Mike Green of Simplify Asset Management

Welcome to the Puck Venture Capital and Beyond, the show that examines the changing landscape of our world. We'll have candid conversations with VCs, entrepreneurs, and thought leaders grappling with our current challenges and providing solutions to key problems we face as a nation. I'm Jim Beer, president of CMBG Advisors. This podcast brings change makers to the table to discover the inner workings behind their decision making strategies and ultimately to how they got to where they are today. One of the things that falls into this issue of trust, I've repeatedly referred to this dynamic of the financial system doesn't seem to be working for young people.

Well, the question is, what does that actually mean to them? Because the financial system does not exist to guarantee people successful retirement. If we want to make sure that people have retirements with dignity, then we as a society have to decide that we're going to take on that liability. We can't outsource it to something like the market. Today, I'm sitting down with Mike Green, a portfolio manager and financial strategist who brings twenty five plus years of knowledge in analyzing and understanding the markets.

We discussed the current financial trends, the changes in population growth, the effects of the Federal Reserve decisions on the economy, and a generational shift in perspective that could shape our future for the better. Mike Green, welcome to the Puck. Before we jump in, you wanna tell us a little bit about your background? Sure. I'm the chief strategist and portfolio manager for a firm named Simplify Asset Management.

We're an ETF firm that launched in September 2020, and we've been very fortunate to grow fairly rapidly in the markets. My background is fairly traditional for finance. I'm from the San Francisco area, which is where I'm speaking from right now, actually, but went east to go to college, went to the University of Pennsylvania's Wharton School of Business, graduated, went into management consulting with a focus on m and a consulting, transitioned into software tools used for valuation. And when I sold that business, I entered the buy side, what's referred to colloquially as the buy side, effectively the asset management industry. And I've been doing that basically without fail now for about twenty four years.

What I'm known for is the work that I do around market structure. And so the dynamics of how markets are influenced by either regulatory frameworks or the types of participants that are in markets. And one of the areas that I'm very well known for is for the work that I've done on the impact of the growth of things like passive strategies. So S and P index funds or total market indices, bond indices, etcetera. So let's jump right in from that perspective then.

In terms of where we are today in our economy and people asking themselves, how do we deal with inflation? Where do we put our money and so forth? Where do you see us headed right now? Well, so I think that there's two very separate challenges that have been created. There's a secular challenge associated with the maturation and aging out of a population bubble, basically a pig in the Python in the form of the baby boomers.

And so in a nearly unprecedented basis on the global scale, we're seeing contraction of the developed market labor forces and increasingly places like China. So data just came out in China showing that their population is now fully contracting and shrinking at a much more rapid rate than we had anticipated that their labor force has likely been in contraction since 2012. This is a very different world than the one we've inhabited for basically the past hundred and thirty years, hundred and forty years. So, you know, many people have seen the charts that show population explosion that occurred in the last hundred years for the human species, that often is presented on a linear scale as compared to a log scale. It's not nearly as dramatic if we look at it as a rate of growth, but we really are seeing something unique.

Right? We're beginning to see population contraction on a global basis. That is a world we're just not used to. Right? We're really not used to it.

I like to tell people that the story of the twentieth century, which was uniquely inflationary, was largely tied to the fact that we had just an explosion in the global population. So, you know, give or take from about fifteen hundred AD to about nineteen hundred AD, the population of the globe was somewhere in the 500 to a billion range, about a billion and a half when we finished the nineteenth century. Over the course of the twentieth century, just the labor force component, forget the octogenarian type population, which has exploded because they didn't really exist previously, but just the labor force has risen in a truly unprecedented manner. We had about a billion people in the global labor force in 1900, we had about five and a half billion as we looked at 2000, so just an explosion in that population. And as we look at 2100, we're actually potentially facing a scenario where it could be five and a half billion, So no net growth over this entire time period.

Now, the central forecast is somewhere in the neighborhood of 6,000,000,000. So there is a little bit of growth, but it gives people a reasonable approximation to understand how much we've downshifted in the fundamental drivers of population growth that we've had over the last, you know, give or take five hundred years ever since the Black Death. That's a very different world and it's one that we're not particularly prepared to deal with. And one of the challenges I think you and I will spend a lot of time on is what happens when populations shift radically towards the elderly, when the younger generation is already contracting, when the number of children capable of representing themselves in a voting framework shrinks relative to the elder population. These are all things that we really haven't had a reason to deal with for a very, very long time.

And in many ways, I would argue that we keep trying to kick the can down the road rather than address them head on. So, Mike, when you're looking at some of the challenges we have now with polarization and a rising interest rate environment, from 30,000 feet, can you bring down for our listeners where you think this slowdown in population growth or decrease in population growth will actually show up in people's lives? So the the interesting thing about population growth is that it has actually an inflationary impact. So most people think of it as, you know, the labor component they perceive as if there's lots of workers that's somehow going to be deflationary. The evidence actually suggests the exact opposite, that when you have an increase in labor forces, when you have an increase in the number of workers, what you're really saying is we have to invest a lot to continue to make these individuals productive and to support the increased consumption that they want to have, which is kind of the definition of joining the labor force, right?

