The 50-Year Economic Collapse That Created Socialism Is Happening Again Right Now

The thing with socialism, it's it sounds obvious. It's like, hey, you've got one group of people who are billionaires and rising class and they can afford 10 houses and private jets and it sounds so obvious that you would just take the money off those guys and give it to people who can't afford to eat. How could you be so daft as to not go in for that? Anyone who looks at the problem on the surface, it's like, what are we all thick? Take money off the guy who's got a private jet and give it to the person who's struggling to feed their children. That that is the most obvious thing in the world. There's something going on right now where the social contract is broken in some kind of way. You've got AI looming in the background and suddenly socialism is the most exciting political idea on offer. What is it exactly that has led us to that being so exciting? >> So, if I was to say what's actually going on in the world right now, we're going through a big long-term disruption. Uh so there's little disruptions that might happen every 5 to 10 years and then there are big disruptions that might happen every 70 100 200 years. Um and I I often talk about the industrial revolution because it was the last time we had a really big wholesale change to the economy. >> Um let me start at a strange point. If we were to talk about the fundamentals of economics because we're talking about economic systems we had this period of time called the Engles pause. Nothing worked. We had inequality. uh the birthplace of socialism and communism was created during the Angles pause. Engles is actually Karl Marx's best buddy. Um so >> so what is angles pause for people that don't know it? >> Yeah. So the angles pause was a period of about 50 years where um economic productivity went up but workers wages went down. Um that the uh economy was growing uh because of the industrial methodology, the industrial revolution but it wasn't fairly shared. Right? So you had situations where someone who previously was a highly skilled tailor and could earn an amazing amount uh a few years later couldn't earn minimum wage >> um because the spinning looms could create beautiful tapestry beautiful you know clothing um very cheaply and an unskilled person could do the job of a tailor with if they had a um spinning loom. Uh so we had this essentially this uh pause, this 50-year pause where the economy got worse and worse for the majority of people. But for an a tiny elite who understood technology and who understand how to do these new things called factories, uh they understood steam and coal and um mechanization. They became wildly successful. They became they got they got called something called industrialists. >> So these >> sounds distressingly familiar. >> Yeah, it's Yeah, exactly. Right. It's predictable. It's it's it's happened before. So, at the end of the Engles pause, three major revolutions happened. Uh, essentially, there was a revolution in ownership. People could own new assets. Um, there was a revolution in skills that we invented the schooling system as we know it today and we reskilled on mass. So, there was a mass movement towards democratization of ownership. There was a mass movement towards democratization of education and there was a mass movement of democratization of political power. Um so we had these three big revolutions uh that that kind of ended the angle's pause and started to move things. We then had the growth in wages. We had the growth in economic uh prosperity. Uh and then we >> now for people taking notes now that want to know how to end this sort of angles pause like moment. Um are the revolutions necessarily violent? Like how did those actually come about? >> So there was both. So in France there was a violent revolution uh where the guillotines came out and and they chopped off everyone's heads. Um it was really interesting. It wasn't even a workers revolution. It was uh it was an overproduction of elites. People who had been to universities, people who had been to colleges, people who had law degrees. They were the ones who actually read led the French Revolution. Um a lot of people think it was the workers who rose up. It wasn't. It was the uh disgruntled elites who didn't get the cushy job that they had been promised. >> But did they end up doing something awesome for the working people? >> Uh not really. No, they well basically they chopped off a lot of people's heads. They gave rise to the Napoleonic Wars. Um so that was very violent. And then in um in Britain we had much more of a democratic revolution. So we had the great reform uh act. We had uh we had a massive movement called the Chartists. And the chartists were basically a millions of people I think at a time where we had less than 20 million people in the country. We had between 1 and 3 million signatures on on petitions and basically they wanted a new charter, a political charter. And they had six demands of what they wanted. And basically they wanted to have free and fair elections. They wanted to have uh you didn't have to own property in order to vote. You didn't have to tell your boss who you were voting for. You could have secret ballots. um that an MP could get paid so that a a normal person could rise up and become an MP without having to be independently wealthy. So they had this list of six things that they called their charter for political power. They took to the streets, huge hundreds of thousands of people on the streets uh saying that we wanted uh to change the way the political system runs. And here in the UK through uh peaceful protest, we politically changed uh the way power is distributed through acts of government. >> Okay. So if I'm at home and I'm really trying to track what you're saying, angles, pause, uh I'll take it for granted that everybody understands why that's bad. You've got a small percentage of people doing financially just incredibly well. The vast majority of people, are they flat or are they actually trending down? They're trending downward. >> Yeah. K-shaped economy would be exactly what [clears throat] you'd call it. >> Well, so a K-shaped economy I think needs further like that to me feels like a slightly different thing that maybe isn't as >> it's a bifocation. It's it's essentially it like just think about it like that. Here's a really great way to think about it. Imagine that we're all running a marathon and then a small group of people get the whisper in their ear, "If you want, you can get on a bicycle. You can hop on a bicycle if you like, right?" And they go, "Oh, okay." And if you know how to ride a bicycle and if you have access to a bicycle, you finish the marathon way faster than everybody else cuz you've got leverage now. And suddenly you get this uh this separation of a group of people who can collect all the rewards on every single marathon because they know how to ride a bike. And the vast majority of the population are going, "What the hell is going on? This seems rigged. It seems unfair. How is it possible that these people are doing these incredible marathon times that seem inhuman?" And it's the same thing with technology here. It's like how is it that some people are able to amass a billion dollars? How how is it that some people are able to uh you know AOC saying a billionaire is shouldn't exist. It's impossible to earn a billion dollars, right? That's like someone saying it's impossible to run a marathon in under an hour. It's like well you can if you're on a bicycle or a car. Um you know you can do 26 miles an hour pretty easily if you've got the right technology. >> What I want to zoom in on is going back to the K-shaped economy. I think people go K-shaped economy. I now have the words. I don't have to understand how we got here. M >> um so how we get here is deficit spending money >> you and I disagree right >> it's it's a two-parter hang with me so we've got that side which we can debate but the thing that I think I want to put forward and you can tell me if you think that this is just patently wrong >> is that >> we wouldn't find ourselves in the moment that we are in where there is so much resentment building up if the rate at which prices were going up. >> Yes. >> Was not far exceeding the rate at which people are making more money in the middle class. >> Totally. >> Okay. So, that to me is the thing that people just rush past and because they can look at all the other things like, "Oh, there are people making an incredible amount of money. Oh, we have a K-shaped economy and that's bad." >> Uh, and I go, "Yeah, like a K-shaped economy is bad for the reasons that I laid out, but it isn't dangerous. What's dangerous is when you have people that can't make ends meet. >> Yeah. Well, K-shaped economy is dangerous because it plays into all these human things around fairness. We we actually have an inbuilt thing called a fairness reflex which when I see you eating a big steak and I'm getting a tiny little piece of bread, it there is an existential anger that kicks in that we call a fairness reflex. And all primates have this fairness reflex. We don't like it. we will sacrifice ourselves and our own happiness to make sure that we punish someone who we think is uh doing something unfair. So like monkeys when when they see something unfair happening they will do things that is uh detrimental to their own circumstances in order to tr try to address fairness. Um it is a it is a major cause of violence like violence happens around perceived uh injustices. >> Okay. So you don't think it's necessary for um inflation to outstrip wage growth in order to end up in a violent situation? >> Well, we have a a a a very dangerous cocktail where Instagram gives us the insight into how a lot of people live very very well. Um, prior to social media, how many how many pe like consider this, if we would go back prior to social media, the typical person, how many insides of a house have they actually seen, right? How many people have actually seen inside somebody's else's house? You would have seen your family's houses. You would have seen your friends houses, most of which would have been very similar to your house. Uh, you would have um essentially maybe seen some houses in magazines occasionally. Maybe uh maybe lifestyles of the rich and famous. maybe pimp my crib kind of shows. Uh but very very rarely did we get an insight into how other people were living prior to social media. And today it's like, "Hey, wait a second. What do you mean that 27year-old has a Lamborghini? What do you mean that dude over there has a river running through his house? What do you mean, you know, that person who seems like, you know, they didn't work harder than I do, you know, has has now spending time on a private jet going between locations?" So, we're now seeing into other people's lives. That sparks the jealousy. Um, it sparks all of that. Everything's getting more expensive. Our skills are being devalued. Right. So, the the stage is set for for people to be really pissed off. [snorts] >> Agreed. And and I'm very aware of the studies in the literature um around the fairness principle. Watching monkeys get rewarded with cucumber versus another one get rewarded with grapes. Look it up. It is absolutely in fact we'll put it on the screen right now. >> Uh it's it is I think humans will recognize it right away. Um okay so I don't know that we have to spend a lot of time on this but um >> and to round that point that exact thing that that you're seeing in those monkeys that's Instagram. >> Yeah. So here's the thing too that we will disagree on. So I I um really believe that progress is a foundational pillar to human happiness. So people are making progress. They're not going to rage out. Even if you have lifestyles of the rich and famous, even if you have MTV Cribs, which was primarily fake anyway, but it's still in the 80s and 90s, it wasn't creating the problem that Instagram creates today. I think people think this is a ubiquity problem. I do not think that is the case at all. Um I think that what's happening is the person isn't getting ahead and it is the not getting ahead. In fact, it's the falling behind. It's the not having progress in their own life. >> Well, so Here's why I think it's it's the K becomes important if the middle line is um >> it's relative to the middle. Yeah. >> But but it's real expenses is what I'm agreeing at. So if the bottom of the K is going below the cost of things, then now you're going to trigger a real danger zone. And so going back to what you're saying about the French Revolution and why it broke so bad, you have overprouction of elites who not only have a status to maintain like people are looking at them some type of way, but now they can't afford that lifestyle. And so now they are falling down. And if I'm right that progress is a foundational pillar to human happiness and they are regressing and not progressing, they are for sure going to be set off. The reason I think that it's at least worth saying to the audience there are two different ways to view this even if we're not going to reach a conclusion in a timely fashion that would be good TV. Um I I put that out there because I think ultimately to solve the problem you have to know what's actually causing the problem. And if you think >> but if you think it's inequality you're going to derange because you will not understand >> inequality is an output right? Inequality is the scoreboard and it can't be a cause. A lot of people say the cause is inequality. Uh if you're looking at a two sporting teams, two basketball teams and you go, "Oh, 120 versus 35." You say, "Oh, the problem is inequality." No, no, no. The problem is that the teams are playing differently and they have different skill levels. The uh the inequality is just a scoreboard and people are not understanding that it is just an output and you can't blame the output. You have to understand what causes the output. Yeah, >> we'll get back to the show in a second, but first, let's talk about what's hiding in your cabinet. Count the bottles. The multivitamin you stopped taking back in March. 