Death of the Middle Class: Billionaire vs Entrepreneur DEBATE - Daniel Priestley v Nick Hanauer

26:28The U.K. worker starts at$52 ,000 before relatively high taxes. The bottom line is the gap in base salaries and tax rates is simply too large for U.K. free healthcare to close. The U.S. wins on pure disposable income per person. Yeah, there's no doubt. The U.S. has had a much more successful economy than the U.K., Brexit being a catastrophe. Can I push back on one thing, though, with the minimum wage or this? The companies that hollowed out the middle class, big tech companies, big finance companies, those mega corporations, and I agree with you, they can afford to pay their workers more money.

27:06One of the issues that I feel, and this is what I'm concerned about, is that in the UK, the majority of businesses that do pay minimum wage, like a friend of mine owns a pub, and that pub has razor thin margins, it's losing money, he's not taking any money out of it. He's massively impacted by taxes and minimum wage. So the companies that I see that are the ones who have to pay minimum wage workers and give people the on-ramp into the economy, pubs, little retailers, mom and dad businesses, these are the ones that really do get squeezed out of the economy. They have razor thin margins and you put more pressure on them.

27:41You say you've got more government regulations, you've got more taxes, and now you've got more minimum wages. And they just go, I've had enough, I can't do it. and the companies that hollowed out the middle class, the Microsofts, the Googles, the Amazons, they go - Yeah, the Starbucks. They go, yeah, we can absorb it. Yes. And also we're not paying tax anyway, so we'll just kind of like do that. So one of the things that you could do, one of the things that we recommend is that you impose these standards progressively, that the biggest companies have to pay the highest minimum wage, medium-sized companies pay slightly less, and small businesses pay less.

28:14Yeah. But even within that context, ensuring that everyone pays enough for people to have enough money to continue to buy stuff. I mean, it's fine and good to say, look, I don't want to pay high wages in my pub. But surely the people working in the pub should make enough money so that they can go to the pub themselves and buy a beer. Right. You have to I mean, you know, the National Restaurant Association in America is, you know, famous for this. They want everybody in America to be able to go to a restaurant and eat, except for the people who work in the restaurants. Can I just say something with your friend that owns the pub as well?

28:50So say you own Starbucks. Yeah. You own a pub. Yeah. I'm a worker. Yeah. If you're going to pay me more because you have this progressive minimum wage and you're going to pay less, I'm sorry, Daniel. I'm not going to apply for the job. I'm going to want to go work at Starbucks. so is there not an issue where you're not going to be able to attract talent because you're not going to be able to pay them as much there are many reasons why you would work for a small business as opposed to a megacorp but i'm saying you're paying me four pounds minimum wage he's paying me eight so why not does he not end up getting all the best talent he might get the best talent and also for my pub i might be able to have to i might match eight right so maybe it works that i just pay it but i'm not necessarily legislated to pay it so here's the thing more Look, as a small business owner, there's all sorts of techniques that you can use to retain people.

29:43Because you're going to have more optionality. As a big company? Yeah, because you are going to definitely pay me more. Well, being bigger is always better. It is absolutely true that that high standard will put pressure on throughout the economy. But the small pub owner is also going to benefit from the fact that all, I mean, are we using Starbucks, whatever example we're using? all these people now earn so much more that they can afford to go to the pub and buy stuff. So one of the interventions that I was part of in the United States was the$15 minimum wage. But we cook that up in Seattle, Washington.

30:21And so I spoke to many, many, many, many, many small business owners who are absolutely terrified by this because, you know, look, We are all business owners, right? And so you can do a calculation in seconds about the risks and the expenses of higher wages, correct? But what you cannot calculate is the benefit of operating your company in a regime where everyone earns more, right? And the benefits that accrue to you from that. Look, a ham sandwich in, I don't know, Somalia costs 25 cents. It costs$25 in Switzerland. What kind of economy do you want to live in? Right? You know, so what were you going to say about your friend?

31:05Well, the friend who owns the pub, his pub is actually full most nights of the week. They have lots of people going there. The issue is taxes and costs. He's got a big government in the UK. We have all of these things. Like everything that you've mentioned, we have it. And we've had it for 25 years. We don't have an affluent middle class that's been created. We have an eroded middle class. So the actual numbers here is that my friends, he took no money himself. And the pub lost 180 ,000 pounds last year. And it's because of VAT. And he feels like he's carrying the weight of training people in their first job.

31:36He's creating jobs as one of the only employers in his little town. And also, he didn't create this mess. Amazon and Microsoft and Google and Facebook and big funds, they are sucking money out of the economy. We're in violent agreement about this. So I just feel like the issue is like, I really want to make sure that we're super, super clear that small businesses are currently squeezed here in the UK. I don't know what's the same in the US. Like they are so squeezed and they are squeezed by big tech and now AI has come along. They feel like they have to learn this new thing and they have to start posting on LinkedIn 45 times a day using AI posts or else they'll get drowned out and they have to, you know, edit videos and become a TikToker as well, right?

32:23So it's all of this constant pressure caused by this tech sector and these big funds. Like one of the biggest threats to my friend's pub is that a big American private equity fund wants to buy the pub and turn it into a block of flats, right? So like they want to financialize this community asset and he's trying to fight to keep his pub, right? So what I don't want to have is I don't want to have big government create a new framework that basically squeezes small family businesses even harder, they all start going, we're losing two pubs a day here, right? They're closing down. They go out of business and then we end up with big corps, big funds who can afford to absorb it and they own everything.

33:05And I also want to be clear that the reason people are struggling is they don't own anything. It's not because of working conditions. They don't own anything. And if they don't own anything - Is that the reason in your view? No, it would be wonderful if everybody owned something. But ownership starts with earning enough money so that you can save money so that you can begin to own something, right? Like one of the lessons that we learned was that trying to give stock options to everyone in a company often doesn't work. It's a catastrophe because for 90 % of the workers in a company, their concerns are immediate and they don't value the stock options.

33:46And if you give them the choice between cash or stock options, It's not even close, right? And so, again, I agree with the sentiment. It's just that I have never seen and I do not believe there is an existence proof for working on planet Earth. What certainly worked great in the United States for 40 or 50 years was a set of standards that required companies to fairly split the value they create with their employees through a variety of mechanisms, unions, which can be problematic for sure. But labor standards like the minimum wage and the overtime threshold and so on and so forth, coupled with a set of policies to discourage consolidation and discourage the kind of exploitation that you have, I think, very smartly articulated so that we can have a dynamic economy.

34:41The only difference that happened back in the time that you're describing where workers had to be included is that it was nearly impossible for a company to outsource their customer success team to the Philippines. And it was nearly impossible for a company to come up with a piece of software that would do 80 % of the heavy lifting of a job. And one of the issues that we have right now is that when you put a lot of pressure on all sorts of companies, we're living in the age of AI and robotics where you essentially, you know, one of the options that companies have is just the option, well, we'll just outsource the labor to another country.

35:16We'll automate it. We'll simplify it. Okay. But the rules that enabled people to do that were written by the same people who are consolidating industries. and taking advantage. I mean, you don't have to live in a world like that. There are other ways to organize the world. The neoliberals promised that free trade was going to make all of us richer. And what it did is it flooded our markets with cheap stuff from China. But it is absolutely not clear that it made people's lives better. It made Chinese people's lives better. It made Chinese people's lives better, but it certainly didn't make people in the UK's life better.

35:56And it certainly didn't make people in the United States' life better. And so you could have imagined approaching that in a fundamentally different way. I guarantee you that if the United States could go back and do it again, we would have rethought it. There's a few ownership models that I think are important that could be looked at. Number one is a sovereign wealth fund. So the countries like Norway, Singapore, these countries, they own natural assets in a sovereign wealth fund. And essentially, every citizen therefore owns a piece of some asset. There is an asset that is owned through a sovereign wealth fund.

36:31It's a very successful model. It seems to work so incredibly well that it's dangerously well. Half of London is now owned by the Qatari sovereign wealth fund, the Norwegian sovereign wealth fund. We're literally losing all of our property to the sovereign wealth funds of the world. So the sovereign wealth fund model is incredibly powerful. Yes. So just for someone that doesn't know what that is, you have natural assets within the company owned in part by the state. So the UK did a stupid thing. We discovered the North Sea back in the 80s, I think it was. And Norway had half and we had half of this Norwegian, this North Sea oil.

37:06And the Norwegians said, hey, we'll just own this in a fund that all of our citizens will benefit from. And that will be a state owned fund. And then we'll take the profits of that. We'll reinvest it into assets and every citizen will benefit from those assets. And the UK said, we'll just sell a license to British Petroleum. Yes. Right. We'll make the rich people richer. Yeah. And Australia is so stupid. We have all this incredible natural resource, no sovereign wealth fund. Britain, when we took over the whole world or 25 % of the world, we operated sovereign wealth funds called the East India Trading Company and all this sort of stuff.

37:38And basically our business model was sovereign wealth funds for many, many years. So sovereign wealth funds number one. So that would be one. The other one is to put shares into baby's names. So when a baby's born, you have a piece of the stock market, like$1 ,000 worth of shares. It's a baby bond idea. Trump's doing both of these things, isn't he? Sovereign Wealth Fund and the baby bond. It's calling it the Trump Fund or something. Yeah, well, they're experimenting with some version of this right now. Yeah. So if a baby, by the time they hit 18, has had 18 years of compounding of owning that asset, then by the time they hit 18, they're literally getting an asset that they can then turn into another asset if they want to.

38:17That's pretty powerful. And then the biggest issue is the financialization of houses. So if you take a value of a house, about half the value of the house is what you might call the utility value of the house, which is it's a house to live in and I want to live in it. And then the other half of the value is the financial speculation value of the house, which is how much value does a fund have if we can rent this out to people for the rest of their lives. I looked at the BlackRock thing and it said, the idea that BlackRock is buying up UK homes is a myth. They are a financier, not a landlord. They provide loans and debt facilities to property developers, but they do not directly own or manage residential housing stock.

38:55Lloyds Bank is buying 70 ,000 UK homes to rent forever? The number of single family homes BlackRock directly owns and manages in the UK is zero. Okay, but he's right. I don't know what the details are, but this is a private equity thing that's going on in this country and in the United States right now. Yeah. In the United States, I've heard a lot about BlackRock buying a home. I'm not sure what the entities are. It may be true. Again, I don't know. They come up with structures to do it at arm's length. Yeah. But like. I guess you kind of own it if you're financing it as well. Or you loaned it to a subsidiary or somebody else, whatever it is.

39:30But the meta point here is that homes used to be owned by people. Yeah. And they bought them to live in. And they bought them to live in. Yeah. And one of the nefarious things that's going on in the West, driven by this neoliberal consensus that the only purpose of the economy is to make rich people richer, is this idea that private equity should buy all these homes and turn ordinary people into this rental class. Just to confirm, yeah, Lloyds Bank are doing that through something called Citra Living. They're buying up thousands of new built homes and apartments smacked as a direct private corporate landlord.

40:07They view the structural shift away from home ownership towards long term renting as a major profit opportunity for them. Yes. That's it. Right. They want to have a permanent rental class that people never, you'll own nothing and be happy is the idea. And people are not like that. People love to own stuff. I want to go back to the central point we were talking about, which is like, how do you solve this? Because you've got two different views on how you solve this inequality. What I find interesting is the UK has better worker rights, but it is— But you also have much less inequality here. I mean, just to be clear.

40:36That is true. So the US is significantly more unequal. Yeah. The US top 1 % holds over 30 % of the nation's wealth compared to roughly 20 % in the UK. And the US consistently ranks as the most unequal of the G7 nations. However, the US is growing much, much faster. If you look at 2019 to 2026, the U.S. has grown over 100 % faster than the U.K. Yes. And the U.K. is vastly more protective of workers. We have the things Daniel said, like paid vacation, paid maternity leave. The U.K. mandates up to 39 weeks of statutory pay. The U.S. mandates zero. Correct. Which is unbelievably horrific. But, I mean, one of the things that happened in the U.K., Steve, is Brexit.

