Who Wants to Be a Trillionaire?

Speaker 2

Magnet stick on

Speaker 1

Elon Musk is a trillionaire, but it's deaf the people on Snap ruining your life. And the amount of people responding with examples of people on Snap ruining their lives, and you know, not the lone trillionaire or, you know, the billionaires out there, it they're, you know, totally worth the read. They're they're really hilarious. So, Phil, how has Elon Musk ruined your life? I guess we're gonna start there.

Speaker 2

Well, that's the thing. Nothing he's done recently has, and you know, I think some of his contributions have improved my life. ⁓ one of those is he has put these little satellite things all over ⁓ circling the the globe that provide internet almost everywhere. And I'm heading up to to ⁓ rural remote part of Canada next month for vacation, and they don't have regular internet up there, but they do have something called Star.

Speaker 1

I feel like such a rube because it was a couple of summers ago and I was looking up into the night sky and I saw this object going going over my head and I was so scared. I was like, is this an alien invasion? Are we being attacked? It was around the time when there were all these drones b being flown around New Jersey. And ⁓ I put I posted my fear online and a number of people are like, no man, that's just Starlink. Like there's nothing to be worried about. And, you know, when it comes to to Elon, you know, I was trying to, you know, go through, you know, all the ways that he has, you know, ruined my life and is ruining my life. But then I realized, like, ⁓ wow, I've actually made more money off of Elon than Elon has taken from me. So I'm enjoying our relationship currently. ⁓ which means I you I might be a little biased too. Maybe I'm not able to see the evils, you know, of ⁓ of the trillionaire.

Speaker 2

Yeah, and that's the thing about it. I mean, he's done quite a bit in multiple different sectors of the economy. ⁓ you know, he's a he's a car manufacturer. ⁓ we can debate Tesla and and some of the subsidies that it received, especially to ⁓ start it off early on. ⁓ he's putting things in space, providing ⁓ internet worldwide, and ⁓ runs a giant social media platform that I think we get a lot of ⁓ consumption value out of.

Speaker 1

One thing that I hear a lot of critics point out is the idea of a trillion. Like you can't even fathom it. It is just so unthinkable and therefore shouldn't exist in the first place.

Speaker 2

You know, I joke and ⁓ pointed this out a a few times in the last couple of weeks, ⁓ I was technically a trillionaire before ⁓ Elon Musk ever became a trillionaire. It's cause I have one of these Robert Mugabe ⁓ Zimbabwe dollars that they printed in their hyperinflation period and it says a trillion dollar note. And ⁓ you you used to be able to get these things on the internet for like pennies and stuff, and they're more of a novelty. But ⁓ yeah, that w what's so magic about the number trillion other than it's easy to say and it looks very, very big? The same people that would object to Elon Musk being a trillionaire seem to have very little issue with the fact that the United States government is forty trillion dollars in debt, give or take. ⁓ so there's a ⁓ an even bigger number out there on the other side, but ⁓ they think that government spending, you know, that's just fine.

Speaker 1

I believe the debt is actually growing much faster than even Elon's wealth.

Speaker 2

Is indeed the case. I mean, ⁓ yeah, our our government has a very clear spending problem and no serious effort whatsoever to rein it.

Speaker 1

And how much of this is due to sort of the the shrinking pie fallacy? Something I like to point out is this value didn't exist before he created it. Yeah. It's not as though he's, you know, rifling through your pockets and taking

Speaker 2

From somebody else. Right. And you see this with the memes is like, well, if we if we taxed half of Elon Musk's wealth, we could solve climate change or we could end hunger forever. And and oftentimes these are people that ⁓ you know they're they're really, really bad at math and they end up ⁓ being a couple of zeros off on ⁓ on ⁓ what they think it would. You know, if you tax the entirety of Elon Musk's wealth, it would barely make a dent in the federal budget. ⁓ it would not solve the deficit. ⁓ in and that'd be like a one-time appropriation. Let's take his entire trillion dollar give or take ⁓ net worth, apply it to the federal government. Well, guess what? You still have a giant spending problem and you're still in deficit.

