Elon Became a Trillionaire — and It Exposed the Scam Draining Your Savings

Elon Musk is now worth more than the next four richest people on the planet combined and more than the bottom half of every household in America put together. But the people who are convinced Elon Musk cheated his way to becoming the first trillionaire do not understand the economy or who is actually stealing from them. Elon's rise to trillionaire status is an incredible story of success, value creation, and theft. But in the age of envy, people are very confused about what's actually going on. So the second Elon crossed over into trillionaire status, half the country instantly called it a crime. Bernie Sanders specifically called it a crime against the working class. And yet, the same weekend Bernie was saying that, a working class employee from SpaceX named Juan Hernandez was sitting on over a million dollars in wealth earned by simply holding his stock and sharing in the risk with Elon and the other employees. He wasn't an exec, he was a welder. But unlike Bernie, he understood how to take advantage of the value that was created by the world's first trillionaire. And thanks to the miracle of our incredibly flawed economic system, SpaceX alone, one company, has created more than 4,000 millionaires. But when I say that, I know that some people are going to stroke out. Why? Because they're convinced that the economy is rigged. And the crazy part? It is. But not in the way that most people think. So they keep shooting themselves in the face with arguments that will ensure they forever remain on the bottom of the economy. And if they get their way, they'll pull everyone down with them. So today, we're going to confront the core accusations that people throw around as proof that the mere existence of a trillionaire proves the system is irredeemable. And in so doing, we're going to prove that something completely different is actually going on. If you want validation that our system is broken, part one is for you. If you want to understand how billionaires are actually a symptom of something very surprising, head to part two. But if you want to understand whether or not we should just burn the whole system to the ground, part three is what you're looking for. Welcome to part one. Yes, the game is rigged. In just the last six years alone, the money in your pocket has lost about a third of its value. And for every new dollar the government collects in taxes, it turns around and spends $1.58, which is the problem. That is the very death march that defines our modern economy. Politicians campaign on promises of more free stuff, and we vote for it, dooming ourselves to the inflationary loop that we are in now. The government spends money it does not have, so it has to print the difference. And the money in your bank account, therefore, buys less every single year. So, if you hold cash, you lose, guaranteed. It's fundamental to the way the system works. If you want to understand the most foundational layer of how the economy is rigged against you, you have to understand inflation. And we actively participate in the madness by what we vote for. The only way to not lose in an inflationary system is to get out of dollars and into assets, stocks, real estate, anything that's likely to rise with inflation. It's just how the math works. And it means tens of millions of people are forced into the stock market whether they understand it or not, just to keep from moving backwards financially. Now, as it relates to how we just got our first trillionaire, you have to layer on AI's peculiar market distortions on top of that. AI is the hottest asset on Earth right now, and the way it's being financed is risky at best, at least according to history. I made a whole video about this, which you can watch right here. The companies building AI right now are borrowing hundreds of billions of dollars to build out the AI infrastructure. This includes chips that go obsolete in about 3 years. The banks making those loans do not want to be caught holding the bag if the market gets spooked, or the revenue just doesn't come in fast enough. So, they are running the same playbook they ran in 2008. Slice up the risky debt, repackage it, and sell it off into the pension funds and retirement accounts to ensure that the public is exposed. That acts to mitigate their risk and dramatically increase the likelihood that the government will intervene with more money printing should a problem arise. Just like in 2008, which drives the value of assets up and cash down. And that's how the bankers end up winning, and the elite class continues to pull away from everybody else. Now, complicating matters in the face of the devastating math around AI chips lifecycle going from new to obsolete, the AI companies put on their books that the chips are going to last roughly 5 or 6 years. But, skeptics like Michael Burry, the guy who saw 2008 coming a mile off, say the real number is closer to 2 or 3 years, and that the 5 or 6-year figure that is being used is being used as an accounting trick to hide losses, at least for now, which only further accelerates the push of the risk off to the retail class who do not understand what's happening. And to make matters worse, normally the most expensive thing that gets built out when building out the revolutionary new tech infrastructure is the thing that lasts the longest. Think of the railroads, the stations for the railroads, or the fiber