I mean, nobody decides that they're going to get off the sofa where they're enjoying their TV dinner and chooses to enter the labor force because they'd like to stay exactly like they were. Right? They choose to enter the labor force either because they want to save for some future consumption when they're not capable of working or because they want to increase their consumption today. Right? And increasing that consumption today tends to be the operative component of it.

Most people entering a labor force aren't coming out of a period of extended convalescence. They're actually coming out of a period of extended education and training, what we call childhood. So when they enter the labor force, they actually are consuming a lot. They need an apartment, they need a dishwasher, they need, you know, suits or a car to drive to work. All of these things place pressure on the aggregate demand curve in economic terms, pushing it outward.

We should be experiencing deflationary conditions associated with that. Now we've introduced a really interesting wrinkle to that by shutting down the economy, changing our consumption patterns radically, and then attempting to reopen it in something that looks something like normal. And the only analogs that we have for events like that would be periods like World War II, where we shut down the domestic consumption economy in favor of a military production economy, and then in 1945 as the soldiers came home, we tried to reopen the consumption economy, the consumer front economy. And what we're experiencing right now is almost identical in its pattern to what we experienced then, Right? A boom in consumer prices, a dramatic increase in a need for the factors of production and shortages of labor that resulted in a short term, there I used the phrase, transitory pulse of inflation.

The difference that time was that we didn't interject ourselves a lot. Right? We didn't change interest rates at all. We actually increased a lot of the tools that were available for supporting individuals as they came back into the labor force, things like the GI Bill. Right?

So there's an explosion of social spending that occurred. We've been through events like this before. It feels like because this didn't have the overarching story of soldiers going off to war, winning and then returning, it feels like we feel much less empowered this time around, right? People seem to be basically shaking their heads saying, oh my God, what are we going to do? Right?

We don't know what we're going to do. And I think that's leading to a lot of frenetic activity on the policy front, particularly on the monetary policy front that ultimately we're gonna find is quite destructive. Because the world that most of us inhabit, we have children that are coming out into this world that would like to rent apartments, that would like to buy homes, that would like to buy cars. And by and large, we've set up conditions to make that increasingly difficult for them. And we're making it even more difficult by doing things like aggressively raising interest rates.

We're already seeing the impact that that's having in the economy by doing things like shutting off new home construction, by dramatically increasing the quantity of apartment buildings, multifamily construction has hit the tank as well. So all of these things were proceeding in a way that feels very haphazard and is likely to cause further damage to the long term story, making it even more difficult for our children and leading to a lot of the social angst and dismay that I think we broadly are all picking up. So people are debating as the market goes down and comes back and goes down that whether or not the Fed will start printing money again and kind of be the backstop to the markets. I mean, do you think the Fed should be printing money at this point? Ultimately, I don't think there's gonna be a choice.

So what we're doing right now is trying to address a supply chain driven inflation by crushing demand enough that supply can get ahead of it. Right now, unfortunately, the evidence of our ability to do that is quite limited, and I would point to the fact that many of the factors of consumption, which got retail spending numbers today, are holding up relatively well. What we're seeing is a collapse in investment intentions, right? So the willingness to spend money to build an incremental oil well or to drill an additional natural gas well has deteriorated sharply despite the fact that those prices are high because we're sending signals to the investment management teams at corporations in particular, right, so the CFOs, etcetera, that we're trying to crush the economy. Nobody increases investment under those conditions, right?

They treat it as the exact opposite. So I'm worried that what we're doing is creating a recession, a demand induced recession, in order to address supply shortages, rather than doing what we did in the 1940s, which is expand production. And this is a golden opportunity for us to be increasing our production of energy, to be investing in our electrical grid, to make it much more efficient and distribute electricity across the nation so that we avoid the sort of brownouts that we've experienced or blackouts that we've experienced in Texas, California, etcetera. We just seem, in my view, terrified to make those hard choices and in part because we haven't had to make them for a long time. We've been coasting off of a degree of surplus that doesn't appear to be there anymore.

So when you talk about this inability to make progress on these complicated issues, do you think that ties into that polarization we're experiencing now? And if so, how do we make progress on that? Well, so I think it absolutely does. And unfortunately, the dynamics of our political system as it exists right now with largely closed primaries and effectively a battle for corporate sponsorship and fundraising capability that is dominated by the extreme voices on either side of the party, instead of having an adult conversation where we focus on the commonalities, we're basically focusing on the interpretation of colons and tertiary paragraphs, right, where we're saying, you know, well, we very strongly disagree with the interpretation of, you know, what a woman is or what a man is as compared to saying, I think we all kind of agree that we want to make sure that our children have the best possible opportunity to thrive. I think that commonality doesn't drive fundraising, right?

If a Democratic candidate and a Republican candidate both say, you know, we may have our differences, but what we both stand for and what we both agree is that whoever you vote for, we need to make progress on educating our children. Well, then you basically have people flipping a coin and saying, I'm not sure who I should vote for. Instead, we try to highlight the differences and that largely involves demonizing the opposition. If you vote for them, the world comes to an end. Right?

