The $40 Trillion National Debt, and the Trade-Offs of Living With Your Parents

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1:47Scott Galloway:Welcome to Office Hours with Prop G. This is the part of the show where we answer your questions about business, big tech, entrepreneurship, and whatever else is on your mind. If you'd like to submit a question for next time, you can send a voice recording to officehoursofproftgymedia.com. Again, that's officehoursofproftgymedia.com. Or post your question on the Scott Galloway subreddit, and we just might feature it on our next episode. Question number one comes from Oscar Gamble's hair on Reddit. When I was in business school, the primary concern was the size of the national debt. The year was 1993, and the debt was$4.3 trillion.

2:21Scott Galloway:We were freaking out. Now, as we reach$40 trillion in debt, how serious is it, and why is it different from 1993? Okay, so first off, some data. Last month, on August 18th, 2026, the national debt passed$40 trillion for the first time. To put that into perspective, when this listener was in business school, the debt was$4.3 trillion. So it's grown almost tenfold since then. And the economy has grown less than five times over in the same period. So even on an inflation or economic growth adjusted basis, the deficit has exploded. I think it was$4 trillion. I think George Washington and George Bush was$4 trillion.

3:01Scott Galloway:Now it's$40. And I would argue it was kicked off by George Bush and his kind of key consigliari, Vice President Cheney, saying deficits don't matter. And W convinced the American public that we could cut taxes and go to war and that everything would still be fine. And since Bush, Bush to Trump, we've added another$36 or$37 trillion. The$40 trillion is the gross number, the part we owe to outside investors, banks, pension funds, foreign governments who agree to loan us money to fund our deficits. and about$32 trillion, or what is it,$40 trillion, that's about, I don't know, 120 or 130 % ratio to our economy.

3:46Scott Galloway:So we're getting to sort of Japan and Italy-like levels. And worse, we're adding$2 trillion a year. If America was a household, the household makes around$50 ,000, brings in$5 trillion in receipts from taxes, and it spends$70 ,000. It spends$7 trillion on social programs, the military, et cetera. and we owe, we have household debt of$400 ,000. Now, the bad news is when the parents die, the kids can't escape that debt. They inherit the debt. And it's just at some point, you know, at this point we're borrowing money to pay for the interest on the debt of money we borrowed previously. And it gets even worse.

4:28Scott Galloway:Interest payments now eat up a record 18.5 % of everything the federal government collects. in sum, almost one in five dollars that you're paying in taxes goes to paying interest on the debt of money we borrowed because we weren't taxing people enough when we were spending too much. Do we need to cut spending or raise taxes? All roads lead to the same place. The answer is yes. The older record was 18.4 % in 1991. The difference in 1991 was that number was starting starting to fall. And also much of that was because of much greater interest rates. So we know it's a problem. And what happens is eventually, and we're seeing this now, people go, you're no longer as safe an investment in America as we thought.

5:14Scott Galloway:There's some risk that you'll either inflate your way out of it with a weaker dollar, or God forbid, at some point, you actually might risk default, or the economy will slow down because you'll have to make such drastic cuts that you'll have a difficult time paying it back. So lenders are requiring more money to take the risk of loaning to Americans or loaning to America to finance this debt, which increases the amount of interest rate and unfortunately could inspire sort of a downward spiral. So what are some solutions? We know this is a problem. According to the IRS, roughly$700 billion a year in taxes that people legally owe simply never gets paid or collected.

5:50Scott Galloway:People often call it, I believe, the tax gap. Or is it the budget gap? Anyways, whatever it is, money that should be collected and isn't. And the greatest tax cut in history was not the Trump tax cuts. It was Trump neutering the IRS because the incentives are now, especially if a complicated tax filing and you're wealthy, is to be so aggressive and cheat because the chances of being audited are so low. The audit rate on millionaires fell more than 70 percent between 2010 and 2019. Yale's Budget Lab found that cutting$20 billion from the IRS budget actually adds about$263 billion to the deficit.

