Gen Z Confronts Me On The Economy

So good, so good, so good. New summer arrivals are at Nordstrom rack stores now. Get ready to save big with up to 60% off brands like Rag and Bone, Levi's, Adidas, and free people. Join the Nordy Club to unlock exclusive discounts, shop new arrivals first, and more. Plus, buy online and pick up at your favorite rack store for free. Great brands, great prices. That's why you rack. You may notice something about this video already. I'm off center, which means someone is about to roll into frame. That someone is Madison. I'm going. Wow, that wasn't awkward at all. She's 24 and apparently has questions about affordability and economics. So get ready for some true excitement. Here we go. Okay, let's talk about affordability. So specifically, why has affordability gotten as bad as it has? And also, what are some ways that we can get grocery prices specifically down? Because that's where I approach the most struggle in my daily life as a young 24-year-old. You go there and eggs are like $6 versus the $2 I paid when I was in college. Yeah. So the best way to sort of understand in very, very basic economic terms, how the price of a good. is decided. A typical supply demand curve looks something like this. Okay, so here on the y-axis, you have the price of a good. Okay. Here, on the x-axis, you have the quantity of a good. Okay, so, right, as the supply of a good increases and the demand comes down, then the price decreases. Okay, so here's where your price would be when they meet, okay, is when the supply meet, this is called equilibrium, is where the supply and demand curves meet. So some of the egg price crisis that had to do with actual, like, disease among chickens and mass slaughter of chickens, there was some of that happened a couple of years ago, and the egg prices have sort of reduced from where they were a year or two ago. But everything remains incredibly elevated. Again, because of the injection of all of this money into the economy under the Biden administration, there are these huge bills that went forth that kind of spread huge amounts of money. Plus, the Federal Reserve was really, really loose in its lending policy. That's why the interest rates were too low. So they were injecting enormous amounts of money. And, you know, again, all of the COVID stimulus that went in in 2020, just free helicopter money to everybody raises the price. So the question is, what are we comparing grocery prices to? So if we're comparing grocery prices to where they were six years ago, They're extraordinary. If we're comparing them to where they were one year ago, then they're slightly hired they were a year ago, but everybody was freaking out a year ago, and they should have been freaking out a year ago. Yeah. And so I think one of the things President Trump is competing with is where the baseline lies. Does the baseline lie from when he took office, or is the baseline where kind of all of our heads are at five years ago, I could go to the grocery store and spend half of what I'm currently spending. As far as what could be done to bring down grocery prices right now, I mean, he should get rid of the tariffs. The tariffs are going to temporarily increase grocery prices. because they're reducing the supply of the products that you want to buy. He himself is acknowledging this. He recognizes that, for example, bananas and coffee too expensive. So what do you just do? He relieved tariffs on bananas and coffee, right? Which is a tacit acknowledgement that when you get rid of tariffs, then the prices tend to go down. Now, there is a study that came out recently that suggested that tariff policy leads to deflation, that it leads to lower prices over time. People are reading that study wrong. What that study says is that tariffs actually lead to job loss.

Job loss leads to people not being able to buy things. When people can't buy things, demand goes down. And so the actual price goes down. So long-term prices go down because you wreck the economy with big tariff for insurance, which is not exactly what you actually want to go for. That's so scary. Yeah. So I think that we have an... excellent supply chain domestically in the United States for food. The biggest problem is just a generalized problem that we feel mostly at the grocery store because it's the most immediate place we spend a lot of money. Again, it's kind of like the clearest place that you see is in the food prices, but everything has gone up tremendously over the course of the Biden administration and is kind of coming down but hasn't gone down all the way under Trump. When I say gone down, it actually, I should correct, the prices went up like this under Joe Biden and now the price are going up like this under Trump. Everybody wants the prices to actually come down. If you want the prices to actually come down, you need a deflation rate, not an inflation rate. The inflation rate right now is 3%. So that means that everything is now 3% higher than it was one year ago. Well, if last year it increased by 11%, you're adding another 3 on top of that, then that's still really high. When people say they want prices to come down, and this is what politicians refuse to understand, they don't mean that they want... the trajectory to look like that. They mean they want the trajectory to look like this. Yes. Okay, and if you want the trajectory to look like this, you need to pursue actual deflationary policies. And deflationary policies You know, that's a scary thing because deflation very typically exists only with radical increase in supply, which, again, we have pretty good supply chains. So it really isn't a supply problem per se. Yeah. Or radical