41:17When did that happen? 2016. Yeah, but it's the same. can, that's taken, what does that take an eight or 10 % out of UK growth rates? It is affected unemployment by 4%, productivity gains by 4%. I mean, the list goes on. So that owned, I mean, part of, part of why people in the UK are feeling down is this unbelievable mistake that the country made. But it's the same in Germany. It's the same in Australia. Germany has unbelievable workers rights. Australia, unbelievable workers' rights. In fact, the USA is the outlier of all the modern capitalist economies. Absolutely. But we're confusing things.

41:55People are pissed off everywhere in the world. Everywhere, yeah. That's what I mean. Everywhere in the world. I want the pitchforks to go away as well. But these workers' rights are not putting the pitchforks away. All of this stuff, we've given this stuff to Australia, New Zealand, Canada, all of Western Europe, all the English speaking democracies, other than the USA, USA is the only one that has virtually no safety nets and no safeguards. Everywhere else has healthcare systems that are much more generous and welfare systems that are more generous and like maternity leave. I mean, it's just inhumane that USA doesn't have maternity leave.

42:30So all of that stuff, but we've got all of that, but we've got the pitchforks here too. And this is why I'm saying I'm really zoning in on the idea that people need to own a house, they need to own a business and they need to own shares. And it's like if they own stuff. I could not agree more. And I don't know how to get them there unless they are paid well enough to do that. Let me tell you an anecdote. During the George Floyd riots, people were burning stuff down in the United States. And there was this fantastic interview with this woman. And the reporter said, you know, I just I cannot believe that you don't have respect for property rights.

43:05And the woman said, we have no property. You know, why should I respect property rights? No one I know owns anything. You know, like, so I am 100 % with you. But I think at the core of it, the core of it is that inequality is way more than an economic inconvenience for the people that it affects. What it does is it shreds the reciprocity norms that make social cohesion and democracy possible. Yeah. It's this dog eat dog. You're all on your own. Grab what you can. I mean, obviously, the Trump people burn the place down. That's right. And burn the place down. Obviously, Donald Trump has created a permission structure for the worst kind of behavior.

43:49Right. The worst kind of corruption. Basically, stealing has come back into style. Right. And, you know, there's all sorts of reasons that are generating this malaise, this sense of unfairness and lack of control. Right. And the thing is, I just I agree 100 percent with your sentiments. I really do about entrepreneurship and ownership. And, you know, at the end of the day, the cool thing about entrepreneurship is you're in charge. Yeah. Like you're in charge here. But not everybody can be an entrepreneur. Correct. Correct. And so I do think that that's a little bit unrealistic. The issue is that 70 % of all jobs that get created are created by small businesses.

44:31And not governments, not big companies, they don't create jobs. Small businesses create jobs. And if we just – not everyone can be an entrepreneur, but if we had 100 ,000 entrepreneurs who were all hiring 10 people, we'd have a million jobs and we'd have 100 ,000 options for people with jobs. So I don't think that we discount the whole idea that entrepreneurship is a big part of the solution. Can I take us briefly back in time? This is not the first time this has happened. The K-shaped economy has happened in the Engels pause. Yeah. What do you mean by K-shaped economy? So the K-shaped economy is where, so a normal economy is one where everyone agrees it's going up or down or sideways.

45:10Everyone can sort of say, oh yeah, roughly speaking, it's a good economy, it's a bad economy, it's rising and falling like a tide. A K-shaped economy is where it's really good for some and really bad for others. It's a disrupted economy, yeah, right? So the top percentage are going up and the bottom percentage are going down. Now, the headlines that we run today are the exact same headlines that were run in the early 1800s in Britain. And it was essentially record profits for industrialists and workers haven't had any improvements. You could almost take every grievance that we have today and you could just overlay it in the early 1800s and you get the exact same words.

45:47The solutions. One of the big solutions in the early 1800s was we need to export people. We need to get rid of people. And what they did is they sent everyone to Australia. So they picked up people and they put them in Australia, right? So same sort of thing, mass emigration or whatever you call it, remigration. So they got rid of people out of the country. So it was very similar. And we call this the Engels pause. But we understand what caused it. 1790, 1840. Yeah. So what caused it was technology. And it was this new - It was the Industrial Revolution. Yeah. So it was the new technology where we introduced a steam engine, we introduced a spinning loom, we introduced tractors, we introduced all of this sort of new technology.

46:28And the owners of that new technology and the people associated with that new technology went like that. They leveled up because of tech. And the people who were not part of that technology went down. Very simple picture you might want to have in your mind is a farm that had 100 workers farming versus one farm that had a tractor. The tractor farm went like that and all the workers went like that because of technology. The interesting thing about the Engels Paws is that for approximately two generations, 50, 75 years, with the exception of the owners of capital, basically everybody else on planet Earth went backwards.

47:04It was hell. It was hell. Charles Dickens. And what happened is that over time, the political consensus changed and working people clawed back some of that value through unions, through labor standards, so on and so forth. So I guess the essence of what I want to get to is, I mean, something you've always talked about, Dan, as well, is that if you start applying pressures on these companies or entrepreneurs, they can just now get up and leave. And that was quite different from that era where we weren't dealing with technological businesses. We weren't dealing with IP and those things. So if you start imposing some of these measures, will these companies get up and leave and go somewhere else where market conditions are preferable?

47:42A lot of UK entrepreneurs are, as we've seen from some of the numbers recently, choosing to go work elsewhere. Okay. I think one of the things that just needs to be acknowledged and put on the table is one of the challenges you have here is you have the Europe or the world has built this incredibly stupid system. where you can operate a business here, take advantage of the UK's market, take advantage of the UK's rule of law, take advantage of the UK's infrastructure, put your stuff in a box, move to Dubai and pay no tax, right? It's idiotic. It's just idiotic and suboptimizing as an American. I pay tax wherever I go, right?

48:24So I cannot come to a place and take advantage of it and then skirt the laws. So this is such a profound disincentive to do the right thing. Well, yes, but the real culprit is what companies can do because U.S. companies can do it. You can't do it as an individual, but you can set up an office in Ireland in Luxembourg. Yes, which is even worse. And it's the corporations that are the bad guys. But you have both problems. You have U.K.-based entrepreneurs who are like, well I can stay here and pay 40 % tax or whatever it is right just pop off to Dubai run the business virtually and pay nothing so what are you saying should be done with those people that do that I think that UK citizens should pay UK tax wherever they go and German citizens should pay German tax wherever they go agree I don't think that will solve it because it's not citizens it's corporations that are the bad guys it will solve one problem it will not this other problem needs to be handled too.

49:22The giant vampire squids of the world are companies that are pumping money out of the economies and they're faceless corporations that have figured out how to play this game. So for example, let's take YouTube for example. YouTube is serving up a ton of videos to people all over this country and they're running ads, but that is pretending to be in some distant place. It's not being in the UK. And what we used to do in the UK is we used to have a broadcast license. If you want to broadcast in the country, you pay a flat fee and you can broadcast. Why is YouTube not paying a broadcast license? If they are a broadcaster effectively and running ads, they sit there and say, oh, but there's this and we shift our profit through here and oh, we have to, I'm so sorry, but we have to buy our licensing from this company over in this other Vanuatu or whatever.

50:11It's like, no, no, no, we don't care about that. It's like, look at how many - Because you do business in the UK, you should pay tax in the UK. For example, you've got this many views and the broadcast license for you is this much. Okay, so do you agree on both points then that you should tax corporations based on where their customers are consuming and you should tax individuals irrespective of where they decide to fly off to? Look, I think in a globalized world that we live in, an individual should be allowed to make a new life for themselves if they want it, right? So, for example, if I genuinely – I make a new life for myself in the UK 20 years ago.

50:45I came here from Australia and I don't want to pay tax in Australia because I was born in Australia. I paid a million dollars worth of tax in Australia, but I now live here. I've got three kids here and I've got a house here and my whole life is here. I don't like the idea that just because I was born in Australia, it's not possible for me to make a new life. Okay, but we have a tax treaty. Yeah. There are ways of handling this, but this ridiculous, look, every rich person I know in Europe is playing this ridiculous game of trying to avoid taxes, right? I don't know how you can look at that and think this is a good system.

51:17But the issue is you and I both know it's so easy to just turn this into a company game. So like, for example, if - We have to appropriately close the loopholes. Yeah. But I'm seeing so many people demonize people like Nick, right? They go, oh, this guy, He's a rich guy and he shouldn't be so rich. Honestly, he's not the problem. I'm sure you pay a bunch of taxes and also you create economic activity around you. These megacorporations do trillions of dollars out of economies. If we take a megacorporation, think of one in your head, and we decide to tax them where their customers are. I was looking at some of the research and it says corporations rarely just absorb the tax.

52:01When countries like the UK or France introduced taxes based on local users, tech giants, like the biggest in the world, immediately raised fees and prices for the consumer and small businesses inside those specific countries to offset the cost. If we had a global tax system that prevented this, then they wouldn't do it because they couldn't do it. If the compliance cost of tracking user locations and paying local taxes outweighs the profit from the region, companies also tend to simply block users in those countries or pull their products entirely. Great, great. And that opens up a possibility of a local company to do it.

52:32Worse. Huh? Worse. Maybe better. I was thinking here about the large language models. And I was thinking about that as an example. If the UK tried to take on Gemini or ChatGPT, etc., we would be using a significantly worse technology than the megacorps. That's accurate, no? Those megacorps, they don't do this. They want to own the world and they want to dominate the world. They're not interested in cutting countries out, right? None of them actually cut countries out. When you think Facebook is just going to leave the UK? Yeah, they're not going to do that. And the other way is how you do it. So if you simply charge - Can they do that in Australia, though, with the news publishing business?

53:11They might do it very briefly as a way to punish political dissent. But ultimately, they operate globally. They have a global business model. and they essentially, too, we just need to say, I'm sorry, you've had your 20, 30 years of not paying taxes anywhere, but we're not doing that anymore. And we are very good at coordinating when we want to coordinate. And we need to say the bad guy here, I mean, it is really just pulling money out of our economies and taking it to other places. And one of the reasons that the USA has become so wealthy with its stock market is because it is the end valuation where all of these vampire squids end up with their balance sheet.

53:52If I look at what happened, it was Australia I was thinking about, but it also happened in Canada where they passed a law called the Online News Act requiring tech giants to pay local publishers whenever Canadian users shared or viewed news links. And immediately, instead of paying the user location tax, Meta simply blocked all news content from every user in Canada because the cost of compliance just wasn't worth the hassle for one particular market. And you have the same thing happen with Amazon where several US states like California tried to force Amazon to collect local sales tax simply because Amazon had independent affiliates like bloggers, et cetera, living in those states.

54:25And rather than dealing with the complex local tax collection, Amazon instantly terminated thousands of affiliate accounts. If every state required Amazon to collect local sales tax, then obviously they couldn't do any of that. They would have to deal with it, right? It's just these big corporations have a massive advantage over the jurisdictions that they're operating in because they have so much more power and so much more flexibility. So what is the, what is your solution then, Daniel, to solve for this inequality problem that we're experiencing? Because, you know, you seem to be less interested in the sort of workers' rights piece because that seems to - We've tried it.

55:03You're saying we tried it? Yeah. What I would like, personally, is I want to see way more small businesses and I want the government to favor small businesses and essentially say, we're going to reduce the taxes and the pressure on the small businesses. We're going to advantage local small businesses that are here and paying tax. We're going to create special economic trading zones if your business is based here and is a smaller size. We're going to basically make ourselves highly competitive for small businesses to show up and do their A game. And what about big businesses? Punish big businesses that are - I wouldn't punish them.

55:35I would just tilt the play. I'm 100 % with him. Tilt the playing field towards smaller businesses and startups. You know, I'm not sure if you've heard about this thing that I just joined the board of called Enterprise Britain that Brent Hoberman, who does Founders Forum, and Steve Fitzpatrick, who founded OVO, just started. It's called Enterprise Britain. It's a group of us who have gotten together with the express purpose of doing exactly pretty much what you describe, which is to try to make Britain an even better environment for business, mostly small and medium-sized businesses. One of the great challenges here is to try to find capital structures that allow small companies to turn into larger companies while remaining here and not fleeing to a better place.