6:27Scott Galloway:So in sum, under the auspices of saving money, we're losing 10 times the amount we're saving. Also, I think we should do away with the tax deduction or lower tax rates for capital gains. I think it's insane that we've decided budgets reflect values, and our values right now, or our tax system reflects our values, our values are that sweat is less knowable than money. And that is the money money makes gets taxed at a lower rate, I think a maximum of 22.8, whereas current income or sweat, the money you make from working, gets taxed at 37%. We should go back to the era of Reagan and raise capital gains taxes to what ordinary income is.

7:05Scott Galloway:You could even potentially cut that rate as long as you equalized it. The tax gap, raising taxes or raising, elevating capital gains, and then we're just going to have to cut spending, folks. My idea is GLP-1 for every household and go after the$12 ,000 or$13 ,500 per capita spending on health care, which across 350 million people basically comes to almost what our deficit is each year. Or if you were to try and get it down to where the rest of the G7 is, it's$6 ,500. You take$6 ,000 in health care savings times 350 million people, then you have your$2 trillion a year in tax gap. Now, could you do that overnight?

7:46Scott Galloway:Is it realistic? Probably not, but you probably need to free spending, go after health care, normalize tax rates, collect the taxes owed, and slowly but surely start to restore fiscal sanity, which should take our interest rates down, which should inspire an upward spiral of fiscal sanity in this country. We have been here before. Our national debt was huge after World War II. As a percentage of GDP, again, it was pretty high in the early 90s. And there's an opportunity here to do what the Clinton administration did and actually get to a point of break-even or surplus. You wouldn't even need to get back to surplus.

8:23Scott Galloway:You would just need to make sure that the growth in the deficit is lower or growing slower than the growth in the economy. Anyways, thanks for the question. Question number two. Hey Scott, my name is Oli, a big fan of the podcast. I'd love to know how you think about the tension between key man risk and equity value in your media company. You obviously have co-hosts on the podcast, but you are also central to the value proposition from my perspective. So is it your view that you will eventually be able to sell the company and not stay on yourself? Would the equity value hold up if you were not there and you were replaced entirely by others?

9:08I would love to hear your strategic thinking behind this. Thank you very much.

9:13Scott Galloway:Thanks for the question. I think about this a lot. I'm constantly thinking about enterprise value. I think that money and profits and enterprise value are fantastically missteps for the value out of a company. It also has the benefit that if you think about it well and execute against it, you can get economic security. And I'm just, that's just how I think. I don't. I'm finally at a stage in my life where if I don't have another liquidity event or an exit, I'm still fine. Greatness in the agency of others. People think I'm doing all this shit on my own. I'm not. We have 27 people at PropG and the reason why we have almost 100 % retention is that I will sit them down and outline to them the strategy to create enterprise value and then I give them equity such that they participate in that equity value.

9:57Scott Galloway:When I talk to small business people who say they can't scale, it's almost always I say, show me your cap table and what you find is one or two founders who want to capture 100 % of the upside for themselves and think that, oh, young people should be just excited to work with me because I'm such a baller. No, young people want to have their home in the Hamptons someday. They want to have the same economic security the founders have. And if you want people to act like owners, you got to make them owners, and then you got to convince them that there's real enterprise value here. Now, what is a threat to enterprise value?

10:23Scott Galloway:What you're talking about, key man risk. So at L2, when we were in diligence to be acquired, the biggest question was, well, Scott, how central are you to this company? what happens if you get hit by a bus or get sick of us and decide to leave. And the most exciting or the best statistic that I would roll out is that two-thirds of our clients I had never met with in person. And so if I were to get hit by a bus, would it hurt the company? Yeah, but the company would still be a company. Now, at Prof G Media, about 40 % of our content or podcasts I touch. The newsletters and the books I'm involved in, but now have a lot of people working on them.

11:02Scott Galloway:You know, we have an enterprise. Is there still key man risk? Absolutely. But now it's sort of going to key men and women risk. Ed Elson, our fastest growing property is Prof G Markets. Ed has become central to that. Raging Moderates gets the most video views of any of our property, and that's Jess Tarlov. So the only way to ensure they're going to stick around is to give them equity and a vision for how we add enterprise value. I am constantly thinking about how we diversify away from yours truly. Now, what probably happens if we're ever to sell Prof. G to a larger agency or a larger entity is that I will have to sign up as well as some of the other employees for what is a fairly onerous employment agreement that says, say they buy us for, call it, you know,$100.

