Free Market

Capitalism: The Season Wrap-Up

TWS 16 | Capitalism

 

Capitalism has too often become the word most people do not really understand. Many tend to regard it simply as taking advantage of others for personal gain when it is so much more than that. As we went on to discover the deeper meaning of capitalism, we have encountered great nuggets of wisdom from a number of people who have felt a passion in defining what this misunderstood word is. In this episode, we gather all of the great ideas that have come up in this season as we bid the topic goodbye. Patrick wraps this season up by providing a summary of the accumulated content on capitalism. With this end comes a new beginning of the next season, and Patrick gears us up as he introduces the next topic. Step into this world one last time and relive the moments that changed the way you think of capitalism forever.

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Capitalism: The Season Wrap-Up

It’s hard to believe that we are at the end of yet another season. This season, we are focusing on capitalism. It’s been fun. We have one more guest which I think is going to end the season with a bang. It’s probably the most excitement I felt in regards to interviewing a guest in a long time. I’ve had some pretty amazing guests but this individual and I have only had a couple of conversations. The one that we did have was at an incredibly high level with some very high-level people. I can’t wait to talk to him again about the principle of capitalism to summarize the season in a sense and then transition us to the next season. If you haven’t read all of the episodes or didn’t know that we were focused this particular season, the first four months of 2019 on capitalism, go back and check out those old episodes. You can go to TheWealthStandard.com or obviously check it out on Spotify or iTunes whichever you’re using to listen.

I want to transition to the topic for next season. I want to summarize the episodes that I’ve done, the content that we’ve covered, the interviews that I’ve had, what I’ve learned and some of the topics and the main points that have stuck with me. I want to make a request of you. I want to hear from you guys and I haven’t done this before. I’m going to give out my personal podcast’s email because I want to hear about what you’ve learned. I want to hear about what’s been enlightening for you. I want to hear what you didn’t like too, whatever. I just want to hear from you. If you guys would reach out, it’s Patrick@PatrickDonohoe.com. In this episode, I’m also going to talk about the next season and my ideas there. I’m going to introduce that topic and so hearing what you guys think about it is important to me. If you have ideas or you like or dislike something or you want to have a specific guest, I’d love to hear that feedback.

Defining Capitalism

Capitalism is one of those words throughout the season that gets the hair on people’s necks to go up. They get ticked off. It leads to very high emotional debates and battles. What I’ve concluded is the following. I believe that most people, and I would include myself in it, don’t understand the true nature of capitalism, what that system does to the human experience and to life. I’ve realized that the definition is important. Understand that word because many believe that capitalism is exploiting the lives of others and sacrificing them for personal gain. I think that’s very propaganda-ish and that is not the definition of it and that happens. People sacrifice others, they cheat, they steal and they exploit. I don’t define capitalism as that. I’m not sure what the definition of that is but I understand that people do that. I understand that big business has received a branding of sorts when it comes to that.

There’s always going to be human nature involved. I realized that people are going to take advantage of others for their own gain. I’m not looking at capitalism like that. The system of a free-market, laissez-faire capitalism, I truly believe is the framework to achieve the highest degree of happiness in life. I’m going to try to make that argument in this episode. I look at the past shows and I talk specifically about Italy, some of the things I’ve learned there. I’ve looked at the world slightly differently as I’ve done this season. I look at how amazing is the life we’re all a part of. The technology that exists, the things we’re able to experience, I realize that it’s not necessarily the life that some people want. I look at as much as technology and as much as the progress that we’ve made have helped us. It’s also made people somewhat lazy, spoiled, complacent and I put myself into that category.

I don’t know if I’d be able to survive if I was in the 1800s, raise crops, not have heating and air conditioning or electricity. At the same time, I look at how our lives, as much as they seem easier, they’re much harder. The connection I’ve made to what I see as the framework or the system to bring about the achievement of the highest level of happiness in life, it comes down to us being able to discover what our strengths are, what our natural abilities and talents are. We apply those in a way that helps others but it’s not a one-sided help.

Innovation and creativity is not about following orders. It's quite actually doing the opposite. Click To Tweet

It helps others but yet it also provides an exchange where we also receive. I look at what I’ve discovered in 2019 with some different business coaches that I’ve changed to. One of them has taught me something that seems common sense, but it’s been incredible how it’s reframed my perspective of those people that I work with. There are 60 some odd people that I work with and it’s changed everything. I think it applies to this very principle. What I’ve learned is when somebody is doing less than 80% of their work outside of their core strengths, abilities and successful experience, then they’re not going to be happy. If they are, it’s for a very short period of time.

I’ve learned that the equation to a high level of engagement, participation and excitement with regards to work has to do with working 80% more in what you’re strong at, coupled with meaningful targets or goals, as well as the appropriate incentives and a good level of accountability. I’m going to get into that as we transition to next season’s themes. What this does is it allows me to see a person’s strengths, have them work and do things within those strengths. I delegate whatever else that may have been their responsibility but ultimately, they’re weaknesses to somebody else. It’s been remarkable to see the difference so far and we’re instituting a few other things when it comes to projects and so forth. I believe that everybody has strengths, talents and abilities. In large part, they’re always evolving. The discovery process isn’t this you wake up one morning and suddenly you know what’s strong about you. You are in an environment and in that environment, you exercise whatever that strength is whether you’re conscious of it or not. You receive that fulfillment, you receive that degree of achievement because you know that you’re good at something.

Pursuing Solutions

That’s why I’m saying that capitalism, that type of system, allows for the free discovery of that. If someone has to figure things out, if someone has to work with others, if someone has to get an outcome as it relates to work, then they’re either going to do it or they’re not going to do it. If they’re given clear direction, clear outcomes as far as what they’re supposed to achieve and then they’re given the environment that it’s free for them to figure it out, they’re either going to do it or they’re not going to do it. That’s the discovery of weakness and the discovery of strength. If they figure it out, there’s an enjoyment and a sense of satisfaction that comes from that. It has been phenomenal to understand that perspective of things. I believe that that system of capitalism, whether it’s on an individual level or on a group level, human beings want to figure things out. They want to solve a problem. We’re hard-wired to pursue that. That’s why when you look at a centrally planned government where the government is solving problems. They’re creating jobs, they’re creating solutions for this and solutions for that. That is not the same incentive.

That’s where I believe that a lot of the horrible examples, whether it’s Venezuela or the former Soviet Union, why those societies end up in poverty, disarray and war. It’s because of the wrong incentives that the environment does not have the structure where it’s incentivizing people to discover what’s good about themselves and apply that to a meaningful solution to a specific challenge. I think it goes globally with those huge examples but it also goes down to the workplace. The individual examples as far as achieving satisfaction, happiness and growth. That’s where I’ve settled and I did have a thesis or an idea of what capitalism was to be. I went into my interviews with that opinion although trying to retain an open mind. I had conversations with Jason Rink, Yaron Brook and Larry Reed, the President of FEE, Foundation for Economic Education. Hopefully, those opened your mind to the notion of the human spirit. It’s the notion of what a human being is capable of, what they can do to create miracles. You look at lighting, you look at electricity, you look at computers and technology. It continues to evolve that is the expression of what talents and strengths are within people.

It’s only gotten better, and even though we don’t have a purely capitalistic society, it’s not a completely free market and laissez-faire which means hands off. It’s not 100%. It’s not absolute, yet just some of it. What that does to create these miracle inventions and innovations that are making all of our lives easier, came from the idea of a person. That’s what people are driven to do. I believe that the more they’re allowed to do that, the more solutions, the better solutions and the more efficiency you’re going to have. I went to Tony Robbins, his Platinum Partner Finance Event and I put some of the summary videos and talked a little bit about it on the podcast. You can go to YouTube and look at those summaries because I did a summary video for every day of that event. One of the things that go through my mind is the presentation by Peter Diamandis and specifically the XPRIZE. The XPRIZE is a prize for whoever wants to participate and they get a prize. I think it’s a $10 million for the one that he is proposing with Tony Robbins but it provides the challenge. Peter Diamandis is an insanely intelligent individual.

TWS 16 | Capitalism

Capitalism: The more people are allowed to innovate, the more better solutions we have and more efficiency.

 

He doesn’t have the talents and he also does not have the resources to accomplish what his XPRIZE is awarding. The one that they’re working on is to figure out a way to take the stem cells of a cattle and grow beef. I think it’s wagyu or Kobe beef with those stem cells and do it for a $1 a pound. The thing is they’ve already figured out how to do it. It started at $3,000 a pound then it went to $300 a pound. They’re trying to get it to a dollar a pound. He doesn’t know how to do it even though he’s a brilliant person. He realizes that inside a group of human beings exists the knowledge to do that. He has created that award and that incentive. It goes back to what I was saying before about the workplace. If you help a person discover their strengths, acknowledge them and put them in a position where they’re able to accomplish something you want to be done. Have an incentive to do it and some accountability associated with it. That is where the ultimate satisfaction of the workplace exists. I know that there’s a lot of details behind that but generally speaking, that’s what I’ve discovered, read about and actually seen outside of my company, the success of that.

Looking at the XPRIZE, I think it’s $10 million, the XPRIZE for Tony Robbins and Peter Diamandis are putting together. It’s to essentially figure out a way to get stem cells out of cattle and grow beef for $1 a pound. There are probably other weirder XPRIZEs as well but I know that one is very important because the emerging market’s demand for beef is making our environment worse. The demand for water, the emissions that cattle produce and the fact that they’re taking up 30% of the landmass, it doesn’t seem sustainable. I won’t go down that path any longer. The idea from what I’m saying is that within a human being is the ability to achieve. Achieving with alignment to their strengths and their abilities that they’re born with and cultivate over time what is going to create solutions to all the challenges that we have as well as the challenges that we foresee in the future. As much as it seems like a centrally-planned government, they have this altruism about them where they have the best interest of people in mind.

I think there’s some truth to that. However, it doesn’t produce the environment in which people are incentivized to take who they are, what they’ve learned and to receive the remuneration, receive the actual compensation, the results by them providing a solution. Those are the different criteria that exist in order for humans to feel alive, to feel that they’re achieving things. I’ll bring up an example that, it’s interesting. In 2018, I interviewed Andrew Yang. Andrew Yang is running for President of the United States. He is probably the foremost technologist if that’s even a word, but he’s campaigning with hologram technology. He also is younger and has a pretty good sense for marketing. I believe he is making waves. He was on the Joe Rogan Podcast. He has been interviewed on a number of other forums. He’s gotten his word out there and his tune is the same as what existed on the interview that I had with him. He just hadn’t made the waves but Andrew Yang is on to something with regard to how fast technology is evolving.