56:24But I am 100 % in agreement with this. And you can have an incredibly dynamic, fast-growing economy. Where all of the benefits flow to the people at the very top and everybody else gets screwed. And you have to do both. You have to do both. I've spent the last decade building and investing in companies. And so often the conversation around marketing budgets follows the exact same pattern. The budget gets approved, but then the results don't come back. And most of the time, the creative pitch and the offer is fine. The problem lies with the audience. Ads reach people who will never buy or refer.

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57:42Keep this to yourself. Terms and conditions apply. For every founder, there comes a point in building a company where your job shifts. From being the person inside your business, actioning everything, to the person responsible for absolutely everything. The only way I've been able to make this shift across the different companies and teams I'm responsible for is by knowing that the right systems are in place to manage everything. systems that don't need me in order for them to work. Our sponsor, PipeDrive, is one of those systems, an easy-to-use, intelligent CRM tool for growing sales teams. My teams use it and have for the last decade because it's genuinely the most effective way to run a sales operation.

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58:57And we probably saw recently, Eric Schmidt did a commencement speech in front of thousands of students. And every time he said the word AI, one of the things that Anthropic, who are one of the leading AI companies, said recently is that entry-level jobs are at risk. And I've got this graph here showing the decline of entry-level job postings. I believe it was on LinkedIn, pulled from somewhere. and it shows that they're consistently dropping and dropping and dropping. AI is, I think about it so often. I was up late last night trying to think through some of this stuff because Anthropic released a report yesterday showing that AI models will be able to improve themselves theoretically in the future and what this might mean.

59:36How disruptive do you think AI is going to be as it relates to job losses? You know, I don't think Bernie Sanders' latest idea is terrible. U.S. will own 50 % of all the AI companies. It is absolutely true that AI has monetizing for free humanity's intellectual property. And a few people are going to directly benefit from that. And I think that in the same way that Norway created a sovereign wealth fund with this enormous asset that they had, creating a sovereign wealth fund with 50 % of the value created by AI and recycling that into, I think it's unclear exactly how those benefits should be recycled, but trying to find a way to make some of that value a cushion for the disruption that it will inevitably cause.

1:00:23I don't think that's a crazy idea. It's a good idea for China and the US. Yes. Yes. But not for anywhere else necessarily. It's not going to help Senegal or Southampton much. No, in fact, it'll damage a lot of those places. Because the Philippines has benefited enormously by being the outsourced back office for a lot of small businesses that AI can now do a lot of those jobs. One of the things that I always come back to is the idea that, say, the UK has 5.7 million businesses. We have a million unemployed people. We need one-fifth of the businesses to employ one person. AI does actually make your business better.

1:01:03Like, AI is really good at helping you with your marketing. AI is great at helping you do legal contracts. There are a hundred ways that AI could actually make 5.7 million businesses a little bit better to the point where they want to hire someone. And if we can incentivize those things to happen, businesses are trained on how to use AI to their advantage and tax breaks for small businesses that are hiring. And there's actually 5.7 million businesses and a million unemployed people. There's a good match there. You know, a lot of people have been talking about AI agents. And what an AI agent can do, for anyone that doesn't know, is it can go on your computer and it can get any task you want done on the computer.

1:01:42Whether that's, you know, editing tasks or whether it's, you know, manual data entry tasks or whatever it is, it can click around on a computer and do things. A lot of the entry-level roles we're often given are that kind of work. I think my entry-level job after I dropped out of university was kind of doing that kind of thing. There was also a little bit of a sales component where our cold call people, and AI can now do the cold calls too. And increasingly, if we just play the rate of development forward, we'll be able to do those things. So if these businesses get more and more efficient, again, it comes back to an entry-level point, is what role will entry-level team members have in these kind of companies?

1:02:18So what's interesting for me, I have a group of companies, small businesses, dynamic small businesses. We've implemented AI in all of them, and as a result, we've hired people. Who have you hired? Entry-level people? We've hired some entry-level people who are augmented by AI, so they become more valuable because of AI. But things like appointment setting, we've ended up hiring more salespeople because we get more appointments. We use it with our marketing, and we end up hiring people who can actually have those final conversations with people. At the very core of my organizations, we have an AI layer, and the AI layer has context and skills and models and security layer, all in there.

1:02:55and it spits out amazing information and data and reports and tells us who to talk to and why to talk to them and what to talk to them about. All these things are happening because of AI. But it doesn't get around the point that, like, if you think about Uber, Dara's been pretty clear that the 9 million drivers they have, I think it is, are going to lose their jobs in the future. If you think about the other sort of white-collar professions we've described, those roles won't exist in the future. Well, I should say those roles will be changed. Correct. If I put on my more optimistic hat, The thing is, is that all businesses operate in a competitive environment and there are two ways to compete.

1:03:33One is to be cheaper. The other is to be better. Right. And the thing about AI is that, yeah, there are tasks that you can automate away. But one person with good AI tools may be able to do the job of five. Right. Right. And yeah, you could eliminate that job or you could keep that person, give them the right tools and outcompete your competitors. The right tools. The right tools. I think there's an assumption that. I mean, this is, of course, what happened with computers. Right. I mean, I am older than you guys. So I remember when calculators hit. You had to be there to realize how freaked out people were about calculators.

1:04:21Right. Like people were talking about, like, what are the accountants going to do? And will kids learn math anymore? I mean, it was like extremely controversial to bring a calculator to school. And then along came computers. And the truth is that computers didn't reduce the amount of work that people did. They increased the amount of work that people did. And I do believe that there are ways in which AI is probably going to do that. And so the job loss may not be as apocalyptic as it now feels like it may be. Because, again, at the end of the day, you have two ways to choose to compete. If you, you know, you can get rid of somebody and do X, but you could keep that person and have them do 5X and out-compete, you know, your competitors in another dimension.

1:05:11I think that that will be something that people are likely to do. Doctors are just going to be better doctors. I think I definitely agree that there's going to be this sort of augmentation of certain individuals. I think maybe the difference between like calculators or computers versus this is AI is coming into a technological economy and it is coming in with instant scale in a way that when Anthropic shipped their new model last week, it went to all of us at once. Yeah. Everywhere in the world. We were all, boom, step changed. with computers. I remember the day that like my dad ordered the first computer for our house and we waited for weeks and weeks and weeks and then we got it.

1:05:51It was super expensive to get one. We unboxed it. I remember us all stood around it looking at it and it was like this Windows 95 machine that had like no memory on it. So the distribution, the sort of disruption was much slower. The pace is much slower. Right. And I understand that like with our team, there's no intent. We have no intention at all to let anybody go because of AI. We're reskilling people, training people. However, would we end up hiring less people, especially in the near term, than we would have otherwise? I think that's maybe conceivable. And a lot of companies, I think, are in that position.

1:06:25I actually was speaking to someone yesterday, and they said, we're just letting the natural attrition in our call center take care of the shift, which means they lose 25 % of people from their call center naturally. They're just not hiring other people back in. And actually, Klarna's CEO said the same thing. He said, we're just letting the attrition take care of it. I'll give you another example though, just to counter that. I work with a husband and wife couple in the North of England who they had a little video production agency and like one or two people who did a little bit of contracting with them.

1:06:59They used AI to create a piece of software and that piece of software helps automate script writing and a few of the things that they do. They launched a waiting list for this. They got five and a half thousand people to join the waiting list. They then signed up their first 1 ,500 clients to a piece of software that cost almost nothing for them to build in four months. And now they're hiring a team of 10 people. And this is a husband and wife who had a small constrained business who are now building out a bigger business. And this is something that could never have happened. They haven't had to raise millions of dollars.

1:07:34They haven't had to hire 30, 40 people. so this this tiny little sass opportunity is suddenly possible because of ai and take take that ai away and that fast growth dynamic little businesses yeah i think anecdotally i could come up with lots of examples as well where particular people are highly entrepreneurial they come across an opportunity but there's this broad if you just zoom out on the way that people generate value in the economy at the moment so much of that is going to change and it's going to be quite quick it feels like oh totally and i don't know what you do about like what do you do about that sudden shift.

1:08:05This happened in the Jevons paradox. The person who had a tractor displaced a hundred people who were in the field. And those hundred people went into the city looking for work all at once. And it was Charles Dickens wrote The Tale of Two Cities. He wrote Oliver Twist. Guess who else came out of the Jevons paradox? Our good friend Karl Marx, who came up with the most toxic ideas ever created and written down. He came off the back of the Jevons paradox. So what do you do about it? UBI? I'm not a big fan of UBI at the moment. Isn't that kind of what this 50 % Bernie Sanders thing would do? Well, it's a sovereign wealth fund, basically.

1:08:40But you have to find a way to help manage through this transition. And you have to, I think, depend on the value. Look, the whole valuation that AI is predicated on is job disruption. You can't get to those numbers unless you're displacing lots of jobs. Exactly. And if that's true, then we should grab some of that value that is created and recycle it into the economy to try to cushion the disruption that it creates. This is a bit of a socialist idea, right? I don't call that socialism. What do you call that? I don't know. Just common sense? Wouldn't that broadly apply to all companies and rich people if they are disrupting the economy and taking an unfair share of that disruption?

1:09:26Should we not just grab and recycle back in? But that is the basis upon which every high-functioning democracy in the world operates. I mean, every high-functioning democracy in the world has progressive taxation, labor standards, rule of law. There's a difference between seizing private property, which would be a socialist way of doing things and a communist way of doing things, and owning strategic assets, which… Which are private property. So, for example, the Dubai government owns the physical hotel buildings that run Dubai, and it leases those out to hotel operators, but it keeps money in its sovereign wealth fund, because it says basically a big part of Dubai is that we own these kind of land assets.

1:10:11So do you think we should go and take a portion of these companies? The difference was the Dubai government actually developed those assets. Right, but we're already too far down the line within a capitalist society like the United States. So we might say that data is the new oil and data is a common good and it is a common asset that has been sequestered illegitimately by these companies. So therefore, you're not seizing what they created. You're basically saying, I'm sorry, but you need to pay a license back to this sovereign wealth fund because you're using a common asset that you were able to essentially seize.

1:10:45You stole it from Africans and British people. You stole it from people in Australia. You stole it from people in Canada. The biggest issue that we're having is that we're actually the nature of the entire economy is changing. So this happened 250 years ago where the nature of the economy was land and we had an economic system called feudalism and colonialism. And then the nature of the economy was industrialization. And we had a economic system called socialism and capitalism. And now the nature of the economy is actually fundamentally changing. So in economics, there's four factors of production, land, labor, capital, enterprise.

1:11:18we're now swinging like a pendulum from land through capital labor and now we're actually in an enterprise economy and we need some sort of economic system that reflects the reality of how money and wealth is made is that is that go to open ai take 50 of their company and then pay out the profits of that 50 to the people i'm always skeptical of any socialist ideas if it comes from bernie sanders i'm skeptical okay but bernie sanders is not a socialist like let's be clear He says he's a socialist. Well, take him as a means. No, socialism is, you know, the government owning all the means of production, right?

1:11:55Look, there are a million forms of capitalism, right? Every country operates slightly differently. And I don't think that Bernie Sanders is saying that we should abandon markets. what he is saying is we should manage markets for the public benefit, not exclusively for the benefit of the owners of capital. And I think that's really different. You know, with like an Amazon, they're using the roads and the infrastructure. Correct. So would you go take 50 % of those companies as well for public benefit and then pay it out to the citizens? We effectively do take part of them in the form of taxes, right?

1:12:40Now, the taxes that we impose on those companies, I would argue, and Dan may agree, are insufficient. They do not accurately reflect the value that we give them. They don't return equal value. So you're saying increase the taxes on companies like Amazon. You both agree? Well, Amazon is very successfully avoiding taxes. Yes. So would you agree to increase the taxes? I think we need to close tax loopholes. We need to make sure that they're paying taxes like all other companies that operate within the economy. Like the guy at the pub that you're talking about pays. Yeah. Right? Yeah. He pays a lot of tax.

1:13:17And the retailers and all that sort of stuff who are in competition with Amazon. Right. Look, one of the biggest issues that we have is we have widespread incompetence in governments. And I'll give you a quick stat on this. In the UK government, you are 10 times more likely to die than to be fired for poor performance. And the UK government fires people at 1 600th the rate as normal businesses for incompetence. So we have an accumulation of massive incompetence in government. So the idea you can come up, we can come up with all the best ideas under the sun at this table. We have a fundamentally incompetent set of people who have misaligned incentives.

