Ask Altucher! EP02: A Crash Course in Civics from the Nation's 47th President (Possibly)

0:00Look, as a manager of people, as an employer, as an entrepreneur, and as even an investor in startups, I can tell you the most important thing for your business is the quality of the quality of people. you hire. The best part is that great candidates are already on LinkedIn. Employees hired through LinkedIn are 30 % more likely to stick around for at least a year compared to those hired through the leading competitor. And I will tell you that the great thing about LinkedIn is that you're not just looking at random people. You're able to see the people who your friends and trusted peers and colleagues who they trust and who they've hired in the past and who they recommend.

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1:19This isn't your average business podcast, and he's not your average host. This is the James Altucher Show.

1:36All right, James, welcome back to another Ask Outer Chair. Jay, I hope you have some good questions for me. To be fair, I haven't seen any questions. People can ask me about investments, the economy, relationships, politics, because I am officially running for president of the United States in 2024, so I'm happy to answer questions about the issues at hand. I've written books about how I've gone from totally dead broke after selling a business to making it back, to going broke again, to making it back. So you don't necessarily have to listen to me. I've just been through a lot. I've been all over the place, metaphorically and literally.

2:17All right. When you talk about the person, I think that's a good one to start. Before I start asking the questions from this person named RealCodeDesta from NootPed.com, from NootPad.com, Let me ask you one question Just for my sake I come from So I come from Malaysia I come from a country That has prime minister What does President Of the United States Do Because like Every time on the news I see like Hey we have to Ben Garnet or whatever Better healthcare for whatever Why can't president Just be like You can no longer have guns Or yes Everyone can have Good healthcare Like what can they do Like it doesn't seem Like they can do anything That's a really good question Because a lot of countries Around the world Have a what's called a parliamentary system where the head of parliament is the prime minister, essentially the ruler of that country.

3:06And some countries like the United States have a president, like the United States has a president. And in many countries where there's a president and a prime minister, I can't think of an example offhand, but sometimes you have somebody who rules the country. And sometimes you have someone who's a figurehead that like goes to funerals and has dinners for the leaders of other countries and so on. Right. Like in England, there's a prime minister and there's a king and the king is the figurehead ruler and the prime minister is the actual ruler. But in the United States, very technically, a president of the United States is elected by the people sort of there's an electoral college, but let's ignore that for a second.

3:48So the president of the United States is elected by there's an election day. all the people come to vote and they vote for like last election, they either voted for Donald Trump or Joe Biden in England or in a parliamentary system, the prime minister is not elected by the people. So what happens is everybody votes not for a prime minister or their opponent, but they vote for a member of parliament. And then parliament makes a vote to decide who the prime minister will be who is the leader of the party so in the united states the equivalent of the prime minister would be the speaker of the house so right now kevin mccarthy in a parliamentary system he's the speaker of the house in the u.s because the members of the house of representatives which is the equivalent to uh parliament the members of the house of representatives voted for kevin mccarthy to be their leader and how did he win not that he is the most popular of all the House of Representatives, but he's the most popular Republican.

4:50And we live in a two-party system in the United States, Democrats and Republicans. There's more Republicans in the House of Representatives. So the head of the Republicans in the House of Representatives becomes the Speaker of the House. And if the U.S. was a parliamentary system, he would be the Prime Minister. And Nancy Pelosi would have been the last Prime Minister. But as it stands, the Speaker of the House is third in line for the presidency, or second in line, rather, If the president dies, the vice president takes over. If the vice president then dies, the Speaker of the House takes over.

5:22If the Speaker of the House dies, President pro tempore of the United States Senate takes over. And that's usually the oldest member of the majority party of the Senate. I felt like there would be such a bad idea, though. Yeah, probably. Every political system has its flaws. Right. And so you asked another question, though. Why can't the president just decide to do something and then it's done? Well, the reason why one separates the powers of, let's say in the United States, there's three separate powers. There's the power to make laws. There's the power to enforce laws. And there's the power to decide if a law is not fair, where fairness is decided by both the constitution and prior decisions about what is fair or not.

6:16So for instance, If I say, if I make a law, if the Congress makes a law that says Jay is not allowed to speak outside, you would go to court and the court will say, well, that's not fair because the Amendment 1, the First Amendment of the U.S. Constitution says everybody has a right to speak. Right. So Congress would say, oh, well, so in the United States, the judicial branch, like anybody who's a judge all the way up to the Supreme Court decides which laws are fair or not, according to the Constitution. They use the Constitution as their base. But the Constitution is pretty vague, isn't it? Well, but that's why then every decision ever made by judges, if it's not in the Constitution, then we abide by those decisions.