Lessons From The Guests

At the same time, he’s using the same notion that essentially planned governments have used in the past, which is taking care of people in providing a solution. What that does, I believe is it discounts the millions and millions of people that have the potential seed in their mind to come up with a way better solution that he’s going to come up with. Giving people money robs them of the ability to go out and discover what is best about themselves, what their strengths are and how that applies to the well-being of others. What’s interesting is that those environments sometimes have to be very difficult. With the rock bottom scenario, sometimes people wake up and they’re like, “I’ve got to do something. I’m going to die or I’m going to live and sometimes that’s what it takes.” Let’s dive into a few other things in relation to what I’ve learned from some of the guests and then let’s make the transition. Larry Reed and G. Edward Griffin have been an inspiration to me. The things that he discovered over the years, how he’s come to believe in human nature and what he’s driven by aligns with some of the things that I’m saying and much of which I’ve learned from him.

I look at just the experience that he’s had writing The Creature from Jekyll Island. We didn’t touch much on a central bank and how that also impacts everything that we’re talking about the market, not being able to find a solution. People not being able to find that solution or any paper over it with money created out of nothing. I won’t go down that path, but I believe that if you google G. Edward Griffin, you can learn about his principles and learn about his philosophy. It’s in line with laissez-faire, free market and capitalism. I do believe that is one of the reasons why he wrote his book and also why he continues at his mid-80s age, to continue to push forward the principles that he believes in by the documentaries that he’s a part of also but also does the events that he puts on. The newsletter that he does is because he’s driven to allow others to understand what these free market, I would say libertarian sense of principles, how they apply to the individual.

Capitalism allows for the free discovery of your strengths and weaknesses. Click To Tweet

David Stockman, that was also an awesome interview. He’s obviously been a contrarian for so many years and has pushed against intervention by the government when it comes to markets, when it comes to the signals that get a person to figure out a problem are manipulated. It confuses them and they’re not able to exercise their strengths, their abilities and their experience to figure out a solution. You have all sorts of intervention that misprices and then also creates false signals. That was a fascinating interview. Andy Tanner, we talked a lot about Greg Lukianoff’s book, The Coddling of the American Mind and it’s always a pleasure to talk with Andy. We mentioned it on the podcast but we spoke for more than six hours that day because these are things that we love to talk about. They’re things we believe, they’re principles that we know will make a difference if they’re understood by more people.

I know that the whole free speech thing has been in the headlines quite a bit. I look at just the ability for people not to speak their mind, not talk about their opinion and have the fear associated with doing that is a slippery slope. When you have an environment of youth, they’re in this transitionary stage of life where they’ve grown up with the philosophy of their hometown and their parents typically. They go to a school system where it has multiple people and multiple experiences. There’s this ideology in the sense that people have to think a certain way. If they don’t, then there’s fear associated with saying things differently or expressing yourself in a different way. It’s polarizing and that is a slippery slope because you don’t allow for the experience of multiple perspectives because those multiple perspectives helped to reinforce certain beliefs and principles or maybe call into question those beliefs and principles that may not be principles.

It was pretty fascinating talking to Andy about that and then of course, David Morgan. I would say they’re very in alignment with David Stockman in relation to how commodities work and paying attention to that as far as investment is concerned. David Collum, that was such an enjoyable interview. You can sense his passion for understanding markets and understanding where we’re at in cycles and talking about it, even though his specialty is chemistry at Cornell. That was a fascinating interview and I enjoyed reading through his year-end review from 2018. A lot of what he said and mentioned, I’ve thought about and it actually made me think a little bit differently. It gave me more detail about what’s going on, whether it’s the pension crisis, whether it’s central banks, whether it’s market returns. There’s so much information packed into that.

Finally, the last two interviews, Connor Boyack and Josh Lannon. I believe that he practices what he preaches. That book that he wrote, The Social Capitalist, he’s trying essentially to take the principles that I’ve been mentioning here and mentioning throughout the entire season. It solves the social problems that exist. Here in Utah, we’re battling a major epidemic with opioid addiction. It’s used by young adults and youth as well as suicide. Youth and teen suicide are incredibly high. When you start to have these types of problems, nobody wants those problems. People want solutions but when you go down the road of having governments institute this and governments institute that, it’s going to come up with the same result. Even though the intentions may be so genuine, there are people out there that have ideas in their mind strengths and their mind talents that are waiting to be expressed. There are solutions to a lot of these challenges and a lot of these issues. I think that’s what Josh and my conversation, and the mission that he’s on.

Application Of Capitalism

TWS 16 | Capitalism

Heads I Win, Tails You Lose: A Financial Strategy to Reignite the American Dream

The mission of conscious capitalism or social capitalism is to identify these epidemic issues, these challenges that exist and will exist. It will essentially allow people to rise to the challenge and provide solutions as opposed to leaning on the government to do it for us. If you guys want to email me and give me your feedback at Patrick@PatrickDonohoe.com, it would be huge for me to hear what your thoughts are, where you disagree with me, where you agree or maybe some epiphanies that you had. What aspect of the conversation was most intriguing to you. The transition, when I wrote my book, Heads I Win, Tails You Lose: A Financial Strategy to Reignite the American Dream. This is why I did the season in 2018 focusing on life, liberty and property. I believe that those three variables create the dynamic for a person to truly experience the American dream.

I define the American dream differently than most define it, not owning a home or, getting a job with benefits, putting money into your 401(k) and retiring. To me, that is not the American dream. The American dream is to come to an environment where there’s freedom in order to discover what is best about you and how you can essentially bring that to the world. You bring that to others and receive the remuneration, receive the compensation for that. I believe that truly is one of the purposes of our lives. In the book, I went down that path of calling into question our school system and where it originated, which is from a Prussian framework. It was to train military and factory workers. We still follow it and that’s not necessarily the path for most. I’ve mentioned Robert Kiyosaki’s book, Why ‘A’ Students Work for ‘C’ Students and ‘B’ Students Work for the Government or something like that. It’s pretty funny.

It’s true because ‘A’ student mentality is following orders correctly but innovation and creativity, it’s not following orders. It’s actually doing quite the opposite. I think that’s why ‘C’ students below are the ones that create such amazing things. Anyway, I won’t get on that path but I don’t believe our school system functions that way. I don’t believe our workforce and workplace is set up to function that way. It’s set up to have people take orders. I don’t believe that’s a way in which innovation occurs. It’s frustrating when you have that system in place. I ventured off and had a researcher look into all of the jobs that she could find that pay more than $50,000 a year that you can do either as a contractor, a freelancer or do it from home, some W2 jobs.

I was flabbergasted as to how many jobs are out there. I took the next step and started to investigate the gig economy. The statistics, you have to take them in stride. Some have an agenda behind them. Some are accurate, some don’t have the sample size that you need but it’s pretty interesting to see. Some of the studies that are being done, where companies are essentially transitioning to a lot of their workforce being freelance, being 1099 contract workers or work from home. There are big companies out there that have their entire workforce offsite or remote. It’s fascinating. I look at that statistic, but I also realized that part of this American dream, part of a fulfilling life, a life of achievement is not to stop working which is the definition of retirement but it’s to continue to provide value.

That doesn’t mean that you worked for the rest of your life. What it does mean is that you take your strengths, the successful experience, the things that make you feel alive and do that forever. It maybe ten hours a week and maybe six months out of the year. It might be twenty hours a week or it might be longer but it’s essentially continuing to exercise those talents, those abilities that you have and will have as you continue to discover them because it’s an evolution. It is necessary for a fulfilling lifestyle. With this research that I had, a researcher dived into it and she’s actually helping me to write a white paper about it. It’s the future of work and how you can live a fulfilling lifestyle without having to retire and much sooner than retirement age. It’s very difficult to chew on this. That’s what I’m going for this season. It’s to discover the individual application of capitalism.

It can be defined by entrepreneurship or entrepreneurialism. It can be defined as discovering a side hustle. Essentially, it’s the future of work and it’s discovering ways in which you can understand the definition of your ideal lifestyle. Where do you want to live? What do you want to do? It’s figuring out how to do it, how to discover what your strengths are, how to maximize those. The success and happiness in the workplace are when somebody spends 80% or more of their time working in something that is their strength and their experience. It’s coupled with goals and initiatives as well as the right incentives. It does not always have to be monetary incentives. That right there is the equation for success in the workplace. Obviously, there’re other variables but those are the primary. That’s where we’re going to transition. In the book, I talked a lot about the human life value statement and creating that. The human life value statement is the assets or strengths, talents and abilities.

The liabilities are your weaknesses, the stuff that you don’t like doing. You have income which is the result of your assets. How much of your income is coming from those strengths and those abilities? How much income is coming from liabilities? What you want to do is increase your expenses, when it comes to your weaknesses and the stuff you don’t like to do. You can maximize the time associated with not only spending it, doing your strengths and abilities but also maximizing those, refining those, discovering more about them. That’s where we’re going to focus on. There’re some guests at that I’m thinking about. The founders of Upwork.com and Freelancer.com, there are some individuals I’ve interviewed in the past that talked about taking your company and making it remote or you working remote. There’re a couple of other guests that talked about The Boomer Revolution, John Tarnoff.

We may have him on as well but this is the angle. It’s to basically take these very philosophical principles of laissez-faire free market capitalism and applying those to the individual. That’s why I’m going to do this go round. Let me know what you think. Thank you so much for reading. I do this because I love talking about this stuff. It’s what lights me up. It’s why I’m staying super late doing it. I’ve seen people benefit, whether it’s the inspiration they receive from it, whether it’s taking the practical advice from what they’ve learned here. I’ve also experienced many people that have been able to make a transition to a life that they never dreamed of by understanding some of these principles. That’s possible for you. I’m excited to talk about some of the things that I believe will make a difference in your life. Thank you for your support. For those of you who are clients of Paradigm, thank you. Thank you for continuing to read the blog and I can’t wait to hear and I haven’t asked much of the audience in the past.

I haven’t said, “Go download this or go seek this out.” I’m excited to hear from you guys. I’m excited to hear what’s going on in your life. I’m excited to hear what you like about the podcast, what you like about some of the guests and things that you’re learning. I’m also excited to hear about what you don’t like. I don’t want to be providing things that piss you off and worsen the experience of your life. That’s not the intention by any stretch. I’m excited to hear about what’s going well, where you’re coming from, what your goals are and where you’re trying to achieve. Patrick@PatrickDonohoe.com is my personal podcast email. I’m going to respond to it. It may take me a little bit. It may take time to do it but I’m going to respond to all of them. I hope you enjoyed it. One of the best guests to round out the season, this guy is young but he understands these principles at a deeper level than I do. I’m excited for him to express some of the things that he feels about the principles of capitalism, how they have to do with our society as a whole. I’ll be with you next time.