Speaker 1

Does Elon have a trillion dollars lying around? Like is there a gold filled swimming pool that puts like Scrooge McDuck to shame?

Speaker 2

And that's the other part of it. ⁓ it's a trillion dollars on paper, but it's not liquid assets. It's not something like he can ⁓ go down to his vault and acquire trillions, ⁓ a trillion dollars in cash or coins or something that he could go spend. Most of this is tied up and the reason that he was bumped over the one trillion mark was that he ⁓ one of his companies, SpaceX, in which he was one of the largest shale shareholders, because he's the founder of it. ⁓ had its initial public offering. ⁓ went ⁓ public on the stock market last week. And in so doing, you know, their original IPO, I think they were they offered the price there at ⁓ thirty $135 a share and it opened already at $150 a share. And since then it's gone up even further. ⁓ most of the stock that he has is his personal holding in SpaceX. And you know that you're valuing it by just multiplying it by its current ⁓ Trading price. So in order to get that money, he would have to dump all of his SpaceX stock. He would have to sell it off. But he's such a large shareholder. Well, if Elon Musk started shedding SpaceX stock, that would have market repercussions of its own. People would take that as a signal, but maybe something is up with this company. Maybe he knows something that the rest of us don't.

Speaker 1

That's something I don't think a lot of people take into account, especially when they discuss something like ⁓ like a wealth tax. Yeah. If you give the signal to the extremely wealthy that they have to get rid of this stuff, it's going to have, you know, huge reper repercussions all the way, you know, down the the chain.

Speaker 2

Absolutely. ⁓ you know, if you're a major shareholder and we're talking Musk and SpaceX, Zuckerberg and Facebook, if most of their wealth is tied up in the stock of the company they founded and then took public, any effort to get rid of it, any effort ⁓ to sell it off is going to send shockwaves through the market for that particular stock. And that affects everyone else that owns stock in that company. So it it's not like it's just there that you take it at its current ⁓ value. And this gets to a fallacy. of the wealth tax crowd is that they are estimating value of what's there to be taxed, what there what's there to be grabbed based on an illiquid asset that's tied to a price itself, and you do anything to disrupt that asset, you send volatility through the market around that asset.

Speaker 1

Let's talk about, you know, kind of the the assets that the ultra wealthy have. There's stocks and then you know we want everyone to be very wealthy who listen to our show. So what are they getting into?

Speaker 2

A lot of it's gonna be in real estate and ⁓ you know, goods that are worth a lot of money on paper. ⁓ you know, if you have a multi-million dollar mansion, ⁓ in a prime location, yeah, that's a worth a lot of money on paper. But again, this is a market that doesn't move very fast and it doesn't change hands very fast. You're talking ⁓ multi-year investments that are tied up in the place that you live. ⁓ some of it's other ownership of capital goods, ownership of companies, ⁓ things that Any decision that you make to sell it or to ⁓ any decision the government makes to tax you on it means you have to change your asset structures around to pay the tax fee, ⁓ or you take the payment if you sell something. ⁓ so these are major market decisions and it just means that you don't have the Scrooge McDuck vault of cash sitting there on hand. It means that a lot of your estate, ⁓ your net worth is tied up in Things that are already in use for something else. There's a lot of empirical work that's done on like what what do ⁓ top earners in the United States, how do ⁓ what does their estate happen to look like? What's their net worth? And we all famously know the ⁓ the Forbes 400 list. ⁓ this is the thing Forbes magazine publishes of the ⁓ multimillionaires and billionaires. And it's kind of a status thing to be on the Forbes 400 list. But your total value of your net worth on the Forbes 400 list reflects. All the stocks you own, all the real estate you own, all of the ⁓ you know, personal assets, it doesn't mean that you have a vault sitting there of ⁓ multi-billion dollars that you can draw upon. And this comes into a mistake because you some get someone like Bernie Sanders, he looks at the Forbes for Ryder list and he's like, uh-huh, there's money I can tax, but it's not really taxable without sending out ⁓ market repercussions throughout the entire list.