Well, boy, that's a pretty compelling story. If I have any faith in you as a candidate running for office and you tell me that voting for the other guy or other girl is going to completely destroy our world, boy, I really should become very motivated to support you. It's not helpful, but it's understandable within the incentive structure of the system. Any thoughts on how we change the incentives of the system so we get back to a more normal approach? So I think we're starting to see elements of that.

Right? So you're beginning to see the introduction of ranked choice voting, where you're effectively all increasingly forced to say, well, what is the least bad alternative? And I think that becomes easier to say, okay, instead of focusing on the extreme issue on the right or the extreme issue on the left, let's try to figure out what's the thing that we can all kind of agree we'll be okay with. Right? I think that's a huge advance that is underway.

And in a lot of ways, I think it's underappreciated that, you know, one, just the technology to do that or the way to think about that probably hadn't been fully fleshed out when we entered into the types of systems that we currently have. Alright, so introduction of voting systems that drive consensus as compared to polarization feels like a great choice. Limitations on the ability for people to exploit the idea of I have unlimited ability to say stuff, right? While in general I support the components of Citizens United and the ability of corporations or interested private entities to influence the content of elections, I think it's important to also have a balanced component to that, right? So to recognize that corporations have very different interests as very frequently they are citizens of the world as compared to citizens of a country, that's an important consideration.

I would argue that that helps to explain some of the deterioration in community focus, right? If Nike or Goldman Sachs is influencing election and equally as concerned about their operating facilities in China as they are about their R and D facilities in The United States, then it becomes harder to argue that you're effectively representing The US population. The second component, and this is, you know, kind of a broader one that speaks a little bit to the dynamics of both older people and the corporate influence dynamic, is the easiest way to think about corporations is they are endlessly lived entities and that's a change. People don't appreciate that that changed in the nineteenth century. Corporations used to have limited life charters.

They used to have to have the capability to be wound down typically after a period of about twenty years. Now they're endlessly lived instruments. Right? It's a little bit like saying, you know, what would happen if we gave vampires equal representation under the law in our voting process. Right?

Well, by virtue of living forever, they are able to play a game that the vast majority of us can't. Right. Do you see pushback there? I mean, you talk about ranked choice voting, which seems to be building up some momentum. And I guess one of the criticisms of it is it's complex, but it does seem like it's been picking up steam.

In the area of dealing with corporations and their disproportionate influence, for instance, as you're referring to, do you see progress there? I do. And unfortunately, I think it falls in the category of antitrust. And just to be very clear, I'm about as centrist as it comes in terms of of my general beliefs. Most people would have traditionally associated me as a classical liberal, meaning I don't care what you do in your bedroom, and I don't care how you choose to raise your children inside your house.

But I do actually think that there are reasons that we have institutions and that there are reasons that we have patterns of behavior that we want to encourage as a society. Right? So public school education is, in my view, an unquestioned good as long as it doesn't exist as a form of propaganda in the service of one particular viewpoint or another. As long as it's not used as a tool to disintermediate parents from the process of parenting their children, and as long as it's recognized that it's a component of the community in which we exist as compared to an organization whose objective is to change the community in which we exist. Right?

It shouldn't be a mouthpiece or a propaganda piece in any way, shape, or form. With that said, I would just broadly highlight that the tools that we have available to us already exist and are simply underutilized. So we have very firm regulations around antitrust that would be one of the mechanisms for limiting the power of corporations by breaking up effectively monopolists. We stopped doing that in the 1980s under what's referred to as the Bork Doctrine. So historically, the Department of Justice and Federal Trade Commission would look at things like pure market share and operate under a presumption of market power.

In the 1980s, we introduced what's called the Bork Doctrine that said, it's not enough to presume market power, you need to have evidence that market power is used against the interest of consumers. And so if prices have been falling, that prima facie is supposed to be evidence that, you know, market power is not being exploited. Of course, the challenge is that doesn't introduce the counterfactual. What would happen if there were competition? Right?

So for example, we all get free library services through Google. Well, we know they're not free. We've actually begun to wake up to that, right? We are the product. We are being sold.

If there were competition, would perhaps we'd be getting paid by Google for accessing our information? Again, I don't know the answer because it's a counterfactual, but there's a tremendous amount of evidence to suggest that the protected monopolies that exist in that framework could very well be raising our prices even as we think they're lowering our prices. And the current inflationary episode, which is in contrast to historical inflationary episodes, historically inflationary episodes have represented contraction of corporate profit margins. This time around, we're actually seeing corporate profit margins near all time peaks, suggesting the issue is not rising labor costs, for example, or rising rental costs or rising pass through costs that businesses have to absorb a portion of. Increasingly, it looks like corporations are choosing to raise prices in part because the media has made such a big stink out about inflation that they have the capacity to do so.