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Capitalism, Free Markets And Innovation with Connor Boyack

TWS 14 | Capitalism

 

Lawmakers oftentimes don’t understand the principles of capitalism. Connor Boyack, president of Libertas Institute – a Utah-based organization whose mission is to clear the path of opportunity for each Utahn by removing obstacles that limit freedom – talks about capitalism, protecting free market principles, and fostering an environment in which people can innovate. He explains why lawmakers should be comfortable with innovation and shares the factors that create the desire for regulation in our society. Connor also expounds on the importance of playing defense and offense against the forces that are trying to undermine what we’ve built and protected.

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Listen to the podcast here:

Capitalism, Free Markets And Innovation with Connor Boyack

I’m here with Connor Boyack. We are going to get an interesting perspective on the theme that we’ve been discussing all season, which is capitalism. For those of you who are new, Connor is the President of the Libertas Institute, which is a Utah-based organization whose mission is to clear the path of opportunity for each Utahn by removing obstacles that limit freedom. They do a lot of legal research, public advocacy and advertising. They also do lawsuits against government events, publications and more. Connor is also the author of a popular series called The Tuttle Twins Series, which are children’s books that teach the principles of liberty in a variety of different contexts. You had surpassed the half-a-million mark in books?

We’re approaching half-a-million and it’s amazing.

You’re the publisher. You’re the writer. I know you have an illustrator as well.

It’s been a labor of love and it’s awesome.

I hear about it all the time in speaking to people that know you and know those books.

There's been some pain, there's been some loss, but no one can argue that we haven't benefited as a society to innovation. Click To Tweet

You sat next to Ron Paul once. That was your in to get them to liven up in the conversation.

This was late at night and we were at dinner. He was pretty tired and he beamed when I talked about you and what you were doing. You struck a chord a number of different ways. You got off a legislative session, which is one of your busiest times in Utah. It’s going to be interesting this interview around capitalism because the perspective that you have creates a unique way to look at some of the principles we’ve been discussing. Number one, you’re in front of lawmakers which oftentimes don’t understand the principles of capitalism and vote to protect people, but at the same time violate individual freedoms. You also write at a children’s level about principles that most adults don’t understand. It’s unique because the way you would speak about it is different than how others speak about it. I want to express my appreciation for what you do. You face lots of adversity standing for principles of freedom. I know it’s not easy sometimes, but you’ve taken a huge responsibility and you’re making a difference.

I think about it this way for your topic, we’ve got capitalism and we can write books about it and we can read books about it. There’s capitalism in theory and there’s capitalism in the trenches. It’s one thing to read Sun Tzu’s The Art of War and be like, “I would totally do that strategy and I would do this.” When you actually get in the war you’re like, “How does this work?” Capitalism is a lot that way at a high level. They are very important principles that I subscribe to. By no means am I saying the theory is bad, it’s spot on. The problem is the real world is messy and you have to interact with people who have political power or economic power and don’t necessarily subscribe to the same principles. How do you do that in a way that preserves capitalism, free markets and liberty and all that stuff? That’s where the rubber meets the road and it’s tough to see how it plays out.

I liked the way you approach things is when certain things inhibit individual rights, that tends to be where you go on the attack, on the offensive.

That’s important because often we’re on the defense. I’m always trying to figure out like, “What are the ways we can strategically pivot?” An example is when Uber and Lyft came to town. People have heard the story play out all over the country. Taxi’s fighting and so forth. We found a single mom who was driving with Lyft in Salt Lake City. She was cited with $6,500 ticket for picking someone up at the airport. It’s insane. You’re going to speed 100 miles an hour over the limit and not get a ticket that much. Here she was doing this consensual whatever thing. She can play defense or Uber and Lyft, on behalf of their clients can play defense and try and fight the ticket, get it stopped. We can use that as leverage to go on the offense and shame the airport, use the court of public opinion and use lawsuits. With us, it’s always, “What are those stories that we can find where the free market is being undermined? Where people are trying to do business and the government is standing in the way. How can we proactively try and fight it?” The benefit with a lot of these cases that we might dig into is there are a lot of sympathies for Uber, Lyft, Airbnb or for food trucks. We did this event called the Rally for Food Truck Freedom. We had about 2,000 people come up in the rain and a dozen food trucks.

TWS 14 | Capitalism

Capitalism: Fear and laziness are what creates the desire for regulation.

 

The whole thing happening was in our state, food trucks were being heavily regulated. Many were going out of business because here in Utah, we have this valley where all the cities are clustered together and 80% of our state’s population is within that valley. There are all these cities pegged together rather than being separate. The food trucks catering to the market are going everywhere in between. They’ve got lunch here, dinner here and the next day they’ll be in another city. What was happening before is that the government was requiring inspection in every city. Fees in every city governments. You had to do these redundant regulations, inspections and costs.

The costs alone, if you’re selling food, you’re on a razor-thin profit margin. If you have to pay all this money to the government for permission to go operate, it was ridiculous. These guys were going out of business. We do this big food truck event. We had all the media coming. We had all these TV crews come out and these reporters were eating food on cameras and saying how much they love food trucks and leveraging that public opinion to shame these cities. When we went to the legislature to fix the law, there was no question. That law passed super easy because we had got on the offense in a way that built public support and pressure to get the law changed.

Let’s talk about why they wanted to impose those regulations, having to do inspections, get licenses or whatever. What’s the driving force behind that?

It’s fear and laziness. Let me break those down. I’ve answered the question like this a time or two because we deal with this problem all the time. With fear it’s, “We don’t know. Are they going to sell unhealthy food? We’ve got to inspect it. We’ll get it regulated.” That’s the fear-based approach to regulation in the mind of the elected officials and the bureaucrats justify as all these regulatory issues. To some extent, we can agree. We want certification and we want an inspection. Maybe the market can do that rather than the government, but that’s a separate question. On the surface level, we all want healthy food only to be sold. We’re fine there at that superficial level.

Fear is what creates the desire for the regulation, and laziness is the other one. What I mean by that is it’s not within the past few years when food trucks exploded, all these cities said, “We need to regulate these things. We need to make this redundant patchwork.” No, that didn’t happen. This was decades-old laws on the books that weren’t dynamic enough to apply to this new business model. That’s what we see time and again with Tesla trying to do business and Airbnb. You’ve got these regulations and you have inertia in the system that does not respond. It’s not agile enough. You’ve got these new innovative business models that are being crammed down these regulatory frameworks and mazes that were built for a totally different system.

It's not the answer across the board, but accountability is essential. Click To Tweet

Laziness plays a big part when we go in and shine a big spotlight at this arcane maze and say, “Why are we making these entrepreneurs go through there?” It’s a bit easier for elected officials to be like, “That looks awful. I wouldn’t want to do that.” There’s a lot of inertia and unless you have people stepping forward and making the case and raising an opportunity to say, “Let’s fix that.” It doesn’t get fixed because these food truck owners didn’t know how to change the law. They didn’t know what to do. When we came on the scene and said, “We’re going to help shine the spotlight,” they were immensely grateful. I eat free at every food truck I go to because I say, “We’re the group that did that.” They’re like, “Let me serve you.” They’re happy. The layperson doesn’t know how to do this stuff, so you get this inertia and silos where this business is regulated this way. This entrepreneur slogs through the system because they don’t know how to change it and very few politicians are enterprising enough to find those problems and then come up with a solution.

What would you say the general consensus is of lawmakers with these issues? It’s interesting you have new businesses, entrepreneurs that are disrupting and finding better ways to do things, which oftentimes may not be perfectly in line with the existing laws. You also have a big business or established businesses that they believe they’re operating in a free market. That’s how they were created, but maybe they haven’t innovated and they’re starting to get disrupted and then use political influence to block certain businesses from competing with them. Where do you see the general consensus of lawmakers when it comes down to those two opposing forces?

This is such a relevant, compelling question because it happens over and over again. We have a problem that is the average lawmaker is ignorant. I don’t mean that in a pejorative way, especially in a citizen legislature that meets part-time. They’ve got jobs. They’ve got families. They’ve got hobbies. Now within a 45-day session, a 60-day session, they’re bombarded with information. You’re talking to elected officials in bullet points. The most effective way to get someone to pay attention, change your mind or go the way you want is a one-pager little summary with bullet points. That’s the level to which the average lawmaker can go on any issue.

Then the problem to your question becomes when they get confused. I’ll give you a very precise example that we’ve dealt with this session. There’s a newer company called Turo. You rent cars. It’s car sharing between you and the person. You want to do Tesla. You want to get a Hummer. You want to get a Lamborghini for a day. People in your area who have that car can share it with you. Who doesn’t like that? The rental car companies have a ton of influence and a ton of money. They hire lobbyists and this happened in Utah. We had a bill that was trying to deregulate and protect the ability of Turo and companies like them to innovate because they’re getting shut down. Like Uber and Lyft where you have Turo drivers being criminally charged and prosecuted for picking people up at the airport.

TWS 14 | Capitalism

Permissionless Innovation: The Continuing Case for Comprehensive Technological Freedom

What happens then is the rental car companies get their lobbyists to go up to the capitol where these superficial, ignorant voters are that can only understand things in bullet points by and large because there’s so much information to absorb about every bill. You get them going to a committee or going to talk to a legislator and say, “We’re the free market approach and all we want is fairness. We want a fair playing field.” They’re not paying all these taxes that we are and they’re not doing all these other things that we are. It’s unfair. That’s persuasive to a lawmaker. I believe in a fair playing field. It’s because the lobbyists for the big companies know well how to spin things in a way that sounds good to an ignorant lawmaker who can’t dedicate a lot of time. When you have the ability to go in there and counter and say, “They’re claiming they want a fair playing field,” what they didn’t tell you are all the cars that they buy for their fleet, they don’t pay sales tax on. They get a sales tax exemption saving a profound amount of money.

We’re totally fine to talk fair playing field if they’re willing to give up that exemption or give it to our group. That’s the problem is there are not a lot of great opportunities for lawmakers to dig in and say, “What do you say to that? Let’s try and get into.” It’s talking points. It’s superficial one-pagers and bullet points. The average lawmaker can’t simply by virtue of how the process works dedicate the amount of time to fully understand the issues. That’s when you get these big companies who are protected by the status quo being able to divert lawmakers into saying, “We want a fair playing field so we’re not going to pass this bill that helps Turo.” Turo and freedom fighters like us on the sidelines are like, “That’s not how it works.” By then the bill’s dead and they have a year head start to keep doing whatever they’re doing.

What ended up happening with Turo, with that bill?