1:13:57We have basically a revolving door between financial, industrial complex, technology, industrial complex. How are you going to solve that? Well, the Singaporean government, they basically said that we're going to have a very high degree of meritocracy in government that essentially we promote and fire based on outcomes and merit. Singapore is a miracle of governance. Amazing governance. It's a miracle of governance, but it is a very small place. Totally. And perhaps the only place in the history of planet Earth that has benefited from a well-meaning dictator. Yeah. Right? Well, yeah, Dubai. It's an astonishing story of capability, competence, foresight.

1:14:40So what is the solution with this AI revolution? I think we all agree that there's going to be job disruption and there's going to be a new type of job. There's going to be probably a delta of people transitioning to those new types of jobs. I've said this before, but I even noticed that within our recruitment processes now, we are really looking for people that have a certain set of skills. We always ask. And it's harder and harder and harder to find those people. Well, that's training. That's education and training. It is, and that takes time. The school system needs to produce people that you would want to hire.

1:15:09Yeah, and that takes a lot of time. In my hiring, I ask the question, how deep are you in the AI rabbit hole? And anyone who says, oh, a lot, I'm like, okay, join the team. And also, if you think about humanoid robots, Elon Musk's pay packet mandates him to deliver millions of humanoid robots or else he doesn't get his big pay packet. If we think about robotics and humanoid robots coming through, we watched the other day Figure AI released this video showing a humanoid robot sorting packages on a production line for eight days straight, beating a human sorting those packages on the production line.

1:15:39My car in Los Angeles now drives itself, as do the taxis, and there's a huge race to make autonomous vehicles. I'm sure there's new jobs created. And I understand in foresight, it's hard to understand what those will be. I assume there'll be more human jobs, more sales jobs. My only thing that I can say is that the future is small businesses. It's small teams of 10 people making YouTube channels. It's small teams of 10 people making software. It's like when you have millions and millions of little small businesses, everyone's happier. But if you read what Anthropic released yesterday, they're making the claim that actually we're getting to a point where it will be an individual.

1:16:17with a team of agents who can now make a trillion dollar company without hiring a single person and actually when you said about making software making that they would they might argue that that'll be agents making that software anthropic said that the amount of code each individual's producing on their own is eight times and this one particular quote which i actually screenshot on my phone last night comes from an engineer at anthropic who was saying they feel useless because now they say they haven't written a line of code in months and months and months this anthropic engineers basically saying like i come to work this agent writes the code for me and i kind of sit and watch and i feel useless um so all those examples you gave okay but what would happen in that situation is you would have a massive deflationary effect at the cost of if if there was one person doing all sorts of things in the economy then the cost of that would go to the cost of the electricity to run it right so massive deflationary and then the question becomes well, what does everyone do, right?

1:17:11What do we all do? We do human things, right? Humans always come up with things to do with each other. Like if I was to tell my grandfather that there is a job called a personal trainer who takes you to the gym and counts your reps, right? My grandfather would go, that's insane. And I say, oh, there's 50 ,000 personal trainers in gyms all over the country. So there are always these crazy new jobs that get created. I look at what trust fund kids do, right? Because a lot of trust fund kids, they don't have to worry about money and they don't have to worry about resources and they go find something to do and it's always weird we're going to traverse through you know potentially the jobs we have now involuntarily go through this transition moment where i think history is quite clear on what happens in these transition moments it gets ugly it gets ugly yeah and then we'll come to you know what i'm hearing is that you're saying we will come to some kind of utopia on the other end of this no no no i don't think i don't think there's going to be utopia.

1:18:07What do you think? Look, I don't think utopias exist. I do think that markets are the greatest social technology ever invented for creating prosperity and for ennobling the human spirit. That is not because markets are efficient allocators of scarce resources, which is the conventional view. Markets are an evolutionary system that enables groups of people to come together and solve complex problems. And solutions to human problems is what prosperity actually is. It isn't GDP or money. And the best world that you can build, I think, on Earth is a market economy governed by a robust democracy that robustly includes all citizens in that economy.

1:18:51And your answer is small business. And I'm 100 percent behind you. And I wish you all the success. My answer is that a lot of people are going to end up working for large companies or medium companies and that we have to ensure, or my part of the answer is, that we have to have standards in place to ensure that those companies treat people well enough so that they can be dignified participants in both the society and the economy. And that will require innovation in laws and rules and all sorts of mechanisms to enable that, but that there is no alternative if you want to live in a decent society.

1:19:36And but the high order bit for me and the reason I work on economics is that the existing economic paradigm basically says markets are perfectly efficient. We should just let them run. And, you know, what comes will come. So you're really focused on increasing the workers' lives and pay. So if you understand the economy from the conventional point of view, including people in the economy is a liberal luxury that you can afford if and when you have growth. And I think everything the new economics says is that including more people in the economy more robustly is actually the technical mechanism that makes both economies grow and democracies function.

1:20:23So to simplify that, what does that mean? from a policy perspective? It is very hard to answer in an uncertain future. In an AI, if you don't know what's going to happen with the economy, I mean, we have no idea how much job loss there will be. We are, I think Dan says quite rightly, going through a transition where the shape of the economy will change. So do we do nothing through the transition? No, no. We aggressively experiment with ways to include more people in the economy. Bernie Sanders' idea is an experiment. What's the worst that can happen? Like, just think about it. What is the worst that can happen?

1:20:59The worst would be is that you give government more money and they leverage more debt. And as soon as the government has a new asset - The economy of the United States does not need assets to leverage more debt. We just created that. We didn't need it. That is not true. That is just not true. We have$37 trillion of debt, all of which was basically given away in wars or tax cuts for rich people. But they can print more money. Absolutely. But these two things, they are not connected. But the truth is that the worst that can happen by running that experiment is that there will be a few dozen guys who are worth$100 billion and not$200 billion.

1:21:39Like that is the worst that that can do. Is that going to be the end all be all? Will it work perfectly? I have no idea. But what I do know is that democracies need to move aggressively to try to make sure that these technological innovations benefit the society broadly, not just a few people narrowly. If I think about the UK, if you implemented something like that here, would people leave? So if you implemented, say we had an AI company here and you said, well, the UK is going to own half of it, would that company just restructure somewhere else because it's digital? They probably would. But now you're back to this old problem.

1:22:14The issue that I... We've been seeing this with the data centers. People are going... I read a report that said the reason OpenAI didn't open their data center in the UK, which they said they were going to, is because energy costs four times more here. Yeah. So they said, we're not going to do that. We'll go somewhere where it's cheap. Yeah. And would that not be the case here where you'd get this sort of brain drain where... And the risk that you run with this Bernie Sanders model is that we leverage the government's balance sheet or non-balance sheet to take out huge debt in the name of our kids and our grandkids that they have to repay.

1:22:44They buy up all these intangible assets and then they're left holding those assets that may or may not perform and will have debt regardless. And then the super clever little anthropic guys say, oh, actually, we're just going to restructure to Vanuatu now, leave you guys holding all of that toxic debt, and we're going to go run this from somewhere else. That could happen. The other thing that could happen is if, let's say, OpenAI, as one example, are making a hundred pounds profit at the moment, a hundred dollars profit at the moment, and Bernie Sanders says, we want$50 of that profit, China are going to have an additional, theoretically, an additional$50 to invest in their frontier models in getting ahead.

1:23:25Bernie isn't saying, I'll take$50, 50 % of your profit. What is he saying? I'll take 50 % of your stock. Which means that then the US would have a equal voting? Yeah. Well, then you're going to get gridlock in terms of voting, right? So if the U.S. own 50 % of the company and Sam Holtman, let's say, owns 50%, they're going to have to vote on decisions? Well, you could put some directors from the public on that board. And what happens to a company when you have the government on the voting board? I mean, you effectively have this in lots of countries where labor has a seat at the table, right? With one of your companies, if half of your board were the government, do you think you'd be able to be as innovative, move as fast?

1:24:05I mean, we talked about the bureaucracy of the government. Yeah, I'm not suggesting that half the directors should be on the government. Mind you, that's what China has as well. China has got essentially the CCP on the board of all of those companies as well. And they move pretty fast. It's a slightly different government, isn't it? Yeah, it is. And there's different levels of competence and meritocracy hierarchy. I worry about all of these solutions that empower government because I don't trust government. My entire life has been one thing after the next made worse by government, right? That's my reality born in 1981.

1:24:36I've never had a good experience with government. Okay, but dude, you grew up in Australia and you live in the UK. If you hate government so much, move to the Congo. Seriously. Look, I mean, it is just no one likes to be constrained. Everyone wants other people held to a high standard. And it just – seriously, there is no libertarian paradise in the world where nobody follows any rules, nobody pays any taxes, and everybody lives like a king. If you hate government, there are plenty – there are 220 countries in the world. 150 of them effectively have no government. Why do you not move your base of operations to those places?

1:25:23Because you would instantly be somebody's, you know, munch. I'm not an anarchist. When a government doesn't fire incompetent people, the previous governments - Everybody agrees. Democracy is the worst, except all the others. Of course, it is easy to point to these things and say they're incompetent, but it is just not honest to say that government doesn't improve our lives. There is literally no example on planet Earth of a high-functioning society without big government. I'm not saying without big government. That's not true. Give me an example. Singapore. Singapore is insanely big government.

1:26:1322 % of GDP. Okay. But they are involved in every element of people's lives. High competence. They fire incompetent people. And again, we're in violent agreement that we should have governments that do that. You should work hard on the politics in the UK to bring in reforms that would increase the velocity of competence. Because I love that. But that's the answer. Yeah. That is the answer, is to work hard to build a government that is as high-functioning as they can be. But here's the thing, and I think you will agree. Look, Microsoft, big companies are equally incompetent. Microsoft bought my company Aquana for$6.4 billion.

1:26:55This is a company that was growing at 40 % year-over-year. It's been so long. 30%, 40 % year-over-year. $750 million in sales. $200 million at EBITDA or something like that. 3 ,000, 4 ,000 of the best internet advertising people on planet Earth. And in one year, it was gone. Wow. Gone. And they wrote the entire$6 billion off five years later. Incompetence lives everywhere. And I just don't think it is realistic to say, oh, pox and them, you know, they suck. Dan, there is no place on earth without government co-creating prosperity. For sure. Here's where I put my hope in this post-AI world. I want to stack the economy in the favor of the small family business and the small business.

1:27:45You and me. I'm 100 % with you. Yeah. I agree. I agree. The question is, how do we get there? Yeah. And you and I are completely aligned in some ways. We need to aggressively tilt the balance of power in the economy from the biggest, most exploitive companies to small and medium-sized businesses. So I see big government and big corporate sucking the life out of little people and little businesses. And I think you are no doubt correct in some cases. But the only thing in human societies that has the power to confront big business is big government, right? In the history of the world, there has never been another force that had the power to address this problem.

1:28:30And the reason I care so much about this economic paradigm is that all of the problems you were describing are a consequence of an economic paradigm that was designed to create those problems. That's why we are in the box we're in, is because neoliberalism literally said the bigger is better. And that we should afford no protection to small businesses. That we should actively advantage the largest players. That free trade is good for everyone. All of these things that weren't true and ended up advantaging in this room me, effectively, and, you know, a few thousand people from around the world and disadvantaged everyone else.

1:29:17And I think the starting point for change is addressing the fact that we just understood economic cause and effect inadequately. The things that we thought would lead to growth led to concentration, right? And the things that we thought were bad for the economy, in many cases, those were good for the economy. Because, look, again, you know the UK so much better than me, and I hate to argue with you about it. But the truth is that you cannot sustain a capitalist system unless most people are paid enough to buy the stuff that the system produces. And there has to be a balance. And again, in the history of the world, there is no example of a thriving economy that did not impose those standards or create through some mechanism the countervailing power that enabled the owners of capital and everybody else to work together to benefit everyone in the long term.