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So my base assumption is that we if we understand that what's [snorts] really going on in this moment is that we have created a political system where we're deficit spending which forces the printing of money which causes it's happening both in the UK and in the US. You get a devaluing of the currency >> uh which makes things more expensive and so now the average person is losing ground. Now, when they give you their rationalization, they might say Instagram, they might say Jeff Bezos is making too much money, but I really believe that history shows that when they're doing progressively better, even though they might lament about those things, they might say like, "Oh, I don't like that." Their their life is getting better. >> Yeah. The pain's not there. If you're if your savings account is going up, if you're upgrading your car, if you're upgrading your phone, um if you're getting a pay rise and it translates into actual real benefits, Yeah. like you you're not going to get violent revolution off that. It's when the two things diverge. Yeah. Absolutely. >> Yeah. The two things diverge from the relevant cost of things. It's a very important caveat for me to keep banging home. >> Okay. So, if we can agree that that is the foundational issue and that the reason that inequality becomes the boogeyman that people will chase and find themselves coming up empty, there's always going to be inequality. You want inequality because uh if you want to incentivize people to play the game like they've got to feel like I can really get ahead, I can win. I can do better. >> It's more than that. Inequality means that the market is correctly recognizing differences of value. So if you have a market that was very equal, then the market has lost its ability to distinguish between anything. So for example, if uh the marketplace has total equality, it means there is no difference between my singing and Adele singing and Ed Sheeran singing, right? The market can't distinguish between the value of Ed Sheeran singing a song and me singing a song. Um that's that's equality, right? So the what what we see when we see inequality is a market that can distinguish between the quality of output. And we want a level of inequality because that means the market is able to distinguish. >> Yeah, totally agree. So, um, that's why I really want to make sure that that's articulated. Okay. So, um, we we've got the angles pause. We come out of it through, uh, some violence, some not so violent revolution. >> The three big revolutions was the political power being redistributed, uh, the ownership starting to redistribute, um, and the mass retraining of skills that were that were relevant for an industrialized economy. So, those were the big three. >> Okay. And so the thing that's broken now to put it simply is people are falling below the cost of things. They're regressing. They're not progressing. >> Okay. So um given that what is it about socialism like if we were really going to give it its due? What is it that makes this idea of um and people go to different extremes but the idea of redistributing wealth? What is it that makes that idea so attractive? Well, it sounds it sounds awesome. Um, and it sounds obvious. Like the thing with socialism, it's it sounds obvious. It's like, hey, you've got one group of people who are billionaires and rising class and they can afford, you know, 10 houses and private jets and it sounds so obvious that you would just take the money off those guys and give it to people who can't afford to eat. Like that just seems like the obvious thing. How could you be so daft as to not go in for that? Um, you know, so anyone who looks at the problem on the surface, it's like, what do we all think? Like, take money off the guy who's got a private jet and give it to the person who's struggling to feed their children. That that is the most obvious thing in the world. >> Okay. So then why isn't it the answer? >> It's not the answer because we have to distinguish the difference between designing a game that works versus trying to fix the outcome that that game produced. Right? So, for example, if we don't like the score between two basketball teams, we can say, "Oh, well, the obvious answer is just take, you know, 50 points off of the winner and give them to the loser and now the winner has to win by more than 50 points in order to beat the, you know, beat this team." You're not actually addressing anything that produced the inequality in the first place. Uh, you're just simply saying, "Oh, we just don't like the score." Um, so because we don't like the score, we're going to re redress the score. we're going to use, you know, a, you know, marker and a pen and just kind of change the score. And uh, and then you you also get the people who actually win saying, well, I'm not going to play in this league, right? I'm not going to I'm going to take my game elsewhere. Um, now in like to to I don't want to stretch the analogy too far, but in the real economy, if you do this too much, the highly productive people, they stop creating jobs. They come up, they spend a lot of their creativity on how do I set up international structures? How do I set this up in my kids' names and my you know different company structures and how do I game the system? They become extremely creative as to keep hold on to the productivity that they generate. There's a there's a law and I think it's around 38 37 call it 40%. when you start taking 40% of what people produce off them, they become extremely motivated to figure out how to change the game so that they stop losing what they get. Um, that has two impacts. It means that the impact is is that they duck and weave outside of the system, uh, which they historically do. Uh, it also means that they put all of that creative energy that was creating jobs and affluence and a wealthy society, they go and they put that into creating structures and ducking and weaving and and and that sort of stuff. So, they >> Why isn't the answer then to clamp down on that? >> The issue is is that when you're dealing with extremely wealthy people, they have uh they have the ability to pay for advice. They have the ability to be leaner, more nimble, more dynamic, and they have the ability to, especially in a digital environment, be anywhere in the world that they that they think they can be advantageous uh with. So, you know, the the problem with all governments is they're geographically limited. The first word in every government is the geography, right? So, the Australian government is the island of Australia. Um, and it can only impact Australia, right? It can only do that. But it can't it has very limited ability to impact Google because Google is a global c company. Here in the UK, Amazon doesn't pay tax, Starbucks doesn't pay tax. Uh you know, Meta doesn't pay tax. Uh in the UK, we have if you buy a Facebook ad, you're buying a Facebook ad to run to a UK audience to sell a UK product that will be shipped from a UK warehouse, but Facebook's in Ireland, right? And you're going to buy something on Amazon. Oh, that actually technically we're in Luxembourg right now, right? when you're buying that thing in Amazon, even though it's from the UK address to a UK address, we're going to be in Luxembourg at the moment, right? So these government these um billionaires, these billionaire corporations, they have figured the game out, right? And as long as governments are limited by geography, then they will always be one step ahead. You you have to acknowledge there is a limitation to how much you can take off people. Um and there are also there are other ways to fight billionaires. There are other ways to like the best way, the the most dangerous way, right? I'm going to get shot for even saying it is uh anti- monopolistic um breaking up of companies. So, you know, what they discovered about 100 years ago is that um if you have a strategic monopoly or if you have a scale monopoly and they just break it up uh and they have to compete with each other, it's good for consumers, it's good for shareholders, uh it's it's good for everyone other than the person who owns the monopoly. So, Amazon, you could argue, has a strategic monopoly, and you could say, look, you can't have AWS and uh Amazon because those two things are too well hedged against each other. uh gives you a big strategic monopoly. You're going to have to spin out AWS and it has to stand on its own feet and compete on its own feet. You have to spin out Amazon. In fact, you're going to have to also break up Amazon Prime. Uh and there's c you can't have Amazon Basics and Amazon the distribution center. Uh because you've got too much of a strategic monopoly here. Um you those things have to compete on their own merits, not based upon your strategic monopoly. Now, um, what I've just said out loud is the most scary thing to the big companies. They do not want Google, Google Maps, YouTube to all have to compete on their own. They want a well-hedged monopoly, which is called a strategic monopoly. Um, they love the idea that these things offset each other, and actually there's nothing you can do to any of their businesses that won't be immediately offset by the other business. Um, you know, that that's what they're building for. They're trying to create strategic monopolies that are bigger than governments. >> All right. So, [snorts] I think you're doing a really good job of speaking to some of the frustrations that people have with uh what they would call the billionaire class with the way that companies are structured. Why shouldn't somebody at home be like, "See, see, like exactly this is what I'm talking about. Like, these guys are dodging at every turn. Uh if we could just have a one world government, then we could like finally stop them from being able to run and flee and hide." um so that we could actually get the fair share like do you think that they are doing something the you're very clear on the um anti- monopolistic practices I think you very clearly come down on the side of they shouldn't be doing it and if you really want to go after them >> part of capitalism capitalism is breakup monopolies >> totally agree so on that one clear now go back to the first things that you listed the way that they'll be in Luxembourg when they need to be they'll be in Ireland like is that something where like this is grotesque, they shouldn't be doing this. >> Yeah. So the the answer is not to create another strategic monopoly called government, right? So government is also a strategic monopoly, but it has one big difference, violence. It has a police force. It has an army. It has a navy, right? [laughter] It has an air force. Uh it can shoot you. It can lock you up. It can put you in a prison camp uh if it wants to, and it does all the time throughout all of history. So if you sit there and say, "I really don't like Jeff Bezos having a strategic monopoly. I wish AOC had a massive strategic monopoly. I wish I wish some mammi guy could actually take over the entire one world government. That [clears throat] would be a lot better. It's like if you don't like the idea of Jeff Bezos having a a strategic monopoly. Well, the good news is Amazon doesn't have prison camps. Amazon doesn't have a an air force, right? Yet. Right. But, you know, these are businesses and Yeah. Okay. They're making a ton of money and they're very robust, very resilient. But as soon as you consolidate an equal and opposite power in government, that's where human life becomes completely expendable. And this is what a lot of young people don't understand right now. We've run this experiment of giving a lot of power to government and giving them a strategic monopoly. They absolutely abuse it within days. Like they are the most freaking horrific people on the planet end up in politics, right? These are not productive people. They're not people who think like normal people. They're psychopaths. These are people who want power, want to consolidate power, want to control you. They they want to run your life. And if you give them power and violence and money and all of that stuff that you want to take off the billionaires, they are not your friends, right? These are people who will historically they will put you in a prison camp. They will send you to the gulags, right? So the the history of fighting monopolies by creating government monopolies doesn't work. What does work is the distribution of wealth and power. Right? So you need to go let's break up the monopolies and make these companies compete on themselves. Let's create uh systems and processes that pre prevent you hitting a certain level of scale before you have to include others into that scale. Right? But it's >> what does it mean to include others in that scale? So, for example, [clears throat] the here in the UK, uh, the labor laws and the minimum wage laws and all of those sorts of things are exactly the same whether you run a tiny little hair salon or whether you run Tesco with 300,000 employees. And if you really kind of want to, you know, disrupt Tesco, give less regulation to small business and say, "Hey, look, if you're a small business with 10 people, you don't have massive bargaining power over your workforce. You know, start your labor laws wherever you want to start your labor laws, whatever people agree with, like obviously some basics, but minimum wage. If you want to employ someone who's, you know, who's struggling to get a job and you want to employ them on a wage that you you can, right? and that gets them on the on the ladder, but the the scale of it is only 10 people. So therefore, there's going to be lots and lots of little companies competing for those types of people and they're going to find, you know, we're going to let the markets function. But if you're Tesco with 300,000 people and a HR department and all those sorts of things, yeah, you do have to have minimum wage and you do have to have more stringent controls because you have a dis disparity of power over your workers. So the idea is that you want to favor small businesses. You want to basically create entrepreneur an if if someone is a small business, if they're an entrepreneur, you want to have lower regulations like anything under 50 people. Let the market like give them an advantage because that's what the big companies fear the most. They fear having to compete with these dynamic little startups. >> Okay. I want to zoom in on that a little bit so I understand why you're biased towards small companies. So, um, is it that you think that they innovate better? Is it that you think that they are more attentive to the customer? Why why should small companies be advantage? >> It's competition. It's it's competition that is keeping capitalism capitalism works because of competition, right? So as soon as and and um look, it's interesting. We're exactly 250 years uh right now since the textbook on capitalism was written. Um so it was uh it was written exactly 250 years ago. A guy called Adam Smith, I think 1776, wrote the Wealth of Nations. Prior to that, he wrote a book on morality. He wrote a book about the moral instincts of humans. He was a deep deep thinker. He was a very human thinker. He was not some guy who was like pro- money and down with the poor and up with the rich. Like that's not that's not where he was at. He was he was all about morality and he wanted to know what is the most moral way of running a society, not just what is the most affluent way. and he wrote Wealth of Nations with that as his lens. But he talks very clearly about the fact that it is the competi it's the competitive part of capitalism that keeps all of it in check. And as soon as power consolidates, then it's essentially the end of capitalism. You have to break that down as much as possible. So when two bakers are in a city, and he talks about this as an example, if you've got two bakeries, right, the, you know, they're both trying to make the best bread at the lowest price. And if there's only one bakery, any bread at any price is is what you end up with. So competition drives prices down, drives quality up. Um, so I'm just pro competition cuz that's the that's the lifeblood of capitalism. We'll be right back with the show. But first, let's talk about how exposed you really are. 