decrease in demand. And if you want to radically decrease demand, you have to crash the economy. Yes. That's typically the way the deflation tends to occur. So basically get used to these prices, is all I'm saying. Unless you have a Delorean and you can go talk to Jerome Powell about radically reducing interest rates in a time of gigantic government subsidies pushed by B. both the late Trump administration, the entirety of the Biden administration. I don't have a time machine. There's never been a period in American history that was significantly deflationary over time that did not coincide with a significant economic downturn. So essentially, the state of what we're living in right now, economically. This is the new normal. It's the new normal now. It's baked into the cake. Yep. Because of how high the inflation was during the Biden administration. Right. He was like handing checks, doing lots of subsidies, doing all these things. And now we're suffering the consequences of that. And I think politically it's one of the reasons why politicians need to be careful how they talk. So Trump came into office and he said, I'm going to bring the prices back down. What he should have said is Joe Biden embedded these prices in the economy. Can't undo everything Joe Biden did. It's not possible unless I just suck all the money that he gave you, go back in time, suck all the money out of every pocket. You couldn't increase supply, but it's hard to see how you increase the egg supply. How do you triple the in order to get back to the old prices? You have to like increase the egg supply by a factor of two or three. Right, to increase the turkey supply. How are you going to do that? Very difficult to see how. During Trump's last campaign when he won in 2024, everybody kept saying that the reason the economy is so bad is because we're living in the economy that Trump created. That was like the agenda that the left was pushing was the reason things are so bad is because of what Trump previously did.

Get what you want to go. I'm not sure that it's actually like a one piece of general life advice. I'd actually sit with you and your husband and go through your bills. This is the best way to do it is to actually sit down, see how much you're earning, how much you're paying in tax, what your bills are, where you can cut, where you can save. It's an individualized thing. But fiscal responsibility and financial responsibility at home, there's no one size fits all other than you actually just have to sit there with a pocket calculator, now your phone. And I'm showing my age. and like an actual Excel spreadsheet and see where you can minimize your expenditures. I mean, again, I've... been your age when I was year 24, I got married when I was 24, my wife was 20 at the time, and we had to absorb her education costs, we had to absorb her medical school costs, we had to still pay off some of my Harvard student loans. Like there was all this stuff. You know, there was a point maybe a year into our marriage, where we were down to like the point of do we need to take out a second credit card to shift debt from one credit card to another for lower interest? It's kind of normal at your age. Yeah. And then the question is, how do you achieve an income trajectory? What is your career path that is going to take you from making 70 grand a year or 60 grand a year to making 200 grand a year? And that can take some time. Every wealthy person I know was once not a wealthy person. Yeah. And those people. had to work and toil in semi-obscurity until they sort of hit a trajectory. So my wife and I had a very good life for sure when we were first married because a good life doesn't require a big house and it doesn't require a huge income. You can have a great life just living in a small house or a condo like we were when we were first married. And it can be wonderful. But if you want that trajectory, that economic trajectory, it's all about how do you transition from sort of phase one of your career to phase two? And do you invest in yourself? How wealthy do you realistically want to be or need to be because those are different paths. Right. You can be intentional about this stuff. Like if you're working for a salary, then you have to look at your company and see, okay, where does the salary path take me? Maybe it caps out at 100 or 120 or 150, whatever it is. Or is it, do I have an idea for a business? Can I start a business? It's riskier. Do I have the safety net that if I fail, I can try again? These are all sort of decisions that you have to make. But I think everybody wants the overnight. How do I get from barely being able to pay my bills to being in a mansion? And the answer is struggling is kind of, I mean, again, these are hard things to just deal with. Struggling is a normal part of being 24 years old. Yeah. Okay, I was 24 years old and I struggled when I was 24 years old. Especially when you get married because it's like, oh my goodness, I'm learning how to be married. I'm learning how to build a career. I have a business myself. So it's like, oh, I'm building a business, my husband has a business, so we're both just like taking risks constantly. Right, exactly. Like being young means being uncomfortable. That's also why you can afford to take some more risks is because when it's just the two of you and you're just, and you don't have kids yet, then you can take more career risks that you wouldn't be able to take if you already had a bunch of mouths to feed, for example. Right. And so, yeah, I mean, I think that the biggest thing to take away is, you know, good sound financial decision making, take a look at your bills, take a look at your earnings.