Speaker 1

Yeah, and what would the wealth tax repercussions be? What kind of impact will they have on, you know, shareholders? Or is there a potential loss of of jobs?

Speaker 2

⁓ there is absolutely a potential loss of jobs. ⁓ you know, if he they're trying to do wealth taxes on the state level. So California has this ballot proposition coming up, ⁓ they're calling it the billionaires tax. You know, one of the repercussions is, well, the billionaires are leaving the state. They're moving to other states as a tax shelter. And what happens when they leave the state? Well, they take their companies with them, they take their assets with them, they sell off things that they hold previously held in California. And you know, what does that mean? It weakens the California economy and ultimately weakens the California tax base. So all this promised revenue they think they're coming in in from this new tax turns out to be illusory. It was there on paper and now it's gone because the taxes are s are going to be so high that they're inducing people to leave the state.

Speaker 1

There's something too about, well, let's you know, call it what it is, you know, envy, ⁓ jealousy. People look at, you know, not just Elon Musk, but also wealthy people, not just billionaires but millionaires and you know, people who are very, you successful, some for good reason, others for, you know, not so good reasons. You look at those people and there's this desire to punish them. And when you punish them, you might in your mind imagine, ⁓ they're going from that giant McMansion to a cardboard box. But then repercussions, I think like like you're d describing, the unseen, what impact, you know, will that have? They don't see because look, a lot of people, I mean, I forget, ⁓ you could probably, you know, tell us what percentage of Americans have a stake in this when it comes to the stock market. How many people have retirement accounts, et cetera. Maybe I'm a weirdo, but I'm actually cheering on SpaceX to do well. You know, I I want all of you know the stock market to do great because eventually I want to be able to retire and I want to have some, you know, some savings there.

Speaker 2

Yeah, the and these are valid concerns. ⁓ you know, taxation, especially for redistributive purposes, automatically in introduces an inefficiency into the marketplace. It means that ⁓ you know, money that could have ⁓ previously been allocated to something productive has now moved into the government's hands. ⁓ there are also dead weight loss effects of the simple act of taxing inefficiencies that are introduced into the market by ⁓ The fact that the government's coming in and taking something. It's a movement of productive resources in a direction that is less productive, a rent-seeking enterprise. ⁓ because you know, once you have ⁓ money that you're collecting from the private sector and making available for spending in the government sector, well, then you have lobbyists to send on Washington, D.C. or the state capitol to try to get their piece of the pie. You move from this. expansive game of the market, a market of growth, to a zero-sum fixed game within the government sector, where the amount of money that you have available is ⁓ you know, it's fixed on whatever the budget happens to be, and everyone's trying to compete for a slice of it. So productive activity in the market sector gets crowded out effectively by unproductive activity of trying to seek some sort of ⁓ of payment or disbursement out of the public sector, out of what the government's offering.

Speaker 1

And when it comes to productive activity in Elon Musk, he's definitely been very productive. But a lot of critics will point out and say, well, yeah, but he he got all the resources or the money from the government. What do you make of that?