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[music] And now, let's get back to the show. Historically speaking, governments have been a bad place to let power consolidate. when you let power consolidate there, they don't necessarily work for and and I'm going to put my own editorial spin here. Correct me if any of this goes ary, but um they're not necessarily always looking out for the little guy. They're looking out for the organism of the government. And so uh given that they will become tyrannical and the individual certainly becomes meaningless in the face of the bureaucracy >> and those bureaucracies will grow and grow and they will feed themselves and um this is where the overlap to what I want to get into now comes. Um I just did a deep dive on Sweden and that was one of the things that they began to realize is that uh oh like this bureaucracy can get so big that it starts becoming >> they almost bankrupted themselves. >> Correct. So it starts to um work in the opposite direction. So but if I were to take the Nordic example and say well hold on we don't have to go all the way to tyranny. There are places that are doing it well now. Um Sweden is a incredible place. They have more billionaires [snorts] per capita than America. >> Huge wealth inequality. >> So >> yeah, they have massive wealth inequality. Right. The reason the reason Sweden has such wealth inequality is because of where they got to with socialism. And it's important it's important to separate Norway because Norway is resourceri due to the oil in the North Sea. They have a massive um sovereign wealth fund. In many ways, they're very similar to Saudi Arabia or something like that in the in the economic way that they operate. But Sweden is is not and Sweden is a great example of socialism gone gone wrong. So Sweden was the fourth wealthiest country in the world, highest GDP per capita. They were doing incredibly well, but they had some wealth inequality, right? Some people were doing better than others. So they became a socialist country. They went all in on socialism. And then they got to the point where where they had runaway inflation, tyrannical governments starting to come in and control everything. They had dropped down to the 25th wealthiest country in the world. So they had lost 20 places, 21 places in their on the league table. [gasps] Nothing was working. You couldn't get anything done. Um their debt went crazy. I think at one point 500% of GDP or some something like something insane. Um they needed a bailout, right? So socialism absolutely crushed their economy. They went from really wealthy place to a desperately like failing economy under socialism. But they had all these socialist people and socialist structures who had gotten used to all the socialist like everything's done for you thing. So they came up with a new brand of socialism. And the new brand of socialism is not redistribution from the wealthy to the poor. It's redistribution from your peak earning years to your uh needy years. So they time shift. They don't wealth shift. So what I mean by that is if you were to take a typical lifespan and you say you you are dependent upon others as a child and then by age 40 you're earning great money and you are a wealth earner wealth provider and that goes right through to say 55 and then you start to taper off and then you're dependent as an elderly person. What Sweden's aim to do through government is to chop off your peak earning years and redistribute it to your beginning and end of life. Right? That's the goal. We help you at the beginning because we tax you so heavily in the middle and then we help you again when you're older. Right? And what they got away from is punish the rich for being rich and reward the poor for being poor. They got away from that and they said time shifting not wealth shifting. And as a result of that mindset shift they were able to come up with a socialist style or democratic socialist or basically a high tax high services environment. But they also we haven't run the experiment of what would have happened if they just had have stuck with capitalism and been the four they you know they were the fourth richest country in the world by capita >> and then they had to come back from the 25th. So this socialist a socialist experiment they they themselves admitted that it failed and it only got better when they went free market and all the like Americans are pissed off because they don't have healthcare really as a major sticking point and they look around the world and see other places that have healthcare and it makes a lot of sense and there's better systems they you know all of that sort of stuff and yes Sweden's got a healthare system but so does Australia so does New Zealand so does the UK so do most places after World War II most western countries came up with some sort of a healthare system. Um, US was the most lenient on the side of sort it out yourselves guys and UK was very much we'll sort it out cradle cradle to grave for you. Um, but you know there's ultimately about 15% of GDP goes into healthare systems around the world. So >> the interesting thing for me is um so many people including a Mam Dani or an AOC they'll point to Sweden and they'll say see this is an example of socialism done well. Um I think without realizing that they tapped out in the 90s and completely gave up on that. And it's interesting there are quotes from uh Sweden from Swedish uh government officials one the finance minister saying for the love of God will you guys stop saying that we're socialist. >> Um same idea from somebody in Denmark. Same thing. I think it was the um sitting or former prime minister said uh cuz Bernie Sanders had just started his bid for presidents back in 2019. >> And he said uh I'm really glad that Bernie got a chance to visit the Soviet Union in 1988 before their entire system collapsed >> uh you know basically because of bad socialist policies. And so there's this sense that the Nordic countries are doing something that maybe they are, maybe they're not. Um when I look at Sweden, the thing I found interesting is that when you start comparing the numbers, you realize very quickly America is also not what people says it is. So I would put forward that America is socialistish. So we the Swedes spend 24% of their GDP on social services. We spend 22%. So it is um it is a huge expense here in the US. we do it terribly and the way that we're going about it obviously is absolutely nonsensical which is another conversation but um I don't know how deeply you've gone into the Nordic countries but when you think about beyond Sweden maybe setting Norway aside um is there something there to like hey let's do a broad-based tax so if in the US 50% of people pay 3% of the tax 50% pay 97% but in Sweden It's very it's across everybody. Like, is there a win there where we just say, "Cool, we're just going to tax the life out of everybody." >> It's a little bit tricky because you've also got very small populations, very homogeneous populations. These are populations that all cluster around a few cities. They've been to the same school systems. They got the relatively same education. They look the same, right? They look like it. It's very difficult cuz humans are primates. It's very difficult when you want to go a continent size example, right? >> Why does it break apart? What's the actual mechanism? >> Um, well, for example, we when you have a small population that are homogeneous, they roughly speaking accept the idea that we're all in this together cuz we all live very close to each other. We all I can see all of us kind of working the same, doing the same. Culturally, we've got the same values. uh you know so there isn't a huge um upset with the idea as soon as like for example a lot of the Nordic countries at the moment are having massive issues because there are no go zones where people look very different and have cultural very different cultural values and suddenly a lot of the Nordic people are saying hey we're not happy with this idea that we're all in this together cuz these guys don't seem like they're all in it together they seem like they're running a very different culture to our culture um So, we don't like it anymore, right? >> What's it? >> Well, we don't like sharing the pie. Like, for for example, if if you've got like let's break it down to the size of a tribe. If roughly speaking, we all know that we're part of the same tribe cuz we're tribal animal. Um, and we all uh roughly speaking work the same. But for the fact that there are some of us that are older, but we know that they did their time. And there are some of us that are younger, but we know that they are the future and they will do their time. Then we're all very much minded towards this idea of we're all in this together. But as soon as we say, "Oh, by the way, uh this group of people who look very different and have very different cultural values, they don't want to work as hard as you want to work and they don't want to work the same way as you want to work. They and they don't have the same schooling or education as you and now you have to provide for them." Our little monkey brains don't don't tend to go in for that. So uh in places where you have a homogeneous society that is very small right living in a few cities and everyone kind of looks the same you get a much more acceptance towards socialism. Like if you were to sort of say um if you were to pick a particular couple of cities where it's all very much like the same in the US, you probably would get away with it. But as soon as you try and scale it across an entire continent, um, you know, it's just harder. It's just harder with scale. >> Well, we're running the experiment in New York City. How what's [snorts] your prediction there? >> Well, the first issue with all socialism is that you have to extract wealth from the productive people, right? That is how it works. You've got to say who currently owns the wealth. There's two types of people who've got the wealth. There are people who uh through unproductive gains, through inheritance or winnings, luck, uh marriage, divorce, they've got gains that you might say are passive gains or illotten gains, right? So, you can sort of say, okay, well, can we get some of that money? But also, you have to cut cast a wide net at the level of government. So, you're going to catch a lot of people who are productive business owners and job creators and all of this sort of stuff. There was a period of time where the physical location was very largely linked to the wealth. So physical buildings, physical factories, physical supply chains, ports, right? New York was built because it was a port uh you know that chips could go into originally. So there was all of these kind of physical things that made New York a place that you kind of just had to be if you wanted to be part of this New York ecosystem. And what we're discovering really quickly in this digital age is that the physical geographical locations don't really matter that much. Um, you know, we don't really care like a hedge fund doesn't really care if it's based in Dallas or Miami or, you know, New York or somewhere else, right? We can move those things around. So, we're discovering that there's a decoupling from geography. So the first problem that you have with all socialism is that if you introduce punitive taxation and punish people for being rich and you point out this is this guy's house and he's, you know, made way too much money and we want to take take a chunk of his house off him and by the way he employs 16,000 of us who are the highest earning of us who pay a ton of taxes. We don't like them either. Then those guys get together and go, why are we here? >> Yeah, this is where we flash on the screen. This is a true story. as mom Donnie calls out uh Ken Griffith. >> Yeah. >> So, >> so they so those of course of course they sit there and go uh we've got an ego. Uh I don't want to be in a city that doesn't want to have me here. Fine. If you guys want to be better off without me, better be better off without me. You know, it's kind of it's kind of like the husband and wife where the wife's earning all this money and the husband's like, "Oh, I don't like this. I'm going to go get a divorce." And the wife goes, "Okay, enjoy." Right? Go on life without me. It's like and and they go their separate ways. >> Now, the reason I brought this up though is you were saying this could work at a city level. So, what is it about New York where it doesn't match your instinct on the city level? >> Well, I'm I'm only saying that people might have a more allin it together attitude at a city level, at a local level. Communism works at a family level. My family is communist, right? So there's there's five of us together and we redistribute the wealth as uh as our communist dictators see fit, right? So we're totally communist at at a family level. I'm so we're socialist at a community level perhaps um at a church group level. Uh and then we become very capitalist when it comes to bigger groups that we don't know everyone in the group and we're not sure what the others are doing and and how hard they're working and whether they're putting into the pot as well. So it's just harder to scale is all I'm saying. Let me let me say it in a really colloquial way. You tell me if this lands. So I I really get annoyed when people talk about this being a race thing. Um so people will say homogeneous and and I'm like why do people think it's homogeneity? Uh I don't think it has anything to do with looks. I think it has everything to do with values. If people share values, meaning, hey, we're all growing up together and I see this person isn't pulling their weight. I'm going to go, hey, [ __ ] what? You're not pulling your weight. I see you every day. This is small enough that I know you. And so we share cultural values. Like Japan has really intense cultural values. And so there, if you've never been to Tokyo, it is the most surreal thing in the universe. They have no trash cans on the street. You will end up carrying your trash for real. >> And I remember thinking, this is the weirdest thing in the universe. If this were America, there would be trash everywhere on the ground