What the bill did that we said by and large is, “If you’re a government and you want to regulate a company like Turo or any other peer-to-peer company, you have to treat them differently than the type of business they’re disrupting.” For example, you have to treat the company Turo differently than you treat Enterprise, Hertz, or rental car companies that own vehicles, own parking lots and buildings because peer-to-peer apps like Turo are a matchmaking service. It matched you with the model X guy. That’s all they are. They don’t have inventory. The same thing, Airbnb is not a hotel. Uber’s not a taxi service. We have this model framework saying, “Treat them differently. We’re not telling you how.” What we’re saying is you can’t go to Turo or whatever new peer-to-peer app comes online and say, “You have to abide by these old regulations.” We’re trying to say in law, create a separate path because they’re different. Everyone freaks out, loses their mind, they narrowed the bill, amended it down to nothing and then it ended up not passing. In a free market, a pro-business state no less.

As societies, as the world continues to innovate, Turo is like you rent your car out to somebody else. It’s not this revolutionary life-changing idea. When those are presented, how have you been able to think through that as far as how you would approach some life-changing treatment? I know stem cells and that type of therapy is getting big, but yet it freaks a lot of people out. It could be revolutionary for health purposes. How do you reconcile your ability to have conversations with legislators who can’t necessarily understand the principles of a simple service like Turo?

It’s tough and to the latter point you bring out with stem cells, I’ve got a friend who’s flying down to Mexico because that’s where you’ve got to go to get this innovative therapy. We have a choice in America as a once in theory or to some larger degree free market capitalist society that embraced innovation that has veered far more towards socialist, redistribution and pro-regulation. We have to make a decision. There’s a fantastic book called Permissionless Innovation. This is by Adam Thierer at the Mercatus Institute. It’s all about documenting how our society has been improved, especially through internet technologies where you had a bit of this Wild Wild West. The lack of regulation stimulated this innovation where people could experiment, fail and succeed that have benefited all our lives collectively.

There’s been some pain. There’s been some loss. No one can argue that we haven’t benefited as a society by the profound innovation that’s been able to happen. His argument is that rather than a presumption of regulation, which is what our society has adopted collectively speaking, we should have a presumption of innovation. We should have permissionless innovation where you don’t as an entrepreneur have first to go and fill out form 1093X and then you have to go over here and get a permission slip. Dot your I’s and cross your T’s. Just go innovate. As long as you’re not hurting anyone and everything’s fine, you pass some simple little check and then go innovate.

The market and the government are very joined at the hip. Click To Tweet

The problem to your question is lawmakers need to become comfortable with that. What we’re trying to figure out in our state, but then more broadly the message to this is how do you get lawmakers to embrace permissionless innovation? How do you get them to abandon the two issues, fear and laziness? How do you get them to care? How do you get them to have faith rather than fear? I think part of that is storytelling by say, “Show me that phone in your pocket.” That’s a result of permissionless innovation.

Imagine if the government had said that before coming up with a new cell phone, you must do all these things. Would Apple have done that? Would their competitors have done that? Would that have sparked all the race of innovation that has accelerated new technologies and new things that we take for granted? Using stories and examples to get lawmakers comfortable with a presumption of innovation is where we need to get to. We’re internal with our organization trying to figure out how do you give them that comfort so when enterprise, when the hotels or when the protectionist incumbents come to them and say, “We need protection. We need regulation,” you can have a lawmaker say, “No, I support capitalism. I support free markets. I understand you may not like it, but we’re going to go this path instead.”

When I look at where we’re at as a society, especially with the fiscal situation we’re in as a country, as well as how our monetary system operates. The issues with government, mostly federal government deficits and how much debt is on the books. The debt they’re in with other countries as well as us, the Federal Reserve. You also look at the unfunded obligations, Social Security and Medicare. There are a lot of issues out there. I look at the future and without innovation, if things slowly sputtered along, there are going to be a lot of heartaches. Technology is where innovation occurrence because the idea of technology is to be more efficient.

In a free market, if you don’t have a technology that makes a person’s life better or reduces the amount of time or reduces the amount of money, it’s going to fail quickly. When you start to stifle innovation, that’s when the future is going to get rocky. I never heard of that book before, but it makes sense because if you’re having a hard time with Turo, what about a life-changing medical procedure? What about the medical marijuana that you’ve been dealing with? It’s one of those things where life is happening quickly, and if the government starts to put their foot on the brakes, it can be bad for everyone.

One of the challenges is that because economics and politics are inherently intertwined, you got all these regulations and laws that are encumbering the market. We’ve never had a truly free market. We can talk about wanting one and how they’re great, but we’ve always had this regulated market and politicians respond to pressure. Whether that’s angry mob pressure or people demanding things and saying, “We want this,” and looking at the polls. Part of our challenge, to be frank, is a lot of people are a climatized to the status quo. It’s hard to quantify. The unfunded liabilities and the college debt bubble, all these things are on the horizon. The numbers are so big we can’t even comprehend them anymore. The layperson, there’s no demand for change. Consequently, there’s no pressure being applied to lawmakers. If anything, it’s the opposite. I don’t want to think about that. I don’t want to touch it. I want my easy credit. I want the ability to get a loan to finance my house, put the burden on someone else, and that’s where the demand is.

TWS 14 | Capitalism

Capitalism: Global warming is itself a bit of political bread. It’s the hip thing to be excited about and it’s what everyone wants to chatter about.

 

You have that perverse incentive for lawmakers to ease the burden on the people who are directly in their ear and the people who can’t advocate and the rising generation who would keep kicking the can down to. That’s part of the problem is when we had the food truck owners rallied together, when we had the Uber and Lyft drivers rallied together, we can go work together to create the right pressure to get things changed. Create a freer market to get these bad regulations out the way. When it comes to the big financial problems you’ve listed, where’s the mob? Where’re the pitchforks? Where’s the pressure? If anything, there’s almost the opposite incentive and that’s to our collected detriment because it’s creating a big problem.

I was in Italy and we were in a city where there were this massive protest and kids apparently left school and they were protesting global warming. In Italy, I don’t know if you know much about what’s going on there, they’re horribly in debt and they’re in a recession. A lot of it has to do with their government and the lack of accountability that’s existed there, but yet they’re protesting global warming. That’s something I think you’re right. Worldwide, we’ve been polarized with status quo and how things should be and it’s been exploited.

Part of it is the bread and circuses mentality of Rome. There are political bread and circuses. Global warming is itself a bit of political bread. It’s the hip thing to be excited about and it’s what everyone wants to chatter about. Why don’t they funnel that same political energy to go tackle the real problems that are actually threatening people? It’s almost a convenient distraction for politicians to look cool and say, “I care about saving the world.” Save your country. Save your budget. It’s like the Jordan Peterson, “Clean your bedroom first and then go worry about other stuff.”

Accountability is a huge piece of capitalism and it also seems it’s a huge piece based on your success. With capitalism, the accountability is if you produce a bad product, people are not going to buy it. Therefore, you have the incentive to produce something of value. When it comes to lawmakers, what you’ve done is you’ve created a similar environment so that they operate in a different environment of accountability. Talk about what you’ve done with creating lawmaker index.

In our state, other groups do this too, but we’ve created it to the point where it’s effective. The very night that the legislative session ends, we already have done and finalized our index scoring of how they did. There’s immediacy. We’re not waiting a few weeks when everyone’s back in their lives. We get it out quickly. Ranking all the best and the worst votes and the benefit in doing this is we’re first to market. Everyone’s looking at our index. It’s the thing coming out the gate to see how everyone did. We get a lot of attention and because we get a lot of attention on the index, that creates an incentive for lawmakers to want to do well so that they perform good.

We can't all do the same thing, but we can support one another on our different paths. Click To Tweet

All throughout the session, we’ll have different lawmakers coming up to us and say, “How am I doing?” We get little bonus points when they sponsor our bills because they’re good free-market bills. We say, “If you run one of these bills, you’ll get some extra points. If you run a bad bill, you’ll get negative points.” We’ll get lawmakers like, “I only did one bill of yours. Do you have a couple more that we could do?” I have a puppy and I can use the treat to do good behavior. You don’t want them to pee on the couch. We have all these politicians doing bad things, you’ve got to wave the little incentive in front of them. By no means is it like the answer. A lot of them don’t care. Some of them live in districts where they’re liberal or progressive and they’re not all fans of the free market. They want these big socialist policies.

Those politicians in true representative form don’t care about our index because they feel they’re representing their constituency well. It’s not the answer across the board, but accountability is essential. When you go on Amazon to buy this laptop, you’re going to see the ratings. You see what everyone thinks about it, what experience they’ve had with it. You can have confidence in your decision to acquire that commodity. Why shouldn’t the same thing happen with elected officials? Why can’t we see their voting record conveniently? How they’ve done on the best and worst? How many times did they raise taxes? How many bills have they sponsored that protect the free market? That type of information leads to an informed consumer, in the case of a commodity or an informed voter. I’m sure you get this too.

You get to Election Day. I get all these texts coming in from people saying, “I haven’t looked at anything. Who should I vote for? I didn’t have time to study, tell me what to vote for. I think like you.” I’m like, “Don’t vote.” The concern is we need to have informed voting, informed consumers in the same way. I took an Uber drive and you can see the star rating from all the other drivers, and I have one too. It’s a self-policing system, a great example where the market is taken care of itself to weed out any bad actors. Why can’t we have that in politics? We need more of it.

Fundamentally, isn’t government about protecting free market principles and protecting individual rights. They’re not there to solve problems. If you look at the innovation that I think is the key to the future, inhibiting that is going to be catastrophic. I also look at it essentially technology replacing the government in a sense. We have the tools of accountability that government creates in the first place, whether it’s permits for restaurants or even drivers’ licenses. There are a number of different things that are governed to protect people, but at the same time, there are a lot of free-market tools that would most likely do a better job.

The issue is there’s always going to be those forces trying to dissuade the adoption of new technologies that are going to disrupt. I’ll give you an example. I was in the House of Representatives this session and I leaned over to my policy director. I made a comment to the effect that there’s this woman, a clerk whose job it is to read the name of every bill when it’s time to vote. That’s her job. You can automate that. Everything’s digital and yet this woman is still required to read. Run that through a Google voice transcription thing. It’s super easy, super effective and it saves $60,000 or whatever it costs to pay her. Yet everyone in charge of the budget and on the staff loves that woman of, “Why would we want to let her go? She’s great.” You have those perverse incentives always trying to inhibit the ability to progress.

TWS 14 | Capitalism

Capitalism: Figure out how to make a difference with your unique skill sets.