optic cable for the internet. But with AI, the most expensive thing, the chips, is the thing that actually dies the fastest. So, the revenue has to come in fast or the debt buries everyone and wipes out the early investors. This is a huge risk for AI right now as the gap between the cost of build out and the rate that revenue is being generated is massive, like staggeringly large. The early money knows that the clock is ticking, which is exactly why the biggest wave of IPOs in history is happening right now. SpaceX, Anthropic, OpenAI, they're all lining up. And an IPO has to be understood mechanically as an exit. It's the moment where the savvy early money finally gets to sell to the general public. A public that is less savvy and prone to getting caught up in the hype. That's why alarm bells went off for a lot of you when the indexes started changing their rules to accommodate SpaceX's IPO and effectively default put SpaceX in people's hands whether they wanted it or not. And right now, more than 30 trillion dollars is tied to the major stock indexes, the S&P, the Nasdaq, the Russell. When a company gets added to one of those indexes, every fund that tracks it is forced to buy the stock automatically. There has always been a rule that a company has to trade publicly for roughly a year before it can be added to an index. That waiting period exists to ensure the market can figure out what the stock is actually worth post a hype before people automatically get it added to to portfolio. This is designed to protect regular people from getting shoved into an untested stock. But this year, Nasdaq and the Russell changed that rule. They built a fast lane so mega cap companies like SpaceX can get added in weeks instead of a year. Michael Burry and many others have cried foul about this. One Wall Street veteran, George Noble, called the change a shameless manipulation of the index. Why? Because it lets the bankers, early investors, and insiders get guaranteed buyers at sky-high prices, and the index investor, you, ends up holding that risk. Nobody can see the future, not me, not anybody, and maybe the fast lane here is savvy investors setting up the public as dumb exit liquidity that's going to get hammered, or it could also be the opening of a real opportunity to regular people sooner, allowing them to capture more of the upside. But I think people are right to be paranoid that this is the public being taken advantage of. Now, the good news is, if you don't like the way one index is handling the situation, there's always another. The S&P 500, to their massive credit, has refused to change the rules. So, until a company is profitable, among other qualifiers, the S&P 500 is not going to put them on the list. Knowing that, I understand why people have all kinds of question marks and suspicions around Elon Musk taking this company public at this moment. And it gets worse because there are still other traps that rig the economy against the average person. One more honorable mention goes directly to regulatory capture that leads to monopolistic practices. You can see this in the way that some of the biggest AI companies are begging for regulation. They wrap it up in safety concerns, but the reality is this is a tale as old as time. Companies, the big corporations that many people distrust, are trying to get the regulations put in place so that the incumbents can end up making it harder for startups to get in. The biggest players end up building a regulatory moat around themselves, and the buying public gets screwed out of better prices and innovation to remain competitive. Now, you put all of that together and it becomes very clear. This is a rigged game. The money is being debased, the federal debt grows and grows, the indexes get bent to pull retail in on hype, and the risks get put on the unsuspecting while the savvy get rich. High-risk AI debt is getting put into your retirement account to ensure a government bailout if there are times of stress, and the regulatory cost of entry ends up blocking out startups that would otherwise create competition and ensure that at least as the buying public, we all win. So, if you came here for proof that the system is broken, that's a speed run for you. Your fears are real and justified, and I understand why people are angry. But, none of that proves that a trillionaire is the problem. Now, it doesn't disprove it, either. So, welcome to part two. What is wealth and how is it created? Want you to picture a trillionaire. Now, you're probably seeing Scrooge McDuck, a vault just full of money, a mountain of cash that some guy is sitting on top of or swimming in, doing the backstroke through all of his gold coins. That image is the single biggest reason that people get this wrong because that vault doesn't exist. That money isn't real. Elon Musk does not have a trillion dollars. Almost all of that number is the theoretical value of the shares of the companies he owns, and those shares are only worth something because other people want to own a piece of what he built. If people stop wanting the shares for any reason, his theoretical value drops or just disappears. Therefore, the right way to think about a trillionaire or a billionaire whose wealth is the stock they own is as a scoreboard for how much value people believe they've created. We'll be right back to the show, but right now I want to talk about an important investment you're not making. You optimize your calendar, your