See how you can get from point A to point B try to have a plan to get from point A to point B Yeah, just recognize that this is normal. It's totally normal. You know there's nothing unnatural about feeling financially uneasy when you're young Right, there's nothing sort of terrible about you It doesn't mean that the system is there's never been a system in human history where 24 year olds felt economically comfortable Yeah, there is no system where that exists and and you can say people in Norway feel more economically comfortable because they have all of these financial safety notes? Oh, no, I have lots of friends. They do not. They can't get a house. Correct. No, that's right. Nobody, the home ownership in these places. You want to talk about home ownership and ability? Home ownership in Europe is almost a non-existent. You're never going to house. You rent an apartment for the rest of your life. Correct. Yeah. So like the idea that like the American dream is somehow equivalent to the Norwegian dream is just not true. Right. It's different perspectives, different ideas. I think as well it's very encouraging to hear from someone, especially at your stage of life and like how successful you've been able to be, that it takes time. I know there's a little bit of hate from my generation, just a little. I think one thing that my generation has been lied to about specifically, especially because our quality of life has gone up so much, is just that... you know it's instantaneous it's instantaneous again people get tired of hearing people my age talk about the prevails one you're young it all it sounds like your parents walking both ways uphill to school but the reality is that like i remember when my wife and i were first married and like a great day was i would have a speech at like a local republican club 30 miles away we drive there in our shitty 1986 honda civic that was literally our first car and we would we would drive out there and i'd have like a couple of books in the back that my publisher had given me for free, I'd be like, I have 30 books, and I'd sell them at, you know, 15 bucks a pop. Yeah. And if I walked away with a couple hundred bucks by selling, like, you know, 15 or 20 copies of the book, that was like a great day. That was like an amazing day. And I did that for years. Okay, like, and everybody does that for years. Oh, yeah. Everybody does that for years. We're always selling stuff on Facebook Marketplace. Like, we just moved into a new house, which is... Totally a God thing because we're going to get to own our first house. That's amazing. Crazy. I literally cannot believe it. But we moved into a house and we were like selling all our furniture because we were like, okay, we want to get new furniture so we have to sell it and then get the new things on Facebook. It's life. And I think with the social media age, especially watching all these like influencers and people online just have this overnight success all the time. And it's fake, it's not real. It's not. It's totally not real. It's not. I've been there. I was an influencer for a few years. All of it's fake. It's all monopoly and then it goes away in an instant, you know? So, I mean, I made the choice to get married young. And so when you get married young, it's a good choice. Good for you. It was great. I love it. But we didn't have anything. Like we were like, oh, like my husband, you know, was a missionary kid. So it's like, he had that, you know. I had student debt. So I was like, what are we doing? But it's nice to hear that like it takes effort and it takes work and it you will come out in the end okay and You know your parents did your grandparents did yeah people on earth today kind of do I mean at least certainly in the West they do it will be okay is the is the first thing to recognize and it'll be especially okay if you just make good decisions There's a natural progression to life and you will be living in 15 years in a bigger house than you currently live in if you just don't make I'm trying remember who said this I wish I could remember who said it but it's a wise line

The first path to getting rich is not getting poor. Ooh, that sounds like a Dave Ramsey quote. Yeah, it's going to say. That sounds like something Dave said. But that really is it. It's like to avoid the worst decision. And that's like half the battle. Let's more on this in a moment. First, you think a fresh start means things will be different. But it's the same system. Banks keep winning. Sometimes you're stuck paying the price. Fees stack up. Collection calls won't stop every month. It just gets worse. Here's the thing. You don't have to keep playing that game. PDS debt has already helped hundreds of thousands of people slash their debt and take back control of their money. That cash should be staying in your pocket where it belongs and not lining the bank's pockets. Look, if you're dealing with credit card debt, personal loans, medical bills piling up, PDS debt actually takes the time to understand what you're going through. They don't just look at the numbers. They get that every family situation is different. They'll work with you to create a plan that fits your life. The best part, there's no minimum credit score required. So they're not going to turn you away when you need help the most. Their whole focus is helping you save money, knock out that debt faster, finally get some breathing room in your budget, so you can take care of what matters, your family. And they've got the track record to back it up, A-plus rating with the Better Business Bureau, thousands of five-star Google reviews, perfect rating on Trust Pilot. That's because they've helped hundreds of thousands of people break free from debt. They can help you as well. I have friends who've gotten into debt. It ruins your life, but you can take your life back. Take back control in 30 seconds. Get your free. Personalized assessment and the best option for you at PDSDOT.com slash shepiro. That's PDSdat.com slash shepiro. To people in my generation, what would