Speaker 2

I think there's some validity at to some of the critiques of him early on, especially in his career. You know, Tesla's a giant electric vehicle company. And we know from the late 2000s, early 2010s, the electric vehicle company enjoyed massive lucrative subsidies from federal, state, and local governments. Elon was also involved in solar ⁓ production at the time and one of his ⁓ other big companies. Well, it it gained from all these tax benefits because solar energy to fight climate change was ⁓ supposedly the next big thing. And what it meant was ⁓ rather than competing on the open market, ⁓ both the electric vehicle and the solar sectors were deeply distorted ⁓ by this infusion of government cash. The third thing, SpaceX. A lot of the contracts that SpaceX has pursued are with things like NASA, public sector entities that are. launching rockets and launching satellites into space. And you know, we can debate what the role of government is in space exploration and developing that sort of thing. But it is as clear as day that a lot of that money is coming from contracts with the government. Now we can critique all of that. Yeah, I think it is a valid part of Elon's wealth, you know, to point out that ⁓ not all of it is private sector creation. Some of it is determined by ⁓ government contracts and government benefits and subsidies for solar and electric. The question there is, y you know, well, who created those policies? ⁓ a lot of times it was Barack Obama, a lot of times it was the progressive left because they thought Elon was one of them, and what's it? So they didn't critique him at the time. Like all these people that are saying Elon's too wealthy now were cheering him on when Tesla was supposedly going to be the thing that saved us from climate change, and therefore we had to regulate the internal combustion engine out of existence and give tax benefits and subsidies to purchasing battery powered vehicles. It's like, okay, well, ⁓ you know, pick your side. ⁓ you can't view that as a moral imperative to subsidize the private sector to fight climate change and then get mad when that makes somebody in the private sector wealthy.

Speaker 1

Yeah, one thing that that I noticed was when the turn happened and people started to draw swastikas on Teslas. So Tesla went from being a symbol of this is such a good person. You know, you are a an elevated person. You're a shape. Exactly. To ⁓ my God, you're a Nazi. And the amount of people who I don't know if they if there was like a sticker or something that they they could put on, but you know the equivalent of basically saying, No, no, no, I bought this when when he was good. I bought this when Elon was one of us. That's not my fault, you know.

Speaker 2

Gets back to, you know, there's this old concept in economics called conspicuous consumption. And ⁓ it goes back to Thorsten Veblen at the turn of the ⁓ 20th century, but he observed that, you know, there are certain goods that people buy for status. Not because ⁓ that's the one thing that they really want. And hey, you know, the classic example is you get a big fancy, ⁓ expensive, flashy watch. You buy that because you want to be seen ⁓ showing that you have a Rolex. You buy something to show off that, ⁓ Hey, I'm wealthy or hey, I'm high status because I have this thing, not because it's the most functional watch out there. ⁓ maybe a perfectly good watch, but ⁓ if you're wearing a Rolex, it's to be seen. And I think there's an element of conspicuous consumption that took place in the electric vehicle market. These are not people that are buying Teslas or other electric vehicles because it's the most effective way to get to work or because it's the easiest vehicle to drive or the best vehicle out there. They're buying it because they wanted to be seen. As driving a battery-powered car because that gives them moral status of saying, I'm saving the planet, I'm fighting climate change. So yeah, quite a bit of that entered into the Tesla market when it was very early on, augmented by public subsidies and tax rebates and disincentives. Because you know, at the same time, they're subsidizing electric vehicles. They were also putting ⁓ stricter environmental emission standards on regular vehicles. So The government policy was all to put the thumb on the scale and and shift consumption patterns over to this, but a lot of the people that were the first movers there did it for conspicuous consumption reasons. They wanted to be seen driving that hybrid vehicle. Before it was the Tesla, it was the ⁓ the Prius. The early Prius drivers and adopters were all ⁓ they wanted to be seen as like waving your Captain Planet flag around to ⁓

Speaker 1

⁓ right, yeah.

Speaker 2

To drive around in this ⁓ environmental vehicle. ⁓ so you had that element in it. And you know, that consumption base, if that's your main motive for for buying something, then suddenly Elon's politics shift in a different direction. Or as he would have put it, ⁓ the left went so woke they kind of left him behind. You know, we can debate. I I don't always agree with his politics. ⁓ I don't all ⁓ I don't hate his politics either. But a very virtuous ⁓ signal obsessed sector of society. also happen to be the conspicuous consumers of Tesla early on because of environmental reasons. And all of a sudden they're owning a car and now the public face of that car is no longer part of their team politically. So yes, they object. They buy the sticker that said, I I purchased this before you went bad or the then they start defacing Tesla's.