While there's nothing we can do about it, we have to pass this through. They're operating in an environment in which that's made more possible, and that's actually creating conditions that in turn feel even more desperate for the average American. But talking about it from a centrist perspective, do you think that whether or not you refer to the Andrew Jackson era or, you know, progressiveism in general, that there is a lane here for somebody to come in and actually with a club go after these large social media and technology companies? I mean, do you see that in our future? I absolutely see that in our future and would highlight that, you know, that is part of why I would argue some people supported Donald Trump because the historical period where that occurred, it took a representative of the elite class, the Teddy Roosevelt or, you know, the other populists that have historically emerged from that, they have to have effectively an inside knowledge of how this game is played in order to start to ferret it out.

Right? Joseph Kennedy is as first commissioner of the SEC, for example. Nobody better placed to understand all the shenanigans that went on and create regulations to reduce the actual risks in the system while keeping it as rational as possible. A lot of people looked to Donald Trump, particularly from the business community, as somebody who was capable of doing that, quote unquote, draining the swamp, creating conditions in which we refocused ourselves on US workers. I know I was encouraged by his pushback to China or his initial pushback to China precisely because I think that we've failed to consider the impact on many components of our society, many segments of our society of outsourcing our trading relationships.

But that opportunity was largely squandered, right, by choosing the wrong representative, somebody who wasn't actually part of that class, didn't really see the call of history in the form of making choices that were in the interest of all Americans, and instead behaved very petulantly. I know that part of that is going to be offensive to a subsegment of the population. I can't imagine why that's not transparent. And I'm not arguing that Biden is doing any better, by the way. Yeah.

I mean, that's the question is when you look at, you know, the Democratic Party, the Republican Party, and special interests and otherwise, the question really is is where is the political energy to go after these, quote, unquote, monopolies? I mean, is it gonna come from the left? Is it gonna come from the right? I mean, you said there's an optimism. Where do you see that coming from at this point?

Well, again, I would argue that, you know, optimism is one of these things. It's always darkest before the dawn. Right? I'm not suggesting by any stretch of the imagination that it can't get worse because it can get much worse. Right?

Places like Venezuela show that to us with absolute empirical clarity. And The United States is far from a level of panic in which we're forced to make these choices. The irony is is that rarely do these choices get pushed through effectively in periods of panic. Right? So if you wait until you're basically bankrupt to try to make changes in your spending patterns, you're gonna face a much more restrictive and much more difficult route that likely results in the liquidation of your company or of your household.

Right? I mean, the single most stressful thing that a married couple can go through is the financial components of bankruptcy, almost inevitably leads to divorce. You know, when we think about that from a national standpoint, there's a very real risk that we wake up and find ourselves making very poor choices in a position of near panic, and that leads to extremely adverse outcomes. With that said, as I was highlighting, there is evidence that not only are we beginning to introduce the changes to the institutions that allow us to make better choices? I mentioned ranked choice voting, for example, before, and increasing awareness of the caustic nature of social media, right?

So restrictions are beginning to be contemplated and will almost inevitably be placed on social media around the dissemination of ideas, etcetera. I'm not a huge fan of limiting the dissemination of ideas, but I do want to see an environment in which we do have a limitation on the dissemination and support of lies. The amplification of lies would be the easiest way to put it. I also would suggest that there is very clear social benefits from limiting the ability of foreign actors to influence it through Facebook or Twitter, etcetera, where you have Chinese and Russian bots that are very clearly spreading misinformation and utilizing those platforms to amplify negative messaging. So let's stay with that for a second because it's interesting.

When you talk about section two thirty and you talk about, you know, how we might regulate social media, and I don't know if you've seen in The UK, they recently they passed some new laws and so forth. I'm wondering, is there any way to analogize to the movement towards taking utilities and calling them, you know, public or interstate commerce, public utility, so to speak, and essentially creating this concept that because these social media companies have gotten so large that they're essentially like a public utility? Oh, to me, there's no question about that. Right? Google is absolutely a public utility.

Twitter is absolutely a public utility. In the same way that the local television station, the local radio station was a public utility and had to devote certain quantities of time by virtue of maintaining their license to access the public over airwaves that were owned in common. Right? Like, we have to accept that. And they were given control of those airwaves in auction conditions under which they were told you have to behave in certain ways.

I have to believe that's coming back. And there's a variety of ways that can happen. You can truly separate the infrastructure layer, right, to use the electricity analogy or the utility analogy. We would never countenance an environment in which your public speech led to your access to electricity or water or heat being restricted. You never consider that.

But information and the ability to transmit an opinion can be thought of in the same way in today's world. Right. So there's reasons why we have platforms that are unfettered, but the minute you actually start editing something, the minute you start saying, well, we're gonna restrict this viewpoint or another viewpoint, man, that's editorial. That's a very different business model. Yeah.

So I recently read a book, The Storm Before the Storm. I mean, do you think there are things that we can learn from that, a book that apply to our world today? Well, so I'm actually I'm on record as having been pitching that book for close to two and a half years now. So just to orient the listener, the book The Storm Before the Storm by Mike Duncan is about the transition period from the Roman Republic to the Roman Empire. We're all familiar with the general contours of the end of the Roman Empire, right?