11:51Scott Galloway:that some money up front, but the rest is on not an earn out based on EBITDA, but an earn out based on tenure. And that is you're not going anywhere. When Gartner bought L2 for a hundred, I think they bought it for 158 million. We got, I think 40 or 50 % of it up front. And then the other 50 % over three years. By the way, I decided to leave after a year as I just couldn't handle working for a large organization. I just, I just, I'm just not cut out for it. Not because I'm such a baller, but I just couldn't stand not understanding where the decision to close our website came from. Anyways, but any agreement that we would sign to be acquired would involve fairly onerous employment lockups.

12:34Scott Galloway:If you're thinking about enterprise value, it really comes down to diversity of capital and income streams, diversity of human capital, no one person. Goldman Sachs always has co-presidents and co-heads. They never want the head of investment banking to walk in and go, I own 40 % of the revenue here. Pay me$100 million or I'm going to J.P. Morgan. So they have co-heads. And if someone walks in and threatens them, they can stand up and say, congratulations, enjoy Lazar Frere or Liontree or Mollus or wherever you're going, right, Evercore. So they diversify away from human capital risk constantly by having co-heads of their departments.

13:15Scott Galloway:networks. You know, Fox has demonstrated they don't have key. Tucker Carlson was the biggest person in media. And when he got too big for his britches, they said, fuck you, it's the platform, not you. We've diversified away from key man risk. So I'm constantly thinking about, one, how you diversify your revenue stream. We have 50 advertisers, not one. That was the biggest problem at L2 is at one point in the early years, I think P &G, Nike, and LVMH were 40 % of our revenues. Acquirements don't like to see that. They want to see a diversity of revenue streams and a diversity of geography and also a diversity away from human capital risk.

13:50Scott Galloway:Have we managed to do that at Prop G? Probably not, but you can still create enterprise value with employment agreements and showing that you have a platform to diversify away. I have been trying to do this for two or three years now. I recognize that two or three years ago, there was real enterprise value here that we could grow. And one of the keys was to launch new podcasts and create different voices. So I'm on one or two out of the five days a week on Prop G Markets. I'm on one or two of the four days a week or five days a week at Raging Moderates. And that way we have a diversity of voices.

14:24Scott Galloway:Now, can I cash out and leave? Absolutely not. I don't think any acquirer is going to do that. But diversity of capital inflows from clients and advertisers and diversity of human capital is how you create enterprise value. And also acquirers aren't stupid. If in fact, there is key man risk, they will essentially bolt our knees to the floor in terms of what would be post-acquisition employment agreements. But absolutely diversity, revenue streams that come from multiple hosts or multiple advertisers create two to three X the enterprise value as opposed to if you just had one big client and one big show.

15:02Scott Galloway:And we have at Prop G Media three or four different verticals where we have a top 20 or a top 50 podcast, which I believe makes us worth double or triple what we would be worth with the same revenue stream that was just one podcast. But you're thinking the right way. Diversification not only makes sense in terms of an investment strategy, but in terms of building enterprise value, you have to constantly be thinking about diversity again of cash flows and human capital driving the business. I appreciate the question. We'll be right back after a quick break.

15:43Support for the show comes from I Am 8. I don't know what it is, but it seems these days, as soon as you turn 30, the urge to incorporate supplements into your daily routine takes over. It's a good instinct, but I Am 8 wants you to know you can do better. The problem with supplements is you think you need a cabinet full of them to feel your best, but you don't. IMAID's daily ultimate essentials has 16 supplements in one drink. Our co-host, our own co-host, Ed Elson, who is not yet 30, has been giving IMAID a try. Ed, give us your personal experience here. It's very good. I take it in the morning.