because Americans don't share that same value. >> And so thinking of Sweden, it's it is a value thing. It's a values thing that that essentially that that it's culturally we're aligned values we're aligned. We want to >> certain values like it will only work in a culture where the value is don't take if you don't need. >> Yeah. Yeah. Exactly. And um and work as hard as you can. Right. And it's that like if you take postwar Britain, everybody knew we're in the rebuilding phase of the country and it was considered to be absolutely abhorrent that you would go on benefits if you didn't need to be on benefits. There were people who had their legs and arms blown off who said, "I will find a way to go out to work." Right? And that's an allin it together. Whereas today we have um I think we now have a a welfare bill here that is bigger than income tax combined. Um, we have hundreds of thousands of homes that have just decided that they're better off in benefits and they don't want to work. Um, and and we now have this issue that it's culturally totally fine to just be on benefits because because you've calculated that you'd be better off on benefits. >> Yeah. Yeah. That that's why to me homogeneity isn't the thing. Certainly race is not the thing. values homogeneity. But but I also >> but a certain type of value homogeneity because if you have value homogeneity about get whatever you can, you're toast. >> But I also will say that don't underestimate humans are primates. So like if if c like if just people who look different are going to also you know they have this the issue is is that when people dress differently and look differently and have come from a different place and don't speak the same language like literally the same language they don't speak um you know this is where this and by the way I'm not talking about theoretically I'm talking about it is breaking down in Denmark it is breaking down in Sweden because of these uh >> immigration like is that there was millions of people who were brought in, right? So, there was a period of time where millions of people came into those countries and have set up groups that don't integrate well >> and this is one of the things that is putting pressure on that on that system. >> But you guys in the UK have a bunch of Albanians. >> Yeah. >> Is it going to be a problem for them even though they're white? >> The the Well, it it it's it has been an issue historically, Romanians and Albanians and all those sorts of things. prior to Brexit that was actually a conversation because it was these this group of people are failing to integrate and they don't seem to have the same values as us around you know so uh you know they they don't have the all in it together values they're here >> I agree but I thought you what you were trying to tell me was that hey we're monkeys and we do notice the skin difference dressing difference language difference um so it's all the markers of values and alignment and all those sorts of things >> you're not going to let escape the racing. we have to put it in. >> I just think it's all part of I think it's all part of it that when you see groups of people that integrate really well um they have more in common than difference, right? So they just have a common language, they have a common dress, they have a common courtesy and and >> so interesting. It it I heard trust me I get what you're saying and it may be because I'm an American and so I grew up with you're just around other nationalities all the time. Well, I'm here in London for 20 years. Everyone's everyone's from somewhere else. I'm not >> Now, that wasn't true even say 25 years ago. >> But when you I'll lay out the thesis and if you think it's uh bunk, you're going to have to help me reconcile because I I feel like you're pushing me to accept that. No, no, no. There is going to be a race component. We have to accept that. But what I I want to test with the American hypothesis that this really is values. Everything else is confusion. in a whole bunch of different >> identify each other around shared American values like Americans are you can spot them a mile away internationally like there is a way that we behave there's a way that we talk there's a way that we act there's no monolith but it's like you really can tell an American >> and that I would say is very easy for it to transcend color and I feel Like people are so rabbid about being anti-racist that they make this about race. And I feel like I'm screaming into a void saying this is [ __ ] values. >> I agree with you. And also here's the other thing. It doesn't really matter under capitalism because under capitalism you voluntarily trade with whoever you want to voluntarily trade with. Right? What what I'm describing is that when you go full socialist and it's a we're all in this together and we're going to pull our resources and split our resources, that's where these things start to become more of issues because we look at each other suspiciously and saying are you working as hard as I'm working, >> right? That's all I'm saying that socialism makes people uh very suspicious of what everyone else is doing, right? So like just think about uh the group project at university. If it's like we're going to put seven or eight of you together and you're going to get the same grade as each other, >> all of a sudden that guy who's off getting drunk and not sitting there studying and and working on the group project, we're now pissed off because hey, wait a second. How come I'm carrying your grades, >> right? And it you try and scale that. The beauty of capitalism, it's the most moral system because nobody cares about any of those stuff. The more capitalism, the more peace you get between nations and people and individuals. Cuz the deal is really simple. You have to be of value to me so that I can trade with you and I've got to be of value to you. So you want to trade with me and we can look different. We can sound different. You can do things your way. I can do things my way. Whatever you want to do is fine because it's all based on voluntarily voluntary trade. So voluntary trade is this amazing leveler where everyone can be however you want to be, but ultimately if you want to be successful, you're going to have to be of value to someone else. Uh do that however you want to do that or not. >> All right. So give me the final analysis on the Nordic countries because the the our time together is meant to drive towards we are going to present a solution. >> Okay. >> Uh and so I want to know if we can just go Norway or we can just go Sweden, Denmark, whatever. >> Well, here's what you've got to accept. If you want to go the Nordic model, you got to accept that this is not redistribution from the wealthy to the poor. This is redistribution throughout time in your life. >> Okay? So that's universal. That's not just Sweden. That's how that's how they think about it as the Nordic model, which is we're going to do really high taxes so that when you're old and when you're young, you get looked after by the state, >> but it's not a Ponzi scheme. It's you are going to pay a ton in, but we're going to give you a ton at the end. >> Yeah. Right. >> Or is it you're going to pay a ton now, but you're going to get the same as everybody when you're old. >> Just so you know, >> I actually don't know the answer to that. >> Just so you know, the wealth inequality in the Nordic countries is astronomical. They have plenty. >> Do you know what the genie coefficient rating is? It's like4 or something like that where >> Jesus that's like China. >> It's Are you sure about that? >> Well, let's let's look into fact check and put it on the screen. >> But I will say billionaires per capita, millionaires per capita, wealth inequality, right? The the percentage owned by the 1%, the percentage owned by the top 10%. Right? The wealth is astron the wealth inequality astronomical. They're not when they tried to tax wealth, the wealthy left and it damaged the country. So they stopped doing it. When they tried to go full their corporate taxes lower than >> Americans. >> They have they love they basically have two systems. If you want to be a let's let's imagine this. Let's imagine that there's a quadrant, right? And you've got people who love to take risks, right? And they're happy to play the risk game. And you got people who love to work hard. Now, entrepreneurs are hardworking risk-takers. And if you're a hardworking risk taker, the Nordic countries are great for you, right? They love low company taxes, right? All sorts of support and help and educated people. all this sort of stuff. Hardworking risk taker, you're in this category. You're in this box. We're going to look after you. You're a wealth creator, right? Hardworking but don't like taking risks. Okay, you're a worker. We're going to tax you high when you're earning high and redistribute it to when you're not earning high, right? So that's that's what they do for that box. Uh you're a risk taker, but you're not a hard worker. Okay, you're an investor, right? Investment class. You're a financeier, right? So we're going to tax you a different way because of that. Low risk-taking, low hardworking. Oh, you're a pain in the ass, right? You're a you're a socialist, right? So, okay, we're going to try and keep you as quiet as possible and keep you stopping from getting in everybody's way. >> There went the comments section lighting up there on that one. Um, okay. So, >> it's kind of true, by the way. >> Yeah, >> look at all the socialists. They're not They don't like hard work or risk. >> Now, they want to go to university and they want to get a degree in butterfly farts. And >> it's a good degree, Daniel. It will serve me well. I'll have you know. Uh we'll get to the resentment thing. So I think that's an important piece. But first, so by way of um understanding who we can model ourselves after, how we find a way out of this. >> Um the one you helped us have a different vision of what the Nordic model actually is. Um it isn't a socialist model. It's a different type of redistribution. It's one over time instead of one from the wealthy to the poor. ended up as >> making sure that we don't get ourselves into that gigantic bureaucracy that is um just taxing people to death, acting like your money is secretly the government's money. Um so that all makes sense. But is that the solution? Or are you looking at them going, "Oh, you guys are so vulnerable to whether it's immigration or I don't know what that it's not a good model." Or are you like, "Yeah, like this. Hey, we found them. if you can make it work, but it is built upon competence. The the the the Nordics are very competent at doing their systems and their healthcare and all that sort of stuff. A great rule that all entrepreneurs and investors tend to follow is double down on your winners and and cut your losses. Um back competence and starve incompetence, right? So, you think about just a your sales team, right? So you you want to go all in on your top salespeople and give them the best leads, the most leads, and you want to say, "Unfortunately, bottom 30% of sales team, you guys aren't performing. You're going to have to go somewhere else." Right? So you starve incompetence and you reward competence. Um the thing with the Nordic model is that they have for whatever reason, they've been able to create a culture of competence uh within their government institutions that most places don't have. same as Switzerland, same as Dubai, same as um uh Singapore, right? So you actually do get competence end up in government. One of the biggest issues that you have to address if you want to do this model is you can't have you can't just simply throw resources at government if competence isn't in the government. Right? So >> I feel attacked right now, Daniel. [laughter] Well, I mean, [snorts] well, in the US, there are parts of the government that are incredibly competent, right? Navy Seals. >> Oh, okay. Sure. >> Right. Would you want anyone else other than a Navy Seal? >> No. But would I want them distributing my money? No. No. >> But, but if you were to say, um, if there was a part of government that was as competent as Navy Seals, should we give them more resources? Why not, right? whatever they're doing, like if they're able to do it. If you go to California and say, "Hey, we only need 8 billion to build this amazing railroad." And then 6 7 8 years later we go, "Oh, we've had 20 billion and we haven't built one mile of railroad." Well, then you don't double down on incompetence, right? You say, "Okay, we need to find a different way because this is you can't just throw good money after bad." So you, yes, it's great that the Nordic model seems to be working and Switzerland and uh Switzerland is not social. Switzerland is very low small government, but the the the it has to be resources and competence have to go hand in hand. Uh you can't just simply throw more money at something and hope that competence uh works. Yeah, you can throw more money if competence shows up for that money. Great. >> Okay. So, I'm going to try to give it a scorecard to see if I'm understanding you correctly. Um so, Nordic models historically, we we've got a coming immigration problem that I'm going to set aside for a second. um or an arrived immigration problem. But what they've earned their reputation on is being small. First of all, I think uh Norway has 11 million people or Sweden 5 million or something like that or they're like 5 to 15 million people and they all cluster around cities. >> Yeah. Yeah. Like when I also say homogeneous, there's not a massive difference between city folk and rural folk in those countries either, right? They're most they're mostly living very similar lives. That's the other homogeneity about it. It's like, you know, you don't have like they're geographically close. They're living in a few cities. Majority are in a few cities. Like this is this is part of what makes it work, >> right? I recognize me in you and vice versa. We share values. We hold each other accountable. >> Your life is similar to my life. You're trying just as hard as I'm trying. You know, all of that stuff. >> Competence being a high one. Um, okay. So, it it's one of those it's a good model. It definitely will not scale. It won't work for everybody. You would have to have the things that you've just walked us through if you want to make that work. If you have a large country, and I looked this up, there is not any country that has over a 100 million people that is uh low wealth inequality, high growth uh and um oh, and over 100 million. So those were the you just don't get a high functioning socialist distributive policy if you start scaling up over 100 million. >> I should also probably name the elephant. There's a few elephants in the room as well which is when someone talks about capitalism versus socialism like no it's a straw man