you say to them when they're kind of pushing these ideals that Zohran Mamdani has where he's kind of pushing for socialism or as he calls it democratic socialism? All I would say is that when we make public policy, you have to look at the unintended consequences of the policies you're making. Okay. Everything sounds really good on the surface, right? Okay, fine, I'm just going to throw a check at you. Oh, my life is better because I have a check now. Okay, that may be true for you in the moment, and I'm not going to deny that if I got a $2,000 check or $100,000 check, I'd feel better about my life than if I didn't get $100,000 check. But that's not how you make public policy, because if you give everybody a $100,000 check, inflation will obviously be rampant. And then the $100,000 is worth it goes, and everybody else's savings are degraded. It's very easy to make a political argument where you say, I'm going to just drop a benefit on your head. It's the free ice cream argument from third grade, right? You have some kid who's running for class president. He says, free ice cream for everybody. There's no real way for that to be fulfilled in a way that actually is useful to kids. Their downside effects of all of that. So when you look at the policies, the long-term policy ramifications of these sorts of policies, you actually do have to look at what is going to happen, not the moment you get to check, but what's going to happen over the course of the next six months or the course of the next year. So many of the policies that Zaharmam Zohran Mamdani in New York wants to try were tried in the 1970s and were disastrous. I mean, wrecked the city. So, for example, he wants to do a bunch of rent freezes and rent control. They tried this in the 1970s. And you can go back and you can watch on tape, the 1977 World Series, which was played in the Bronx because the Yankees were in the World Series. And there's a very, very famous video of Howard Casell who is commentating the Yankees game. They pull out, there's a helicopter shot of Yankee Stadium, and there's fires everywhere.

And so he says the Bronx is burning. Why was the Bronx burning? Because apartment owners were burning down their own apartment complexes for the insurance money because the rent control had made it less lucrative for them to continue to operate the apartment than to watch them burn down and take the insurance money. Oh, yeah. And the price of operation goes up over time. So if it's stuck there? Correct. All these things have unintended consequences. Everybody wants like an immediate solve. There's a sugar high, I'm sure, for people who receive this in the immediate term. If you want to make New York more livable over anything like the mid to long term, you actually have to change seriously the underlying policies and prevent people from building extra supply. rather than stimulating demand with subsidies and also restricting supply with regulations. When you're talking about handing people a check doesn't really help. It makes me think about in COVID when they started handing out all these stimulus checks. And for a moment, it felt great. For a moment, it was like, oh, cool, I can buy a bunch of new stuff. And then it turns out you go on Amazon and everything costs five times what it once did. Right, a Thanksgiving dinner is now $1,000 where Thanksgiving dinner was $300, like five years ago. There's a great chart showing the price of goods in the United States over time. And what it shows is every single good that government has subsidized, the price up. Every single good, the government does not subsidize, the price goes down. When the government subsidizes the demand for a particular product, let's say college education, colleges just adjust the price to go up with the increased demand. Got it. Meanwhile, if the government stays out of it, then the prices tend to find their own level. TVs have gotten better and cheaper. Yeah. Because TV companies look at you, they look at me and say, oh, those people want cheap TVs, great. And if I can make a better TV, then I will be able to make more money. That makes sense. So when the government steps in and gives money to people to go to college, as it would be, then they raise the prices just because, oh, well, look, these people are going to college. The government's giving you money. We'll just charge more money now because we can. Exactly. And not just because we can, but also because unless they're about to hire a bunch new professors. Yeah. Then they still have a limited number of slots at the college or university. When I was at Harvard Law, for example, there were like 500 people per class. I think there's still about 500 people per class. They've not actually radically increased the number of enrollees at Harvard Law School. And so what does that mean? If you have 10,000 applicants as opposed to 2,000 applicants, well now I know that I have a big pool of people who really want that, and so the price is going to go up. Yeah, and I think in the conversation of education as well, when all these subsidies are happening, it doesn't really push people to look for the cheaper options. Right, or even the best option. So one of the things that's happened in the public markets with regard to student loans, for example, is let's say that there were no public market. Let's say there were no FISA loans. The government wasn't involved at all. Okay, so you get out of school at 18. You decide, I'm going to go to college. So you look around and you say, I really want to go to... University of Iowa and I'm a major in art history. So now you have to go to a bank. And the bank is going to look at you and say, why would we possibly loan you without any collateral money to major in art history? There's no way. You're not going to make that money back. Yeah. And so the art history major at University of Iowa is going to have a real tough time unless there's a donor subsidizing it, getting anybody to come. Instead, if you say, I want to go to University of Iowa and I want to major in...

