends who are energy investors who you know who I'm talking about in our chat room easy easy stray bullets everywhere going to his take it easy over there take not going to say his name taking a stke but his nickname is deep state but but he's an energy investor he said that this bill was the biggest Bonanza that they've ever seen he said these these guys were running around like uh you know it was like The Beverly Hillbillies where they struck a gusher and they they're running around with pans trying to collect the oil that's where he basically said this was but it was a bunch of energy investors at the Mana the Mana was coming down from from heaven and they're just going to collect as much of it that was a huge boondoggle and payoff for these green energy investors that's who it went to it did not benefit at all what about the chips act the chip Act is more complicated because it does create incentives for manufacturing in America and moreover there is a National Security El because we need these Advanced chips we can't be totally dependent on chip makers who are in foreign places within 100 miles of the Chinese Mainland right so that that one's a little more complicated while Intel is imploding you know they can't manufacture so well just to finish the thought I mean the the the issue with the chips Act is that there's a lot of good reasons to believe that even if we incentivize this we're still hopelessly behind and the chip faps that we're building are just they're still years behind what they have in Taiwan for example so it's not clear it's going to work is my point but but I think the motivations make a lot more sense all right everybody this has been another amazing episode of the Allin podcast socialism is garbage and it turns into communism no I'm exacerbated I mean if Kamala doesn't get out there and start doing some interviews and explaining herself I'm out um I mean I'm out making news at the end just I'm I'm just frustrated I'm I'm literally going to smash this laptop right when jcal was about to become CTI millionaire she shut the door I mean I mean it may have already happened anyway H my God that's so funny yeah u r to what's the what's the price now 80 bucks or something you're G to get a much different answer we need someone to generate we need someone to generate a meme jcal at $40 a share demat $80 a share Republican no I mean I just we need to get Hala on this program here face the music let's go you want to run for president come on all in and let's talk about it if she's not going to answer basic questions it's disqualifying for me who's trying to get her is anyone trying to SPS on it I mean on it but I mean we we'd love to have her on we'd love to have JD on we'd love to have Waltz on let's go let's have some real conversations about this stuff by the way can can I make one final point of that whole uniz gains tax is best case scenario what the um CBO estimated is that would raise about 400 billion a year for all these tax hikes that's only 20% of the deficit we're running right now we don't get anywhere close to closing the deficit with all these tax hikes what that means is you have to cut spending moreover she's got a bunch of new programs to increase that deficit and we know that that 400 billion number is an optimistic scenario because like jamath was saying the rich people are going to flee they're going to try and move their wealth into structures or places where it's harder to tax I think it's actually more than that I think what'll happen is funds governments etc for the right entrepreneurs with the right assets will help you pay the exit tax so that you can just leave the United States and that's going to be an investment class that's going to emerge in my opinion which is these organizations that will pool Capital Sovereign wealth funds specifically and when an entrepreneur shows up and they have you know 50 hundred a billion dollar tax bill to expatriate from the United States they will pay it for you and the reason is they'll bring the jobs and they'll bring the knoow and they'll bring the future capital investment into that country it's it's a very easy investment to underwrite actually so I would I I would just pay a lot of close attention to the fact that Capital flows are very fungible in 2024 and they'll only become more fungible over time buenos era beautiful beautiful this happened by the way this happened in France I mean they did they literally did this they tried it a lot of French citizens all of a sudden became citizens I think I think it's important though you have to now go to the logic if this is what people want I think it's important for people to see the impact of it and then for them to have to change their mind or stay with what they're doing because it's working yeah it's not going to work you're you're right Jal in France and Norway this was tried there every time wealth taxes get tried it what happens is the wealth flees and you never raise as much as you think you're going to and then what happens is in order to raise that money they have to apply it to more people Elizabeth Warren already wants to apply it to Americans with a net worth of 50 million not 100 million so this whole idea that well this won't affect me because I'm not of those rich people the IRS was created and they when they created the income tax it was originally only supposed to apply to to less than the top 1% okay I got to go love you guys so everybody thanks for coming to the all-in podcast episode 193 we'll see you next time bye-bye take care boys let your winners ride Ravid and instead we open source it to the fans and they've just gone crazy with it love you queen of [Music] going besties are that's my dog taking driveway oh man we should all just get a room and just have one big huge orgy cuz they're all this useless it's like this like sexual tension that they just need to [Music] release that's we need to get merch [Music] our and now the plugs the all in Summit is taking place in Los Angeles September 8th 9th and 10th you can apply for a tickets summit. Allin podcast.co and you can subscribe to this show on YouTube yes watch all the videos our YouTube channel has passed 500,000 subscribers shout out to Donnie from Queens follow the show x.com thee all inpod Tik Tok the Allin pod Instagram the Allin pod LinkedIn search for Allin podcast and to follow chth he's x.com chth sign up for his weekly email what I read this week at chat. substack docomond sign up for a developer account at console. gro.com and see what all the excitement is about follow saxs at x.com David saxs and sign up for glue at glue. follow freedberg x.com freedberg and ohal is hiring click on the careers page at ohal genetics.com I am the world's greatest moderator Jason kakanis if you are a founder and you want to come to my accelerators and my programs founder. 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