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SPEAKER_03: Hey, everybody. Welcome to This Week in Startups, the podcast that we've been doing for over a decade and over 1,100 episodes.

SPEAKER_05: And we talk on this podcast about technology, startups, investing in startups, but we don't delve too much into public equities because, well, I've never been a public equity guy. But lo and behold, 10 years later, I've got two companies, three companies that have come public. All these SPACs are happening. And I find myself drawn to maybe understanding the public markets a little bit better than I do as a private market investor. And a friend of mine said, hey, you have to read this book. This guy has a lot of common thoughts with U-Do about capitalism and maybe problem solving. And I read this book.

SPEAKER_09: It's a tiny little book. There it is. It's not that thick. How many pages we're talking about here?

SPEAKER_05: I think it's a four-hour listen. I listened to it. Yeah, under 200 pages. And the book is called Common Sense, The Investor's Guide to Equality, Opportunity, and Growth. And it's by a guy named Joel Greenblatt. Now, if you're in the stock market and you know who he is because he's written a bunch of books that were bestsellers and that became basically Bibles of people who were into public stocks, things you may have heard of this book, You Can Be a Stock Market Genius, Little Book

SPEAKER_03: That Beats the Market, Little Book That Still Beats the Market, The Big Secret for the Small Investor. And he is the co-founder and managing principal and co-chief investment officer, tons of titles there. From Gotham Asset Management for the past 12 years, my understanding is, Joel, that you used to run other people's money and now you run just your own.

SPEAKER_05: Welcome to the program. Did I get that intro right?

SPEAKER_10: Well, I started in 1985, so ran outside money for 10 years and then started running outside money again in 2009.

SPEAKER_05: Got it. So you took a little break in the middle. And according to my knowledge of public market investors who run funds and stuff like that, which is basically limited to what I've seen in popular fiction, like on Billions, when Axelrod says, screw it, I don't want to deal with all these LPs anymore. I'm running other people's money. I'm going to run my own and do it my way. And then he goes back saying, you know what, maybe I do want to run other people's money. How do you make that decision? Is it just you're annoyed at the LPs or you feel too much anxiety about running other people's money? You kind of went into it in the book a little bit of this really hard decision of, and I think about this a lot. And it falls into being staked in a poker match as well.

SPEAKER_15: You, it can affect your play as a picker if you're betting your money versus other people's money and perhaps in a bad way. So explain how other people's money factors into your behavior as an investor.

SPEAKER_18: Well, that's an interesting question. So I ran outside. I started in 1985, my own firm, Gotham Capital, ran outside money for 10 years.

SPEAKER_20: We did very well, and we had done well enough to keep our staff and return the outside capital and continue to run our internal capital.

SPEAKER_22: The reason we, we returned it is that a number of reasons.

SPEAKER_20: One, we're very concentrated investors. So it's quite volatile. I have a partner, Rob Goldstein, who joined me in 1989. And every couple of years when, you know, when I say concentrated, there are six or eight names, and that's concentrated in the, or 80% of our portfolio, that's concentrated in the public markets. And every couple of years, you'd wake up and lose 20 or 30% of your net worth. And since we know what we own, and that's just when one or two things don't go your way for a little bit, or you're wrong, or, you know, a lot of things happen. And when you have outside investors, that feels bad, you know? And so my investors were great to us, but it got to a point where I love the business of trying to figure things out and investing in them. But I think the added pressure of having other people's money didn't make it as much fun. So when we had the opportunity to keep our staff and continue to run our internal capital and return the outside capital, we did it.

SPEAKER_27: And it was interesting. And I got five kids. And so it was nice not to have that pressure as well.

SPEAKER_09: It is an added pressure when you're placing a bet and you're saying, man, I know that

SPEAKER_28: this one, I believe in this one, but I know there's all this downside to it as well, right? There's some amount of risk or it wouldn't be a bet. It wouldn't be, there can't be gains without losses. But when you've got other people's money, you're like, I don't know if they would make that bet, right? Or do I want to, I would make this bet. I want that, uh, you know, alpha, beta, whatever the, the delta of what could happen and all this craziness, uh, when you're making bets, but you, you start thinking about the other person in their mindset and that kind of gets in your head, doesn't it?