7:01or it goes all the way up to the Supreme Court and the Supreme Court says, no, we're going to change our mind on this one, which is something they did, for instance, with abortion rights recently. The Congress, which is composed of the House of Representatives and the Senate, they make all the laws and the executive branch, which is run by the president of the United States, he enforces all the laws. And all that means is that if there's a law that's a federal law, then he has the power to, if Congress has taxes are now 99 % and somebody doesn't pay their taxes, the president can go to the treasury department, which is in the executive branch and say the IRS, which is run by the treasury department has the right to collect that money from that person.

7:45And that person can't sue or anything because it's a law. Or if Congress says, we're going to go to war, the president then goes to the department of defense and says, we're sending the army to this country because Congress says there's a war. There's also a National Guard and there's an FBI. There's various law enforcement agencies in the executive branch that are not local. The police is local. The president's not in charge of those. But the FBI and the National Guard, they're like the nation's police. And so he can use, or an IRS agent or, you know, there's various agencies within the executive department that the president can use to enforce laws.

8:28Or if Congress says we need to send a billion dollars to Florida because of the latest hurricane created a billion dollars worth of damage, then the president and the executive branch are in charge of setting up a way for the billion dollars to get to the people who need it in Florida. So they enforce all the laws. Now, that is according to the constitution. over the years, every branch has changed and taken more and more power. Every branch fights for power in the United States. So the president has now powers like executive orders where he could make his own. He can say, I'm sending this army to Afghanistan, even though Congress has not made it a law that this is a war.

9:12So he could do things like that. Or he could say, I'm going to make an executive order that everybody gets a thousand dollars in a bailout during the pandemic. Now, by the way, the name of our country is the United States of America. So as a country, we're really just a collection of governments called states. So, and each one of those states has a judicial legislative and executive branch also. So the governor of California is like the president of California. And then there are state senators and state representatives, just like Congress is for federal. And there are state judges all the way up to a Supreme Court of California that decide on state laws.

9:55And even in some towns like New York city has a mayor who's like the president of New York city. And then there's a city council who's like the Congress. And then there are city judges. So it all goes down depending on where, you know, like New York city might have different laws than Los Angeles, because the city council of New York city makes different laws than the city council of LA. If someone says, Oh, I think these laws are unconstitutional. It goes up to the courts in LA and the courts in New York city. And then people could appeal them up to the Supreme court if they want, but that's very rare.

10:26And the mayor or the governor, whoever is in charge of enforcing those laws. The other thing the president does, which they didn't use to do according to the constitution is they can recommend laws to Congress. And then the party that they belong to like Democrat or Republican basically follows the president's advice and tries to make the president's agenda laws. There are many ways in which the roles of the president in Congress and Supreme Court have changed the rules since the United States started. And some of those have been good, and probably some of those are bad. Everyone thinks it's in the Constitution that there are nine Supreme Court judges.

11:05There is no specified number of judges in the Supreme Court. I think the initial Supreme Court had six judges. And Roosevelt is an example of someone who tried to stack the Supreme Court. He wanted to have more judges in the Supreme Court so he could appoint more judges because that's a lifetime position. So once you appoint a judge, your influence will be felt for decades if you're a president who appointed a lot of judges. This whole thing felt like a whole mafia organization. It's kind of like that. I don't know what mafia organizations are really light, but let's take the model in both The Sopranos and The Godfather and assume that that is fact.

11:42You know, probably it's close to fact that there's a Godfather who's sort of like the president and he enforces. Actually, I think mafia organizations are more like fascist organizations where there is one person who is basically in charge of everything. They make the laws, they enforce them, they decide what's fair, and then they appoint people below them to execute on those and those people can govern however they want but typically they again do the same structure they're like the dictators of their area you know someone's like the godfather of the metropolitan area around new york you know that he might have capos you know sub godfathers who are like in charge of new jersey or connecticut or whatever also i should mention a fascist and this is often forgotten in the definition when people call someone a fascist a fascist usually supports capitalism, but heavy government control of fascism.

12:41So a lot of people will disagree with me on this. You know, we had these, a very controversial thing in 2020 when, because of the pandemic, the United States, and I don't even know if it was Republican or Democrat, but the United States told every business to shut down unless you were, you know, a needed business and emergencies. Government control of business is a very fascist tendency. And this is why, you know, fascism is often associated with the far right. And that's often true because some, you know, there's an element of fascism that says we are superior to other people. So we have more rights and so on.

