What Happened to 23andMe? Why Harris’ Plan to Tax Unrealized Gains Makes No Sense, and Time Really is Money

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1:20And even better, you only pay for results. There's no need to wait. Speed up your hiring with a$75 sponsored job credit at Indeed.com slash podcast. Terms and conditions apply. Welcome to the Prop G Pod's Office Hours. This is the part of the show where we answer your questions about business, big tech, entrepreneurship, and whatever else is on your mind. Hey, Prof G. Hey, Scott and team. Hey, Scott. Hi, Prof G. Hey, Prof G. Hey, Prof G. Hi, Professor G. If you'd like to submit a question, please email a voice recording to officehours at profgmedia.com. Again, that's officehours at profgmedia.com.

1:53So with that, first question. Hi, Prof G. This is Mitch. I work in tech in the Bay Area in Silicon Valley. and I see a lot of different companies doing really great things in this area and one of them which I invested in a few years ago is 23andMe when I was trading at$10 a share. I really believed in this promising technology and strong leadership however now it's now trading below 50 cents a share which has been a tough pill to swallow. I was wondering how this could happen to a company with such potential in a growing industry and what it says about the future of personal genomics, and similar tech-driven healthcare companies.

2:34I'd also love to hear your thoughts on whether this space still holds promise or if there are any underlying challenges that investors might be overlooking. Thanks for all your insights and books and fostering a thoughtful dialogue on so many important topics. We all appreciate it. Thanks, Mitch. Thanks for the question and your transparency. So first off, the first lesson is, first and foremost, forgive yourself. The second is, think about diversification. Now, let's talk about the business itself. 23andMe was founded in 2006 and is primarily recognized as a genetic testing company that offers consumer insights into their ancestry and health risks through mailed-in saliva samples.

3:11It also operates as a data company. The company has built a massive database of DNA from about 10 million people who agreed to share their genetic information for research. Beyond testing, 23andMe has ventured into the pharmaceutical industry, developing its own drugs based on findings from its genetic data. So it was obviously very promising, but it's struggling. It's gone from a$4.5 billion equity valuation down to$200 million. So its value is limited 98 % from its peak. And NASDAQ has said that the stock, which now trades below a dollar, could be delisted. Now, CON Wojcicki is trying to take 23andMe private at just 40 cents per share.

3:51The company's main revenue stream, consumer DNA testing, has fallen short, raking in only about 220 million last year, far below expectations. When you have a growth company that is investing at these kinds of levels to create sort of a 10x better product, especially I would imagine around research and genetics and healthcare and data, that is a capital-hungry monster. And if the company is growing 50, 60, 70 % a year, then eventually the revenue is the top line, will take care of itself. And you'll get to a point if you have, assuming you have positive gross margins, where you start to make a lot of money.

4:22The problem is, is that if you miss, typically what happens in a small business is you miss on the top line, but you never miss on the expenses. What do I mean by that? Even though maybe your revenues came up 40 or 50 % off plan, you managed to spend what you plan to spend. And that's where growth companies get into huge trouble. And that is if they don't register the growth that the investment was expecting, or that justified the investment. So all roads lead to the same place here. They're probably going to take this thing private and they are probably going to lay off, I would imagine, 50, 70, 80 % of the workforce and focus.

4:56I don't think this company ever had any business being in drug discovery. That is a decades-long business that requires billions of dollars. I think the average drug takes over a billion dollars to bring to market. And also, they just misestimated the demand for this. The hack didn't help. I'll give you a personal example. I would never do 23 and me because I was a sperm donor in college. I was getting called back three or four times a week for about a year, which was very exciting for me because that was a lot of money back in 1985 or whenever it was. I have somewhere between one and 7 ,000 children, or at least biological children.

5:29And with 23 and me, they can figure out it's you. You could also go to a website, submit your name, address, and they send you a certified letter. If you send it back, an email goes out to your biological children with your contact information. I would do it if I had 10 or less, or I knew I had 10 or less, but that's the thing you don't know because it was totally unregulated back then. My mom made me stop doing this after about a year because she said, you realize your daughter could end up marrying her brother and not know it, and she forced me to stop. Anyways, that's my story and why I don't use 23andMe.

5:57But to bring this all back to 23andMe, this was a tech company that required a massive amount of investment, and the growth basically petered out. And as a result, it just can't justify the current investment, and they're going to have to totally recalibrate the company. This happens a lot. The question now when they take it private is, will they be able to cut costs? Will they be able to pare it down such that this company has some hope of creating positive cash flow, or will they find another means or another adjacent business that offers some sort of growth? But at 50 cents, the assumption is they're going to go out of business.

6:33Just some quick tax planning here. If you were fortunate enough to have some other investments that worked out, you may want to think by the end of the year of selling down this stock and registering or taking the loss against any gains you might have. So the silver lining here is you have a tax loss, which has some value. If you invested 10 ,000 bucks and you've lost 95%, you have a$9 ,500 write-off when you sell the share. So wait till a year where you have some gains and then take the loss or sooner if you want to get your capital out such that you can take advantage or offset your capital gain.