 

That’s the nature of governments, the Ronald Reagan, the closest thing to eternity is a government program or a government job. This has been great. I didn’t have all the time in the world, but we appreciate it because hearing from you is a different perspective on reality. I look at it completely different. I don’t see things as you see them because of your experience, especially with lawmaking in general in that process, but also understanding free market principles at the level that you do. Capitalism is interesting because we’ve never had pure free market capitalism in anything.

There’s always been in our modern society some element of government and policing to an extent and not protecting human rights. At the same time, you look at the capitalism principles, creating an environment in which people can innovate and not have this oversight or scrutiny and what they’re trying to do. It’s beautiful to see all the things that have happened in our lives, whether it’s the technology in our cars, our phones or in our computers. The more freedom we advocate, the better the innovation is going to be and the better our lives are going to be. To end with this, talk about what you see is the future of just lawmaking, markets, and society. How do you feel things are going in general?

Anyone who cares about capitalism has to care about politics. You have to care about human psychology. They’re inherently connected. You can’t succeed in life financially if you don’t understand how the system works. It’s like getting out the chessboard and all the pieces are laid out and you think it’s a checkers game. You have to understand the rules of the game. As sad as it is, politics inherently as connected to the system of capitalism that we have or the partial capitalism or whatever you want to call it. That’s the downside and the opportunity I see that a lot of people disconnect the two. They don’t realize if we’re going to be successful and have a true market economy or whatever degree that we can, we have to get involved politically.

At a minimum, we have to be aware politically to know where the currents are going and what to do. Either get involved, support someone else who is effective in your state or the national level. As great as it is to go try and make money and grow our businesses and that’s all important, we also have to be playing defense and offense against the forces that are trying to undermine what we’ve protected and what we’ve built. You look at the rise of AOC and it’s still burning to these days. The popularity of the rise of democratic socialism from people who don’t even understand the implications of what that term even means.

There’s a good reason to be a little fearful of the future from a capitalist perspective and what that means. We can’t care, ignore it and think it will go away. We have to confront the fact that the market and the government are joined at the hip. We need to know what to do about it. That’s the pitch I would make to your audience is to figure out in their path of life what their unique skill sets and interests, how to get involved and how to make a difference because we need all the manpower we can get. Whatever state your dear audience is in, I would invite you to go to SPN.org. That stands for the State Policy Network, and it’s like an umbrella association for all the different free-market think tanks across the country. Every state has at least one, some have more than one. Whatever state you’re in, if you want to see who’s in your back yard working in the trenches, and I promise you they’re having more success than any of the national groups that are doing. It’s hard to get national reform, but there’s so much opportunity at a local level where the rubber meets the road and these are the guys in the trenches working on free-market stuff in your community. SPN.org is where you can find them.

That’s the thing even doing interviews like this. You have been influential outside of Utah, The Tuttle Twins, but I know you’ve written a bunch of op-eds for nationwide newspapers. Plus, you’ve gotten a lot of press with some of the things in Utah. The digital privacy is one I remember where Utah was one of the first states to pass them. It’s one of those things where with Connor, whether it’s me following them on social media or it’s sharing some of his thoughts because I oftentimes talk with people and mentioned The Tuttle Twins books and give them away. You can have a similar impact, whether it’s through following these organizations, supporting them financially, but also sharing thoughts and sharing ideas. I’d also say Tuttle Twins is an incredible way to learn about free market principles from a number of different angles because teaching your children about it through those children’s books is incredible.

Breaking it down to that fundamental level solidifies that theory and that principle in your mind. I know that you’re making a huge difference here, but as our society continues to progress or grow at a quick rate. Alexandria Ocasio-Cortez, you have some radical ideas that are manifesting and because of good marketing, because of good influential tactics are gaining steam. Understanding what those things mean as it relates to our future is important. I understand that I don’t have time during the day to write the way you do or to do videos or to lobby legislative sessions, but there are organizations out there that are passionate.

It’s a division of labor. We can’t all do the same thing so we can support one another on our different paths.

What are the best ways to follow your organizations?

Our website is LibertasUtah.org. The Tuttle Twins books are a combo deal with all the discounts and workbooks we throw in is at TuttleTwins.com. If any of your audience wants to follow me or find out about me, google Connor Boyack and I’m easily discoverable.

Connor, thanks. I appreciate it.

Thanks for having me.

Thanks, everyone for reading. We’ll see you next time.

Important Links:

About Connor Boyack

TWS 14 | CapitalismConnor Boyack is president of Libertas Institute, a public policy think tank in Utah. He is also president of The Association for Teaching Kids Economics, a national organization helping teachers educate their students about the free market.

Connor is the author of several books on politics and religion, along with hundreds of columns and articles championing individual liberty. His work has been featured on international, national, and local TV, radio, and other forms of media. A California native, Connor currently resides in Utah with his wife and two children.

 

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Looking At The Markets, The Political Arena, And The World Economy with Dr. David Collum

TWS 13 | Economy

 

Let us talk about the free market as we dive into the insights of Dr. David Collum about the economy, our society, and our future. He is a Betty R. Miller Professor of Chemistry at Cornell University and is a regular and valued presence on the internet commenting on the financial system and the predicaments of our time. Dr. Collum gets philosophical and shares the paradigm and perspective he is using now to look at the markets, the political arena, and the world economy as a whole. Looking into our current situation, Dr. Collum shows how the economy has become about moving money and not goods and services, sharing better ways to distribute.

Watch the episode here:

Listen to the podcast here:

Looking At The Markets, The Political Arena, And The World Economy with Dr. David Collum

I have an interesting guest. We’re going to get into his story and what he does for living as well as something that I became intrigued with. His name is David Collum. He’s a professor at Cornell University. However, he writes a yearly economic review and has done for the last several years. You can find it on PeakProsperity.com, Chris Martenson’s and Adam Taggart’s blog. I’m excited to dive into his insight into the economy, into our society and what he sees as our future. David, welcome to the podcast.

I’m glad to be on.

I did a ton of research into what you wrote about in 2018. I happened to be going to a financial conference up in Whistler right after Ray Dalio was speaking, Howard Marks was speaking and there are a number of others. It helped me have a more refined perspective on what occurred in 2018. What I want to do is dive in briefly to your story because your economic review of things and your formal profession are a little bit different. Would you maybe explain how you came to start writing this annual review?

I didn’t pay any attention whatsoever to the stuff. I did chemistry. Around 1995, I started to pay some attention, some natural things start to develop some savings and you realize that it’s starting to matter. My dad and I used to chat about it when I was a kid. It was natural. As a raging bull for a while after that. In the late ‘90s, I started to notice that things are out of whack. In a fateful moment in July of ‘98, I decided to think for totally out of whack and I dumped half of my equities in cash. Almost to the day we went into that Asian crisis, I feel like I’m a half genius, half idiot. Down in the basement, I said, “If this comes back, I’m dumping the rest.” We came back and by mid ‘99 I had exited equities. There’s some phenomenon where once you go bearish, it’s hard to go on bearish again. Bulls get taught lessons much more dramatically than bears. By ‘99 I dumped all the equities right down to the last share and I was buying gold. I wouldn’t tell anyone though. It was embarrassing to buy gold.

Finally, I fessed up to a couple of people and they go, “Gold?” I said, “Yeah.” That paid off well over the next several years. It took a couple of years to not feel like an idiot though. I read more and more. I was at this chat board run by a guy named Doug Noland. We would chat and I wrote some stuff up at the end of the year and said, “Here’s how my year went and here’s what I’m thinking about.” One day I went viral. I left the containment field. I went from 200 clicks because that’s how many of us were there to quite a few thousand. It turns out one of the guys, named Jessie’s Café Américain, he had started the blog and he put it there. The next year I wrote it again and it got bigger. It was in 2008 or 2009, I decided to get serious. It was my 30th year of investing so I called it 30 Years of Investing from the Cheap Seats.

I laid it all out and all of a sudden, I started getting emails from people around the globe. The most shocking of which was the one I got from Iron Horn and he said, “This got passed to me,” and made some comments. From there, every year got bigger and broader. It had a natural growth rate to it. In 2018, it was about 160 pages. It’s hard to write 160 pages, but it’s hard to do it at the end of the year. I go into some lizard brain to do it. It goes to Zero Hedge, which spreads it around the globe. I’ll take on anything that catches my eye. If an antique catches my eye, I’ll write about antiques. If college finance catches my eye, I’ll write about it. There’s always a section on bonds, valuation and stuff like that.

I don’t necessarily count it by the pages because I’m reading it on a browser. I counted by how skinny that little icon is that you have to drag down. It’s quite a bit of work. Let me dive into a few things that you said. The first is you started to see things differently in the late ‘90s, which gave you a certain perspective. You acted on it. Maybe talk about where that philosophical base came from and maybe how it’s evolved into what that paradigm or perspective is you’re using to look at markets, look at the political arena and look at the world economy as a whole. Maybe you can go through that if you would.

I’m not a trader. I go into a position I usually average in slowly. It can take years. I probably make a trade a year even sometimes. I’m 100% about valuations. What happened to me in ‘98 is I concluded the valuations were at a point where historically win from that point. That’s still true to this day. Of all the cycles I’ve been through, I was in all bonds starting in 1980. People would say, “That was stupid.” I go, “I was making about 15%. It wasn’t that stupid.” When the crash in ’87 occurred, I was reading about it. I was not paying attention, but I realized I should be in equities. After the ‘87 crash, I moved into equities. I moved out again in ’99. I moved into gold, a lot of cash. I had a short position, which is a trade thing for me to do. I’ve done it twice. I will probably never do that again. It worked both times, but I know better now.

Winning doesn’t mean you’re not an idiot. I don’t blame myself. Every decision I make goes through the filter of it doesn’t work, will you forgive yourself? I started buying in ‘09 but I failed to buy not out of fear but out of greed. I started buying it. What a lot of people don’t know is we got down to approximately historical fair value in ’09. They think we are in some basement somewhere. We were nowhere near a basement. I document that exhaustedly especially in ‘18. I was positive that we would have to blow out a lot more. I remember Doug Cliggot saying, “I’ll be buying at this level and then it’ll drop. I will be bullish and at this level I wish I had saved my money.” That was the mode I was in.

When it jumped away from me I said, “This is 1931. We’re going back down again.” Nobody saw the levels of intervention coming. I know hundreds of people saw the mortgage crisis, hundreds and hundreds personally. I can’t find a single person that can point me to a single article where they said before this is over there will be trillions of dollars inserted into this. I can’t find that article anywhere. I failed to catch this road rage created by central banks. I’ve been largely not catching it. I was trading a lot of water and gold and I’m waiting for the next downswing. If my worldview is correct, it’s going to be a nasty one because they’ve blown up a gigantic bubble in both bonds and stocks. When those two start to blow up, I don’t want to be in the splash zone.