team, your systems, but not the one asset that runs all of it, your brain. That is a huge liability. Your brain is your business, and right now most people are running their business on the cheapest fuel available. Caffeine spikes, [music] sugar crashes, stimulants that borrow from tomorrow to get you through today. I take Ketone-IQ when I really need to do something high [snorts] cognitive load because I'm not willing to let my brain be the bottleneck. [music] It delivers pure ketones, your brain's most efficient fuel source, directly across the blood-brain barrier. No caffeine, no sugar, no crash, just your neurons firing at full capacity hour after hour. Athletes use it, top CEOs use it, I use it. Go to ketond.com/impact [music] for 30% off your subscription order or visit your local Target to get your first shot for free. That's ketond.com/impact. We will be right back to the show, but first let's talk about your standards. Most people have two sets of standards, the ones they talk about and then the ones they actually live by when nobody's watching. When you're busy, moving fast, and hungry, those standards get negotiated down. You grab whatever is closest, [music] and you tell yourself it doesn't count. But it does, your body is keeping score, trust me. That's why I keep Paleo Valley beef sticks on hand >> [music] >> whenever I'm at risk not being able to get whole food because I refuse to let hunger be the thing that breaks my standard. [music] These are 100% grass-fed and grass-finished beef. Zero sugar, no artificial preservatives, no soy, gluten, or corn. Just beef and organic spices with 6 g of protein per stick. When you're running between meetings, traveling, or just don't have time to think about food, reach for a Paleo Valley beef stick. Right now, you can get 30 beef sticks for just $36. That's real nutrition for barely over a dollar per stick. Click the link below to get your 30 beef sticks for just [music] $36. And now, let's get back to the show. In fact, that's a good place to start the definition of value. Economic value is very simple. You create something people want more than they want the money that you charge for it. Can be a product, a service, or a share. Doesn't matter. [music] Value is created literally out of thin air when something new enters the world that people want badly enough to pay for it. Could be a brand new thing that solves a problem nobody had previously solved. Think of the airline industry. For all of eternity, humans could not fly. Then we could. The Wright brothers captured some of the value, but the real wealth was generated by the people that made the innovation accessible to the masses. Proving that it could be done was cool, but the value is in the productization of the thing. In packing the innovation in something others could have or use. That's how you create value. Making something people want. Typically by solving a problem. Shares turn money into money-making machines as one example. Shoes keep your feet from hurting. Packaged food makes it much easier to avoid starving to death. Video games entertain you and make your free time more enjoyable. Doctors keep you healthier. Trainers get you strong. So on and so forth, but all of them are examples of how value is created. The more value you create for more people, the more wealth you can accumulate if you own that company. But there is a part of the process that confuses the life out of people. When you create value, you're not necessarily taking a slice of somebody else's pie. Now, you might be. Competition is certainly part of the process. Some people are going to win and some people are going to lose. But when new products, services, or efficiencies are created, new money can be conjured out of thin air by the Fed and injected into the system without causing inflation, as long as it's kept in proportion to the new value that's been created. So you've got bad money printing that comes from deficit spending, and you've got good value creation that can lead to new money through innovation. Now, I'm not going to bog us down by going into too much detail here, but failing to understand that is why so many people become convinced that a billionaire, or now a trillionaire, must have done something illegal. But it's just not true. It's just a fundamental misunderstanding of how money creation actually works. Inflation occurs when more money chases the same amount of goods and services. But if you create more goods and services, more things for people to buy that they actually want, you can either watch things get cheaper and people are thus wealthier because they can afford more stuff, or you can, in proportion, inject more money into the system, spurring growth, and people get wealthier because they literally have more money, but prices have not gone up. This is how a society at large gets wealthier. There is literally more money to go around and more cool things that people want. People are actually getting richer in real terms when it's led by innovation. When that happens, the person that created that new value has literally made the pie bigger. And if they've made the pie bigger by a lot, then they're going to get a lot richer. Before SpaceX reusable rockets simply did not exist. Before Starlink, you couldn't get high-speed internet in the middle of the ocean, on a farm, or in a war zone. Elon took raw materials and turned them into things that didn't exist before. He created value, things that