Speaker 1

You know, I was there when he purchased Twitter. I was there when he decided to rename Twitter to X. You know, I didn't know you were able to trademark. Let's take a letter of the alphabet. And, you know, at the time the prophets were saying this he's going to doom this social media app. He fired a a huge amount of people from ⁓ the Twitter staff. And, you know, you turn around and

Speaker 2

Yeah.

Speaker 1

The man the man's a trillionaire. I don't know. It's it seems like he has a pretty good head on his shoulders when it comes to actually investing this stuff.

Speaker 2

He does seem to recognize waste and he does seem to operationalize that. Remember, this is a guy that also he went in there in the Doge and and we can critique the Trump administration, ⁓ the way that it executed Doge. It never made anything permanent. But ⁓ but I think Elon's mentality going into that was probably in the right place, recognizing that there was waste ⁓ around him all over the place. When he buy buys Twitter, what does he do? He he discovers that it has all these teams of superfluous employees. That are basically doing social justice activism ⁓ in the higher ranks of the company. And he's like, Well, this isn't really necessary to the product. Let's fire that. Let's get rid of it. And there was, ⁓ no, no, this is going to collapse the app. Remember all those predictions that they were saying, ⁓ well, Twitter's going to ⁓ you know, cease to function, the site'll be down. And other than the normal hiccups that every social media platform has, it's performed You know, is good if not better than any of its competitors.

Speaker 1

Yeah, one thing that I've noticed is the the search function on on the app kind of sucks. But super groc is a much better search function ⁓ than the search function on the app it itself. So if any of you are looking for old tweets of mine that I should have deleted, use your super groc and you will definitely find them a lot easier.

Speaker 2

And I go in ⁓ even a step further, Supergrok is now a better search engine than Google. Yeah. I I can ask it a question and it's not always going to be right. You know, always check your sources and the likes it gives you. But I get better search results than if I were to type the same subject into Google or the first twelve or are to some junk website trying to sell me something. You know when

Speaker 1

When comes to the first trillionaire, I think the idea of power, influence definitely, you know, comes up and you know, can anyone really be entrusted with that much money, that much power?

Speaker 2

Well, hey, you hear this. This is the other claim that's made. It's like, well, the the wealthy people ⁓ exercise outsized influence on our politics. First off, no one is sufficiently wealthy to sh shift the course of the entire ship of state. ⁓ it just doesn't happen. You know, we're talking even though the wealthiest people in the world, if it's Elon Musk, the trillionaires or the the multi hundred billionaires, ⁓ for all the money that they supposedly are dumping into politics and influencing things. You know, the track record just isn't there. One example I I keep pointing out, there's this guy named Tom Stayer, ⁓ who's like a perennial candidate for office in California. And he's this left wing multibilliaire, ⁓ you know, has huge fortunes. And he's run for political office twice, personally. ⁓ he's like, Well, I'm I'm a rich guy, I have the right ⁓ ideas, I'm gonna fund my campaign. And the first one he ran for president, and he finishes like 15th or something in the primaries, the Democratic primaries. It just never gets off the ground. But you look at the amount of money that he dumped into that, and it's in the tens, if not hundreds of millions of dollars to try to make a name brand for himself. ⁓ but he wasn't done yet. So he he loses the presidential nomination. And then just a couple months ago, he decided to run for governor of California. He's like, all right, well, this is a lefty state. I can ⁓ get my agenda here and If you were in California any time before that ⁓ primary election over the last several months, and I was out there several times, ⁓ our main office is located there. It's just wall-the-wall Tom Stayer advertisement. ⁓ this guy is dumping, you know, ungodly amounts of money into buying year time, essentially, for himself. Well, he finished third. It's like hundreds of millions of dollars, flushed down the toilet, nothing to show for it. This is a real-time demonstration that ⁓ you know, buying a political office is not what it was made out to be. ⁓ the ⁓ outsized influence simply isn't there. And we have other examples. Michael Bloomberg ran for president and dumped a whole bunch of money into that, didn't get anywhere. There are ⁓ you know, it's not just a Democrat Republican. I think there are wealthy people on on both sides that sometimes it's successful. And those that do succeed on self financing their campaign, i.e. Donald Trump, he had some other cachet there. ⁓ I think it was much more his personality that for various reasons was attractive to parts of the electorate rather than the fact that he's this rich real estate developer.