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19:03Scott Galloway:Welcome back. Question number three comes from Joe from Toronto who texted us. Hi, Prop G. How would you weigh the financial benefits of living with your parents against the independence and lifestyle benefits of moving out? I'm starting a well-paying job at a niche consulting firm in Toronto and only need to be in the office twice a week. I could live with my parents about an hour away and save aggressively to invest and build a strong nest egg. Alternatively, I could move downtown and gain more independence, but save significantly less over the next several years. How would you think about that trade-off?

19:36Scott Galloway:That's a good one. Okay, so just a little bit of data here. According to the Fed, nearly half of American adults under 30 live with a parent. That's, Jesus Christ, can you get over that? That's 49 % last year, up from 37 % in 2019. And most of them have jobs. Seven in 10 Americans aged 25 to 34 living at home are employed. So is it worth it? A Fed study found that young adults living at home actually don't offset the housing savings by spending more elsewhere. They actually spend less than peers who moved out in categories including clothing and recreation. But the long-run data cuts the other way.

20:12Scott Galloway:Urban Institute found young adults who lived with parents between 25 and 34 were significantly less likely to be homeowners or even heads of their own household 10 years later. And when they did buy, they didn't buy more expensive homes or carry smaller mortgages, so there's no visible trace of savings ever showing up. So the key appears to be how long you stay at home. Research cited by the Institute for Fiscal Studies found that U.S. men who lived at home for a single year in the late 20s had better labor market outcomes than those who didn't. However, staying four to six years was associated with a reduced likelihood of holding full-time employment.

20:44Scott Galloway:So it's situational. The reality is if you're a responsible young man or woman who's looking to save a home and has a job, the way I would phrase it is the following. Living at home when you're just sleeping there, you're out of the house, you're with friends, you're working hard, you're out of the house 14 to 16 hours a day. I would argue being at home and saving the money as long as you're disciplined around saving and investing that money, I think it's a great thing. And so I moved home after I started my job at Morgan Stanley and then I moved home for a year because one, my mom was sick, but two, I liked living at home and it just made things easier for me.

21:25Scott Galloway:I think like a lot of young men, I like the idea of simplifying my life, saving some money so I could just focus on work. I would argue that that's healthy. What isn't healthy? You're spending 20 hours a day at home playing video games. You know, you come out of your basement to ask your mom, where's the meatloaf? But you're not out. You're not working. You're not exploring. You're not finding friends, mentors, and mates. That is unhealthy. And unfortunately, it begins to be kind of enablement and these kids don't develop the skills. The real world is a fantastic training ground for making money, making relationships, developing social skills.

22:05Scott Galloway:And you are not playing, you are not practicing or on the field learning those skills when you're at home. So living at home, I think it's great as long as you are taking the money you'd be spending on rent and saving or investing. And specifically, you are just sleeping at home and nothing more. You're not in your basement, you're not hanging out, you're not using it as an excuse to not have the economic pressure or relationship pressure. So it comes down to this. If it's a bed, then stay at home and save the money. If it's a real home and you are not developing the skills or the economic warrior mentality to build your own life, then it's a problem.

22:47And it's, a lot of my friends

22:49Scott Galloway:talk such a big game. You know, once my parent, once my kids are done with college, they're out, they're on their own. And then this is what happens. Your kids are good kids. They're working hard. They're trying hard. They can't afford to live in New York and pursue their dream of fashion or whatever it is. And so they continue to support them. Or the real fear is what I call a failure to launch. And that is the kid doesn't finish college, can't find a career, doesn't feel real economic pressure and incentive. I had economic pressure at some point. My mom wasn't just going to let me stay at home.

23:23Scott Galloway:If she'd come home when I was an adult and I was just sitting watching TV, that would have been a very ugly conversation. And I think she would have kicked me out. But I was getting home at midnight, going to sleep, and I was up at 7 a.m. again. So I think she was fine to like seeing me and was happy to support me in my younger years. So, again, I think it comes down to the following litmus test. You shouldn't live at home. If you're sleeping at home, that's fine. But you shouldn't be living at home other than very short periods of time post-college or post-graduation from high school. So in your instance, the only thing that scares me is that hour commute.