people really wanted. He didn't move wealth from one pocket to another. He created value where there was no value before. The pie legitimately enlarged. The pie literally got bigger. And the value of the slice that he owns, now that that pie is much larger, has gone way up as a result of the things that he did. Now, in response to this, I know people will often say, "Wait a second. Elon did not create that value. He received government subsidies. That's where the value was created." Or they'll say, "Wait a second. Elon did not create that value. His employees did. Elon is effectively just stealing the value created by other people." Now, the ultimate test of the veracity of those claims is to say, "If that's true, go replicate Elon's success." What you will quickly discover is that despite you also living in the same country and also having access to the same government and the same pool of talent, you will be unable to do what Elon has done. And that's because builders, the people who create value out of nothing, the ones who can turn a zero to a one, are not random people who happen to be in the right place at the right time. They have a certain set of skills that the world values very highly. Now, all of us are subject to being born in the right country or getting the timing right. I'm not denying that there's an element of luck, but when you see somebody succeed at that level over and over and over, chalking it up merely to luck is to miss the point of how value is created in the first place, which robs you of your own agency because there is so much that all of us can do. Now, there's a great scene in the movie Steve Jobs by Aaron Sorkin where Apple co-founder Steve Wozniak, the real-life engineer who's played in the movie by Seth Rogen, asks Jobs in disgust, >> What do you do? >> He says that everything Jobs is known for was created by someone else, an argument that we hear about entrepreneurs all the time. And Jobs [music] says coldly, >> I play the orchestra, and you're a good musician, you sit right there. You're the best in your role. >> Now, it's obviously a thing to say, but it gets at a truth that people don't want to accept. You haven't created value until you've created something that people actually want more than they want their money. The world is littered with phenomenally engineered products by incredibly brilliant people that ultimately failed because they couldn't do the final magic trick of turning it into a product that people wanted. Beta lost to VHS, even though it was a better technology. Kodak's digital camera lost to everyone, even though they were first. The DeLorean is an absolutely iconic car, but the company still went bankrupt. Engineers at Sony invented the first MP3 player, but they got buried by the iPod. Atari essentially invented home gaming, but got obliterated by Nintendo. And God only knows how many incredible feats of engineering have come and gone, but failed even register in the public consciousness. Now, this is not to take anything away from the incredible people who make up the mass of a company, the employees who show up every day, and they work themselves applying their talent and intelligence to the goals of the company. Entrepreneurs would not be able to scale without them, but it becomes a question of risk and reward and the ability to generate tangible value with your talents. There are engineers making a million-dollar plus salary at some of the large AI companies right now. And they're going to collect that check whether the company succeeds or fails. The welder at SpaceX is going to get paid whether the rocket flies or the company goes bankrupt. His wage comes first, and it comes guaranteed. The person holding equity gets paid last and gets wiped out first. That's the trade. Labor takes the sure thing, the owner takes the risk of walking away with nothing. You get the upside because you risked the downside. Elon's compensation package, for instance, pays out nothing, zero, zip, zilch, unless he is absurdly successful. So, he only wins if the other shareholders win. And an insane number of his employees are shareholders. We've spent so long vilifying entrepreneurs in our society that we've forgotten how rare that skill set actually is, with or without subsidies. But, let's look at the government involvement directly. Around 38 billion dollars in contracts, loans, and credits have gone to Elon's companies over 20 years. Now, it sounds pretty damning until you look at what that money actually is. The big loan to Tesla got paid back early and with interest, so taxpayers actually made money and citizens were able to keep their jobs. The regulatory credits helped to incentivize the transition from gas to electric. Elon didn't reach into taxpayers' pockets and take the money [music] out. People voted for politicians that had a green agenda, and Tesla was simply the company that followed the regulatory incentives provided by the voters. And NASA didn't hand SpaceX a gift, it paid SpaceX to do what NASA couldn't or wouldn't. SpaceX managed to drive the cost of rocket launches way down, a cost structure that the incredible engineers at NASA had decades to address, but didn't or couldn't. As Charlie Munger said, "Show me the incentives and I'll show you the outcome." Entrepreneurs will follow governmental incentives. That's why politicians create the incentives in the first place. To then be mad that people take advantage of them is nonsensical. If you don't