Speaker 1

I was gonna bring up ⁓ Mike Bloomberg because he was my my mayor at at one point when I was living in the in the city. I believe we had ⁓ I think it was three terms we had with him. And I'll tell you what, I really liked being in the city when Mike Bloomberg was mayor. I thought he ⁓ I thought he did a a fine job. But one thing that I noticed, you know, obviously Bloomberg, his huge media company and all of that stuff. And one of the things that he really cared about were the size of sodas. Yeah. How much soda, you know, should one person be allowed to consume? And a man with a multi billion dollar media company behind him could not persuade Americans, could not persuade New Yorkers to Drink less soda. So what did he think he had to do? Well, ⁓ if I can't persuade you, I'll get into government and try to actually exactly ⁓ to make it unlawful to consume the amount of of soda. And I think that really says a lot about the, you know, psychology of people who do get into into politics. Like this this idea that I I might not be able to voluntarily get you to agree with me, so I'm gonna try to force you.

Speaker 2

Yeah. Yeah. It's it's the quest for control. You think about it. You know, even the example we're talking about with something like ⁓ subsidizing electric vehicles. Well, what is that all about? It's like people are not adopting these on their own unless they have a very particular preference for it. And I won't begrudge someone if they want to buy an electric vehicle. It's not for me, it may be for you. But if the th the government's putting its thumb on the scale and saying, Well, if you buy an electric vehicle, we view this as a righteous choice, so we're going to give you a subsidy. But if you don't buy an electric vehicle, you're harming the planet. So we're going to make it cumbersome through regulation. We're going to drive up the cost of ⁓ of regular cars, internal combustion engine cars. Well, i you know, that's distorting the marketplace of choice in ways that I I would argue is pretty unethical. You can claim that hey, you want to do this for the righteous reason of saving the planet, but then the very same people turning around and saying, Okay, well, ⁓ here's someone like Elon Musk that built his ⁓ Tesla empire under the very same policies that we created to incentivize a Tesla empire and disincentivize an internal combustion engine empire, and now we're going to blame him for it. You know, something's missing from that moral equation.

Speaker 1

And something too to point out is you know, often you'll hear socialists talk about, you know, worker-owned cooperatives. Yeah. Where the workers should, you know, seize the means of production, own the means of production, own a real stake in their company. And, you know, some good news that comes with someone becoming a trillionaire is that all the people who worked at SpaceX had a little bit of equity in that company. So from the top down, you have people like kitchen staff ⁓ who worked in the cafeteria who are hundreds of thousands of dollars richer. That that's a white pill if I've ever seen one.

Speaker 2

That that's the wealth creation effect. Yeah, it's it's the the person that has now one of the most lucrative, hottest stocks going right now, simply because they worked there and they accrued that as part of their benefits. ⁓ so yeah. It it's not like Elon Musk stole a bunch of money from somebody. Kadiri actually did create value with this company. ⁓ some of it is public sector supported, some of it's also private. ⁓ like Star Lake is a very lucrative private market he's gotten into. That that wouldn't exist without SpaceX. Well

Speaker 1

Here's to your next trillion dollars, whoever you are, whoever becomes the next trillionaire. This has been Happy Hour Econ. We'll see you next week.