So what we think of as the fall of Rome and the inflation, etcetera, that accompanied that. What is a much less well known time period is the transition from the fall of the Roman Republic, the quote unquote democratically elected, not truly democratic, but you know, the Republic in which people voted for representatives. Now there was an entitled aristocratic class, what we call the senatorial class, that had disproportionate representation, but there was also representation for the lower classes. The frictions associated with that and the political selling out of the political class, the economic selling out of the political class, created conditions under which that form of governance became increasingly ineffective and the lack of productivity of the public sector became the dominant feature of the late Roman Republic, right? Effectively nothing good could get done.

The need to change that is what gives rise to an empire. It's effectively people saying, I don't care who's in charge and I don't even care if I vote for them as long as they make the trains run on time. Now obviously Rome didn't have trains, but you can think about the exact same thing as long as the public chariot is running on time or the bread and circuses are distributed efficiently and my family is not starving to death, I don't really care what you call yourself. You can call yourself the emperor, you can call yourself the first citizen as what as Augustus actually did, and maintain the pretense as Vladimir Putin has of democratic elections within his country. That could very well be the outcome.

But what you're really doing is getting rid of the endless moronic debate that puts people into a condition under only the most inane concepts actually receive, you know, general support. Right? Do we all support not killing kittens because they have black tails. Right? Oh, yeah.

We can all agree on that. Right? That's perfectly fine. But, you know, how much money should we be spending on defense versus how much we should be spending on seniors versus how much we should be spending on the education of children and what should we be teaching people, what should we be coming together for. Those are hard conversations that reveal internal biases and put at risk in an elected class and causes them to do things that result in nobody making hard decisions.

I couldn't agree with you more that this notion of not making hard decisions is creating a problem. And if you look at the world today, you know, there's this movement towards nationalism. We do have Chi as the ruler of a billion four people and presumably are one of the most powerful people on the planet. How again, other than rank choice voting and kind of this general sense that we can kind of move in the right direction, are there other tangible things we can do right now that the Romans, for instance, could have done to preserve the Republic? Well, part of it is making hard good choices.

Right? So what ultimately led to the downfall of the Roman Republic was the corruption of the senatorial class. And you hear echoes of this in the statements of elected representatives. I forget who it is on the Republican side, you know, who just said in response to the, you know, should senators and congresspeople be able to trade on inside information tied to the regulatory framework, the argument as well, you know, we work really hard to get here. We have to have a way to cover our expenses.

Right? That's no different than the senatorial class in Rome selling out to private interests and saying, you know, well, we have to somehow or another be able to finance our election campaigns for console or creator or quest or etcetera. Right? There's extraordinary degrees of commonality. I would also suggest that we're seeing components of what's called the Novusoma, right?

So individuals who are breaking through the system because the old system has become so ossified. So you and I are both in California, I'm willing to bet that within the next twenty four months we see Nancy Pelosi resign as Congressperson from California and move to becoming an ambassador with her daughter selected by Gavin Newsom, a relative to replace her and preserve the Pelosi family access to power for another generation. Right? That's about as clear, a Roman senatorial class behavior as you could possibly get. And I'd be willing to bet that we see that.

Okay. So that seems like you do have a concern that there is this entrenchment of the elites. And do you think you're seeing it on both sides, the left and the right at this point? As I mentioned with Nancy Pelosi, I think you see it on the left. On the right, I think you're seeing the exact same thing.

And would argue that there's another class of elite, effectively the business elite that, you know, are increasingly involved in that process as well. And I'm not knocking Glenn Youngkin because I actually think that he's proven relatively effective in leadership of Virginia. But the business elite, the leadership of Carlisle going to become governor of Virginia is, you know, the equivalent of buying a title for your family from the government. Right? It's the same underlying philosophy and dynamic.

We're absolutely seeing it. I don't think it's as hopeless as what we had in Rome because it's not actually an inherited class and we have a general level of surplus that is much higher in today's world than what we actually had in Rome. So there's far fewer people who are genuinely starving, who are desperate and willing to have their votes bought in exchange for a few pieces of silver. I think we're in better position, but we don't have that much more time before if we don't pivot, we could very well see that disappear, right? Europe is finding itself in a position where it may not have much more time at all.

And you're seeing the dramatic rise of the populace and the nationalists that are effectively trying to create additional bases of power because similar to what you've seen, this is a separate tirade, right? Saudi Arabia has had something really important happen in the last seven years. They've moved from a royal family that consisted of every one of the seven sons of the original founder of Saudi Arabia, had equal claim to the title in secession. Now you basically have a single component of that that has been compressed. In Europe, you had the same dynamic where you moved from an Italian government and a French government and a UK government, etcetera, to increasingly you were moving towards a pan European government which limits the ability to access the halls of power in a way that is being fought against now.

Italy is effectively trying to start the process of breaking away in some ways, you could argue. That's just that in my view, if I put it in the historical record, that's the equivalent of the elite saying we need more jobs, so let's create more bureaucracies. As you point out, which I think is important that we don't have this inherited class, do you think as the boomers continue to age out, so to speak, that this next generation coming up will get galvanized and essentially become that new energy that starts to reform the system? I hope so. Right?