geoengineering and you go to a bank. And the bank says, okay, well, it looks like the trajectory for your income path is pretty good. So I will give you a decent educational loan because I think there's a good shot you're going to get paid back. So this is what happens, for example, when I went to Harvard Law, the impression that banks, I wouldn't need a publicly subsidized loan to go to Harvard Law. The salary coming out my first year when I was coming out was $180,000. And so they knew that if they lent me, you know, 100 grand a year to go to Harvard, that over the course of the next 10 years, there's a very high likelihood that I was going to pay off my loan. So the private markets are very good at determining their risk, and that's particularly true in education. In education, bizarrely, the only area where there's no collateral, right, they can't seize your degree. If you don't pay, they can't take your degree back. What are they going to do with it? So the question is, why would they loan to you? And the only answer is because they believe you're going to earn out, and then you're going to pay back your education. But the government doesn't care. The government has an interest in making you feel better by going to college. Governmental actors took the wrong lesson from the 60s and 70s. So in the 60s and 70s, a major income gap began to emerge between college grads and people who are high school grads. Yeah. Well, obviously. Of course. Of course. Just as there would be a major income differential between people who graduate high school and people who don't graduate high school. Yeah, of course. So what the government said is, well, the way to solve this is by getting more people to go to college. Okay, well, actually, all that did was it created a striation in college grads. Right now, there's a new striation, which is if you go to grad school, better income trajectory than just college. And there's a huge striation in majors. So if you're an ed major at Harvard, you're going to earn way less than you would as a STEM major at Harvard. Of course, of course. I've never thought of it that way, so this is very much blowing my mind, is that the government giving subsidies. potentially ruined college education in the sense that, you know, people used to go to college to actually pursue things that would provide a career or a better future for them. Like, I'm going to go to law school. You know, I'm going to become an engineer. And now we have all of these random majors, like, I'm going to major in philosophy of kneecaps, like something stupid. That's right. And not only that, it also screwed up the employment market. So, for example, you want to work as a barista at Starbucks. Why do you need a college degree? To work as a grease at Starbucks. You shouldn't have to, right? Or as a hairdresser or whatever. Like there are a million jobs in America, millions and millions of jobs that should not require a college degree. The problem is, if everybody goes to college, then it turns into graduating from high school. Yeah. It's just like the next level. And so if you didn't go to college, there's now something wrong with you. And then to make things even worse, basically what college degrees have become is an effective IQ test. So we look at the degree that's on your diploma. And we, or we look at the degree that's on your resume, rather. And we say, okay, you went to Harvard, that means you're smart. You went to, you know, Juko, that means you're not a smart. And so we'll give you an advantage if you went to Harvard as opposed to you went to Juko. Well, then why do we make the guy who's going to Juko pay $200,000 in order to compete with the guy from Harvard? What would have been better is if we actually didn't have that system at all, and employers hired without regard to college degree. So you're seeing people now. like Peter Thiel or like Alex Carp or like we do at this company, actually try to look at the underlying performance in either prior jobs or apprenticeships instead of just looking at the college degree as sort of the be-all-end-all heuristic shortcut. Yeah, I really appreciated that when I applied to this company because I ended up dropping out of college. Two of our three founders did not finish college. Yeah. Right? I'm the only one with higher education, really.