SPEAKER_20: Well, you know, uh, you, you were saying that you're, you're not as experienced in the public markets and the public markets gives you a quote every day and that's very harmful. And, you know, if you lived in your house and they were giving you assessments every single month, you know, of whether it went up or down might bother you a little bit. And in the stock market, you get it every day. And so whether you're right or wrong, we're starting, we're at least trying to look out two, three years. And, you know, if they give you estimates every day, when people are emotional and they get excited, they'll pay up for things. And when they get excited the wrong way and more depressed, they'll, they'll sell things. Uh, Ben Graham, who, you know, was Warren Buffett's teacher said, you know, you're really in business with Mr. Market and you never know what side of the bed he's going to get up in the morning. He's pretty emotional guy. And so you get those quotes. It's a little different than being on the private side where you know what you own, you're thinking longer term, uh, stock market, unfortunately get quotes every day.

SPEAKER_31: So it makes it a little more difficult to keep your head.

SPEAKER_32: And yeah, that scorecard is great when it's going up, but like you said, so much of it

SPEAKER_05: is emotion and then you have all these outside factors. Uh, and there is this very weird phenomenon when things are going up, people want to sell and book the win. And when people, things are going down, they want to stick with it. There's a, there's investor psychology of let's call it your LPs or my LPs. They get skittish and they make bad short-term decisions when you and I know, I think, you know, you having obviously much more experience than I do, but, uh, you know, I've been at it for 11 years investing in private companies, almost overwhelmingly with a winner, you just want to sit on your hands and take the win.

SPEAKER_15: But then everybody, when we have a winner in our portfolio says, are we selling? Are we selling in secondary? Are we going to take some chips off the table? And I'm like, I'm not sure you want to take chips off the table right now. Cause this thing's a rocket ship. If anything, we might want to put more fuel into it.

SPEAKER_28: For three decades, um, in terms of sitting on your hands and not selling versus this phenomenally bad behavior of neophytes and short-term thinkers where they sell the winners and they hold and they, and they dollar cost average until losers.

SPEAKER_36: Sure. So, you know, uh, Warren Buffett would always say, you know, oh, Michael Jordan's doing too well. It's like, let's get rid of him. You know, he's, he's taken up too much of your portfolio, you know, he scored too many

SPEAKER_20: points. So let's get rid of him. And, uh, you know, that's kind of sometimes the thinking, but, you know, we're, you know, traditionally when I got started, uh, I got started doing more special situations and, uh, interesting, um, extraordinary transactions. So really it's, I described it in my first book, you can be a stock market genius. I, uh, my in-laws used to, uh, shop, uh, at tag sales and country auctions and yard sales in Connecticut when they went up there for the weekends. And I described what they were doing. And when they found a painting, like a yard sale or a country auction, their question, uh, generally wasn't, is this painter going to be the next Picasso? So their question was, oh, was there a similar painting by the same artist just sold at auction for two or three times what I can buy this one for? So very different skill sets, you know, they're both good skill sets to have, you know, is this guy going to be the next Picasso? That would be great. That's a, that's a lot, much tougher nut. If you can actually, uh, what we used to do is look off the beaten path for bargains that other people weren't looking for, uh, that's more of what I, uh, I was doing in my earlier career. Now we're looking, as you're discussing, uh, buying good businesses that are cheap. And that's really how Warren Buffett evolved in his career. Uh, he started buying just bargains and then he said, well, if I can buy a good business cheap, that's much better. And, and, and our investment style over the years has evolved much closer to that. And in which case you can stay with the businesses, you know, if you're just sort of dumpster diving for things that are cheap, you know, holding it for the longterm, if it's not in a great business may hurt you. But if you are investing in good businesses that have good longterm prospects, then of course, uh, it lends itself to being longterm investor. And so it's very different ways, a lot of different ways to make money. Uh, we've done them all and they're both good. I don't, I don't, uh, you know, I taught at Columbia for over two decades and, you know, MBAs and I teach, uh, all those methods. I, I am agnostic as to, uh, smart ways to go about, uh, making a profit and both work.