7:06Thanks so much for the question. Again, let me finish where I started. forgive yourself. Question number two. Hey, Prof G, this is Colin from lovely Marietta, Georgia. Appreciate you taking my question. I'm looking at some of the new policies laid out under the Harris-Wallace campaign and the latest thing about taxing unrealized capital gains. Seems pretty insane to me. I know I'm a social liberal fiscal conservative. I like to think of myself as an independent voter, but to tax unrealized gains makes literally no sense to me. And the fact that it's people with 100 million or more seems to be the dividing line, even that doesn't make sense to me.

7:51Why, if they're trying to stop the uber wealthy from leveraging their securities, why would they not look at something like fees for loans against securities as collateral, as opposed to taxing something that hasn't happened and can realize result in losses? I'm curious about your take on this and your thoughts on what levers they should really be trying to pull instead of this, or whether you agree with their stance. Appreciate your answer. Thanks. Bye. Thanks for this. Yeah, it's getting a lot of discussion. So according to our website, our campaign supports parts of President Biden's earlier budget proposal, which didn't get through Congress.

8:37The reality is this tax would probably only affect a tiny percent of America's wealthiest people, those with over 100 million in wealth. That's about one in 10 ,000 people who aren't paying at least a 25 percent tax rate on their income. It mostly targets individuals with most of their wealth and tradable assets. The reasoning is that it's meant to fix a tax system with a super rich, often pay lower rates. The middle class folks, according to NBC News, the top 1 % has 40 % of their wealth tied up in unrealized capital gains. Also, according to the Treasury Department, will raise about$500 billion in tax revenue over the next decade.

9:11But the bottom line is this makes no fucking sense. And, OK, it's worth talking about conceptually. This is never going to happen. There are both moderate Democrats and the entire Republican Party are just not going to let this happen. There's real issues with this. One, if you're going to tax unrealized capital gains, then you get into the business of, all right, you're going to have to value all these assets in the end of the year. You're going to have to do a mark. Every year I spend the better part of a full day with the folks at Goldman who manage my money trying to put a mark on my private investments.

9:45How do you value those things? It's like I have investments that I could value at X or 5X, and I can make an argument for either of those things. So because the tax would be on a quote unquote number of value. Now, obviously, the value of the stocks you hold can be easily marked or calibrated, which in my view would make private assets much more attractive. So all of a sudden you would be creating asset classes that are much more attractive than other asset classes. And then what happens if those assets go down in price? Do you purposely mark them down? It just makes no fucking sense. And the over$100 million thing is just populist bullshit, in my view.

10:24I just don't think there's any way this can work. And also, one of the real benefits, I think, of thinking long-term that I like is you should buy assets and never trade them and hold onto them. And one of the greatest wealth creators in history, and it sounds stupid and easy, but it's true or simple, is just the tax-deferred structure of holding onto assets and not trading them. That is kind of the key to wealth building is buying shit and forgetting about it. Like so many things that Democrats do, the intentions, the philosophy, the theory behind it are absolutely right. And that is rich people are not paying their fair share.

11:02Let's go to the 25 wealthiest people in America. They pay somewhere between four and 8 % tax rate because the loopholes in the tax code are extraordinary. Everyone's focused on tax rates because that's just a literally weapon of mass distraction. The key is the tax code, which has gone from 400 pages to 4 ,000 over the last several decades. And those 3 ,600 pages are there simply to fuck the middle class by creating all sorts of loopholes for corporations and wealthy individuals who are paying the lowest taxes since 1939, corporations, and the wealthiest individuals who have seen their taxes plummet through all kinds of crazy tax avoidance.

11:37One of those pieces of tax avoidance you referenced, and that is basically the strategy is buy, borrow, and die. What do I mean by that? I own a bunch of Amazon and Apple stock. I don't sell it. It keeps going up, tax deferred. Well, what happens? Maybe I need some money. I can borrow against it at very low rates. And then that money keeps compounding off the whole base because it doesn't get taxed. I don't have to send 23 to 40 cents of it to Uncle Sam. It keeps growing off a much bigger base. and then I put it into a trust. And then when I die, it transfers to my kids tax-free. That is how the wealthy get even wealthier and build dynasties, which is bad for America.

12:15So what is a way around that? An alternative minimum tax. And that is at the end of the year, if you're a wealthy person, and I would lower it to say anything over$10 million a year in income, you pay an alternative minimum tax of 40 % or maybe even 30. And that is you say, look, we don't care what loopholes you've been able to figure out. You're going to pay at least 30%. You're making a shit ton of money. And whatever things have been slipped in by lobbying groups or the Republican Party to give small business owners their first 10 million tax-free, to create a donor advisor fund, we actually haven't given the money away yet, but you get to write it off.