I mean, my children are part of the post millennial class, and I see some evidence that that subsegment, that emerging class below is more thoughtful, less entitled, less angry than the group that came before them. They're more pragmatic in their approach. I think it is, again, one of the signs of hope for me paradoxically is the age of the boomers at this point and the fact that there is somewhat of a vacuum that exists post Nancy Pelosi finally eating her last pint of ice cream. We will have leadership change and that creates opportunity. I just don't know if that leadership, that young leadership that is emerging has become so corrupted by the need to obtain power within the existing system that we perpetuate this for another generation.

Because I'm not sure we have that much time. Well, yeah. And I I was recently listening to a podcast series that economists put on talking about China. And one of the things they were talking about was this issue of, does the generation coming up feel that they can do, quote, better than their parents? And in America, for instance, more and more, I hear young people complain that it's easy for you as a boomer to talk about how things have been okay for the last twelve years.

But from our perspective, we feel like with housing and health care and college expenses, things have just really stunk. And it seems to me, as you said, in terms of time, we do have to address that anger. Well, I think one of the real challenges is that anger is well earned and certainly appropriate. But whether that anger, whether we're capable of subsuming the anger and replacing it with good choices as compared to vindictive choices is yet to be resolved. Right?

On the left, I often encounter thinking that boils down to some variant of, well, the core issue is there's seven and a half or almost 8,000,000,000 people in the world today and the total carrying capacity of the earth is somewhere in the neighborhood of a billion and a half people, and so the solution set just has to be we shrink the population. That's not a solution. I'm sorry, it's not a solution. Any game or any solution that consists of let's wipe out two thirds of the world's population in the next generation is a completely unrealistic and unuseful proposal. Because what I know for a fact is you're not going to choose to sacrifice your children.

You're not going to choose to sacrifice yourself. You're going to come up with any number of class protected arguments to say, this is why that doesn't apply to me. Well, I'm part of the technocratic class, right? I'm not part of the problem, I'm part of the solution. Sorry, if that is your viewpoint, you are part of the problem, right?

So that type of hard recognition that we need to operate within the constraints of the system that allow everybody to do better as compared to forcing everybody to accept less, I think is a really important component of it. In economic terms, it's what's called the paradox of thrift, right? We can't all save our way to success financially because that means that we're withholding our resources from everyone else in the economy. So I think that's really important. And I think it's very hard for most people to grasp that idea that the only way, you know, this is the term, the only way out is through, right?

The only way out is through in this scenario. I was recently in my newsletter writing about this notion that there seems to be this kind of general feeling that we're a little stuck. And I heard Ezra Klein and Rachel Maddow talking about on the podcast this morning that there's just this sense since the two thousand seven crisis that the financial system isn't working quite right. And you talk about the anger that the young people have and this kind of oversimplification where you kinda throw the baby out with the bathwater. And again, the question is, how do we create a safe place or an environment where those in power actually start to really listen and hear the concerns of young people and start to come up with constructive solutions to these complex problems?

Well, again, I think it boils down to a component of what we were just discussing. Right? I mean, if the young people's solution is some variant of the old people should give everything up and starve, you can understand why the old people would resist that notion. We need to create or paint a picture in which everybody is capable of doing better and it becomes a win win or the gains in one class are just reduced significantly relative to the gains in another class. That seems impossible to achieve in today's era of defeatism, But I would just point out very simple things.

Like, you know, we just agreed to spend give or take a trillion dollars on various forms of green energy. Right? If we were to take that money and instead of deploying it in solar, which is basically, you know, let's fill up all the deserts with various forms of solar panels that represent toxic waste for the next generation to figure out what to do with, and, you know, wind power that can be thought of as best way to make chicken salad for flying chickens, you know, we instead chose to say, okay, we're gonna get serious about nuclear power and we're going to remove the barriers to construction. And by the way, that very well means that somebody has to end up living near a nuclear power plant. We're very sorry.

We'll compensate you individually for the loss of the property value. We'll do the takings clause in the constitution. We'll figure out a mechanism to address that, but we're not gonna lock everything up in endless protests and regulatory bureaucracy for the end of time, which accounts for three quarters of the cost of building a nuclear power plant today. Right? The delays associated with that, the financing associated with the legal expenses associated with it account for the vast majority of what we're experiencing.

So you were talking about nuclear power and this notion of, although there's been a lot of focus on green energy, which is wonderful, we've gotta get realistic. And I think that's a really good example of what we were talking about, which is this notion of you've got young people that are arguably saying, hey, you know, you're destroying our planet with global warming, and there's there is this real fear and anger. And then the question is, okay, but guys, we've got to come up with a practical approach here, and nuclear energy seems to be a part of that. I was, by the way, emboldened, and you just brought it up. In Adrift, Scott Galloway's new book, one of his suggestions is rehabilitating nuclear power, and you're seeing people discuss this thing that really was off the table.

And so I'm a little more optimistic that with Ginn, we're starting to have these more difficult conversations, it appears, essentially because we're being forced to. I think that's really, really important. Right? And it's part of the point that I make about the dynamics of surplus. A positive change doesn't happen when people are in a panic about feeding their families.