Well, you're the smartest, obvious. I'm just kidding. I'm just kidding. Caleb, don't take it that way. Okay. So I want to better understand what happened with the housing crisis and how we got to a point where houses are as expensive as they are. What we're getting right now is the impact of a few things. One, massive inflation of the currency. So that is putting a lot of money in people's pockets, like just cash money in people's pockets. That's what happened during the Biden administration. And so they're taking that money and they're saying, where do I put that? So you're seeing it go to the top end of the stock market, right, NVIDIA and the rest, but you're also seeing it go into real estate. People taking that money and saying, I want to buy a house. Simultaneously, because the inflation was so high, because people had all this money in their pocket, the government is trying to bring the inflation down. And so the Federal Reserve increased the interest rates. That is a way of making it harder to borrow money. Yes. Because they don't want people to borrow more, if you can borrow more money, you continue to have this inflationary price spiral. So what does that mean for people who own houses? If you wanted to increase the supply of houses, then you need to do one of two things. Either get people who own houses to sell them. Yep. and move into a different place, or you need people to build houses. Again, there's a delay effect on the building of the houses. You'd have to relieve the regulations. They haven't really done that. So what you end up with is a bunch of people who are older who are not moving out of their houses. This was a big problem, is that you'd have high prices. It was sort of a bizarre, sticky real estate situation in places like Florida. You would have people who are 80, who don't need a five-bedroom house. Right. But they don't want to sell their five-bedroom house. Why? Because if they sell their five-bedroom house, which they have a 30-year mortgage on at 2%, they now have to get a new mortgage and their new mortgage is at 7%. Yeah, which is a lot worse. So they don't want to sell. So they just stick in that house and they stay there and then that's not new inventory on the market so the price doesn't come back down. That makes sense. So the housing market's been very sticky. Yeah. I noticed as well in 2020 it felt like so many people were buying homes just because the interest rates were so low and it was so affordable. Did that cause a lot of the issues as well? Yeah, I mean, as soon as you have a lot of people who have the money in their pocket, your demand has gone up. Yeah. So if the supply doesn't go up to meet it, then you have a problem. So one of the things that happened is that because of the worldwide shutdowns from COVID, for example, all the materials coming into the United States came in slower. We had these gigantic bottlenecks. It became very expensive to build. The tariffs are making it more expensive to build right now. If you talk to contractors, they're having a tough time getting the materials that they need at an affordable price. So the price of building has gone up. And so you have all of these things kind of meeting in the middle and making it very, very difficult to buy houses. And that's particularly true in places that are already... very pressured in terms of space. Yeah. That's really true in big cities and their surrounding suburbs. Again, this is why I got myself into trouble by making the, I think, eminently obvious suggestion that if you can't afford to live in New York, I'm not talking about should we shift policies in New York? Of course we should. I'm talking about you as a 24-year-old.

you should pursue the best opportunities available to you. Right. If that opportunity is not available in New York, just a piece of life advice, then you should really look to move to Nashville or Florida or someplace or Austin, someplace where you have a better opportunity to do that particular thing. And that's always been a hallmark of economics, is the fluidity of, for example, labor. You lose your job. You don't sit around saying, I want my old job back at the same exact factory. You try and find a new job at a different place. If you can't afford to buy a home in one particular place, typically what we would do in the United States is we'd try to find a better place to live until you'd get population movement. Fewer Americans are moving now. And because fewer Americans are moving, that means that, again, there's a lot of stickiness in the markets in places like New York or Los Angeles or Seattle. We'll get to more on this in a moment. First, something that surprises people when they start a business is how often success comes down to just answering the phone. Not branding, not marketing, just doing the very simple thing of answering the phone. The problem is most businesses are still trying to manage communication with systems that were not built for modern teams. Some messages are in emails, some in text, some in voicemails. Some are sitting in somebody's CRM. Eventually, nobody knows who responded to whom. And that's why today's episode is brought to you by Quo. It's spelled QUO, the business communication system built so you never miss a call. Quo gives your entire team one shared number for calls and texts. Everybody can see the full conversation history, which means customers don't have to repeat themselves over and over again. every time they talk to a different person. Quo also works wherever you work on your phone, your computer, in the office, on the road. You can keep your existing number, add teammates quickly, sink your CRM, and let call routing handle itself as your business grows. Because this is 2026, AI is built in. It can even qualify leads to response or respond after hours, helping your business stay responsive even when you're not actively working. Everything lives in one place, calls, text, voicemails, transcripts, customer, and details. Your team gets the full picture before every conversation, and that creates a better experience for everybody involved. There's a reason Quo is the number one rated business phone system on G2 with more than 3,000 reviews and why over 90,000 businesses rely on it to stay connected and responsive. Money's on the line. Always say hello with Quo. Try Quo for free. Plus, get 20% off your first six months when you go to Quo.com slash Ben. That's QUO.com slash Ben. So you mentioned a little bit ago that the tariffs are causing a lot of bottlenecks in the buildings. So did that start during Trump's presidency at the start of that, all the policies he was putting in place? No, it's exacerbated a little bit in things like lumber, but it really started during COVID. So during COVID, because the global markets basically shut down and because all the ports were closed, and it created these massive supply chain bottlenecks all over the world. That meant that materials just were not available to build. And then it took a long time for global shipping to restart. And there were empty ships that were arriving on shores because the ships keep going whether or not they're loaded up. And so you ended up with this huge supply chain bottleneck, which did, in fact, contribute to the Biden inflation. It wasn't just that Biden had bad economic and fiscal policy, which you did. It is true that COVID. did create massive supply chain bottlenecks that led to inflation. Because again, if you have bottlenecks in supply, less supply, same demand, higher price.