to suggest that capitalists think there should be no government no services no safety nets like none of that stuff you know there is there is lay fair like crazy level anarchist capitalism which would be like a government of less than 15% of GDP or less than 20% of GDP there's normal range capitalism where the government is about 20 to 35% of GDP, right? Somewhere around a fifth to a third. This is most functioning c countries. Then there's we're getting into a socialist state when you hit about 40% to 60% uh of the size of the economy is government and then you get into, you know, sort of socialism plus 60% to 80% and communism 70% up to 100%. So it's kind of like a sliding scale. How big is the state? Like we're not talking about a binary here where like a capitalist doesn't believe in any social nets or any role of government or any of those kind of things. I'm not in that camp. Like I'm I'm not like I do think it's insane that America uh doesn't have like just a normal ambulance service that doesn't send you broke, right? Like in parts of is it still true that in parts of America if you call an ambulance it's like going to be thousands of dollars? >> I people don't understand what America actually is. So if you are uh broke and you can't pay the hospital will just write that off. If you have insurance, they're going to gouge the insurance company for the money. Uh if you tell them, "Oh, I had to ride in an ambulance, but I don't have insurance." They're like, "Cool. It's whatever $600." Uh I I'm sorry. I do have insurance actually. Oh, they're like, "Oh, that'll be $6,000." You're like, "Wait a second. Can't I just pay the 600?" >> I I agree. That's insane. >> Yeah, that is insane. I totally agree with you. >> It is not what people think. It is not that we don't have healthare. It is that we have a completely corrupt, broken system that has been completely captured. And and I don't I'll derail us if I start going down. >> But by the way, most people are not advocating for that. Like most capitalists are not saying, "Oh, the American health care system is the best possible system in the world." I personally much prefer the idea that if I call an ambulance, it's a government-run service that comes out and picks me up and takes me to a hospital and that that is a taxpayer funded thing because I I assume no one's calling an ambulance unless they need an ambulance. Its job is to administer first aid and take you to hospital. >> Well, so people will call an ambulance for the dumbest [ __ ] in the universe if there isn't the system of like that's a thing that we don't do. >> Um so there's no question part of America's problem is that we have systems that are very easy to paristitize. And so uh th this it it comes down to values. All right, we we can get to that in in a a minute. But so first, okay, the when you look out at the world and you see uh we've got a system that's broken >> because it is not taking care of people because we have this K-shaped economy that is driving people below the cost of goods and so they're effectively getting poorer by the [snorts] day. >> Uh the redistribution models that people use are not working. You need a high competence government with a high homogeneity of values and lifestyle and the places where everything is beginning to break down. um is I mean if we look at the UK since we're here um walk me through like what exactly is breaking down if we're not going to be able to import the model of um the Nordic countries presumably because of diversity and we have >> I'm not yeah I'm not picking on diversity. I'm just saying that you need alignment of values. I don't want that to be the thing that everyone obsesses about in the comments. I was just simply saying with socialism you start to think about is everyone working as hard as I am. That that tends to be and then you get with more socialism you actually get more aggression between groups between tribal tribal rivals however you want to draw those lines. >> Right? So anyone who people can mark out as not working as hard as I am if we all if we're all in this together you get tensions. Whereas in capitalism we just trade take it or leave it. Right? >> And in that case I meant diversity of lifestyle. diversity of values and so >> fair. So here's what I think is causing the K shape, right? And I know you want to jump in on some of it, but like let me kind of map out a little bit of a thesis here, but there's definitely the issue of printing money, debasing currency, causing inflation. Like that's a huge part of it. There is this other part of it as well, which is technology. And take if you just simply let's imagine you had a an island and on the island you had a couple of different groups of people and everyone's trying to survive on the island and you go to one group of people on the island you say here's the Swiss Army knives right you guys all got Swiss Army knives and cigarette lighters right so you can easily start a fire you can easily sharpen sticks right you've got this little edge of technology fast forward a couple of months we know which side of the island is going to be doing incredibly well uh versus the other side of the island this side of the island might have taken over the other side of the island just by giving a slight technological advantage. History is full [snorts] of slight technological advantages leading to global domination. Like the British took over the world because we had guns and steel and boats and like slight technological edges and then the UK had 25% of the world's po population living under the British Empire. >> [snorts] >> Um, and we took over places like India and we took over m like continents because we had a slight technological uh edge. I I feel like having listened to some of your stuff, not all of your stuff, but I feel like you overlook that the role that the slight technological advantage actually plays. Now, what's happening is that where we've introduced general purpose technology. Now, by the way, when you talk about big trends, you got to think in decades. and just take something as simple as social media or cloud computing. It's like we're going to give some people social media that will distract them and make them do dumb stuff, unproductive things. And the same technology will make some people sell like a billion dollars worth of lipstick to their followers and make a ton of money with a team of 10 people, right? Haley Bieber. And it's like this same powerful technology for in the hands of some people, they're just going to hugely blow up and some people are going to be massively distracted with life. >> And just to make sure I understand, you're saying that's a technological difference. >> Yeah. That that essentially like the bicycle in the race that we talked about before, if you've got the leverage of technology, you know how to ride the bike, uh then you win the you win the race every time. Um, and what we're seeing at the moment is we're seeing part of the K-shaped economy is we're seeing some people who totally get how to use technology. You're an example of this. You're running this YouTube channel making money in a way that our grandparents would never have dreamed possible. Um, using this new technology. Uh, I'm not sure with Quest whether you were uh e-commerce retailing and like were you selling a lot of Quest online? >> That's how we started. So, at one point it was 100%. Yeah. But um yeah, ultimately no goes. >> But I'm guessing you're a fairly tech- enabled company at the time. Yeah. And you were probably more tech- enabled than your rivals and than your peers like all of the you know the traditional businesses that were already in the marketplace. You probably were more effective, more lean, you probably faster to implement technology than others. Um and therefore you you you come in and you win and you you win the race. >> [snorts] >> So since the 1970s 80s we've had personal computers, internet, cloud computers, social media and now AI. These bicycles, even Steve Jobs called them bicycles for the mind. These bicycles of the mind, these techn these general purpose technologies, certain people figure out how to use these productively and they accelerate. And the majority of people are distracted by these technologies. They're actually not just neutralized by them, but disadvantaged by them. And their life gets worse because they're flicking through endless short videos and they're, you know, sitting there on social media just consuming content when they should be working, right? So, their life is getting like this is a wedge that that this technology is a wedge that drives some people down and some people up. Um, and that the impact of this over the course of decades is creating a two-tier economy, a two-speed economy. Um, and it's >> give me a percentage of that as your cause of the uh K-shaped economy. >> Like I think it's I think it's right up there with the deflationary effects of money printing. >> Percentage, please. >> Uh, let's go let's go a third. A third. A third, right? So >> the last one. So let's say a a third is the money printing, a third is technology, and a third is that the amount of wealth in society has allowed people to make stupid unproductive choices with their lives without realizing that they're making dumb unproductive choices with their lives. So let me explain that when you get a young person who should be an electrician because the economy needs more electricians and you get a young person who should be a plumber and who should be building houses and should be being a nurse and should be doing something that is the what the economy wants and needs. But through price distortions, market distortions, government bubbles, that person is able to go and do butterfly fart degrees, right? It's like, I'm going to study the farting habits of butterflies this week and I'm going to do a PhD on that. And they're able to deploy their time and resources in unproductive ways while accumulating huge amounts of debt in the process. Uh and if you get that on mass then you also get a massive investment into unproductive behavior. A massive investment into like an unproductive investment. The pro the trick with investing is you must invest in product in productivity. You have to invest in productivity gains. Um, it's like the old saying of uh if a government was to pay one person to dig a hole and pay another person to fill the hole in, technically they've created $200 worth of GDP growth in the economy, but that is not a productive investment. >> If you had to define productivity, >> well, productivity is moving humanity forward. It's actually like you are satisfying real wants and needs in the economy that people genuinely want to pay for. That is making life better, cheaper, faster. Why would anybody ever pay for something they didn't genuinely want to pay for? >> Uh because governments can create market distortions. For example, they can give young 18-year-olds loans to go to university to study whatever their passion is as a university student. >> Is government redistributing the wealth the only way that the abundance of wealth creates a problem? Or are there other ways? Whenever money is transferred that didn't involve voluntary trade, that didn't involve a buyer and a seller making rational decisions uh about making improvements to their lives or making improvements to their businesses, then you get market distortions. And market distortions are essentially rewarding poor productivity, right? And the the classic example is digging a hole and filling the hole back in creates two $100 to dig the hole, $100 to fill it back in creates $200 of GDP, but nothing happened. Um, and ultimately this didn't need to happen. No one was asking for it to happen. This was just a fictitious distortion bubble that was created. Um, so I would say there's there's a three-part problem. Technology is creating winners and losers. Government is eroding the value uh of money constantly, 6% 7% a year in some cases. uh and that compounds and then we're making really horrific unproductive investments with people and capital uh in the economy. >> Okay. Uh all makes sense very clear. I am a ghast that you call that the third a technological thing. Um so that part I would say is culture and intellect. I don't think it is rightly everybody has access to the same technology. You're just saying that some people use it poorly. Uh and I would say okay I think that's a very strong argument but to me that comes back to culture. It's the reason why you have different subsets of ethnicities that will do well and some will do poorly even though you look at them they look exactly the same. So whatever racism they might be facing is neutralized. >> It's also skills training. So when we created the skills the skills training the schooling system for the industrial age we trained people on how to operate within the industrial age and then we started to get price rises. When I look at your mobile phone I see a studio in your pocket. I see the ability to communicate value to the world and to build a following and sell stuff and buy stuff and and uh you know a supercomput. Other people just see it as a consuming device of just, you know, but they don't have the skills to recognize what what what power. Are >> you saying that's from education? >> Yeah, I'm saying it's an education system. So, so the the reason that we have this disparity. >> Wait, wait, wait. >> Yeah. >> Are you saying that uh wealthy people obviously it's not perfect, but wealthy people are getting a better education than poor people? What I'm saying is that when a new technology is introduced, there's an initial period of time where early adopters and people who adopt the skills required to leverage that technology, they get early gains. >> Um, so for example, the British are no longer ruling the world because of their steel and guns and ships anymore because everyone's figured out how to have steel and guns and ships. Um, you know, all the things that the British, you know, we we we no longer lord it over people because we have spinning looms. Um but we did lord it over people for spinning looms for a while. So now that spinning looms have been democratized. Uh there's no competitive advantage in that. But for a brief period of time um those who like you know the hair salon that runs on AI is going to out compete the hair salon that doesn't run on AI um for a brief period of time and then they'll all run on AI as they figure it all out. But there is an uneven time distribution. The Engles pause was an uneven time distribution between some people figuring out how industrial revolution uh economy and technology worked and a lot of people going, "Hey, wait a second. I'm a farmer. I I know how to plant seeds and pick crops. Uh like I I know how to, you know, work with a plow. Uh what do you mean I have to go there?" Or I know how to be a fine tailor