1:30:18You and I are in so much agreement on most of it. We're like an inch apart. What is that inch? So I've seen Nick's policies implemented and I don't feel it's enough. And the reason I don't feel it's enough is I think people are more than consumers. They're more than wallets. Okay. You've only heard me talk about the minimum wage and something else. You haven't seen all of the policies. But the missing piece for me is ownership. When people had houses, they felt really good about communities. When people had small businesses that they owned, they felt really good about their communities. And when people own some shares in the overall economy of the fastest growing companies in the economy, then they feel like they're participating.

1:30:58So for me, the non-negotiables of fixing this problem is that people can easily own a house, own a business, and own shares in the fastest growing economy. Yes, yes, yes. And how do we get there? Yeah. Yes, yes, yes. I totally agree. And I just think that Dan and I have a slightly different view on the path. I think capitalism is ownership. It's ownership. That's what capitalism is. Otherwise, if you don't own anything, you're not a capitalist. Your whole story - You agree on the path, but the - Sorry, you agree on the outcome, but the path - Yes. But how did Nick get rich? Nick started companies.

1:31:32He owned a family business. He leveraged the family business into an investment into Amazon. Yeah, born out of third base. But it's ownership, ownership, ownership, and did a lot with it. Okay. Fairfax. But I'm saying - Let's be fair. But how is that applicable? You're saying other people should do what Nick did. Yeah, but it's hard to get born into a family that owns a small business. Well, if there's more people who own small businesses, then there are more - Then it's easier. Then it is easier, right? I just want to - I do want more people to be - What do you mean by this? Well, it's all about how you get there, right?

1:32:03You overlook the fact that being born on third base, we should aim for more people to be born on third base. But third base is coming from a family - That owns a small business. With - Or whose parents earn enough income to enable all of that. Right. And look, not everybody who is affluent. In fact, a tiny minority of people who are affluent are small business owners. Right. They are mostly doctors and lawyers and professionals of a variety of kinds who work. I'm not against that. In big companies, in middle management roles. And they. I'm not saying everyone should be a small business. Yeah. Yeah.

1:32:42So anyway, I just think that I think the high order bit here, I mean, for me, and this may sound like too squishy for you, is that is that societies have both the right and the responsibility to organize their economies in ways that benefit everyone. Is socialism the answer? No, socialism is most definitely not the answer because socialism, again, we need to operationally define that term. Yeah. If socialism means, look it up in the dictionary, the state ownership of the means of production, that is a catastrophe, right? And it's a catastrophe because all socialism can do is split up existing prosperity in a fairer way.

1:33:29It can do that. The problem is, is that socialism does not know how to create more prosperity. So for one minute, you can make everybody better off. But 10 years later, everyone is poor because once because this is the power of markets is what markets do is evolutionary systems is they generate increasing prosperity. They that's what solutions to human problems is right. Going from aspirin to antibiotics is economic progress. Right. And the beauty of markets is that they're evolutionary systems where every business effectively is an organism competing to fill a niche, which is the perfect product for whatever market segment they're creating.

1:34:14You are a canonical example of this, right? What you have done here. And thank goodness for it, right? Because in a world where there wasn't capitalism, there's no way. You have effectively, independently created what was a television network. It's miraculous. Like, you have more reach than MSNBC, dude. That is the power of markets. But, you know, they have to be harnessed to benefit people broadly. This does not mean that the profit motive shouldn't exist. but and how though this is what i'm trying to get to and this sounds a little bit like there's this middle ground we're like playing with where socialism on one end is okay you know short term whatever you said then on the other end you've got this like extreme capitalist approach and i was looking at those are the laissez-faire capitalism right and this socialist status control both of those things are terrible ideas am i right we want something in the middle on the left side then on On the socialism side, you get lower growth in your economy over the long term.

1:35:12Correct. Okay. And then in a capitalist economy, you might have higher growth, but then you have more inequality. Yes. Correct. And the sweet spot, and this is one of the most important, this is an important matter, one of the most important points I would like to make, is that all of the evidence suggests that when you come to the middle and you have a market economy that is actually actively managed to include people, that is the growth sweet spot. You have more growth. So you have more growth. Absolutely. GDP growth rates in the United States were four, four and a half percent for decades, 40s, 50s, 60s.

1:35:52And then as soon as the neoliberals took over in 1975, GDP growth rates fell first to 3 % and now to 2%. When they did want. Cut taxes for rich people, deregulated powerful people and suppressed wages for everybody else. So the most important socioeconomic fact, as I've said many times before, in the United States is that the median full-time worker earns about$60 ,000 a year today. If they had maintained their same share of GDP since 1975, instead of earning 60, they would earn$120 ,000 a year. So you're saying there's no trade-off in the middle? Because there's trade-offs on both ends, right?

1:36:28We just described the trade-offs. You're saying that in the middle there's the sweet spot. That's the sweet spot. Where there's maximum amounts of growth, maximum amounts of participation, maximum amounts of political stability. This is what Darren Asimuglu and James Robinson call the narrow corridor. This perfect balance between laissez-faire capitalism and socialism. I mean, socialism is stupid because it kills markets. But this impulse to more fairly share, let's call that where socialism comes from, this impulse to have a society which is more egalitarian. But what all the data suggests is that when you build a market economy that basically tries to make sure that everyone participates, where workers get a fair share of the wages, where as the company, as the economy grows, as it did for years, and you've got another, you have a great graph in here.

1:37:25So for decades, as productivity grew, everybody benefited. And then in the 70s, it decoupled. And as soon as it decoupled, GDP growth rates fell. Right? If we had, and all of this, all of this was a consequence of policy, of policy. So here's another thing the new economics teaches, is that there's this idea that a middle class, a thriving middle class, is the consequence of economic growth. That if we just let the economy grow, we'll get this great middle class. And that is because economists assume the economy is something called ergodic. Now, ergodic means, let me show you the difference between two games.

1:38:10One is ergodic, one is non-ergotic. Rock, paper, scissors is an ergodic game. And what that means is the outcome of the next game has nothing to do with the game before. Right? Monopoly is a non-ergotic game. And in Monopoly, no matter how many times you go to Monopoly school, if you play a game of Monopoly long enough, one person will own everything and everybody else will have nothing. And that is what a market economy is. It is characterized by luck, path dependence, and compounding. The past. Well, it's the past, right? Where you start, right? Some of us started on third base. some of us like you, as I recall, started on actually first base or home plate or something like that?

1:38:57Well, I think, yeah, probably second base. Okay. Maybe second base, but whatever, but we can have parents that love me electricity. Okay. Fair point. Right. And you're very capable and good looking and all the rest of it. Right. It could, it could, it, no, I mean, just if we're just being honest, right. We're just being honest. You had some natural advantages, but you know, when monopoly, you land on park place, the first role you're rolling, you get four good roles in monopoly, you're going to win the game, right? And compounding, the better you do, the better you do. And the thing about in an onergotic system is that both advantages and disadvantages compound.

1:39:32Surely, you know, people in your life who've had a couple of things of bad luck, right? And then they spiral into oblivion, right? And so what that means is that a middle class and thus a high-functioning society with social cohesion is always, always a deliberate construction. It is always created by policy. Always. And all of these things that we are pushing back against, him and his way, me and my way, are a consequence of basically an economic theory that said to policymakers, do it that way. And it was a mistake. mistake and we should recognize that mistake and try to heal these mistakes, which we can.

1:40:16We can have a great society. We can have an ownership society. We can have anything we want. We just have to decide to do it and not let a small group of incredibly rich people dictate the terms of the economy. This is within our grasp. What are your thoughts then? I agree in principle with all of that, especially the last bit, a small group of very, very powerful people dictating the economy, meeting up in Davos, coming up with how our lives should live. There's more to the story here. In the early 70s, they decoupled the dollar from gold and they created the fiat system, which meant they could print money.

1:40:53That inflated assets, it financialized assets, including the family home, which meant that as soon as we could print money, we could inflate the value of family homes and make it out of reach of most people. Well, and then finance took over and became 20 % of the economy and all the rest of us. Yeah, we ended up with these two massive institutions, which is the technology industrial complex and the finance industrial complex. And those two institutions have driven a wedge in society. My only difference with Nick, and it's a small difference, is that I don't believe raising the floor is going to be enough.

1:41:28I really do. I didn't say it's enough. It's table stakes. Yeah. And my experience with that is. It's a minimum. Because I've seen the minimum and the pitchforks are out here in the UK where we have that minimum. My worry here is that where we are, the technology economy and the finance economy is racing as if it's in a car. And then all of the workers who are selling time for money, labor for money, it's as if they're running. And we're saying, ah, you guys just need better shoes. You need comfier shoes. If we give you a pair of Nikes, will you guys be happy? And it's like, this is not going to close that gap.

1:42:05we have to acknowledge that technology and finance are the two like big funds and big tech are basically hollowing out the middle class. And if we don't acknowledge who the real bad guys are, when I say bad guys, I'm not sure they're real bad guys, but essentially systemically, they're the bad guys. We need to essentially say, hey, big finance, big tech, you can't financialize our houses. That's for us to live in and for us to own. And you also can't just eradicate all of our little small businesses, we need to tip the scales back in the favor of those small businesses. Because little towns, you go into any town in England, like little towns in England, the thriving towns that everyone wants to live in, they have lots of small businesses.

1:42:47They have a butcher, baker, candlestick, and maker type stuff is going on. By the way, the best high street in London is the one I live on, which is Marlebone High Street. So you agree? A hundred percent. Yeah. I've got 60 seconds and I'm going to show you how much I can get done because of our sponsor called Whisper Flow. It's a business I invested in that turns your speech into text in any app or device. I'm going to post into our Slack channel, which rewards whichever team member conducted the most experiments this week. Hi everyone, here is this week's experimenter of the week. Congratulations to the Diary of a CEO trailer team, which is Ant, Liv, Dom and Cam.

1:43:24You guys have one. Okay, now I'm going to open Gmail. So here is one of our founders on an email chain that I want to connect my team with. All I have to say is add my team's emails and Whisper will do exactly that. Now a quick message to Juan who does my schedule every single week. Hey Juan, it's Stephen here. Can I record on Wednesday at 2 p? Actually, no, let's record at 3 p.m. on Wednesday. Whisper Flow is four times faster than typing and it is incredibly easy to use. So if you want to give it a go, all you have to do is head to whisperflow.ai.com to download it today. I've done almost 700 interviews with some of the most interesting people in the world.

1:44:03And one of the things you learn, which is unexpected, is that vulnerability is the doorway to connection. And after sitting here for two, three hours with a guest, I feel a deep sense of connection to them. And as they leave, what I get them to do is to write a question in the diary of a CEO. We've taken all of the questions from the Diary of a CEO. We have put the question here on this card with the name of the person that wrote it. So you can sit at home as I do with my fiance and my colleagues at work and other people in my life. Whenever we get a minute, we play the Diary of a CEO conversation cards.

1:44:37And it is incredible what happens. These are great if you're in a romantic relationship and you want to connect your partner more. These are also great if you're in a team and you want to bond your team together. And I have to say they're also great for families that want to learn more about each other and that need a good excuse to spend some time in a digital world in the analog environment, connecting human to human. It is remarkable what the right question at the right time can do. Go to thediary.com and you can get these conversation cards right now. One thing I find interesting is you're saying that there's this sweet spot in the middle.

1:45:11Yes. Where you still get the upside. You get dynamism. You think there's a sweet spot in the middle? And decency. It's a very narrow sweet spot and it's very hard to achieve because Germany has really tried so hard and their economy is collapsing. Their economy is going so badly at the moment. And they've tried everything. Workers have to be on the board, for example. Of every company, you've got to have a worker on the board. So they're doing as much as they can to do inclusion and the German economy – Okay, so where is it what? Okay, but here's the thing. It is simply not fair to say the German economy is collapsing.

1:45:50Like, have you been to Germany? Yeah. Like, come on. Like, have you been to Stockholm? Like, these places are incredibly high-functioning. Yeah, there's definitely a Ford momentum, but the German car industry is getting hollowed out right now. China. Right, China's doing that. Okay, but just because workers are on the board of German companies and German people are unhappy, you can't necessarily connect these things. I just want to acknowledge, though, that there are places like Dubai, which are very close to laissez-faire capitalism with a sovereign wealth fund. And just hold on. If you talk to someone who lives in Dubai, they freaking love Dubai.