You had this perspective of things in ‘09 and then you saw the initial intervention mostly and then it gravitated to QE, how markets would respond short-term and the long-term.

The corporate buyback isn't capitalism. It presupposes that every other aspect of the economy is free market, which is not. Click To Tweet

First and foremost, I joined the club that turned out to be big and wrong that inflation would take hold. It hasn’t. There are people who say it’s there, but it’s not of the magnitude we thought and gold coming out of that bottom. It wasn’t in 2000. If I remember ‘13 where gold started paying dearly for not being right and that’s the thing I blew. I didn’t listen enough. I was like Lacy Hunt, Mike Shedlock, they were deflationists. I bought the bankers line that determined central banker can create inflation. Hunt and Shedlock are the two that I happen to remember well saying, “We are going to have deflation.” It didn’t sit with me and I think they’re correct.

It’s one of those things in hindsight. Everything makes sense as to this move and what it caused. I was looking at foresight when the move is taking place and seeing what impact it’s going to have. Sometimes it’s impossible because it could go a number of different directions. That was ‘09 and the world has changed quite a bit. How has your perspective changed in regard to your philosophy? Valuations no longer make much sense at all. You’ve had a lot of creative corporate finance going on which has continued to grow certain sectors. Ultimately, there are signs that there could be a correction. There are also signs that there might not, but maybe talk through what your experiences have been since 2009 and how your philosophy and perspective have been refined.

It hasn’t changed too much in the sense that of all the bubbles, this one is the one that seems most nonsensical to me. Every previous bubble, there was a good plot line, there was a good story. Whether it was 1929, 1999 or the 1960s where you can always say, “Here’s this revolutionary moment in history and things are rocking and this is why it’s exciting.” Even the South Sea Bubble, they all have a story. The story of this particular bubble is the Fed won’t let us down. That’s a stupid story because they’re incompetent most of the time. They are able to be competent in the short-term, but not able to stop the tides in the long-term and be a cause of a lot of pain when they don’t. I severely blame the Fed for ’09. They’re at ground zero for ‘09. It wasn’t crazy consumers. It was monetary policy.

How do you address those that are like, “The world would have gone to crap and were crumbled if the Fed didn’t intervene?” I hear that quite a bit.

I can live with that idea as long as those people acknowledge that aid has caused it. This is like Ted Bundy is killing people. The second thing I would want them to acknowledge before we would be on the same page is if they’ve been excessive since ‘09. It went off the cliff during Yellen’s term as Fed Chair. She had opportunities to start getting things back to normal and she failed. All excessive QE’s, it’s possible they can see disasters. They’re afraid of it. We now have a Fed who’s afraid of deflation, afraid of a recession. The Fed used to be the root cause of recessions and now they’re trying to avoid them at all costs. When the next one comes, it’s going to be bleak. We’ll have massive corporate debt. I can’t even fathom. Pension funds are underfunded at the top of a bubble. How do you get an underfunded pension when they’re all underfunded? The next brutal correction’s going to send them far into the basement that they’re going to break. They’re going to break right on schedule for the Boomers trying to retire. It’s going to be unpleasant. If the next recession comes and goes and it was garden variety, it’s wrong. I don’t know what to say, but we’re going to be in fetal position on the next one.                                    

I’ve dedicated this season to the theme of capitalism. When you look at free market capitalism and what that philosophy entails and the principles, I would say a lot of economists have understood it for a while and then what it has become. Looking at how that word is used nowadays, there has never been a truly free market, capitalistic system. That’s where you have intervention particularly by central banks and how that does not allow for certain elements of capitalism, mainly failure to occur. It essentially creates unintended consequences and now it’s been creating unintended consequences for the better part of 100 years. If you look at where we’re at, I would say fundamentally when you look at a free market, we would have crashed. Banks would have been out of business. A lot of other businesses would have folded, but that would have been given rise to a more efficient monetary system potentially. We can’t know. It’s all speculation.

You look now at what you mentioned, the fundamentals there when you start to manipulate behavior, you’re essentially deferring the problem to the future. Who knows what that’s going to be? I look at some of the same concerns that you have, the unintended consequences are monstrous. Maybe talk about a few of the big ones. You mentioned pensions. You mentioned the corporate bond market which is massive. Maybe get into those few points which you talk about extensively in your review. Maybe talk about those couple of those main unintended consequences that a lot of this monetary theory has created.

I went completely back to the law on valuations. I presented approximately twenty different metrics of market valuations. They all point to the same story. That is regression to historical mean won’t be a 50% correction. I believe this time at 50% correction, things will break. I don’t know what. These are chaotic systems that you can’t predict. You can predict it, but it will be a mess though. What we have is the appearance of politics getting into the game. At least some of your readers have been paying attention to this modern monetary theory. I’ve tried to get my brain around it. It looks like total nonsense to me. In theory, it’s fine. In practice, it looks like a disaster. It emerged in the context of a budget deficit that’s running 7% or 8% a year. We know in the GDP is running at 2.5% over several years and the budget deficit is running at 7% or 8% that you’re in a death spiral unless you turn it around. The market trends 300% while the GDP ran 30% to the extent everyone I know thinks over time they track. That’s not a good situation. That’s the famous Buffett indicator.

What we’re going to see in the 2020 election, politicians always promise free stuff, but you will be breathless with the level of free stuff being offered in 2020. Goofballs like AOC, Alexandra Ocasio-Cortez pulling the Democrats so far left that they’re socialists. I would never have thought there’d be people who were devout socialists in competency for high office. The rallying cry for the Democrats is going to be, “Wall Street got theirs in ‘09. It’s time for us to get ours.” That is going to be a catastrophic spark to cause problems that are almost unimaginable. I don’t know how to go there. If readers are interested, search justice Democrats. Go on an online search. You’ll find out there’s a coup going on within the Democratic Party and its real. I’ve seen videos of Ocasio-Cortez talking about how she got put into power and stuff like that. It’s a strange thing, the new guard of super liberals, super left wings. They are not trying to beat the Republicans. They’re trying to beat the Democrats. There’s a whole bunch of them. This is the real stuff. I wouldn’t have believed it but the first time I saw a presentation of it, there were videos attached showing people talking about it from the past.

What’s happening is there’s a powerful group who’s attempting to find Democrats in districts for which Republicans will never win. There are plenty of those which the people in the district are not happy with their representatives. They’re trying to knock the Democrats out at the primary. Ocasio-Cortez, AOC, is the de facto spokesperson for the Democratic Party. She’s got the microphone. It’s open mic night. She got elected with 15,000 votes in the primary. That’s where she got elected in the primary because she wasn’t going to lose the election. She’s going to lose the primary if she could. This Omar woman, I can’t remember her whole name. There’s about four for these freshman Democrats. This is the surreal part that people have to do a little deep diving. They were recruited by a casting call. They literally put out a call, Ocasio-Cortez said her brothers submitted her name and somehow it’s like they’re putting together a boy band or something. They’re putting together the Bangles and the plan is to start knocking off Democrats. I was wondering why Ocasio-Cortez was hammering the Democrats. She’s done some talks about that because she’s not against the Republicans. She is against the Democrats. This political move has massive implications for free-market economics.

It’s the first that I’ve heard of some of the points that you’re talking about. I look at what has essentially been a huge influx of capital, which I would say created the big bull run from ‘09 until even late 2018. It makes sense that you have a lot of economists at the helm there. You have Wall Street, which for better or for worse, they know how to manage money, they know how to make money and they understand the implications of losing money. You’re essentially saying that now, the influx isn’t going to go into the hands of Wall Street. It’s going to go into the hands of those that don’t understand even the fundamentals of things.

TWS 13 | Economy

Economy: When you start to manipulate behavior, you’re essentially just deferring the problem to the future.

 

My tax guy told me I’m going to pay 10,000 more in taxes this year because of the new tax laws. I didn’t see this coming. Maybe I’m unique. I’ve got an expensive house, got big real estate. If that’s true, April 15th is not going to deliver checks to people. All of a sudden there’s going to be a completely unexpected slowdown. That’s not going to help. We mentioned that all the time, student debt’s destroying a generation. Corporate debt’s nuts, corporate debt’s in a massive bubble. If you start toppling corporate debt structures, that goes straight to the economy.

One of the stats in your report that surprised me was the majority of the Russell 2000 was in junk status.

Something like 50% of the debt. It’s even worse then. 50% of the debt in the S&P is right above junk. When you swept the junk, you set up triggers all over the credit markets because there’s plenty of holders that did by statute, by legality which can’t hold junk. Electric’s a piece of garbage. It’s gone around the drain. Deutsche Bank’s going around the drain. There are a lot of companies that are not bringing enough revenue to pay their debt service.

Everything in essence intertwined and connected even other countries. Whatever is going to be that trigger that starts to release the dominos, who knows? Pensions are catastrophic because of the interest that they’re using as part of their actuarial models, which are not realistic. You add the unfunded liabilities. It’s been surprising to me because we’re in Salt Lake. Goldman Sachs’ biggest office in the world is in Salt Lake. You also have a relatively high percentage of startups getting to certain capitalization levels, but they don’t make any money. They operate based on being able to receive different rounds of funding. You look at how business is being created these days. We have to operate on a profit and I have had developers poached for 40%, 50% more than I was paying them.

I can’t afford that because other companies get funding. They bid up the prices of labor. You see signals everywhere. I tended to be in your camp back in ’09 or 2010. I didn’t see what was coming. I look at, “Is there something else on the horizon that we don’t see coming?” It’s the technological innovations that could potentially impact efficiencies and prices in a deflationary manner. I look at what you’ve gone through and that’s why the 160 pages is incredible research. It’s not stating just talking points, but also the actual proof behind it. I definitely recommend anyone who’s reading this who has some level of insight to check out David’s 2018 report definitely. Looking at these concerns that you brought to the table, I haven’t necessarily looked at the impact of Justice Democrats.

Justice Democrats are political. You’ll find articles about this movement. Who knows what they’ll do? That’s why these risks have appeared, but something like 65% of the population is signing off on the ideas of socialism. Back in the ‘20s and ‘30s, society had got through this unbelievable industrial revolution. Society was trying to figure out how an industrial world should be organized. There were central planner types. These were the guys who were at risk of being called Trotsky types. At the time, it was a credible idea that you needed good central control of things in this world that we had entered. There are the free market guys who said, “No, free market capitalism is the way to go.”