Right? It's not like we can sit down and have a very measured conversation as you're dealing with a screaming baby that's, you know, where your wife is saying, oh my god. There's a formula shortage, and my milk has run dry. Right? I mean, just to use ancient terms associated with this, that is not the time that you wanna sit down and have a conversation that says, okay, you know, what do we do for the next thirty years?

Likewise, having those conversations as I was referring to before where there's any consideration of a solution that says, yeah, sucks for you, but it has to suck for somebody and, you're not the protected class or you're the old, it's just going to be much worse for you. Naturally, people react to that as any cornered animal does and they lash out in unpredictable ways. Right? So we just have to accept that those solutions are off the table. We know that there are certain things that are really difficult to discuss, like religion and politics, for instance.

Yet, I do believe character is an important component to moving us into a better direction and a better place. Do you think as a country, we can have a discussion about character that doesn't polarize people further? Well, I think that's one of the reasons so first of all, I'm an atheist. Right? I just wanna be really clear.

And so by definition, all I really want is to do best for myself in the next give or take thirty years, forty years that I'll be alive. And then the rest of you can all go screw yourselves. You know, that's obviously untrue. And the point that I would make about religion is I don't actually care what you get together with your friends and neighbors to worship. I care that you get together with your friends and neighbors.

And so the sense of community, the sense of involvement in our community that used to revolve around showing the respect for your neighbors of waking up on Sunday morning, washing your face, shaving it, putting on reasonably appropriate clothes and going to participate in a community ceremony, that was really important. And we don't have that type of thing today. And remember, like, people would have to wake up, make sure the horses were shod, get the wagon ready, go through all the process of going into a town to participate at the local church. And that's asking so much more than we're asking for people to hop into their cars, potentially wearing their flip flops and go off to a community meeting of some form. Kind of silly when you think about what we think of as sacrifice today.

So we have to figure out ways that we incentivize that and we reward that good behavior. And for as valuable as it is for you and I to be sitting over a Zoom like connection, that doesn't begin to compare to the component of breaking bread together, a firm handshake, looking into each other's eyes in person, etcetera. Right? I mean, you and I are both actually looking at cameras as much as possible to give the other person the impression that we're actually looking at each other. And the simple reality is that's unnatural.

That's not what we were designed for, etcetera. So there's a stiltedness to it that makes it difficult for us to trust each other. And that trust component is really the critical dynamic. Because if I say, here's my proposal for the hard choice. One, I have to be willing to demonstrate some sacrifice on my part.

Right? And two, you have to interpret that genuinely as compared to cynically and saying, well, he doesn't really care about that. He's asking me to make the hard choice. Like, that's really part of the problem and that's part of the dynamic of developing a sense of community and trust that we as social animals have to have if we're gonna make those hard choices. Yeah.

And completely agree. And all the studies coming out talking about the lack of friendships and the lack of community involvement and the deaths of despair. I think as a society, we've come to grips with that this is a problem. The question is, while we are essentially debunking our institutions, how do we bring people together? I mean, it's one thing if you're going bowling, it's because you like bowling.

Right? If you go to a baseball game, it's because you like baseball. Some people go to church because of spirituality. Some people go to see their friends. But at the end of the day, there has to be a value or some collective belief that brings people together.

And I guess, how do we restore that sense of community, you know, without an ethos? Like, what does the country stand for? How do we bring those people together? Well, I think that's part of what we're discovering when we talk about social media. Right?

Because remember, institutions themselves are now increasingly entities. Right? So Facebook exists as a legal individual in our legal context. Right? It is natural that when you and I start talking about how do we force this entity to retreat from our lives or change and reintroduce the physical components or the true community aspects to it, that the natural response from that organism is to resist, Right?

We're cornering that animal and we're causing it to resist. And I think you're seeing this in the broad resistance from the social media companies to the change that we're trying to impose on them. And it's quite interesting. Right? I mean, like, how does Pravda respond to complaints about the, you know, central government?

Right? Well, it quashes them. That's what we're seeing in terms of the debates around this, in terms of the public sphere. It's increasingly being quashed by Twitter, Google, etcetera. The only way that's gonna happen is through elected representatives.

They're the only ones that really have that capability of saying, this is what we try to stand for. And so I would encourage people to look for representatives in a representative government system that are going to speak for them and their desire to recreate community. Right? So one of the most disappointing things that was pointed out to me that DeSantis said recently, and again, I try to remain as apolitical as possible in this process. He was asked the question, what would you do if you were elected to change these dynamics?

And his comment was apparently something along the lines of, well, I just have to really convince the Democrats how stupid and dumb they've been and how wrong they are. Right? And it's like, man, you know, it's not like I'm a master negotiator, but I don't really think that's the path to unity, you know, nor was Hillary Clinton labeling people deplorables. Right? I mean, like, it makes you feel good for about two and a half seconds to be nasty to somebody on Twitter and to score that punch down point, but it's not at all helpful.

Right? So there is just a component. We have to put it on ourselves. We have to demonstrate that we care. And equally, we have to demonstrate that to our children that we care.

This is the first election where all three of my children will be adults and voting. And one of the things that makes me happiest is my kids turning around and saying, This is important. We're going to participate. We're going to express our voices. Now are they as informed and enthusiastic as I would like them to be?