13:17And the most superior person is the dictator. So there's an element of fascism that that's that, you know, that's kind of like a far right stance, but there's also an element of fascism that's far left, which is kind of a populist control of business. Like these business leaders are unfair. So we're going to take control of their businesses to make them more fair. Or we're going to decide what the correct allocation of resources in society, because we know better than the markets. Stalinist Russia, Stalin was a fascist and Maoist China, you know, Mao and Stalin were both communists and fascists.

13:51I mean, that's not good for society, isn't it? Like, just have people decide what's good for society or decide what the market should be. Yeah, no, that's horrible for society because think about it. Right now, New York City is a good example, or London is a good example, or LA is a good example. London does not produce enough food to feed the people of London. Like, there are not these huge farms or food factories or whatever in London producing enough food to feed the people of London. And that's the same. That's true for Moscow and Beijing and every city almost. And yet in communist countries, people often starve because the dictator and the central group that's running the country, They often try to figure out these five-year plans, how to buy all the food from wherever to feed the people in their country.

14:52Well, the United States doesn't do that. We just use the market. So like market forces decide the prices and the supply and the demand of all the food. So if there's a lot of demand for hamburgers, then companies like McDonald's, I'm just hypothetically saying, or let's say grocery stores like Target or Walmart or whatever, they might say, oh, there's a lot of demand for meat. So let's find all the farmers we can in the United States and buy meat from them. Let's find all the meat from Argentina as a big source of supply of beef. Let's find all the meat and we'll buy them for cheap prices because we'll buy in bulk and then we'll sell because we know that there's demand so in a fascist or communist dictatorship just a few people try to decide in advance what all the demand and supply and prices should be for food and they're they often get it wrong because it's impossible there's a million variables involved market oriented economy like the united states i'm not even calling it a capitalist economy.

16:00It's just a market oriented economy. Market forces decide how much beef is needed, how much vegetables are needed, what the price of them should be, where we should get them from. Like that's all decided by the market. The president, the Congress, the Supreme Court have zero or have 1 % to do with it. Sometimes they say, oh, this food's really bad for you. So we're going to make it illegal. But that's very rare. Mostly we can eat whatever food we want.

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18:31I could be totally wrong. I could be totally naive because I don't know anything. Does that also relate to Federal Reserve increased rate or inflation as well? Yes, completely. Every department of government, like let's say the Department of Education, let's say the IRS, let's say the Federal Reserve, let's say the Department of Agriculture, they're all like mini fascist governments. And again, I'm not saying good or bad because they have best intentions. Even Lenin, who was the first head of Soviet Russia, and even Mao, who was the first head of communist China, I'm going to assume for a second they had, at the very, very beginning of their careers, good intentions, which is that people would be better if everybody was a little bit more fair about the allocation of resources.

19:25So they said, well, at first, we need to allocate the resources to make things fair. And then eventually, the people will be able to do it themselves. And I am just the first citizen, the first person to do it. But you look at it. The Federal Reserve right now, they made an arbitrary decision, which is that we were having too much inflation. And we need to raise interest rates because when the interest rates are raised, people spend less. The reason they spend less is because there's more incentive for them to put money in the bank where they get interest on their money rather than spend the money.

19:59So there's more incentive to save. And when interest rates are higher, it's also harder to buy things where you're borrowing money, like on a credit card or a mortgage or whatever. It's more expensive to buy things if you're borrowing money. So people don't buy houses because the monthly payment on your mortgage, which is a loan from the bank, is higher because interest rates are higher. So like if you buy a house today, as opposed to a year and a half ago, you're paying double the monthly rate and people don't want to do that. So they don't borrow. It's too expensive for them. So less money is spent.

20:34So many businesses go out of business. And when you raise interest rates, there's a great possibility of a recession. Now, if we didn't have a federal reserve, what could have happened was that, you know, market forces then take over and, uh, market forces might've said, well, the price of beef is getting too expensive. So more and more people will start eating fish or vegetables or whatever, something cheaper, or, or they'll, they'll find, you know, Walmart will find sources of food that are cheaper. Inflation would maybe naturally go down. Then also we would have gotten a chance to see what inflation was transitory.

21:10So for instance, some of the inflation that we're experiencing is because of the war between Russia and Ukraine. So oil potentially is, is in trouble and wheat, We get a lot of wheat from both Russia and Ukraine. So price of wheat has gone up. And because of the pandemic, our supply chains with China have had problems. So some of that inflation happened. And because we didn't build houses for two years and nobody was cutting down trees, there was a shortage in lumber now that we are building houses again. And the price of lumber went up, which means the prices of houses went up to build a house.