One can make the argument that that FDR was about a big compromise where the free market guys basically said, “Let us do our thing and we’ll put safety nets underneath you.” You’d get welfare state beginning. It’s the reason why society does protect weak people at some level. The welfare may be viewed as pejorative, but it gets out of control. It’s not a bad idea. We’re entering a period where we’re going to be looking ahead to a new grand compromise because somehow capitalism hasn’t done itself a service. I’ve been fighting about share buybacks and how corrosive they are and stuff like that. I’ve concluded people don’t even understand what they do and don’t do. The most fundamental level of what a share buyback is, people don’t understand.

Share buyback was illegal, but Glass-Steagall came into place after the Great Depression. It’s down as well. What I’ve discovered in the months I’ve been doing this theme is we’ve never had capitalism. There are capitalistic ideas and principles, but there’s never been a system because the corporate buyback isn’t capitalism. It might be, but at the same time, it should presuppose that every other aspect of the economy is a free market, which is not. Interest rates were manipulated which allowed for the corporate world to capitalize on low-interest rates and finance buybacks. It doesn’t necessarily create productivity in the company. It keeps their valuations at the same level or higher.

One of the ways to look at it is if you have an economy that’s based on goods and services, then all boats rise. This is an economy that develops new ways to do things and people’s boats rise at different rates, but all boats rise. We brought prosperity to ourselves by being fairly free market-oriented. The monetary policy has turned our economy from one of providing goods and services to one of moving money. We turn on CNBC, you don’t hear about capitalism; you hear about finance. As the economy morphs from goods and services to finance, you morph to a zero-sum game economy because no one’s making any. You say, “Yes sir.” What are the biggies? Is Netflix the replacement for US Steel? Is Amazon even the replacement for Standard Oil? Is General Electric being replaced by Facebook? These are stupid ideas.

Now, as the economy becomes about moving money, not goods and services, the little guy’s getting killed. That’s the wealth inequality problem. We will solve the problem not by finding better ways to distribute wealth, we’re going to solve it. I’m not saying it’s a solution is what we’re going to do. We’re going to try to redistribute wealth and redistributing wealth doesn’t work well. An efficient economy has a way of distributing wealth such that it’s fair. It’s not necessarily benign, but it’s fair. The workers get their share. They’re not as skilled as maybe then the upper guys who spent years in college and doing smart things, but they get their share. By pricing capital cheaply, they basically priced labor out of the equation.

Now, it’s cheaper for McDonald’s to get robots than to hire people. I am a little worried that change is always good. People worried about what we are going to do with a buggy whip maker, with cars. They’ll find a way. We’ll figure that out. Change can also be quick that it causes problems. If you add hot water to an ice cube, it cracks. If you’ll let it warm, it slowly melts. Things adjust. If you get too far from equilibrium, you get avalanches, earthquakes and explosions. These are big displacements from equilibrium who are turning the equilibrium.

We brought prosperity to ourselves by being fairly free-market oriented. Click To Tweet

What’s the central mechanism for that balance? What should it be?

First and foremost, the missed opportunity is for the Fed to quit worrying about recessions and let the downturns go. Let the downturns keep shaking out the losers and leaving room for the winners. When I was a kid, my dad was a contractor. He worked in one area and he went into cement pumping. It was this big monster truck that pumped up seven floors. I said, “Why did you go into cement pumping?” He said, “You mean besides I can make money?” I said, “Why that one?” This must have been 1970 or something. He said, “It’s because the truck costs $350,000,” which back then was a pot of money. He says, “I can compete with any other contractor who has the capital to buy that truck. We can both be on the playing fields at the same time.” He says, “What I can’t compete with are wildcatters who come in, undercut my prices and put us both out of business simultaneously.” Making capital precious keeps the meatballs out of the game. It keeps shaking out the losers and keeps the winners. It keeps the honest businessmen, the efficient businessmen in the game. Right now, we’ve got all these businesses that would not exist if we weren’t giving them credit and that is a problem.

That’s also what they consider as the solution where a lot of these technologies are ultimately to make life cheaper, make life better, make life more efficient and solve the world’s electricity issues and food issues. It’s both sides of the argument. What I’m saying is what’s in the middle balancing it all out? Like you said about water, if you go too cold, something happens. If you go too warm, something happens. Who is there dialing the temperature?

It’s the rate of change. Every once in a while, you have a small earthquake. You never get them anymore. If you go for 100 years in California without a serious earthquake, you’re about to get your rear kicked. This is where I blamed the Fed. They kept trying to avoid the corrective measures that would have kept it from getting too far from equilibrium. You asked me how I got into this. The field I’m in chemistry turns out to be complicated. Few people want to go near it. I was told that I couldn’t get funded and things like that. All sorts of contrarian things drove me into this field. What I discovered is absolutely everything that people thought they knew it was wrong, almost to the letter was wrong. We’ve gone through many projects after projects. Not only were the answers to the questions wrong, but the questions themselves were also wrong.

For 35 years, this has been my life. What it has taught me is experts can be dead wrong. I have a few superpowers, none of which you’d normally think of me. I’m not that smart. I have the ability to figure out what I don’t have to do and not doing it. That’s a superpower. The other thing I have the ability to do is to look at a bunch of experts who all tell me something and say, you’re full of crap. Few people have arrogance or the ability to resist the tractor beam, but I can look at a dozen central bankers who say, “This is what we should do,” and I go, “I don’t think so.” That’s a special crazy. I’m supposed to debate one of the vice presidents of one of the federal reserves. That’s a special crazy. It’s scheduled now I’m told on a podcast.

Is it one of the board members?

It’s a guy in St. Louis and it’ll be on Twitter, I guarantee you. It probably will be less than a debate. We’re going to talk about modern monetary theory. He invited himself to my podcast, curiously enough. He chimed in and said, “What about both of us?” At first, I don’t think he knew who he was. I said, “He’s the vice president; you got to say yes to this one.” We’re going to get on and discuss it. He entertains the idea of the modern monetary theory, which in practice is preposterous. I can explain it in theory, but I can’t explain it in practice. He’s an open-minded guy. I don’t think we’re going to clash. I also know that I can’t let it clash because it’s not fair to him. I could say, “Why did you instead do this?” In public he can’t respond to certain questions. I can say, “Isn’t Greenspan an idiot?” What is he going to say? I am going to have to be aware of the fact that I have to approach this differently.

Going back to like my original question, now I know we’re a lot of your philosophy has come from. You have stated theories. Human beings all have that element of fallibility where we form certain opinions, but it’s based on certain amounts of information, but not all information. I don’t know if anyone has all information, but you look at the world in that capacity and you realize that there’s a tremendous amount of trust for people that are considered so-called experts. You put yourself in a political role. You put yourself as part of the Federal Reserve. Suddenly the layers of power create this God-like mentality, but it also creates this incredible fear of being wrong.

That’s where a lot of the issues start because there could be positive results because of current monetary theory and what they’re trying to do. At the same time, they never addressed the consequences and there’s always going to be consequences. I can’t wait for that debate, but what a platform to try to have a discussion with an insider at the Federal Reserve on MMT, which is excellent. At the same time, it’s a modern monetary theory. Calling the question does monetary theory in general and what it does because right now it doesn’t make sense. Maybe you can explain this briefly, but from what I understand, the difference is it’s a creation of money that’s not monetized. There’s no underlying asset. If the Fed prints money, they buy a mortgage or they buy a bond or they buy a treasury. They buy something. This buys nothing.

The modern monetary theory has one of the premises that deficits don’t matter.

There is no debt. You’re never going to have debt. You could print your way out of a deficit.

TWS 13 | Economy

Economy: At the time, it was a credible idea that you needed good central control of things in this world that we had entered. Then there’s the free market guys who said free market capitalism is the way to go.

 

We talked about this many years ago. It is actually about 100 years old. We said, “In theory, the government doesn’t have to tax us at all. They can spend the money created with help from the Central Bank.” What happens is the cost of government shows up as inflation and it erodes your spending power as a tax. There are a lot of problems with this, one of which is that inflation is called a hidden tax. I want the taxes to be in plain sight, so we understand what it is we’re being taxed. The real problem is they make this assertion that taxes are to control the money supply. The claim they make is you spend the money and then you tax to pull that money back. It becomes a chicken and the egg if you’re not careful. Some say, “We’re already doing this, why do you care?” It is also this dismissal of government spending is rampant in that community.

Their idea to curb inflation is up to Congress to curb spending. When was the last time you saw them do that? That in practice goes nuts. When was the last time a guy stood up and said, “We’re going to have an inflation problem? As your senator, I’m proposing a bill that will cut jobs.” That’s not going to happen. It’s a stupid idea. Once in a while, they say something stupendously stupid. For a while it can sound rational. All of sudden they say something that’s mind-bogglingly stupid. I go, “You guys are making it up now.” It’s getting a lot of negative press. In theory, the tax against Larry Summers and Frogman even of all people are fighting it. They’ve shown up at the moment when our deficits look unsustainable. Along comes this theory that’s 100 years old that says, “Deficits don’t matter. Don’t worry about it.”

It’s not a coincidence. This has been fascinating. I wanted to see what your insight is and your philosophy around how you view you view things. Hopefully, the audience got something out of it. In the past, we’ve talked extensively about a lot of the issues we’ve briefly touched on. These are issues that are results. Those results have a cause. The cause is where to start, not trying to change the results by themselves. I look at what the Federal Reserve has done since 1913 and what’s happened since then. You can see a lot of positive things, but also from a fundamental standpoint, you can see a lot of negative things. We’re at unprecedented levels when it comes to the signals of our markets and the levels we’re at whether it’s a debt or otherwise. It’s scary at the same time. It’s always that question in the back of my mind, “What am I not seeing? What do I don’t know that I don’t know?” That’s always been that X variable that’s part of the equation that few people can ever understand until it happens.

When Powell showed up, people who thought they knew Powell as chairman of the FOMC. People said he’s different. He doesn’t care about the markets. He’ll do what’s right and the markets are damned. If they have to correct, they have to correct. Two events occurred that were mind-boggling to the point that those who are likeminded were breathless. It was December 24th when the markets had corrected 16% after a 300% run. They corrected 16% and all of a sudden secretary of the Treasury Mnuchin who’s most famous for his wife. The president’s working group on capital and we go, “That’s not even a blip? What are we doing?”

It’s possible something was going on in the credit markets under the surface. I picked up little murmurs about that. In January, Powell found himself on stage with Yellen and Bernanke. The huge mistake he made was to be on that stage because you do not speak as the Fed jury. You don’t speak extemporaneously onstage. He monitored the idea that the Fed was ready to support the markets. All of a sudden, that was the birth of the Fed, what they call it. The idea the Fed will not let the markets drop. Those two events created this massive January rally that we’ve witnessed. What it did is it showed a lot of serious players that the Fed is weak.