and stitch and thread. What do you mean that a sewing machine can now do this for free? So um ultimately there's an there is a time lag between a new technology being introduced early adopters massively having an advantage and then suddenly everyone knows how to use it and everyone does it. That time lag tends to be or historically was 50 years maybe with technology it's going to be 20 years but there is a time lag where early adopters get rewarded disproportionately and lagards uh lag are laggards. >> Yeah. Okay. Um, but you're saying that accounts for about a third of why people are falling behind. I get why this is why I think it was very important that we express to people that there still may be a difference in how we talk about the K-shaped economy because that does explain why there's a difference between the people that move quickly on technology and the people that don't. It does not in my opinion explain why those people are getting behind the average cost of things which I put forward is 98% of what matters. The 2% of like monkeys banging on cages cuz you're getting a great cucumber. >> Yeah. Let me give you give you the the mechanism is that money moves towards that that is difficult and scarce >> and it moves away from it's no doesn't move towards things that are easy and ubiquitous. So when someone has amazing mathematical abilities, they are literally called a calculator and they get hired by the biggest companies in the world to calculate mathematics and then a calculator comes along and no calculators get paid anymore. Uh there once was a typing pool uh where people would handwritten notes to these people who had typing skills and then suddenly everyone can type and then we don't need a typing pool anymore. So what is happening with technology is the K that is partially it is accelerating those who know how to use it but it's also devaluing the skills of those who think they've got something of value to offer the economy but largely it's automated. So here in the UK, we used to have cab drivers earning really great money like like kind of top 10 top 20% of the income uh level like top top quartortile or top quintile uh was cab drivers were in there because knowing your way around London streets was actually given a name called the knowledge and if you had the knowledge you could be a London black cab driver. It was very prized, very difficult job. Um, and it was a very like it was essentially a workingass >> ticket to making a lot of money professional. >> But then along comes GPS and suddenly Uber turns up and someone on their first day in London can become an Uber driver and the they don't have to speak English or know London streets. Basically, if you can just drive a car, if you have a driver's license, you can now have the knowledge. Um, and no longer it's no longer a valuable thing. And so you're saying that a black cab driver was making in nominal terms more than an Uber driver or only in real terms? >> Um, a cab driver in London was a top quintile job. So up until the time of GPS technology and up until the time of Uber and all of those sorts of things, a black cab driver was essentially printing money, doing very very well. Right? you >> let me then let me abstract the question. Are you saying that if I were to look at the average worker they are making um nominally meaning the number would be the same? So real let's set that aside where it's like inflation adjusted but just nominal terms are you saying the nominal dollar amount is going >> I think it's probably the nominal amount is going down for black cab drivers as well. >> Forget black cab drivers because to me it's like technology just shifts things around. >> Okay. If the numbers the same but the purchasing power is lower, then you're talking about an inflation problem, right? But also, if the value of the work is no longer scarce, right? If the value of the work is ubiquitous and easy to replace, right? Like cuz think about what tech technology has. >> What I'm trying to I'm trying to really get to the essence of what you're saying. So if you are saying that we the gig economy people are just making less money and it isn't that prices are going up that's an exacerbating issue but the reality is even if you had no inflation you would still be getting people following falling lower and lower on the economic totem pole >> in the industrial age >> but is that what you're saying >> during the Engles pause >> yes >> a a a tailor a fine tailor >> lost their economic value because of sewing machines Yeah, but I don't care about that because it it's completely irrelevant. That guy is going to get >> inflation thing that was the value of your skills got eroded by technology >> cuz technology simplifies, outsources and automates. >> Yes. But if you take averages, the world is way better off. So what I'm trying to figure out is are you saying that we have not we're either in some sort of transitionary period where technology has so obliterated so many people that this isn't an inflation problem, this is a technology problem, which is what I hear. Part of it is a technology problem that >> but specifically that I would be able to read in the data as there are now a lot more people with lower paying jobs. >> I'm I'm saying that a lot of people like let me give you a really life example. Someone in my family used to be a journalist >> and that was a super highly paid job >> and her job was to write two stories a week. That was it. 500 words to a,000 words times two. and had an editor whose job was to edit those stories and had a photographer whose job was to go out and take photos and develop film for those stories. All of that was a very I grew up in a family where there was a journalist in the family. We had a local newspaper. Hundreds of people worked at the local newspaper. Photographers developing film in the dark room. Journalists going out and interviewing people face to face. All of that was a real thing, right? Unfortunately, that job is just it's very hard to make the case that someone should be paid a professional level wage to essentially write two blogs a week uh and to take a photo that I could take on my phone. Right? So, ultimately the value the person you could kid yourself, hey, I've got these incredibly valuable skills and experiences and you know, like I should be paid an amazing amount of money because like I always have been. Or you can say, "I'm sorry, but technology has now made it that anyone can write a story, distribute a story, take a photo, distribute a photo, develop a photo. All of that stuff is just in your pocket on your phone." Loads of people do that as a side thing for free where they publish content all the time, as well as whatever else they're doing. This is no longer a job. This is no longer a This is no longer a valuable job. >> Okay. So, here's what I hear you saying. Please correct me if I'm wrong. that um when these technologies come into place, whether it's the industrial revolution, the great internetification, doesn't matter. Same idea. Um that the jobs lower in value >> if they if they don't adapt to it, if they don't change. Yeah. Those those jobs are just not as valuable anymore. >> Uh now you just put a caveat and the the very >> a lot of people don't want to adapt. >> Yes. Okay. So this feels important for us to tease apart. Here's what I would say. History shows us with without equivocation, equivocating, whatever. >> People get what I'm saying? I hope uh that a new technology comes along, anybody that's say north of 35, they're toast. It's just going to obliterate them. Uh most of them won't be able to adapt and it's real and it's brutal and living through these transitions is super gnarly. But the technology brings about more jobs, new jobs, and from a GDP perspective, we're better off. Um, so I look at this and I say, "Yep, we're uh the internet changed things so profoundly and there is a percentage of people and this is why the life expectancy in the US is going down largely because of men dying deaths of despair and there's enough of them dying deaths of despair that you can actually see it in the the overall life expectancy. But GDP is still going up. People have just shifted to other jobs. New kids coming into the workforce are not going, I can't find jobs. they're finding jobs. They're different jobs. They might be a YouTuber and they're making way more money doing effectively journalism. So, I'm saying that's a very different phenomenon >> uh where more jobs have been created by the internet by a lot than existed before. So, I I in no way, shape or form and trying to contradict your very astute point that um the there will be a huge class of old jobs that will just cease to be relevant. And for that person, that is a tragedy. And this is why the learn to code became a slur and people were getting so weird. But the reality is that the next generation does learn to code. More jobs are created. And so I would say and if by all means if you know or if somebody in the comments knows if there's data that shows that I'm wrong, I would love to see it. But that um that if you were to completely strip out inflation, you would not see that technology has lowered the average person's ability to earn a living. They've adapted their new jobs to be sure, but it's been a net benefit economically. >> The problem Yeah. economically, but economically is about aggregate and it's about averages. But the problem with technology, especially in the short term, when I say short term, at an economic level, you're talking decades, um, is that a smaller group of people earn way more. So, you might say, oh, there's no longer 10 journalists who earn 50 grand each, but there's one tuber YouTuber earning 500 grand. >> So, you think they're really, it's aggregated up. You think the data would back that up that there's fewer >> uh, YouTubers making as much money as a journalist? uh we know that with digital technology that it doesn't distribute evenly on a bell curve. It extreme it's very much on a power law. So we like for example you can take dating statistics 5% of people get 50% of the dates. Um Amazon the top power sellers get 50% of all the sales and um so it's a anything digital is a power law distribution not a bell curve distribution. The bell curve distribution was largely latestage industrial revolution uh being distributed geographically and dealing with geographical limitations and essentially requiring factories to average out working pay and all of those kind of things that evolved over a course of a 100 years. But early stage technologies do bell curve distribution sorry do power law distributions not bell curves. Um so >> do you still think we're there with the internet? Obviously AI for sure. We'll get there in a minute. But um are you saying the thing that I'm missing? >> Well, it's in the data. In the in the data that I've seen, the one of the reasons we have an eroding middle class is actually we have a widening wealth uh wealthy class >> based on technology. >> Well, yeah. If you go and talk to anyone who's doing really well, it's not like they're sitting there going, I ignore technology. Um they're pretty leveraged with technology. um they're either leveraged with media, finance or data or uh IT systems >> and it's a shrinking number. >> No, it's a the the wealthy there's a there's a growing number of very wealthy people, right? Part of the reason that we have a shrinking middle class is because too many a lot of people are going up, right? That is reflected in the data. We also have people falling down, but we actually have a a disproportionate number of people are going up. They're jumping on this technology up curve as well. And do you think that will balance out over time or >> at the level of an individual as you say there is a catastrophic loss of I used to be a travel agent. I used to love taking people on trips around the world. I used to love organizing people's trip to Milan and to you know France and it was so great being a travel agent. Now it's all automated and it's all online and people just go on a website and do it right. At the individual level the economic function got replaced. the money moved, but to that individual, they they just lost this dream job that they loved for decades. >> That part I I really understand that that um I'm so with you. What I want to figure out. You had a criticism of me and I want to see if this really is something I'm missing because it's entirely possible that this is a huge thing that I'm missing. So what I hear you saying is um the power law distribution with technology, let's call it the internet cuz I don't think we felt enough of it in AI yet. >> But the power law distribution of people who can successfully adopt technology is so profound that part of what is driving the split between people that are technically wealthy and people that are doing poorly is the ability to continue to monetize their skill set in an increasingly digital world. Yeah. >> Wow. Okay. So, you're saying if I do the research there, I'm going to see that in the >> I think you'll see I think you'll see that and I think I also think over time it then starts to turn back into a bell curve as the technological as as we hit mass adoption of the technology and provided you don't introduce another new technology. >> Wow. >> AI unfortunately. Well, what we've had is we've had this this uh rolling uh internet, [snorts] personal computer, phone, uh cloud, social media, AI. We've just had boom boom boom boom boom. Right. So, bel uh sorry, power law, power law, power law, power law. Um what typically happens is that there's a generation that's left behind. As you say, people who are older, they're more reluctant, more set in their ways or more entrenched. Um and then you get a new generation come through and you get a power law on the new generation who are early adopters and then eventually it becomes ubiquitous widespread best practices. Everyone knows the best practices. The school system changes and adapts to it. Training and skills is widely adopted. It no longer gives some crazy awesome advantage. Um and we saw this by the way with the introduction of capitalism. So early adopters to capitalism had this unbelievable boom in prosperity and wealth, right? So we we see this with the USA. We see this with you know um uh Britain and western countries and all this sort of stuff. unbelievable standards of living living at a time where 90% of the people lived on in abject poverty globally and then suddenly capitalism spreads around the world and everyone lifts out of poverty right and it and then boom there's a new higher standard of living where everyone has a you know a lot of the things that capitalism provides. >> Very very interesting. That is um my read on that situation was devastating for the generation that gets hit by it, but the next generation comes along and starts filling those jobs and