21:47So some of that inflation was temporary and will get worked out. But the Federal Reserve was worried about extreme inflation. And consequently, they're raising interest rates so fast, they don't have a chance to see if those interest rates work yet or not, since it takes 18 months for interest rates to be felt by the system. And they haven't even been raising interest rates for 18 months. So we don't even know yet what the full effect of interest rates will be. Unfortunately, there might be a recession that's completely artificial. It's completely caused by the Federal Reserve. Inflation is not necessarily a bad thing, by the way.

22:22We've had inflation for the past 120 years, basically ever since the Federal Reserve was created, and a lot of inflation since we went off the gold standard in 1971. What's happened since that time? Well, the medical lifespans have increased. Literacy levels have increased. Silicon Valley has made supercomputers that we could put in our pockets with cell phones these days. Biotech has rapidly been curing diseases, and AI now is going to increase productivity everywhere. So inflation is not necessarily a bad thing. Just hyperinflation is. And the way you cure hyperinflation is you make sure the country as a whole is innovating faster than the economy is growing.

23:07And in the United States, it's always been true. We're the most innovative. Most inventions come from the United States. We're the most innovative country on the planet. So we've been able to avoid inflation for the most part, despite all the money printing by the Federal Reserve. We've been able to absorb that because we're creating more and more products and innovating new technologies and so on. What would you say the last innovations that the U.S. has done? Well, AI, ChatGPT is an innovation. Now, the principles of AI have been known for a while. Like, you know, yes, there's some innovation in neural networks in ChatGPT.

23:44I'm not going to explain all of what that is, but the idea of taking every single thing ever written until the year 2021, that's essentially like everything, every book, every Wikipedia page, every Reddit page, every tweet, every article, all the way up to 2021 is in ChatGPT. The idea of taking so much knowledge of history, like ChatGPT is essentially like the library of Alexandria from ancient times. It's all the knowledge in the world. And then using neural networks, and again, I'm not going to explain the specifics of how ChatGPT works, but it's used in this way to simulate how humans make decisions and respond to queries.

24:27And it has all the data ever created in the world to respond. That's an innovation. and biotech and genomics are huge innovations. Can you imagine we can edit a gene? And now 20 years ago to sequence the human genome, it cost a billion dollars. Now it costs about$10. And now we can even take a gene and edit it and inject it back into a human and change their lives, cure diseases and so on. And this is only at the beginning of that industry. It's only the beginning of AI. It's only the beginning of, dare I say it, crypto. So it's only the beginning of automated driving and using technologies for energy unrelated to oil, which is both good and bad, but doesn't matter.

25:11All these things are innovation. Obviously, we always will hear bad things happen to self-driving or AI. But when bad things happen to them, I think it's good because they learn from their mistakes. Because self-driving, every time they get into an accident, that actually is to make sure that wouldn't happen again because they were self-correct, they were programmed better and stuff like that. Yeah, I mean, did you see what happened today? Like we're recording this on a day where SpaceX sent up a rocket into space. Okay, a rocket costs like billions of dollars to make. And within about two minutes, it was about 20 miles high.

25:51It was supposed to be a 90 minute, it was supposed to go into space and then come back and it would take about 90 minutes. But after about two or three minutes, it got about 20 miles high and the different parts of the rocket had trouble separating. So it exploded. Self-destroyed. The response in SpaceX offices, everybody was wildly cheering because it was, I guess, a new rocket or whatever. And it launched successfully. And now they'll learn a huge amount about what went wrong so that when there's an important mission, it won't explode in the middle of an important mission. And so it's not like we want to celebrate failure, which I think, you know, failure porn happens too frequently, but it's very important to be able to plan for failure so that at the very least you learn an enormous amount about it.

26:41Like why were people in SpaceX cheering when the explosion happened is because A, it launched, which is very hard to do. This new rocket launched. And so they learned from that. B, they're going to learn what went wrong. and C, it exploded without harming anybody. It was a safe, that worked as well. So many things worked and now they have an enormous amount of data to learn from. So that's critical. Yeah, well, you know, we got sidetracked a little bit. Now get back to the first question that actually asked. I know, this is like the perfect civics, what's called a civics lesson, a lesson in basic government to someone from Malaysia.

27:23That's why. Exactly. That's why I'm so curious. Why didn't the president just like, hey, everyone get$1 ,000 for everybody? Well, he did that during the pandemic. Right, yeah. Not him, though. And so what happened was everybody got$1 ,000, and they spent it on food and clothing and so on and houses. And so food got more expensive. The inflation happened in the system. But now they don't have the extra$1 ,000, so prices will come back down. I mean, everyone thought oil was going to go to like$200. Well, guess what? Oil is below to where it's like half of what its high was. I don't know the exact price of oil right now.