They capitulate. I heard the same thing as far as Powell is concerned but imagine the pressure he’s under. That’s where everybody caves at a certain degree of pressure?

Imagine if the generals in World War II couldn’t imagine dropping guys on Omaha beach. How would that work? If you’re in that position, you can’t be weak. If you can’t make the tough calls, you don’t get to be there, but he is there. He blew it and he looks real. He did a 60 Minutes episode.

I didn’t know he was the one with Yellen and Bernanke. I knew about the 60 Minutes one.

He wasn’t explicitly lying, but it was a massive dose of it. It was a massive dose of highly-engineered statements. When they asked him about wealth inequality, whichever one I know says, “You got the point at the Fed on that.” That’s the whole financing the economy in spades. When they mentioned that to him, he said, “That’s not under our jurisdiction,” which is technically not a lie, but he caused it.

That’s a big thing. That’s one thing that’s scary. At the top levels, there’s little velocity. At the lower levels, that’s where all the velocity is. That’s the main catalyst for higher inflation, but it’s kept at bay because it’s at high levels. It’s interesting Powell’s involvement and what the cause of that is. In the end, if they’re the temperature creator that we’ve been referring to, it’s one of those things where the markets have rebounded because that was not what they were priced for at the end of 2018.

The indicators say we’re close to a recession. We were close in 2015. I said, “A recession is coming.” People laughed. By the end of the year, you can see we were flittering around 0%.

Human beings all have that element of fallibility where we form certain opinions that are based only on certain amounts of information. Click To Tweet

On the yield curve, you are briefly inverted too. There are lots of lots of signs. I’m assuming you don’t sit down and take December off and write 160 pages about things. What are you using during the year to keep a pulse on what’s going on? What feeds are you following, what podcasts? What newsletters? What are you typically paying attention to?

Twitter is a gold mine. It’s big mind sync. If you can manage your Twitter feed better than me, you’re a better person. I happen to like Zero Hedge. You got to have a filter. Zero Hedge is great. I’ve had people tell me I’m an idiot for following Zero Hedge. 700 of my followers follow Zero Hedge. Everyone I know who I think is a big-brained Wall Street genius type, they all follow Zero Hedge. I would say Zero Hedge is indispensable. You can’t believe everything because they get stuff wrong, but they’re way ahead of people. Between those two, the stuff I can pick up on, the fly off Twitter is exciting.

Who are you following on Twitter specifically?

I’ve got a list of about 170 people who are on a list. I’ve got a much larger follower list, but I use my cold list and the guys I watch all the time. I watch it for Hussmann, Felder. My favorite person is Rudy Havenstein. He is a hoot-and-a-half. He’s the comic of Twitter. There are certain journalists I keep track of. Lisa Abramovich is good. Kate Long knows the bond market. Chris Whalen, there’s people coming across the feed all the time. Josh Crumb, Luke Roman. These are all people who are the junkies of financial Twitter, everyone knows their names. We’re all following the same people. They’re all entertaining guys. They don’t all agree, but they’re out there battling and posting. If you’re on Twitter and you’re there to share cooking recipes, it’s a colossal waste of time. I bang on the politics a lot.

When the Mueller report got summarized, I was having a field day for about a day where I was pointing out that 500,000 articles were written on Russian collusion, that is the number in a couple of years. There were people who are completely and utterly clueless and the media is completely and utterly clueless. Who knows about obstruction? The fact of the matter is they blew it. The Democrats blew it. They played their cuts. They believe their own press. It was hysterical to me. It’s like the Covington MAGA hat boy, they completely screwed that up. Every couple of months, they completely screw up a story. You got on Twitter and you’ll see their stupid stuff and you go, “I can’t believe those journalists are missing that.” It’s like a huge cocktail party where everyone’s drunk as a pig in Wall Street.

When’s the debate? What’s the date and time for that?

It’s sometime in April.

Do you have nothing definitive?

If you pay attention to my feed, I can guarantee you it’s going to be posted a few times. I don’t think it would be that exciting. It’d be archaic. I’m playing the straight man through this other guy. I don’t want to name because it hasn’t happened yet, but I think I’ll be poking. He’ll be explaining, I’ll be going, “What about this?” That’ll likely be the tenor. There’s the podcast himself. I like the guy.

Who’s the podcaster? Are you not allowed to say that either?

It’s Mac Abraham. We’ll see what happens. It shouldn’t be combative in my opinion. It should be a nice discussion.

TWS 13 | Economy

Economy: There’s a tremendous amount of trust for people who are considered so-called experts.

 

When you have that type of contention, that never leads to a productive dialogue. I’m excited for you to do that. That should be an incredible experience. We will let our audience know that they can chime in or at least listen in. David, this has been an awesome discussion. Thanks for taking the time. Is the best way for people to follow you Twitter or are there other ways?

If you search my name, the top links are no longer chemistry. @DavidBCollum is my Twitter feed. You can find me there. Anyone who passes the minimum IQ test could find me because I’m in the Department of Chemistry at Cornell. If armed with Google, that is not enough information. You need help. I get emails from people, some rather stunning ones sometimes where I go, “I didn’t expect that one.” I am the Paris Hilton of finance now.

I thoroughly enjoyed reading through your material. Thank you for the research that you do. I know it’s making a difference. Hopefully, with the combined efforts of others that when things start to get a little haywire, there’s enough influence to make sure the decision at the bottom is a good one.

I’ve never been on Twitter through a downturn. That’s going to be fun because my Twitter experience has all been during this big tenure.

You have been bearing one of the biggest runs.

He’s calling you an idiot in public. I’ve been chastised. One guy said semi-complimentary. He said, “People listen to you. You should be more careful.” I said, “If they’re listening to me, they’re in trouble already.”

There are a lot of freedom fighters out there that understand a lot of fundamental principles and basics and see the nonsense in what’s going on. I see why. Typically, that theory isn’t valued. Correction ensues because hindsight is one of the best teachers.

I’ll throw out a lab pitch for your readers. Of the many things I’ve focused on and said, “That doesn’t make sense.” The Roth IRA is a bad idea and is relative to a regular IRA. It has got a mathematical hole in it that’s a monster. I’m looking at this and I figured out and then I go, “Why haven’t people figured this out?” I don’t know.

What is the hole specifically?

The hole is if you get taxed the same at the beginning or at the end, which is the Roth versus the regular. The results are the same. It’s 4th-grade math. Timing’s irrelevant. You are taxed 20% in front of 20% at the end. You’re getting to the penny the same amount. The problem is the Roth IRA, you voluntarily put in money, pay the tax on money at the marginal tax rate. You’re taking the top sliver off like a 35% tax rate for some people. You’re voluntarily paying the high tax rate, whereas in the regular, when you pull it out it comes out over the effective tax rate. It comes out over all the brackets. The effective tax rate uses around 12% to 15% lower.

What if it is higher in the future?

The cost of government shows up as inflation - called hidden tax - and it erodes your spending power as attacks. Click To Tweet

It could be higher but that’s about no one knows. All I know is you’re giving up 12% to 15% upfront based on that logic. I want to ask him, “Why do they market the Roth?” He said, “You’re selling Corvettes, you sell the red one.”

It’s the bet of what you pay now versus the bet of what you pay in the future. The math gets the same rate. You’re paying the same. You can make a bet of not paying now, but then if taxes go up in the future, AOC says 70%.

Against the 70% but you’re still paying the effective tax rate at the end.

How do they calculate the effective tax rate in that regard?

There are actually calculators online that do it.

You put all the margins and it creates the effect.

It comes out starting at 0% and then 5% and goes up to 35%. No one’s effective tax rate is ever higher than their marginal by definition. They would have to drive the tax rate so high that the effective tax rate would soar and that’s almost impossible.

Change the tax code to tax withdrawals.

Even when the margin range was up 80%, 90%. Back in the early ‘60s, the effective rate was way lower.

There are trillions and trillions of dollars in qualified money. It comes down to at what rate you pull it out in the future. That’s the determining factor. David, thanks. This has been insightful. I appreciate your work. We’ll make sure that we get the word out, increase your listeners a little bit. Hopefully, as things start to manifest and a lot of the stuff that’s been deferred for a good part several years, that there’s enough influence out there. The culprits or those that created the whole thing are held accountable.

The system will break and then they’ll blame something else.

TWS 13 | Economy

Economy: The fact of the matter is the Democrats blew it. They played their cuts. They believe their own press that itches.

 

Those guys will be long retired. Alan Greenspan, he’s on his last leg.

His reputation as has dropped. His legacy finally got uncovered.

Have you seen that new documentary? It’s relative to the bailouts and what’s occurred since then as far as what Greenspan’s reputation. It also has some interviews with Bernanke too supposedly. I can’t remember the name. Where we’re at as far as social media, as far as information and how quickly it transfers, accountability is a lot more probable these days, especially at those levels.

If the next recession we get through it without a big deal, then I would say that I called her on. I’d be doing me a call if we get through another one.

It’s one of those things where it’s an artificial manipulation. If it was a free market, there’s going to be a correction. There has to be. If you have a manipulation, then it papers over the problem.

You’re out of manipulation. At some point, you get to the end of the rope and the next one is going to do it. Has it started? I’m on record saying I think it started in December.

With that little correction?

When the NBER announces when the recession started, I’m on record saying, “I think it started in December.” Watching auto sales and stuff like that. When they start, they start ever in perceivably. You don’t notice it. There was a poll done in 1991. They asked 51 economists whether there would be a recession that year and all 51 said no. Not only there was there but when the poll was done we were in it. That shows you how hard it is to detect when it started. When did the avalanche start? You noticed when it finished.

There are many fundamental issues and if it goes, it’s going to go. The talks by Howard Marks are interesting and I’m not sure if you’ve read his book. He hits upon the emotional state of things, the feeling state of things collectively. There’s this fundamental variable, fear, greed or passiveness and what that has to do with market cycles. The book is Mastering the Market Cycle. That’s interesting because Twitter is probably given you a good pulse of what the sentiment is out there.

It is bi-modal. You got the Yahoo saying everything’s wonderful. You got the bear saying, “I think it started.”

I’m excited to see what happens. For those that are in the know, for those that are prepared to make certain decisions, it’s going to be a great opportunity. There’s going to be a lot of people that pay a dear price for it.

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About David Collum

TWS 13 | EconomyDavid Collum is the Betty R. Miller Professor of Chemistry at Cornell University and is a regular and valued presence on the internet commenting on the financial system and the predicaments of our time. David has contributed many Year in Review articles and podcasts to the Peak Prosperity community, all of which are available online at www.peakprosperity.com.

 

 

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