1:46:33They're the happiest people. are like and they talk they talk entrepreneurs entrepreneurial people yeah the rich people not the poor brown people who are well i mean because they pass indians and don't know well they yes and also when i talk to a lot of the uber drivers there and i talk to people who work in cafes there and all that so they're all quite pro dubai as well isn't it okay but that's because their other options are horrific yeah that is it's probably more extreme inequality isn't it It's more extreme in equality. It's extreme in equality, but because the place is growing, until recently, obviously, because the place is growing, it feels like there's a rising tide for everybody.

1:47:10There's something about economic growth that makes people very, very happy. And there's something about a lack of economic growth that makes people miserable here in the UK, for example. Okay, but just again, Dubai is a place, the UAE, has been powered by the most extraordinary gusher of free cash probably the planet has ever seen. I mean, you can look up on your iPad there, like the tailwind that economy gets from the unlimited resources. I wouldn't say that's why people love Dubai. They love it because of the entrepreneurial vibe. Who loves it? Like ambitious people. Yeah, so this is the rich people.

1:47:50Yeah, rich white people go there. No, I see young people who want to have a crack. And then because they're rich relative to the people doing the work, the labor. Well, what they're looking for is a place where their work will be rewarded. Let's imagine the UK where your ability to get onto capitalism, your first million or your first two million is very easily low taxed in order to get things going for you economically. I just want to see a situation where ambitious. Not a bad idea. Yeah, like you're ambitious people. Like what I hate is that I see these young people who are really super smart.

1:48:23I wish they were here building. And they're like, you can't succeed in the UK. They'll just tax it off you. As soon as you earn anything, they take it. What if you're not ambitious? And they leave. I think you're benefited by a lot of the ambitious people. So when you get one in a hundred, if you get one in 10 people who are entrepreneurial or one in a hundred people who are entrepreneurial, they're creating optionality. They're creating companies. Do you think the US is this? The US is sort of set up for the American dream. This is more of a US approach, isn't it? What we have there is higher inequality.

1:48:51I'll give you to one extreme. The US, you hit the top rate of income tax when you hit$700 ,000. In the UK, it's$100 ,000. And it immediately goes to 60 % tax, 62 % tax. And then it drops to 45 % after that. But there's this kind of like - Does it really? Yeah, it's this weird pain. I should know that, but I don't. This insane thing where you basically pay 20%, 40%, 60%, 45%. And it's this kind of - Fine, but to the point - You should probably fix that. People leave. The US approach sounds more like what you're saying. People are leaving to the US. Like a lot of Brits are actually going to the US.

1:49:27And the US has higher inequality, which means it's probably more likely that the pitchforks will come out. Well, for an ambitious person, they don't care about inequality, right? Inequality is the opportunity to get ahead. Yeah, they might not. But from a social perspective, the pitchforks are probably going to come out sooner in the U.S. because of that inequality than in somewhere else. They seem to be coming out here in a big way. They're coming out here, but they're also coming out in the United States. Look at Zach Polanski is gaining a huge political movement. Zohan Mandani in the U.K. Sorry, New York.

1:50:04We're seeing a rise of socialism in the United States. Okay, but Zoran Mandami calls himself a socialist because he does not have another word for what he is doing. He has said seize the means of production. He's said it. And he said take houses off landlords. Like he's a card-carrying socialist. But he hasn't done any really socialist things. I just think that there's a bit of a confusion. But asking wealthy people to pay a little bit more tax is not socialism. Standing up grocery stores in food deserts because no grocery store will do it because it's not profitable enough is not socialism. This is the government provisioning benefits to citizens, fixing potholes, making bike ramps, whatever the stuff he's doing.

1:50:52These are not socialist things. What they are is not strictly neoliberal things, which is just like letting rich people run roughshod over everybody else. The thing that I see with, say, a food desert and a store is that the tax system is so punitive that a small opportunity like setting up a grocery store with all the taxes and all the regulations and all the stuff the government puts on you, it's just not worth doing it. There are better opportunities out there. Like, I'm not talking about remove it for rich people. I'm saying for startups, for small businesses, for businesses that employ less than 200 people.

1:51:25If you basically create very positive experience, very positive conditions for small businesses to get started, they will set up a grocery store in a bad neighborhood because they go, yeah, you know what? I can figure out how it works in this. Do you think there's a chance that we have a bit of a bias as entrepreneurs? Everybody at this table is an entrepreneur. Yes. And for whatever reason, I think a lot of mine might be some like, I don't know, trauma or whatever. I had a bias towards setting up a business and taking that risk. Whereas like my other three siblings, they didn't do that. And I don't know what I did to have that bias within me.

1:51:58Like, if you really think about it, it was probably something my parents didn't intend to do, which meant that at 18, when my four, three siblings went to university and sort of followed that more, one could say safer path, well, yeah, safer path, I dropped out. How angry were your parents when you dropped out? Oh, they didn't speak to them. My mom was, yeah. My mom's Nigerian as well. So she didn't, She left school when she was a child, didn't get an education, can't read, can't write. That must have been a tough conversation. Tough is an understatement of what happened. But for whatever reason, that's the path that I took.

1:52:27And I can acknowledge that I'm in a bit of a minority. Yeah. And I think I sometimes consider, like, maybe I don't realize that through privilege or through some genetic privilege or whatever, I had this particular orientation towards, like, entrepreneurialism that maybe other people don't always have. And that means that the start of the grocery store. I get crucified in the comments. Not everyone can be an entrepreneur, right? I'm not saying everyone can be an entrepreneur. I've never said that. But the grocery store analogy there is someone would start that grocery store if it was easier. But not everybody would.

1:52:58There's always a risk to reward ratio. And government brings in all sorts of regulations. And government only really thinks about big businesses. If you talk to anyone in government, small businesses don't exist. And they just simply think, why hasn't Tesco done it? Or why hasn't Walmart done it? Yeah, I've never started a business in the UK. But I can tell you that in the United States, the barrier to setting up a grocery store in a food desert is not the regulation. It's Safeway. It's the supply chain. It's all the stuff that you've described, which makes it incredibly difficult for somebody to operate a single location grocery store anywhere.

1:53:38Like your friend's pop. Yeah. So what do you do about that? So what I would do is I would I would. And again, in the United States, we used to have lots of laws that pointed the economy towards small businesses. So if I was in charge, I would impose a much higher minimum wage, but I would do it progressively. All the labor standards, all the all of the regulations would be imposed progressively. And in terms of regulation, I would make it far like for a big company. There's a lot of regs, right? You have to follow every rule to the T. For a small business, you have a lot more flexibility. Yeah.

1:54:15I love that. Because we need the standards, but it turns out to be really hard as a single proprietor, even to read the manual, right? To know what you're supposed to do. Yeah. So to me, it would all be progressive. So it would be easy to get capital, easy to start a business, relatively unencumbered by regulation, although constrained to a certain extent. Some extent, yep. There are terrible things that small business people do too. Wait, how'd you make it easier to get capital? Oh, you could have government programs that were designed to help small businesses get off the ground. We have the British Bank that underwrites for the first$25 ,000 of loans.

1:54:52Yeah, we used to have the Small Business Administration in the United States that did a lot of that work. Yeah, so we have a lending institution here that is 75 % underwritten by government for a£25 ,000 startup loan. So there is some schemes that can work. I started all my companies on a credit card. The key thing is there's a difference between entrepreneurials and startups that are intending to scale and just small businesses that want to exist as a small business. I'm really big on the idea that we want communities that have lots of small businesses, even if they have no intention to scale and exit and any of those sorts of things.

1:55:23That old-fashioned thing, right? Yeah. Where you just had a grocery store. Yeah. And it's good to do that. And you weren't trying to create Walmart. Yeah. You just wanted to run a grocery store. It's hot, though, isn't it? because if you want to be cbs or and you you want to you want to be a network but with a grocery store idea if you've got mom and pop grocery store here the next to it you have let's say i know in the uk it's called spa which is a grocery store 7-eleven the problem is if those are next to each other and one has um economies of scale i.e 7-eleven can buy the cucumber yes for uh 20 of the cost yeah of the mom and pop shop then if you're on that street the 7-eleven is going to survive.

1:55:59That's why we tilt towards small business. The United States used to have laws that expressly prohibited that. And why did they get rid of them? Neoliberalism. So they got rid of the restrictions on... Yeah. There used to be express laws to make sure that big companies could not buy raw materials cheaper than small companies. Like when I was young, when I was your age, if you wanted to buy a competitor, you were sweating bullets because that had to be reviewed by a body. And if they thought that you were consolidating too much, they would just say no. But if you think, I think about all my friends that have opened retail stores through their companies, and they only do that when they get really big because their e-com business is supporting it.

1:56:43So if you think about, I know the Gymsharks, the Represents, Uniractive. So you can't... Okay, with respect to retail, you are largely correct. It depends on what kind of retail. Like you could have a gym. You can't e-commerce a gym or, you know, there are all kinds of retail, some of which is somewhat immune from e-commerce and some of which is getting destroyed by e-commerce. It doesn't matter if we're talking about retail. There were regional manufacturing companies, regional everything. And it all went away. And you have never experienced a world in which that used to exist. Like your entire business experience is this sort of neoliberal world of giant companies.

1:57:21That's true. And the world I grew up in, we're like young, medium old, right? But I remember what it was like to go to the video store and select videos from the video store. I remember what it was like. Yeah. Like I remember going to the CD store and listening to music and talking to the retail employees. When I was growing up, the cool kids worked at the CD store. The geeky kids worked at the bookstore and everybody worked at the, everyone else worked at the grocery store. And all of those business models are gone. And this is what I mean. We need to kind of tip back towards small business experimentation being protected and all of that.

1:57:56The other thing too, and I should raise this about minimum wage and giving people more money, the bottom half of taxpayers in the UK pay 9.5 % of all the income taxes. the government could remove taxes off of 50 % of workers in one move and it would cost 33 billion and you just get rid of that and then every single person in the bottom half of income earners gets a 10 % pay rise to 15 % pay rise right I love it so where do we get the 32 billion from just just keep in mind their budget is 1.4 trillion I know I know I know but we're gonna have to 1.4 trillion you're talking about this much to take 15 million people yeah I agree I'm just saying where does the money because i know what's going to happen kia starman is saying they found this 20 million billion 20 billion dollar black hole in the finances and they and that's the reason why they're saying they've had to cut back on pensions and these kinds of things so if we add another 30 billion to that where where do we where do we get the money from you're talking about reduce the amount of administrative burden to tax 15 million people and keep on top of the tax on 15 million people just the sheer volume of people who have to work at hmrc i completely agree all of this insanity.

1:59:04No, but I'm saying where does the money come from? Yeah. So out of 1.4 trillion, I'm pretty sure we could find half of 1 % of it or whatever to get these number of people out of tax. I think we could tax big corporations who are taking the piss. And I also think the economic spending rounds of getting those people, the poorer half of people should not be paying tax. If you give them more money, they'll spend more money, right? Okay. I agree with you. So you're saying tax big corporations more in the UK at point of consumption? Personally, I would make it very similar to a broadcast license that it's a fixed fee that's very hard to wiggle out of.

1:59:43So if I may, let's say I'm an open AI. Yeah, you might have a broadcast license to pay to access this market. So you're going to charge, say you say I'm going to charge open AI 4 billion, 5 billion to access our market. For example, Facebook is very much broadcasting videos and content all the time. So is YouTube, so is Google, all that sort of stuff. So you just simply say, guys, the cost of doing business in this country, if you want access to this market, is a fixed broadcast license fee of 500 million a year or whatever it is. And you just say, based on the number of views that you guys get and how much attention you suck out of our economy, we just essentially tax the attention.

2:00:19You're literally, if people are spending an hour a day on their phone doom scrolling, that is a broadcast. You're broadcasting to our people. So therefore we've got a broadcast license. So those are the types are things that I would look at because they're very hard to wiggle out of. Do you think then these companies like an open eye would then, as we said earlier, just increase the subscription fee in this market? And you see this sometimes where in certain countries, something is cheaper. I remember going to the United, I used to go to the United States to buy my Apple products because it was cheaper there.