So how long approximately do you think it would take in order for the demand to actually reach the place that it needs to be to lower housing prices? So demand has to go down or supply has to go up? Yeah, I mean supply. I'm sorry. I'm making it works. Right. So how long would it take for supply to go up? Yes. It depends on where you are. So again, in New York City, the answer is it's going to take a while, right? You can't really build it out. There's no place to build out. So you have to build up. It's very expensive to build New York City. The regulations there are really, really exorbitant. even if you got rid of most of the really onerous regulations, the taxation, the difficulty in building, it would still take, I would imagine you have to talk to a builder route. I would take three, four years minimum, before you start getting a real alleviation in the housing supply in a way that dramatically would lower the prices. Anyway, in like in Austin where you can build it out, it's a lot easier, right? You can just get some developer. Everybody's yelling at the developers right now. How dare the developers buy up housing in Austin? Well, the developers are buying up housing in Austin because What they're they're frequently doing is they're taking older houses, making them over, and then reselling them at a higher price to people who want the houses. And if that continues, then the developer moves on and does that to another neighborhood. And that's actually how you increase the housing supply. Let's say that somebody is buying up a whole block of single-family homes that are each 900 square feet from when your grandparents were there, and they're flipping those all into 2,500 square foot or 3,000 square foot homes because they're on big plots of land. And now they're selling them to somebody who's upper middle class. I would say it's a good thing because you will increase the housing supply. Why? Because those developers are now going to take that money, and they now know there are a bunch of people who wanted those houses, who weren't able to get those houses, and now they're going to go build new houses if they're going to go build any brains at all. And if they don't know any brains, what they'll do is they'll take that money, they'll put it in a bank, and that bank will then lend out the money to another developer to take out the money to go build those houses. If you want more supply, then the incentive of demand creates supply. So the reality that you know a number of people. who are willing to buy those crappy houses, then somebody will build the crappy houses, the basic assumption of classical economics. Now, the only reason that wouldn't happen is over-regulation, prevention of people from building those houses. But there is this sort of assumption that But you want that house. Okay, well, there's no right in economics to that house. There's no right in America to, quote, quote, that house. You know, this happens all the time that there'll be bidding on empty land. Forget about the house. There's bidding on empty land. Yeah. Okay, forget that there's a house already there. You'd like the piece of empty land to build a three-bedroom house that's going to be 1,400 square feet. I want that piece of empty land to build a 10,000 square foot house. I have more money. I'm going to buy that piece of land. Yeah. Okay. Does that mean that I deprived you of that piece of land? Or does it mean that I was able to pay a higher price and that the person who received that payment for that empty piece of land, which maybe they bought 100 years ago? Yeah. They're not going to take that money. And they're going to put that money in a bank. That bank knows that you still want to buy a piece of land to build that house. And so if you're a good credit risk, they will lend you that money to go out and build that house. Free flow of capital is the way that more things happen. So you would argue that capitalism is the best route because it will always increase the supply.

For people? To meet the demand, yes. To meet the demand. Correct, exactly. Because if you're a capitalist, then what you want to do is get your product to the market and take advantage of the fact that people want that product in return from you. You can talk about sort of a mixed economy and then you can talk about socialism proper. So socialism proper would be the government just seizes the entire housing supply and then redistributes it as it sees fit and then decides the price of houses and essentially builds ground up by forcing people at the point of gun to build. And what you end up with is terrible workmanship. You end up with a completely... unwieldy market, you end up with the ugliest housing available. I mean, go look at the Soviet Union or the ugly people are living the ugliest places. By dint of the government, the government decides where you live. That's full communism. That's typically not what people are talking about today. When they say socialism, what they really mean is confiscating wealth from wealthy people and then subsidizing particular people in order to build quote unquote affordable housing. So what they're going to do is they're going to go to a developer and they're going to say, okay, in order for you to build X number of luxury units, we're also going to force you to build. X number of affordable units. It does have unintended consequences. So, for example, why does the government need to do that? The idea would be that you have to force somebody who is a luxury builder to build a certain number of affordable units, and the affordable units are going to be, I assume, rent control. It's going to have to be the government telling you what price you can rent at. And so it's basically a subsidy from the government to the developer, and you now have to pay the developer to do that. Okay, well, the government is filled with inefficiencies. The government is not going to determining prices. What