12:51Yeah, we got to get rid of that shit. Now, can you get rid of that shit? Probably not. So rather than trying to get rid of that shit, all right, let's just have an AMT. And And that is people who make over a certain amount have to pay at least X percentage. In addition, your idea is a good one. And that is if you borrow against your stocks, then effectively you're monetizing them. So what I would suggest, though, is that maybe there's a 2 % tax on any money borrowed or something like that that says, all right, it still incentivizes people to borrow money, invest, buy shit, grow the economy. But instead of paying on a margin loan 4 % or 6%, they're paying 6 % or 8 % and it generates some tax revenue that way.

13:29We have an alternative minimum tax. But trying to tax unrealized gains, good luck with that. Thanks for the question. We have one quick break before our final question. Stay with us.

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14:26And so does my wife, who keeps stealing all my hoodies. Stay fit for the season and Abercrombie's newest arrivals. Shop NFL by Abercrombie in the app, online, and in store.

14:42Hey, business owners. We know you know the importance of maximizing every dollar. With the Delta Sky Miles Reserve Business American Express card, you can make your expenses work just as hard as you. From afternoon coffee runs to stocking office supplies and even team dinners, you can earn miles on all your business expenses. Plus, you can earn 125 ,000 bonus miles for a limited time through October 29th. The Delta Sky Miles Reserve Business card. If you travel, you know. Minimum spending requirements and terms apply. Offer ends October 29th, 2025. Welcome back. Question number three. Hi, Prof G.

15:17This is Brendan from Hood River, Oregon. I often think of wealth as the ability to spend your time doing the things you want to do. It's fairly common to hire someone to maintain your yard, do your taxes, manage your investments, or have a house cleaner come by once over a few weeks. But being in the high net worth space, I'm curious what services you use in your personal life to free up you or your family's time. Big thanks to you and Ed for providing great entertainment for all of us listeners. Hey, Brendan, that's a great question. and their entire podcast sort of focused on productivity, I think my approach to life and spending probably is not that relevant to a lot of people.

15:53So I'll start with trying to look at this through the lens of when I was younger, what I did, when I didn't have any money, and what I think you should do. The first is I wouldn't invest in single stocks. I wouldn't try and talk to yourself or delude yourself into thinking you're a better investor. I would focus on your career and exercise and relationships, and I would outsource all investing and buy low-cost index funds and just not worry about it. So that's one thing. Pre-cooked meals. If you love cooking, then do it. But if you don't, try and find a routine around food you like that's pre-cooked, pre-done, if you will, and that's healthy.

16:25I think it's a great idea to get an app around working out and set a road schedule. And I like doing intense 20 to 30-minute workouts. I used to go to the gym and then I would spend an hour and a half there. I'd probably only exercise for 20 minutes, just kind of wandering around, futzing around. By the time you get to the gym, change, all that shit. I like the idea of having an app that is very intense. I think the first kind of purchase I would make as a young person in terms of paying somebody else would be pay them to clean your apartment unless you enjoy that kind of stuff. Some people do.

16:55But I think it's important to feel for your own mental health, like you live in a nice, clean space. I think people should live in a small space when they're young that's inexpensive, that's near work, so they can just use it almost like a hotel or just a bed. I don't believe in hanging out at home. I got a lot of shit for saying this on TikTok. But I think your time at home is inversely correlated to your success professionally and personally. I don't think you want to be at home much. Under the age of 30, I think you want to be out of the house kind of 15, 16 hours a day. And then as you get older, what I find is really helpful.

17:26I have an assistant who I pay very well, but there are assistants available in remote areas, Costa Rica, Mexico. There's a whole rising genre of outsourced PAs who can work two, for, you know, if you need it, eight hours a day. Essentially, where I am in my life right now is that there are a small number of things only I can do. Only I can do. Only I can record this podcast right now. But I don't do the sound engineering. I don't do the special effects. I don't write the scripts. I don't contact the guests. I don't follow up with the guests. I do none of this. I don't bill Vox. I don't get the numbers.

17:59I don't get the analytics. What I am doing right now is the only thing I do for this podcast. And that's the way it should be, because there is someone who is better than me at everything else, but I am the best at this. So what you want to do is take what you are best at and leverage it across as many things as possible while outsourcing everything else. But I love the way you're thinking. And again, I bet there are just a ton of sites that focus on this, but I appreciate the question and wish you a ton of prosperity and free time. And also, I think it's really important on a regular basis to do nothing, to literally do nothing.

18:35I have times on the weekend and I plan them out. My favorite thing is nothing. And that's fine. Doing nothing is fine as long as it's planned. Thanks for the question. That's all for this episode. If you'd like to submit a question, please email a voice recording to officehoursofpropturedmedia.com. Again, that's officehoursofpropturedmedia.com.

19:04This episode was produced by Caroline Shager and Jennifer Sanchez is our associate producer and Drew Burrows is our technical director. Thank you for listening to the Prop G pod from the Vox Media Podcast Network. We will catch you on Saturday for No Mercy, No Malice as read by George Hahn. And please follow our Prop G Markets pod. That's right, the Prop G Markets pod, wherever you get your pods for the new episodes every Monday and Thursday.

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