2:00:47And then in the UK, it cost me like not even a little bit, it was like hundreds of dollars more to buy a laptop here. The same laptop in this market versus this one cost different amounts of money. They may choose to try and pass on that consumption tax to consumers. Maybe they do do that. Maybe we could try and legislate against that, that they have to essentially be on parity with where they are in other markets, that they have to charge parity. if we don't do anything we essentially have nurses and you know like teachers and all the people who are in the normal 50 % of the economy whose job is now to hold up the economy while Starbucks doesn't pay taxes while Amazon doesn't pay taxes while Google doesn't pay taxes and Steve I think all your questions are really really good but they all point to the same thing which is that you know the economy is a collective action problem Right.

2:01:43And now it's a global action problem. It's a global it's a global collective action problem. And if we want if we want robust solutions to these problems, we're going to have to robustly coordinate activity across the world. And, you know, like for during the Biden administration, they tried really hard to do this global profit tax where we're but that collapsed under the weight of pressure. But all, you know, again, all of your questions, I think, are really good, but they all point to the same fundamental weakness of governance. And Nick, you need to talk to your billionaire mates and also say, if we don't start investing in the economies that we do business with, which you are saying, right, of course, right?

2:02:26It's a lonely business, I'll just tell you. But it's like those CEOs of those companies, you know, you drain the whole economy out and then what next? I think on this pass-through problem, I was looking at different ways that this ends up being applied. So if you think about the Big Mac, the Big Mac costs different things in different states, depending on how much tax that state charges. So in Oregon, the Big Mac is$8, whereas in Chicago, it's almost$9. If you think about bookstores, you can buy one book on the high street for$20, the same book online is$10, because they're passing through the costs.

2:03:01So it's conceivable that if we say to big corporations, right, you guys are going to pay a bigger tax to sell into the UK, then the UK consumer, they might pass that on to the UK consumer. And they might look at different markets because, you know, they might say as a company, we want to make 30 % margins. And the way to make 30 % margins in the UK is to bump the cost. The UK consumer could say, I'm going to use a VPN and pretend that I'm going to be in a different market and pay a lower price. And it doesn't matter. You still have to pay the broadcast license if you want to be available in our country.

2:03:31These are hard problems and we need to know who is the person that we're targeting. It's the Black Rocks of the world. It's the big banks of the world. It's the big mortgage. I had a private conversation with the CTO of a very large company, technology business. And he was saying to me, he goes, I don't think the UK understands the situation it's putting itself in and the EU with all this regulation. He said to me that we sell this particular product. It's a physical product. And because the UK and I think EU have put this new law in where you have to have removable batteries. interestingly the unintended consequence of that is we have to stock more lithium batteries more of them go into landfill yeah and also your devices break because they're no longer waterproof so you're going to actually it's harming the environment and also he said the thing you guys don't realize is that you're actually not a big market anymore for us and because south america's coming online we actually don't have to sell the product here and you think about this in terms of some of the regulations around ai as well when a new product launches on a chat gbt yeah it goes in the U.S.

2:04:38first because of regulations. And then maybe six... No, it goes in the U.S. first because it's the biggest market. Biggest market, but also we have our regulations around some software and GDPR and all these kinds of things means that sometimes we just don't get the features. And sometimes in our history of building the previous business I was in, as creators, we would sometimes have to wait 12 or 18 months to get the same tools that my competitors in the United States could use, monetization tools. They'd have the monetization tools first then we'd have to wait 18 months. The economy is a set of trade-offs.

2:05:10That is the problem. Economics is called a set of trade-offs. The actual definition of economics is making trade-offs and picking your trade-offs. I totally get it. Regulation does actually suck for consumers and for businesses. And the EU is now over-regulated to the extent that you can't even take a lid off a bottle without the government being involved with how the lid comes off the bottle. And it's killing our dynamism. we are really just like and the u.s is under regulated and if you buy chicken in a in a store and and don't cook it could be anything one in three chances you'll you'll you'll you'll get uh either e coli or salmonella and your life expectancy is lower exactly and everyone who everyone who eats in the u.s it comes back from the u.s and goes oh my goodness i hate i hate eating food in the u.s it's all terrible it's all trade-offs does this not then mean our ultimate conclusion of this conversation is around morals and ethics, around the trade-offs that we think are the right ones to make.

2:06:13And so it's a question really of morals and ethics. Yes. Human flourishing. Yes. A hundred percent. The purpose of the economy is to improve human lives. The way to do this is to massively maximize small business power because when people - I think it's more complicated than that. When I have to work shoulder to shoulder with my workers, I treat people well, right? When I'm a mega corporation who have faceless workers down on the factory floor that I will never meet, I will never sit next to on a plane, I will never come in contact with my workers, I can treat them however I like. Why do you think that's reductive, Nick?

2:06:49Well, I think that what Dan is saying is true and massively insufficient. Of course. I mean, we're in violent agreement about the small business point. Like, I don't want to be naive and think we should go back to the 60s or something like that. Like, I don't think that's true. But again, here's what the new economics shows, that corporate consolidation increases prices, lowers wages, decreases consumer choice, and decreases the rate of innovation. Right? And I 100 % agree. Because innovation, again, the conventional view of innovation, the conventional economic view of innovation is this sort of great man theory.

2:07:30You have this smart, rich guy who's sitting somewhere and he or she has this amazing idea and that's innovation. That is not what innovation is. Innovation is always combinatorial. Technology makes itself out of itself. You start with a rock. The rock was our first technology. And you did a lot of stuff with rocks. And we also had sticks. Actually, sticks were our first technology. When you tie a rock to a stick, you have a hammer, a spear, an arrow, an axe, a shovel. It goes on and on and on. And what that means in terms of policy is that because innovation is combinatorial, The more diverse people in a network who come together with different ideas and different sets of experiences, that is what drives the rate of innovation.

2:08:23And this is mathematically demonstrated that a diverse group of people working on a problem will absolutely consistently outperform a homogeneous group of high performers. And then when they become really successful, which will happen eventually, if you let that system play out, you have this inequality unless you intervene at some point. And recycle it. And then when you go to recycle it, you get back to this issue of us needing global cohesion. Yes. Because some people won't want the recycling. Correct. And they'll say, well, I'm just going to go to Ireland or I'm going to go to Dubai or I'm going to go somewhere else.

2:09:02Correct. And this is maybe a function of the new economy where people can just get up and leave and take their value with them. Yes. And this is the conundrum. This is the conundrum. But the meta issue above the conundrum is recognizing that citizens have both the right and the responsibility to want to address that problem. And you grew up in a world where it was illegitimate to address that problem. That economics told you, don't worry about those problems. The market will sort it out. Is there like a radical idea of how to solve this? Do we need like all the very, very rich people in the world to come together collectively and say, we're going to create a new model?

2:09:43Like, how do you, I don't know. Is there any radical ways to solve this stuff? Or is it just all trade-offs once again? Democracy. One of the big radical ways is breaking up companies and it's unthinkable. This is what TR did. You know Jeff Bezos, right? Yes, I do. It was in my wedding. I wonder if he would lose more sleep about higher taxes or having his company broken up. Oh, for sure broken up. Because if you broke up Google from YouTube, if you broke up AWS, Amazon Prime and Amazon, if you like the biggest thing that scares the billionaires is backing competition with the market. And it's like, oh my goodness, I don't want to have to compete.

2:10:17I've got this amazing monopoly that just works. A hundred percent. Right. So. But is that a perfect solution? Because I was thinking. It's not a perfect solution. Pretty good solution. It's the least worst solution available. It's pretty good. It's pretty effective. I mean, this is what Teddy Roosevelt did. These companies aren't making any money, though. They're like being subsidized by the mothership. So like in an, let's say Amazon Prime, that's competing against Netflix. Dude, these companies make money where they want to make money for tax optimization and strategic reasons. Look, I mean, you know, like when we started Amazon.com, I'm not sure if you guys remember, the whole hit on it was it's not profitable, right?

2:10:52The secret to Amazon.com's success is the negative cash conversion cycle. For virtually every business on planet Earth, to grow requires capital. For all of your businesses, growth requires capital. But for Amazon.com, we took an order. We put up the website. You take an order. You instantaneously transmit that order to a book warehouse, which has all of the titles in stock. It's shipped the next day. It's received the next day. You ship it out, hit the person's credit card, but then you don't have to pay the bookseller for 90 days, right? And what that means is the bigger the company gets, the better cash flow gets, whether you're making money or not.

2:11:39So we didn't have to make money because most companies have to make money because if they don't, they don't have the cash flow to continue. Like Amazon Prime businesses. Yeah. And so there are things available that we could have made money in one minute just by increasing our prices by 3 % or 4%. Yeah. These companies are also not worth trillions of dollars because they're not profitable. They're worth trillions of dollars because they are making money. But the issue is they have strategic monopolies. And if you really want to make them lose sleep, you need to break up strategic monopolies. You need to say there's an actual limit to how big a fund can be.

2:12:15There's an actual limit as to how big a strategic monopoly can be. You can't have things that hedge naturally against each other and prevent real competition. So these things are ways of – and also ties up their attention. So while they're thinking about not getting broken up, they're also not competing with all the other guys out there. So it's basically capitalism runs on competition. And this is the one thing that we've missed. We have less competition. Yeah. When Adam Smith said capitalism works, he said it only works when there's competition. If there's one bakery in town, any bread at any quality at any price is what you have to pay.

2:12:52As soon as there's two bakeries in town, it has to be the best quality at the best price. Although with two, you can collude. But if you have five, it's very hard. So Amazon has a monopoly over - Strategic monopoly. A strategic monopoly. So what does one do with Amazon? You break it up. Yeah. Into what? AWS, Amazon Prime, Amazon Retail. Fine, but they've still got a monopoly in online e-commerce, theoretically. Yeah, well, it's just harder. it's easier for someone to come along and compete. Right now, it's very, very hard for me to compete with Amazon because they are pulling in cash from AWS.

2:13:23They're pulling in cash from all these other subscriptions. There's so Amazon basics. You could break up the retail. You could say you can have a bookstore. You can have an electronic store. You can have this. You can't be the everything store, right? So you could, there's all sorts of ways that you, but you have to acknowledge when someone has achieved a strategic monopoly. Do you think that's a good idea? Do you still learn shows on Amazon? No, sadly. Okay. I wouldn't be here talking to you guys if I'd still get you. No, no, no, no. That's true. Jeff won't come. No, sadly, I sold my shares. But, you know, I am open to all of these ideas because I know, I mean, I am completely with Dan.

2:14:03I know that the world would be a better place if these companies were smaller and we had more competition. And again, there are no silver bullets to these complex problems the world faces. We are not at this table going to come up with this algorithmic idea that is just going to make the world a better place. None of these solutions are perfect. They are always going to be the least worst thing that we can come up with. But I think at the level of principle, living in a world where we try actively to limit concentrated power in all its forms, where we try actively to include people in whatever way, whether as entrepreneurs or just workers, as robustly as possible, where we try to make sure that people are engaged enough in the economy so that they will be supportive of the democracy.

2:14:59not want to burn it down. These are high level principles that I think reasonable people can agree with. And they come into conflict with people like Elon Musk and Jeff Bezos and Mark Zuckerberg, who do not want to live in that world, who want to live in an oligarchical world. And I just think that we should have that fight and win. We have a closing tradition where the last guest leaves a question for the next, not knowing who they're leaving it for. And I think it's quite a relevant question. I'll ask you first, Dan. The question is, in a world with so many challenges, what can we do to restore hope and trigger engagement?

2:15:40Getting back to what we were talking about, we need people to know that the rules of the game have changed and that the rules that we grew up with, where we grew up in a particular industrialized, late-stage industrialized world that had those rules, and we now live in an early stage digital revolution world. And the thing that gives me hope is I know how the rules of that world work, right? Someone explained it to me. They actually explained, this is how you start a business. This is how you grow a business. This is how you make a million. This is how you hire some people. This is how you get a great team working side by side.