would be better is to just let the developers build as many luxury units as they want. People who are in these sort of mid-range will then have a better supply of luxury units. They can move from their mid-range apartments to the luxury apartments. Their apartments are now empty. The price of those goes down because you have a higher supply of mid-range apartments. And then all the places that are affordable housing. those people move up. Like, this is how housing has gotten better over time. So one of the things people miss is they assume that the housing supply is totally static in terms of quality. Right? They assume this is why you see these memes online. My grandpa used to live in 1950 on one salary working at the Ford factory and grandma wasn't working and they could afford a house. The house they could afford was shit. It was terrible. If you go back and like seriously, go back and look at a house built in 1950. Oh yeah. I lived in one of those houses last year. Yeah, they're not good. They're not nice. I mean, they're really bad. They're like 950 square feet. They typically are not particularly well insulated. They don't have central air very often. Like they're not houses that anybody wants to live in. So when they say, I can't afford the same thing my parents. could afford. That's not true. You can afford the exact same thing your parents, your grandparents could afford. You just wouldn't want to live there. It's like saying, you know, back in the day, my grandparents, they could afford to live on a, you know, one salary in 1955, okay, well, if you want the rotary telephone back and you wish to have a clunker that gets 10 miles to a gallon, and you don't want a microwave and you don't want an oven, you don't want any of the nice things that we typically enjoy, we could do that. I mean, we could do that right now, but that actually is living more like... some places in like Central and Eastern Europe than it is like living typically in the United States. This is finally clicking in my mind for the first time how it works. Because my parents, they bought, you know, their first home was $50,000 and it didn't have a dishwasher or heat or any of those things and they were able to move into a better house over time. But even then it took, you know, 10 years. 100%. So this is my parents story too, right? So I grew up in an 1,100 square foot house, something like that in Burbank, California. Two bedrooms, one bathroom, six people.

And no amazing amenities. It was fine. It was like a nice middle to lower middle class house in Burbank County. It was a great place to grow up. But my first apartment that I got with my wife, our first condo, was like 1,400 square feet. That was like our first one. Whoa. So it's bigger than what my parents had when they were, you know, when they were getting married, it's bigger than what they had. And then we've been able to obviously work our way up to like a really, really nice house. But that's true for my parents also. So, you know, when people talk about the wealth gap and they look at various groups. One thing that happens is people change their wealth status over time. One of the ways people have traditionally built up wealth in the United States is by going and buying a house in a particular area, holding it for a particular period of time, and then selling the house. I mean, that's been one way that people have made money. That's, you know, buying and holding stock is another way that people have made money. But yes, I mean, the quality of life that your grandparents had or your parents had is so much lower than kind of the normal quality of life that we all take for granted. Everyone's grandmother could buy, go down to the local store, and for a cent, you could buy a candy bar. Yeah. Okay, does that mean she was wealthier than we are? Well, no, she was living in 1920. So actually, the stuff that she had availability to would be absolute poverty level, like below poverty level, crap today. Yeah. Right. Like, every poor person in America has a cell phone. Okay, not one of our grandparents had a cell phone. Right. Right. It's a magical piece of machinery. Some of them didn't even have landlines. Correct. If you go back to like the early 1900s, a huge number of houses in the United States didn't have toilets. And they have houses. So trying to compare by simply looking at kind of like dollar amounts, what you can buy with the dollar is the thing that's more important. There's an economist who I like to cite named Marian Toopy. And what he has developed is a measurement that I think is much better than just looking at dollars. What he has developed is basically how much time would it cost you in your life to purchase a particular unit of a good? If you go back to 1800, it would cost you multiple days of work. to buy basically an hour of light, right? Because you had to buy a candle. And so the candle had to come from somewhere. Sometimes it came from whale oil, sometimes it came from wax, right? Today, it costs you zero time to buy an hour of light, right? You flip on your light, it's done. You literally can just do it for free. Okay, so that is why it's better to use sort of time value and what we have to invest. And that's why if you look at your life right now, and you compare it to, like, how long would it have taken you to get... Let's say you order a table from Amazon. It takes two days to get there. Yeah. And took you one click of a button. And it cost you, whatever, $100. Okay, so how many hours would you have to work in order to earn $100 to pay for that table and to have it shipped and to put it together? And the answer is it's a lot cheaper now than it was even 30 years ago. Yeah. Well, thank you. I feel like you covered everything and I really understand kind of where economics are and why the increase of demand and supply kind of affects. the economy and also why socialism doesn't work. Thanks. Which I never knew. Good time.