that it it keeps the bell curve. But if the bell curve isn't there, that is for sure a missing piece to my assessment of why people are going up and down. Cool. I'll definitely do the research. Thank you for pushing on that. Um okay, so that introduces a confounding variable. Obviously, we're about to step into the next massive technological revolution, which is AI. M um so do you given what you just walked us through does AI then just make this even worse where we've now got the exponential of all exponentials and it's going to be this really small number of people that are going to do well and everybody else is going to get crushed down or yeah I think if we were to zoom out hundreds of years a hundred years from now we'll view this entire period of 50 years as a boot period for a digital age or different economy different so let's say we were in the 2150 or 20 2250 and we're looking back at the turn of the 2000s, we would see this boot period which is oh they came up with personal computers, they came up with internet, they came up with social media and cloud and then boom and then they got to AI and all of this would be the on-ramp >> and then you'd see the AI adoption and they go boom, right? And this would be the big uptick. And you and I, we're similar in age and we're we we think we've been living through this like crazy time of like disruption because of all of these new things every 5 years, but actually it's just the on-ramp to AI and it's like boom. Okay, now we're in a very different universe. Um, and yeah, I do think that essentially in the next 10 to 20 years, uh, this is a this is essentially now we we're about to hit the liftoff moment for a very new economy, very new world, and we're going to have an angle pause. We're going to have some people who get it very quickly. We'll have early adopters on the power law, um, late late lagards lagging behind. We'll have two-speed economy. Um, you know, all the same things that we saw in the early 1800s. Okay. So if we have the ability to look back, see the history, understand how this plays out, angles paused, people are not going to put up with it, like there will be a demand for change. How do we facilitate that demand? So I hear people crying out for change. The call for socialism being exactly that. It's people feeling maybe an angles pause like thing and saying socialism is the answer. the way that you described I thought was brilliant which is it seems self-evident to somebody that doesn't necessarily understand economics they just say well we'll take from this guy who has a lot give it to other people so um you've given us sort of the individual answers in a preAI world um does AI change your calculus and is it take from the people that are you know employing now robots and AI and say listen [snorts] we're going to have to UBI this like we've got to distribute this wealth around or is there a different solution. >> Yeah. So in the early 1800s and it was multi-dead. It was 60 70 years of transition from the time that um Adam Smith wrote wealth of nations through to the end of the Angles pause was I think 60 years something like that. So it was two it was two generations of people almost three generations of people before we got a new schooling system before we got a new government. Um so we had the great reform which was a government political change. Had the um uh compulsory schooling system which was a skills change. Um we got floating companies the the limited liability act um which was a new way of owning wealth um and and sharing wealth was through limited liability companies. So we actually introduced new thinking, new technologies, new paradigms. Uh and we ended up with socialism and capitalism as dominant economic systems. All of these were incomprehensible to the agricultural age mind. So the person who owned land and was a a vicount or a baron had no concept of any of these ideas. Like all of this would be completely radical and foreign to someone just in the 1760s, right? and they would understand colonialism, mercantileism, they would understand uh feudalism, they wouldn't understand all of these other isms that we came up with later. Um, so we have to accept that what we're going to have to go through as we move into a very different economy is this this is so big, so large that it requires new economic paradigms. Um, it like for example, you cannot fast forward to the future and I don't know how it looks and I don't know how we get there. You cannot have a situation where corporations can be bigger than countries economically and can make up their own rules globally and pretend to be in Ireland and Luxembourg when they want to be and be doing trade here. Um you you you know essentially I would say that a way to get our heads around it is almost imagine that digital companies are the new forming continents. So there is a continent called Google Google and there is a continent called Meta. There is a continent called Nvidia and there's a continent called Amazon and there's King Jeff and King Larry and King Sergey. They're so big and vast in their power that they're actually creating almost new uh economies, new new continents of of of size and scale. We notice that they start doing things that governments only used to do. They start being interested in education and training. and they start being interested in security and and border control and force like policing and right so they start getting themselves they blur the lines very quickly between what governments used to do and what companies used to do because they kind of are the new continents. Um we're going to have to have a new way of governing these massive organizations. Uh we'll also have to make decisions around what is common property versus uh individually owned or company owned property. So, for example, if AI is trained on all of our data, surely that's common property, right? Like, like surely it can't just simply be owned by the company that sucks it all in without asking permission. So, maybe we need new common assets that actually in order to lease those assets, leverage those assets, if you're a company, you have to pay into a common pool that gets redistributed to the people who help generate those assets. Um, so we're going to have to start thinking about how does the economy work given that the nature of the economy has so vastly been disrupted. Okay. You did admittedly say you don't see the path, but I'm so curious. Do you have any beginnings of even the threads to pull on how we do that? Well, I'll say for instance, you said something earlier that really resonated with me, which is when it's unearned um wealth that I can't remember if you were talking about tax, but I'll say that when it's unearned wealth, it does something very different psychologically. Rich people implode when it's just inherited. They didn't have to do anything to actually get to that point. There's a der of meaning and purpose. I don't think UBI will solve the problem. I think that we'll end up right back where we are. It'll be the cucumber grape problem because there are going to be some people that just have the um talent wherewithal to accumulate whatever disposable income people have anyway. >> Also, if you think about it logically, if you just give everyone two grand a month and two grand a month becomes the meaningless amount, >> right? >> You know, like cuz if you get two grand a month and I get two grand a month, great. >> What's cool about that, right? >> I want four grand a month or >> Yeah. Well, we we still keep going like this. Yeah. >> And suddenly all you've really done is just given a lot of people 2 grand a month that they can spend with our companies and our wealth goes like that and they don't get lift off cuz they're not doing the right things. Yeah. It's transitional to try and soften the blow and stop people from uh you know to give the basics. >> There's nothing so permanent as a transitional government project. >> Yeah. Yeah. But but you're essentially you're not you're really not solving the problem. um you you know like the the issue is is that uh yeah you might introduce something that is transitional. The other thing too is how are you creating the two grand a month? So is the two grand a month just simply uh spent into existence through money printing cuz now you're creating a compounding problem on top of the money printing problem. You know cuz a lot of governments they go oh we know how we'll do two grand a month we'll just print it. Uh it's like oh great so we'll just inflate the value of everything. we'll have runaway inflation and it'll just be out of control. Crazy. Like the only way to actually get your hands on two grand a month is try to redistribute it. So then you go, "Oh, we're going to take it off the rich people." And the rich people go, "Ah, but we're global now. Sorry. We're based in Fiji. Um, come and get us in Vanuatu. That's where our server our servers are now in the middle of the desert in the Sahara. You know, that's that's our that's our new outer space, >> right? We're going to put them in space." Yeah. Yeah. Good point. Right. Sorry, we're in space now. um you you know can't can't catch us where you know I like sorry I I only earn 100 grand a year on on paper. Sorry. Um so they they're going to always have the better advisers. They're going to have geographical benefits. They're going to have all of these kind of things. So trying to redistribute it is going to be incredibly difficult. Um and then you'll go into oh we need to redistribute wealth. Redistributing wealth because it's an un um realized gain. and it's an unrealized gain. Because it's an unrealized gain, you're going to create a liquidity crunch. So essentially, you're going to say, "Oh, we're now taxing people on wealth, but the wealth isn't real. It's just a calculation. So we now have to try and get our hands on the money against that wealth." That's just going to suck money out of the economy, right? The whole economy is going to become, you know, illquid because of the wealth taxes. It's going to be this crazy scenario where you're going to choke the economy trying to tax people uh based on wealth. You know, it won't work. uh it's never worked. >> Um given the things we've talked about today though, despite that I think people are going to make a move for it. Um so >> just quickly, one thing that would work is to regulate that data is a common good and needs to be leased by companies that leverage data, right? Uh, another thing that might work is that um the the data centers become government assets that have to be leased and that or they're highly taxed assets like really highly taxed assets because they are essentially public works or they're public plumbing. Um, you know, they're they're essentially it's like they are the the uh the grid, right? So it's like you basically say if we can choke point around those things that all the companies have to leverage and use right so by all means be anthropic be Google be be all of these be cool and innovative but the data centers and the chips themselves are treated as something special in the economy that is a publiclyowned good or a public uh resource. Help me reconcile that with your public statements that we are likely to bankrupt the economy, not the government, but that the the companies themselves are building these data centers at a rate that just cannot be justified by the amount of money that they intake. >> So if you're right about that, then now by being really aggressive in our tax, we take something that's already hyperfragile and we kill it. Well, so what what's happening at the moment is we're spending something like 700 billion a year on data center development. Um, and about a third of that cost is uh very short-lived. So when you develop a data center, you've got the land and the power and the resources that go with it, which long-term asset, right? So obviously that's fine. And then you've got the physical concrete and steel and all of those sorts of things. But then you've got the GPUs. the GPUs kind of get replaced every three or four years um and then you have to resell them and we're going to create a huge economic issue where let's say let's say out of the 700 billion let's say that only 250 300 billion has to be recycled every year that is an insanely high amount of money that only lasts a few years that of capex when we put down railway tracks they lasted a 100red years we could yes we bankrupted the economy but we ended up with a 100redyear asset debt off the back of it. When we did the grid, we bankrupted the economy, but we ended up with the grid. When we did um fiber optics, >> were the grid and the railroads done privately? >> A combination of private and government, and then they got privatized because they were going bankrupt, right? Similar to the 2008 crisis. Um the government had to step in. Okay. >> So, the UK bankrupted itself twice with uh railroads and once with canals. Um canal mania. >> You guys dealing with canals? Yeah, we built a canal network from Birmingham to London where you take boats up and down the canals. Yeah, we had canal mania. >> Interesting. I always wondered what those were. You see them in um >> that's how we shipped stuff up north and south. >> Yeah, we we created an internal boating network to move products and services up and down the country with canals. >> Um but we bankrupt it was a big infrastructure project and we sent a lot of people bankrupt as a result. Uh globally we had a massive financial bubble around uh telecommunications fiber uh fiber optics going into the ground in the late '9s early 2000s. But even though it created massive financial meltdown uh we ended up with 30 to 40year assets off the back of it. So we were able to refinance them pretty easily and we were able to get through it pretty smoothly because the long-term viability of those assets. The issue that we're about to have with AI is that we're spending hundreds [snorts] of billions on this AI stuff and it only lasts three or four years and then you got to resell it into the market uh and there has to be a secondary market for that level of spend. Um here's what's also happening and if this sounds a little 2008 you you you'd be forgiven for thinking about it. We're repackaging up this data center debt and we're going to pension funds and we're saying, "Hey guys, good news. Backed by Google, backed by Amazon, backed by Nvidia, backed by these biggest companies in the world. They never go broke. They're AAA rated. Why don't we repackage this debt and sell it uh to pension funds as a high yielding 6% a year uh AAA rated pension fund debt? Uh, and you guys can you guys are looking for yield to pay your pensioners. Why don't you just buy these data center debts that are backed by Google? what could possibly go wrong, right? Um, and what could possibly go wrong is that we build out this massive infrastructure that