2:16:14That gave me an enormous amount of hope. I have a pathway out of where I was born and the wealth I was born with and where I am now. Someone explained to me the pathway. Here's how the rules work and here's how you make success. One of the things that makes people feel hopeless is that they're stuck in a game where no one explains the rules. So explaining the rules. So I would say we need a schooling system. The thing we don't talk about enough is that the schooling system has to explain to kids the relevant information as to how to function in the current economy. So I played that forward in my head and I was thinking, okay, you get a million kids and you explain all of the rules to them.

2:16:49At some point, if you just give it a year or two, say they all knew the rules, there's still an edge and some of them would figure out the edge totally and then you've got this pocket that know everyone knows the rules but then others know this particular way to beat the system and that could be with i don't know they learn about ai they learn about whatever and then you're kind of back into the same place and you were one such person yeah who got the edge someone came to you went pst you know they're saying the rules of this that's actually there's a way to get an edge yeah and you had it within you for whatever reason to capitalized on that edge and now you're a multi-millionaire.

2:17:26So there's always going to be the rule and then the rules get instantly expire. Every single day after you explain the rules to someone, there's a new set of rules. The only consistent is change. And at the moment, most people I encounter who've never had any explanation going on about how the world works now, they are hopeless. They feel completely hopeless. As in, like I see kids who are sending out CVs to Microsoft or to like some major company, they don't realize that those companies are getting 3 ,500 applications. I get it. The day after you explain the rules to them, the rules are one day less relevant.

2:18:04And so it's true. You'd have to go to school every single day. Well, yeah. Lifelong learning. You do have to do lifelong learning. Like there is a lifelong, part of the rules is lifelong learning. That is actually one of the rules, which is the only consistent is change. It sounds like you're saying though, that if we teach people the rules of business, then people will have more hope. But there's so many people that I know, like my fiancee who, she cares about something else much more than she cares about business. She cares about like... She set up Bali Breathwork. Thank you for the plug. She was able to create Bali Breathwork because, well, I said it, not you, right?

2:18:38She was able to figure out how to turn her passion into something that is commercially sustainable. But I'm just using her as an example. Did she get that from the school system? Fundamentally, maybe she got it in part because she has a dad who's an entrepreneur. Yeah. She has a fiance who's an entrepreneur. Someone explain the rules to her. She has the support network. Like she supports me, I support her. She knows how to enroll people into her success. All of that is called pitching, publishing content, creating a product offering. I only know one thing that I've seen work again and again and again and again, which is I teach people.

2:19:11People who learn the entrepreneurial method suddenly feel agency and hope. I agree. I'm not saying that's for everyone. It's not for everyone. It's for people that had whatever mean you had in terms of the upbringing, the luck, the fortune. I'm not saying everyone's going to be an entrepreneur. My answer to that question is the entrepreneurial tool set gives people a lot of hope. I get that. One of the things that we have to acknowledge is that it's a certain type of person who has a certain type of goals. There are some people who actually just want to go outside and they want to work. Maybe they want to work one day a week or two days a week.

2:19:45Sure. I don't want to do push-ups and I don't want to do sit-ups. I don't want to go to the gym. But if you ask a fitness professional, how do you improve your body? How do you feel good? Right? The fitness professional says, hey, these are all the things that I've seen working for a lot of people about going out and getting fit. And you might not want to do them initially, but actually the people who do these things, I hope. The people that do those things might have an inherent privilege, right? Wait, the world's not fair. Like the world's not fair. Some people are born on dirt bikes. I need to know your answer to the same question.

2:20:13I think we need to have vital democracies that manage economies in ways that are optimized around human flourishing and not capital efficiency, not capital accumulation. That we live in a world, you completely grew up in a world, where the highest good was capital efficiency. The capital efficiency and godliness were the same. And we have organized society in this way. In the United States, we literally have a norm and a set of regulations around maximizing shareholder value for corporations, right? This was invented out of whole cloth in the 1970s. This whole idea that the purpose of the corporation should be merely to enrich shareholders.

2:20:58And the evil of that idea isn't – what they weren't saying was, screw the poor. What they said was, if you maximize value for shareholders, it will be good for everybody. And that was the lie, because it wasn't good for everybody. It was good for a tiny minority of people. And the lie was that when you do that, growth rates will go up, GDP will go up, we'll have a rising tide. And the tide didn't rise, it fell. And what modern economics says is that we can have a different construct, we can have a different society that purposefully includes people in a robust way, whether they're a worker, whether they're a small business.

2:21:40And if we do that, everyone will benefit. The economy will grow faster. People will be paid better. Prices will be lower. We will have more innovation. This is within our grasp. We just have to decide to do it. You should go into politics. I am in politics. Well, I hear that. One thing I don't like is waiting for the world to change. And I like personal agency. And at Nick's level that he's playing at, I love the fact that he's in politics and he's using his wealth and his power and his influence to change the system. For most people, waiting for the world to change does not feel empowering. And I guess where I'm coming from is, like, yes, tilt towards this because that's the political movement that's required to make sure the world includes more people in capitalism.

2:22:28And I love that. and while that's happening take personal accountability personal agency figure out what is your next move watch all the episodes of diary of a ceo learn from people and you know and jump on and and figure out yes subscribe right do me a favor subscribe to the channel and if if that if that is done like people people who do that end up feeling hopeful because hope comes from having personal agency. And personal agency is knowing your next move that's going to benefit you and move you forward. I agree. And I realize, do you know, the older I've gotten, the more I realize my own privilege.

2:23:07And my privilege isn't necessarily that I built a business and that I have money now and all those things. My privilege is something happened when I was young from the point of maybe even where my parents got to live. But do you feel guilty about it? I don't feel guilty about it, but it just has allowed me to see my own bias and to realize that I have this unknown unknown. Unfortunately, that's growing by the day because I'm getting more entrenched in my own privilege. And what I mean by this is like, I play out the scenario theoretically. My dad left my mom and my mom still struggles to read and write.

2:23:42And she would have had like four kids, can't read or write, can't really get employment. She worked at St. Luke's Hospice as a volunteer. And I go, God, if that one thing had happened, how different would my life have been? and and so that's like a privilege that i i've never even acknowledged because i it's kind of inherent it was like built into my life and then would i be sat here now would i be be the person i am today if that one little thing had happened no would i be ambitious and optimistic about the world or would i be theoretically could i be resentful could i be like some of my other friends who came from the same city where i came from who didn't have a father who may i've said to some of my friends, I said to one of my particular friends back home, if you would just get a job for a couple of months, I will pay your rent for years.

2:24:28Didn't happen. Can't get a job at his subway for three months so that I would pay his rent for years. I ended up helping him anyway. But I just, I remember saying that 10 years ago, it just highlighted to me that there's a real deep inherent privilege that I have that I'm like not even aware that I have. Sometimes it's trauma, my dna my brothers are all very smart naturally um and what if i didn't what if like i didn't have those two parents and what if i didn't have the whatever genetic composition i had like then would the advice apply that then would the advice i give to the world would it apply so i i i mull that and go it's got to pass that lens for it to be broadly applicable and therefore i think effective advice i love your level of compassion and empathy for people and the fact that you're having that self-exploration means you're an incredible type of person.

2:25:18With each individual, each person wants to do the most with what they've got. I'm saying that if I was to visit a small town that had a thriving 10, 15, 20 businesses in there, there were enough entrepreneurs to create optionality for people, that would be a good town to go to, right? And if I go to a town where there are no entrepreneurs and there are, like everyone feels downtrodden and there's one big Costco and that's the only employer in town, that's going to be a shit town. So all I'm saying is you need a critical mass of people who have agency and that lifts up the, like having a few, do you know, in Japan, they call it the shogun family, right?

2:25:56And the shogun family lifts up that little community. And around that shogun family, you end up with lots of other businesses and lots of other, like it flows out. But when you have one monolith in the world that is the only company in town, and it is the only place that ships stuff to your door, and there's only one place to get your CDs and there's only one place to get your Netflix, then pretty much everyone else is just reduced to being a consumer. What do you think, Nick? Again, I've said it before. I agree with this sentiment 100%. I am an entrepreneur myself, but I expect that operating and empowerment applies to, it will no doubt apply to a high percentage of people who watch your show, right?

2:26:38Lots and lots of people who watch the show are entrepreneurial, want to be entrepreneurial, so on and so forth. But I suspect you're talking about less than 5 % of people on planet Earth that fit that paradigm. And I want to create a paradigm that works for everybody. And you're saying if you hit those 5%, Well, even in the UK, it's 6 million self-employed people out of 30 million workers. It's not tiny. It's a pretty decent percent, right? It is a major opportunity that more people than ever could take part in. If you asked a health professional, how do you get hope? Go to the gym, go for a run, all that stuff.

2:27:13You're asking an entrepreneur, how do you get hope through personal agency? I'm going to tell you what's worked for me is the entrepreneurial method. So maybe we need to ask a broad group of people. But I suspect that what they will come back to you with is the quiet miracle of a normal life. If you want that, that's great. I want that. And I want that for everyone, that's gone away. It's gone. Houses are unaffordable. Sorry, local jobs don't exist. No one's paying healthy wages. All of that stuff that I want as well, it's great to sit there and want it, but that doesn't give me hope. That gives me disappointment that it used to exist.

2:27:51The family home that most people would love to raise a family in, it's 1.2 million pounds now. And if you want to fix that, you have to enact this. Yeah. You have to do these things. Most people. What is that? People are going to wonder what's on that piece of paper. So this is, you know, I mean, the main body of my work is coming up with a different economic paradigm, a way of understanding economic cause and effect that leads to the world that Dan prefers, that I prefer. I think, I don't know, but I sense it's the world that you prefer. And what you have to do is you have to rip down the existing economic framework and replace it with a 21st century thing that inclines policymakers to make good decisions, not bad ones.

2:28:37And the booklet itself, can you show the booklet? Yeah. So this booklet is 21st century economics. Now, this is aimed at policymakers and professionals. Yeah. But if you go to marketsbuiltforhumans.org, you can download this for free. And that is merely an expression of the paradigm itself, going from believing that we should just increase capital efficiency to human flourishing, going from understanding human beings as homo economicus to homo sapiens, going from understanding the economy as a parietal optimal equilibrium to a complex, to an ecology, all this stuff. But when you understand it in a new way, you come to very different conclusions about how you should organize the world.

2:29:25And that is the starting point for global transformation. I love it. He's already a billionaire. He's got time on his hands and he's got money to fly around the world doing it. Do it. And while he's doing it. All I need is for people like you to help me explain it. Yeah. And like I love it. I'm not against it. I'm just saying what will give most people hope is taking agency over their life where they can do something this week to improve their life. Yeah. So next time I see you, there will be a test. And download it, give it to your lawmakers. Well, so what I'll do then, I mean, we've got different reading materials people that are listening can pursue here.

2:29:59We've got Dan's books here, which I'll link below. Dan, is there a particular best book to start with in your opinion? The most recent one is called The Lifestyle Business Playbook. And it's basically how to get started with a small business and a business that will give you more fun, freedom and flexibility. And I like the idea of supporting anyone who's trying to create a better economy. Some of the most miserable people I know are waiting for the system to change. And I don't want you to be that person. I want you to be doing something in your own life. And then over here, I'm going to link all of your books below as well.

2:30:27Yeah, I mean, I just think that a starting point for global transformation is under, look, economics is the operating system of the world. If it's the wrong operating system, you end up with a very bad circumstance. And economics is invisible to most people. They don't even understand it's the it's the water they're swimming in. They don't understand that policymakers are making decisions that affect their lives based on a particular understanding of how the economy works. And if that's wrong, then you're going to make some terrible decisions. If you believe that prosperity trickles down from the top, you're going to enact a certain set of policies.

2:31:08If you believe that growth is built from the middle out, you will make an entirely different set of policies. If you believe that the middle class is a consequence of economic growth, you will go one way. If you believe that the thriving middle class is the cause of growth, you will do a completely different set of things in terms of policy. All of them aligned with what Dan wants. But that's where you have to start. Those are the meta questions that you have to answer. And then you deduce logically to all of the things that Dan prefers. But you have to start up here. You have to start with a set of ideas that govern how people see economic cause and effect.

2:31:52And that is what this is. I shall link it below. Thank you so much. We're done. Thank you. You are fantastic.

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