Absolutely not. But I have ridiculously high standards on this stuff. So, you know, if they approach a fraction of those, I'm pretty happy. Yeah. I think electing officials who don't demonize the other side and that really will cross the aisle and work with the other and try to bring back that sense of unity is certainly something productive that we all can focus on.

One of the things that falls into the same category, you mentioned this issue of trust. I've repeatedly referred to this dynamic of the financial system doesn't seem to be working for young people. Well, the question is that I just encourage people to ask themselves is what does that actually mean to them? Because the financial system does not exist to guarantee people successful retirement. And again, this goes back to what do we actually want to accomplish?

If we want to make sure that people have retirements with dignity, then we as a society have to decide that we're going to take on that liability. We can't outsource it to something like the market. Right? And unfortunately, one of those easy choices that we have made is for individuals to increasingly be herded into financial markets in the form of passive indices, target date funds, etcetera, where you're not expected to make an active series of allocations or choices. Right?

It's presumed that that's not influencing the behavior of the markets themselves and potentially leading to really catastrophic outcomes. Primary area that I do work on is this issue of market structure. And one of the things that I would highlight for people is the challenges that we've created for ourselves by choosing to outsource things like retirement security, social security increasingly to financial markets. That's not the job of financial markets. And so when you say they're not working for us, that's probably because we've turned to people with high school educations and told them we want them to be neuroscientists.

It's not its job, right? That's not what you want in life. What we actually want is a financial system that works to allocate capital in the most efficient manner possible. That doesn't guarantee anything to anyone in terms of retirement outcomes, etcetera. And the sooner we recognize that the better off we're going to be.

And so I would encourage people who find anything that I say remotely interesting to check out some of the other videos and podcasts that I've done talking about the risks associated with passive investing and making some recommendations around that and encourage your elected representatives to increasingly understand how much that is also a bought and paid for dynamic with Vanguard, BlackRock, and other large financial market participants increasingly steering the dialogue. With the government at one point buying, as I understand it, up to 60% of their own T bills through quantitative easing and keeping interest rates artificially low because we were buying our own T bills. Is that in any way relating to what you're talking about in terms of allocating assets in a more productive manner? Absolutely. So first, the most important thing for people to understand is that the definition of an economy is just people doing favors for other people.

Right? Now capital markets exist to facilitate that, effectively taking surplus savings that I have today, investing them in a way that facilitates meeting those demands from other individuals and me having the capacity to return them in the future. Government bonds are no different. Right? This is just a mechanism that allows the government to effectively create a storage space for all the cash that has been put out there, all the dollars that have been put out there, creating a compelling alternative to people spending them today, which would induce inflation.

The government borrowing is not actually contributing to profligate spending. It's actually saying we're going to create conditions under which there is less dollars available in the future to do all the stuff the government is doing because we're gonna have to pay back that debt in the future. What's happening with things like the government buying those instruments is that we're really trying to short circuit that process and say, we simultaneously wanna tie stuff up in the public, but we can't afford to do all the stuff that we wanna do today. That's not necessarily a bad thing. If the government were choosing to do that in order to build infrastructure, if the government were choosing to do that in order to create an increased human capital component for the next generation, I'd be all over it.

I think this would be a fantastic way to spend money and I'd support it in almost any way that we can if I believed that the government could contribute to doing that efficiently. Unfortunately, where we inhabit right now is we're increasingly doing that to address two separate issues. One is immediate entitlements and needs of the older generation because we're unwilling to ask for sacrifices in the form of higher taxation. We recognize how politically unpopular that would be. And as a result, we have to accommodate this in a different fashion.

The second problem that I have with it is the miscommunication around it, right? That it's either the end of the world or it's not. No, what's the end of the world is choosing to spend that money badly, Right? That's really the core of the issue is, again, you can spend all sorts of money. Like, if if you came to me and said, I'm thinking about making a purchase that is three and a half times my annual salary, should I do it?

Right? And it's creating a non dischargeable liability. My question to you would not be, like, I just can't turn around and say, well, that's a dumb idea to never do it. Or that's a great idea, you should do it. I want to ask, what are you going to spend it on?

And if you're a 25 year old who's spending it on a house that you're going to live in for the next thirty years, that's actually probably a pretty good way to spend your money. Because among other things, your income will go up and you'll have the opportunity to pay it off. If you tell me that you're going to spend that three and a half times your income borrowing money to buy a whole bunch of lottery tickets, you know, it doesn't matter how many times your income. I'm like, that's just a terrible idea. Why would you do that?

Again, it comes down to the quality of the choices that we're making and we're not doing a great job of it in part because I would argue people aren't having these types of conversations in a serious fashion with both themselves and their elected representatives. Right. Mike, this has been fantastic. Thank you. Thank you.

Wonderful discussion. The Puck Venture Capital Beyond is produced by CMEG Advisors. If you enjoyed the conversation and haven't subscribed yet to the show, you can find us on iTunes, Apple Podcasts, and SoundCloud. Check us out on Instagram and Facebook, and let us know what you think about the podcast.