want the government to offer incentives, make sure you let your congressman know with your words and your vote. Additionally, we're competing in a hyper-competitive global economy. If we want to make sure that we're thriving as a society, we're going to need policies that keep us competitive. Now, personally, I think there is way too much money in politics, and I want far less government involvement in the economy. But unless we want to wall ourselves off from the world, become isolationist, and leave churches and families to carry everyone who falls behind, we will need some reasonable amount of subsidies to maximize employment and steer industry. To compete against countries like China, who pour subsidies into the areas that they want to win globally in, we will need to point capital at things that matter for our national security, as but one example. If we don't like that the government is currently offering incentives to green energy and the space race, that's fine. But don't call the entrepreneurs who follow the incentives grifters. They're literally doing what we've told them to do. Another argument is that the stock price isn't about value creation, it's just about hype. There's no doubt that hype is a part of what makes something valuable. That is just how the human mind works. We like to get excited, and that is certainly part of the price that we'll pay. Apple's iPod wasn't better than Sony's MP3 players. In fact, at the technical specs level, they were worse. But owning an iPod carried cultural value, and that is worth a lot to people, whether we think it should be or not. Jobs and Elon are extraordinarily good at building that excitement, but it doesn't mean that the products themselves aren't valuable and that the companies themselves aren't valuable. They are. Plus, Elon's companies make products that people not only want, but in the case of SpaceX, they're doing something that no other company or product on planet Earth has ever been able to replicate. The same with Starlink. Tesla has the most competition, but it was still the first company to make electric cars desirable and people are betting that Elon can continue his unprecedented string of successes. So, the value is real. Elon has truly made the pie bigger. Now, the question becomes has he made it a trillion dollars bigger? Has he created that much value? The people that are angry would definitely say no, but that's because they've got the cause and effect backwards. Go back to the 30% inflation in the last six years statistic. When the government debases your money, every asset gets repriced higher. Not because it got better or more valuable overnight, but because the dollars measuring that value got weaker overnight. You take away the deficit spending and the money printing and Elon wouldn't be a trillionaire even with all the same level of value, hype and excitement, the subsidies, all of it. If we don't want trillionaires to exist, we don't need to break the entire economy to stop it as Bernie, AOC and Mondaire would like to do. We just need to stop deficit spending and money printing which causes the price inflation. So, who should you actually be mad at? And what do you do about it? So, here's where we actually are. The system is rigged. The raw numbers have gotten silly because of inflation and a real human being is getting historically almost unimaginably wealthy inside of this distorted system that is leaving so many people behind. Which leaves us with one real question to answer. Do we burn this whole thing down and start over? Do we fix it? Or do we learn to win inside of it? With that in mind, welcome to part three, how to deal with a rigged game. In 1820, around 80% of the people on planet Earth lived in extreme poverty. Today, it's under 10%. For nearly all of human history, no society on Earth had ever produced sustained economic growth. Everyone was poor on every continent, across every century. It was just grinding universal poverty as far as the eye could see. The TV show alone should be required viewing so that people can see firsthand just how hard it is to scrape together enough food and shelter to simply stay alive. And how the people who thrive universally rely on innovation to get a better result from their time and energy. Societies, as a product of evolution at the level of civilization, have found over and over again to pull people out of desperate, grinding poverty, you must do things to foster innovation. That's going to create inequality as some people are simply better at the task than others. But inequality isn't an anomaly that requires explanation or something that will serve us from trying to eradicate. Poverty is the thing that people should focus on. Poverty is the constant. What beggars belief and what requires an explanation and what needs to be fostered is the engine of prosperity. That's what we have to understand and protect. That's what's at the center of this entire video. How do we intentionally create value? When we fail to understand what actually causes the creation of value, we end up looking at a trillionaire and we see a crime. But it only looks like that from the safety of a society that's born of innovation. People making things other people want, building businesses that make life easier, and scaling those things up through capital aggregation and improved efficiencies creates an incredible world. And this engine of prosperity has allowed us to pull so many humans up out