SPEAKER_41: How do they differ in terms of skillset and also timing?

SPEAKER_28: Because it, I'm just taking an assumption here, but it feels like before the quants and, you know, a large number of people participating in the market, uh, retail investors, which we saw in the dot-com era up until the, the, the great recession in 2007, eight, and now we're seeing again, because of this little company I invested in before they launched called Robin hood, which now has 15 million traders or something like that in the market.

SPEAKER_44: How do, do these strategies differ when you get over participation in the market at the same time as the number of companies that have gone public gets cut in half? These are outside factors that must impact how you play your game because you're not playing your game in a vacuum. There are other people at the poker table. I want you to answer that question when we get back from this quick break.

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SPEAKER_28: Let's get back to this amazing episode. Welcome back. We have a really big deal of a guest on the program, Joel Greenblatt.

SPEAKER_05: Now, I didn't know him. And I feel stupid that I didn't know him because I'm not into the public markets. The public markets I find so confusing. Because there are these stocks that act weird. And I don't understand it when these companies get so big and they start doing all this funky accounting. All I know is three or four people in a room, they have a good product, and I think they're smart. I make a bet. But you do this very different thing in a market and a casino where you have outside influences. And before I went to break, I was thinking about these two outside influences in relation to the two types of investing you have. And I guess we could vector them in a two-by-two quadrant here and go through it. Which is number of market participants in a market in relation to the two investment

SPEAKER_03: strategies, both of which are really one's bargain basement, I guess you could talk about

SPEAKER_28: finding bargains. And I guess the other one would be buying great businesses. When you put those against a small number of companies in the market and a large number

SPEAKER_44: of people wanting to participate, that's got to screw things up, right?

SPEAKER_55: Well, it's interesting. There's another data point that we should throw in there that the market cap now, even though

SPEAKER_20: there are half as many publicly traded companies as, and even less than that, than when I got started, there were even more. The market cap of those companies is much larger than the market cap relative to, let's say, GDP or something like that, than when we had more companies. They were just smaller. So the market cap, the total market cap of the market is actually bigger on a relative basis than it was 20 years ago when there were twice as many companies to choose from. And if you like to look for bargains, I'd rather have more choices and especially more small cap companies where people aren't looking. So I think that has impinged on, you know, smaller investors. But the S&P 500, you know, there are over 3,000 publicly traded companies now in the US. The S&P 500, though, is approximately 90% of the market cap of the entire amount. So the remaining 2,500 companies are only 10%, something along those lines. So, you know, when we talk about the numbers, that's really how it stacks up. What I think is a shame, to be honest, is the high cost of being a public company. You know, it costs between $2 and $4 million to be public. So if you are a small company, you want to go public and you only have 10 million in sales or 20 million in sales, you can forget about it. You have public company expenses of $2 or $3 or $4 million a year just, you know, making all the filings. And it makes no sense.

SPEAKER_57: And even if you had 10 million in profits, I'm not talking about sales, 10 million in profits, you also can't be public. That's 20 or 30% of your, you know, net income. It also doesn't make sense to be public.

SPEAKER_20: And that's a real shame because they've tried to make some changes. It's obviously hasn't been effective. And that's why you see a shrinking of the amount of companies. So much regulation has let small companies not be able to access the stock market in the way they should. That takes away dynamism and a lot of other things that the public markets could. So I think there's a lot of over-regulation there. I think they've tried to make some corrections with all kinds of different things. But I just, you know, now that you're giving me some place to complain, I would complain about that, that I think that there should be- It's outrageous, yeah.

SPEAKER_09: I mean, you look at other markets that are, you know, not as robust as ours, and that do

SPEAKER_28: not have the same legacy of freedom that America has that's ingrained into our system.