needs replacing every 3 to four years and not a lot of people are paying for it. So in the UA on behalf of every citizen of the USA, if you uh if you divide up the spend, it's about 2 to three grand per person that these companies have spent on individuals. The vast majority of people in America are not paying anthropic. They're not like it's only like less than 10% I think >> pay 20 bucks a month. It's like 1% of people might pay 100 or 200 a month. There's a tiny tiny tiny group of a few million people globally who are actually using coding tools and burning through tokens and all that sort of stuff, but the vast majority of people, it's like, "Oh, I need I need an omelette recipe and I wonder what my cat would sound like if it was Eminem, right?" It's like [laughter] I do wonder what your cat would sound like as Eminem. I'm not going to lie. Okay, so you're saying that technology obviously is going to grow, but it won't grow fast enough. Not when you have to turn these things over every three-ish years. >> Yeah. >> Okay. Um >> and pension funds are holding the baby. They're going to be holding the baby in a few years time. >> Has that already happened? Starting to happen. Okay. So terrifying. Um but that brings me back to >> just just it was on the front page of the FT the other day that the banks, big banks like JP Morgan are freaking out about the debt associated with data centers and are repackaging and reselling it >> because they don't want to hold They don't want to hold it and they're reselling it to pension funds. >> Woof. >> Right. What could possibly go wrong? >> Well, from their perspective, and not to um assume the worst of them, but they're thinking, let me put it on pensioners because they will absolutely have to be bailed out because they vote. >> Yeah. So, if you fast forward, a prediction, a timeline would be that the government bails out all the pension uh the government bails out all the pension funds in order to own all the data centers. The data centers are then common goods. That's how we fund UBI. They own the data centers. They lease the data centers to the tech companies. Tech companies pay a certain amount and then that redistributes to people who are not part of the elite class. >> And how do you feel about that? You're like, uh, rough, but >> it could work. That could work cuz it's based on value and trade. Um, it's it's not necessarily a perfect solution, but it's certainly it's not just dilutive. It's not printing money. Uh, it's it's it's essentially treating data centers like a common good. I'm not this crazy person who says that there's no role for government. Government can't own stuff and all that sort of thing. >> But you are a crazy person that said government, you don't want them to get too big because they suck at distribution. >> Yeah. Well, what here's the difference. When it's based on value, ownership, and trade, it doesn't need a gun to take it off you, right? So like like there is a difference between for example if there's a natural monopoly over clean drinking water and that is a natural monopoly. It's like okay fair enough. The majority of that is a natural monopoly. We could have resellers and we could have brokers and we could have different things but there's a natural monop. We don't need 10 different duplications of this pipe under the ground. So therefore, it kind of is not a bad thing for a government to own as a public good and then run it as best as it can. It's going to be inefficient because it's government run, but it's more inefficient to have 10 different companies trying to uh duplicate a natural monopoly. It doesn't require guns and police. The problem with the problem with socialism is the redistribution angle. Ultimately, here's what here's what happens. It's essentially a system where all the highly productive people say I'm out. I'm leaving and then they start saying no you're not right. We are going to erect uh initially legal walls to stop you, taxation walls to stop you and then physical walls to stop you. Right? We are going to put you to work whether you like it or not. Right? Wow. >> That is the socialist. That's where socialism ends. There's a slight difference with, hey, the government owns data centers because they bailed out the data center industries and now they're getting getting their money back from tech companies. That's based on trade, right? And it's based on a natural monopoly. You don't necessarily need all of these tech companies don't necessarily have to make the same data center development um costs. >> Okay. So, that sounds a little wealth sovereign wealth fundy to me. Yeah. >> Because I'm trying to think of this. >> I'm not anti- sovereign wealth fund. >> Yeah. No, that's where I want to go because I my initial reaction is that I don't want this going in the hands of the government. I don't want them to bail them out. If they messed up, then you let them go bankrupt and it is what it is. Um, but if it can be done well, I would love to hear your take. So, we talked about briefly Norway. We set them aside. Let's bring them center stage. Let's talk about some of the countries in the Middle East. >> How do you do sovereign wealth funds? Well, why hasn't America done one? >> Yeah. Sovereign wealth making >> hasn't done one either. >> No. No. Crazy crazy situation. We should have like in hindsight the Norwegians did so much better with the North Sea than the British did. Um I I I really for starters I really distinguish between natural wealth. So natural wealth when a country has natural resources that to me is the family silver. >> Right. Australia absolute idiots running Australia total like the worst politicians in the world. the dumbest people in the world that you could possibly put into politics is running Australia. >> Congratulations. >> Yeah, we're we're great at that. That's that's one of our specialties. Um, but one of the things we do is we have all this natural gas and in our infinite wisdom, we subsidize other countries to take it off us. >> This is like a green policy. >> It's like so I it's it's corruption or just stupidity, but rather than build a sovereign wealth fund, >> we just don't even tax it very highly. We just say, "Oh, we'll subsidize it to," right? It's this crazy thing that it's the family silver and we're not saying this is family silver. It should be that if the family silver has to get sold, you can sell it one time, right? It's not a renewable. It's a one-time thing. That money goes into sovereign wealth fund for all future generations. Uh we have this woman called Gina Reinhardt who is through corruption her I'm going to get sued. through luck and good work, her grand her father was able to get all these mining rights in South Australia and she's like a gazillionaire. And it's crazy that we sit there and say, "Oh yeah, she can make a ton of she can make so much billions selling the family silver that is essentially the dirt beneath the ground that can be sold one time." Um, in my mind, natural wealth is a family silver asset. You can sell it once. belongs to everybody and it's for future gener it's for all future generations. That makes total sense to me. >> Okay. So, uh data I would say is a little bit different of a category but >> well maybe maybe not because data is a one-time asset. You suck it up and process it one time. It's all the data of everything everyone has ever written. It's all the words on the internet. It's all like it's all the photos. It's all the images. Right. >> Yeah. But we create so much per day. >> Yeah. And it is a natural common asset. Like it's essentially like it it's kind of dripping off you right now. Who's to say that just because Facebook hoovers it up or someone else hoovers it up, who's to say it ceases to be yours, right? Out, >> how are you going [clears throat] to stop China? Uh, we're going to derail on this. So, let me just say on the economic part of it, >> I'm just saying data could be thought of as a common asset. >> Okay. So, let's just take that. Like let's just simply say this idea that hoovering up everybody's data and turning that into a a data set that you can train algorithms on. >> Yep. >> There's an element of that that feels like it's a common good. >> Okay, perfect. I I will grant you that for sanity sake. >> Um so we have this sovereign wealth fund now. How do we stop? How do we do the sovereign wealth fund in a way that works and doesn't derange the government and give them, you know, extraordinary power that they end up abusing? And how do we do it well? Because when I think of nations, I'm setting Norway aside just I'm not as familiar. >> Norway is a great Norway is a great benchmark. >> Compare and contrast Norway with like the Middle East where it's done where they're these dynastic families. Yeah. that run everything and they basically give people enough money to keep them quiet and then a little slave labor on the side because you're not a citizen so you get nothing but we import you for cheap labor like that doesn't strike me as vision there's something called the curse of resources which is also Australia has the curse of resources the curse of resources is that because you make so much money off this stuff that you end up becoming you end up creating unproductive citizens >> life is too good it's it's the curse of being born into a wealthy family as well. Um that ultimately you don't end up being highly productive because you don't have to be. Um especially if you're also in a desert, right? The truth is that if you live and work in a desert and it's bloody hot and there's not a lot of natural resources going on, you are not motivated to get out there and work hard because your body is telling you to conserve energy uh and not move around so much. Don't leave the air conditioning. Um so the combination of those factors means that you don't end up with highly productive people. um you need to work very very hard to educate, train, build industries. Dubai has worked incredibly hard to try and build industries outside of oil and gas. Um you know, so >> but doesn't that just come down to the leadership? >> Yeah, it comes down to competence and leadership. Yeah. But you essentially the the best practice is that you leverage your sovereign wealth fund to invest into skills, training, infrastructure, a platform for people to do well if they want to work hard and do well. and that you try to avoid as much as possible purely and simply paying people to exist where there is no incentive to work or do anything productive. >> Okay. So is that what you consider the most likely outcome in this scenario in terms of the west broadly? >> Well, I don't I I don't necessarily believe that we'll end up with the west. I think we will. So, you know, you talk about China versus USA geographical countries. I think we're actually moving towards tech economy versus um like digital tech, AI economy versus traditional industrial economy. >> Um and it's less about geography and more about these two worlds that exist on top of each other. Um that you could be in the USA and be completely impoverished because you're just disconnected from that tech economy. Or you could be in the middle of Vanuatu, but you're running a tech business and you're, you know, making a ton of ton of money. So, it's less about geography and geographical borders. It's more about the the the are you running on this system or that system. Um, and where do I think we end up? I mean, I think we end up with a a very new new set of rules. We'll need to reform like same thing that they did back in the 1800s. uh reforming the amount of political power individuals have and where they get their political power from. Uh new economy assets, who can own them, how are they owned? Uh do we all own them? Can we earn into more of them? Um which is very human. It's very very very human. Uh one of the last things Hayek ever said is that the reason we can have billions of people alive is property ownership. without property ownership, he said the entire economy will fall to like the the world population will starve if you take property ownership away from people. The idea that you'll own nothing and be happy. Humans are not built for that. We we are own we love games where we can get ahead and win and own stuff and have stuff that is ours, right? It's so built into our nervous systems. Um >> so it's like can we create games where people can earn into more and succeed if they if they do that? And then education systems. We need to have new education systems where kids are taught all the things that are currently wrong and that you're punished for in the current education system. We need to make them right and that you're rewarded for. Oh, you're an attention seeker. Well done. Congratulations, Tom. You're an attention seeker. You've got 4 million followers. Uh, that's a good thing. Um, oh, you like to delegate your maths homework to a CFO. That's pretty smart. You should delegate your maths homework to a CFO who's using AI to do maths homework while you go off and do something else. Um, oh, you like to work in teams as opposed to taking exams on your own. That's totally normal. We like we like people doing that sort of stuff. Oh, you're not a square peg who fits into a round hole. You know, you're not a a replaceable part. That's perfect. We want you to be different and unique and and divergent from from the norm. Um, that's perfectly acceptable. So, we need a school system that basically says, "Here's how you understand what you're unique at and your skills and who you would partner with and how you would be more enterprising as opposed to industrial labor." Um, and yeah, so we'll need those three big changes that that they discovered upon uh back in the early 1800s. Education system, political system, ownership system. >> Daniel, this has been insanely interesting. It's great. >> Oh my god. I I really enjoyed my time with you. This was the most engaging. They've all been wonderful, but this this was special. >> This was fun. >> Uh where can people follow along with you? >> Uh I'm on most of the social media platforms. Um and uh Daniel Priestley. I've got a new book out called uh Lifestyle Business Playbook, which is about how to leverage the tools and technologies to have a fun freedom and flexibility in your work. Um and uh yeah, all all of those sorts of things. God, we got to get you to write a book about the economic path forward. It'd be great to get your mind on that. >> Start working on it. [laughter] >> God, I hope so. Boys and girls, if you have not already, be sure to subscribe. And until next time, my friends, be legendary. Take care. Peace. If you like this conversation, check out this episode to learn more. >> America doesn't exist. There's blue America and red America and tech America and all these different subtribes within it. The word American is like the word Korean. Yo, you're saying something here.