of the dirt, and we have lived in this prosperity for so long that we're confused, and we think it is a fundamental law of nature that it will always be here, and it is simply about distributing it in an appropriate manner. But, the reality is >> [music] >> that innovation engine is the most powerful force on Earth for lifting people out of poverty that has ever existed, but it is rare, and it is fragile, and it's best understood as being nearly a miracle. Anyone who looks at a trillionaire and screams thief puts the entire prosperity engine at risk by failing to understand that that person has made the pie bigger. And the thing that took us from millionaires to billionaires and now trillionaires isn't greed, it's inflation. Now, that doesn't mean that there isn't greed, and it doesn't mean that the system isn't rigged. We've gone through that. And it doesn't mean that we don't have to protect ourselves against the ultra-wealthy from using their money to co-opt the political system. They most certainly will, but these are separate phenomena, and if we don't keep them separate, we will burn our entire house down trying to get rid of our rat problem. The fire will disperse the rats, it may even kill some of them, but it will destroy every single thing that's good. If people don't understand how good we have it right now, even in this horrifically gilded age, we will break the engine of prosperity and rapidly find out just how bad things can get. When you have a system that's as flawed as ours that has soaked us in safety and prosperity for as long as ours has, campaigning on burning it all down is the easy answer. Seize it all, redistribute it. That's the call you're going to hear from a lot of people. But that method of fixing the system has been tried many, many times before. And it is as predictably [music] destructive as a woman who stops unwanted advances by pouring acid on her own face. It solves one problem, but creates another that is much, much worse and self-destructive. If we don't want there to be trillionaires, great. I get it. Stop deficit spending. But no one should want to burn our all too flawed system down because it has flaws. Not when the [music] fix is so straightforward. And that even if we can't fix it, we can still learn to succeed inside of it. The particular brand of corruption we have now is one in which everyone can still win. Some will always win more than others. That problem is never going to go away. But the system is rigged in a way where real value must be created for the elite to win. The people trying to rig the game have to create something where everybody can win in order for them to succeed. And the only way to lose is to not play the game. Think back to Wan, the welder at SpaceX. Wan didn't inherit anything. He didn't win a lottery. He did two simple things that are available to almost anyone in this country who's paying [music] attention. First, he made himself more valuable by learning to weld. He elevated his skill set. And then second, he became an owner. He wasn't some super savvy insider investor. At first, he said he didn't even know what SpaceX was all about. His friend just told him about the welding job. But the only time he sold any of his shares was to start his own business. He didn't cash out the first second that he could. He held on while the stock became worth more and more. Even though that meant he had to take a bigger risk. Our economy is not Elon and the elites versus you. It's investors versus savers. Anyone can be an investor. But if we vote for deficit spending, anyone who tries to save will automatically lose. It is the most immoral setup, but it's the one that we have. Every other distortion and abuse in our economy is a drop in the ocean compared to that. We can and should address things like loopholes that allow people to borrow against stock and avoid selling it and paying taxes, but I promise you we don't have a revenue problem. We bring in trillions of dollars a year in tax revenue. We are quite literally the richest country on planet Earth. We have a spending problem. Bernie thinks he's standing up for Juan, the working man, but in reality he's standing up for murderous policies that break the very thing that has made us such a rich country. [music] I don't know if he really is naive and just does not understand economics or if he's sinister, but either way those policies have been tested over and over and over and they do not work. Politicians and talking heads should instead be repeating two things on a loop until the end of time. One, balance the budget so people can save their way to success. And two, until then everyone needs to invest in assets and pray innovators come along and make the pie bigger. The system is not fair. It's never going to be fair, but even with all of the market manipulations, all of the money in politics, a welder at a company today can walk away a millionaire. So don't burn it down. Only misery would ensue. Instead, learn to play the game well. And if you want to see how well-intentioned but bad policies can break an economy, make sure you watch this video here on rent control. Till next time, my friends. Be legendary. Take care. Peace. If you like this conversation, check out this episode to learn more. The average rent for a one-bedroom apartment in Manhattan now exceeds $4,200 per month. That's more than twice the average monthly income for a recent college graduate. In San Francisco, a person earning