SPEAKER_05: I'm thinking specifically of Australia, Japan, and the UK, where I get pinged constantly by

SPEAKER_28: all kinds of weird, fugazi people who are like, we can take companies public with 10 million

SPEAKER_05: in revenue, 15 million in revenue, and it costs, literally, I just have this email from somebody who's trying to get me to move some of our startups to UK or Australia, not move them, but, you know, to float them in those markets.

SPEAKER_44: Even Japan, you can float a company for 10, $20 million in revenue, and they're like,

SPEAKER_11: it's $300,000, and we are the tip of the entrepreneurial economic spear for the entire planet, for entire humanity, and we are ankling ourselves.

SPEAKER_15: We've literally ankled our economic system in order to protect people from losing money.

SPEAKER_64: This makes no sense.

SPEAKER_65: No, I agree with you, and they've made some efforts to have these small markets where there's less regulation, and you can raise a little bit of money. I would just say those efforts are tiny in comparison with what they should be, and so

SPEAKER_20: hopefully, they'll expand those at some point, because, as you're suggesting, it's a great country, it's a great place to do business for the most part, still, no matter who's in charge, and at least it's better than most other places, and, you know, it'd be great, you know, right now, entrepreneurs can raise money, but you have to be in certain techie businesses or certain hot businesses that, you know, private equity guys will, or VC guys want to back, and so it's not so easy for everybody, just a select few, so I think

SPEAKER_39: a public market would democratize that a lot more, and, you know, I wish there were more public companies, and, you know, hopefully that'll turn a little bit.

SPEAKER_44: In your era, in the early days of your era when you were in the game, you had these incredible

SPEAKER_28: companies like the Home Depots and the FedExes, they went public at very low market caps, what were the companies that you bet on, or that you wish you had bet on and passed on in that

SPEAKER_05: early era, when there were two, three times as many public companies that worked out, and that would have been able to go public, that wouldn't have been able to go public now?

SPEAKER_36: Yeah, I'm not gonna get into that, I mean, if I talk about all the things that I missed over the years, you know, it's, I mean, you know, I would really have to think long and hard, of course, I didn't buy Apple.

SPEAKER_73: There's gotta be one that got away that, there's gotta be one that got away that just burns.

SPEAKER_36: Well, I certainly looked at Apple a number of times during, you know, its life, you know,

SPEAKER_20: even after it got crushed after the internet bubble, and, you know, still had a chance when Steve Jobs came back, and, you know, there are a lot of stories of people who did buy it then, and, you know, what that turned into, and, obviously, they didn't even have the iPhone at the time, and everything else, but you, you could bet on the jockey, and, you know, there was the opportunity there, so, that's a big one.

SPEAKER_05: When you replay that one in your head, because we all, as poker players, replay the hand that they played incorrectly, or they played sub-optimally, what's the lesson you take forward from that?

SPEAKER_20: Yeah, I think you can't look at the current metrics so much, you really have to look forward and say, what's the market opportunity for this business, you know, it's, it's kind of like another one I missed, you know, in the 80s, when I saw it, and it looked like a great business was Walmart, so, you know, if you look at the metrics for Walmart, when it has

SPEAKER_57: 50 stores, if it has the prospects to open 1,000 or 2,000 stores, the metrics when it has 50 stores don't mean a lot.

SPEAKER_82: Yeah.

SPEAKER_57: So, just missing that, and even if you paid what sounded like a higher price for those 50 stores, but realize, no, they actually have a model that can be expanded 20, 30 times, and that's much simpler than figuring out, you know, the next tech stock or something, that's just, you know, multiplication skills.

SPEAKER_20: So, you know, those are the ones that also bother me, because, you know, what I tell my students is, I've done quite well in the markets, not only because when I started in the early 80s, the market hadn't gone up in 13 years, so any idiot who started then, you know, that was a good time to get started, but also, we've done pretty well, and, you know, I made, you know, my partner and I always laugh, we've made so many mistakes, and if we worked for somebody

SPEAKER_57: else, how many times we would have been fired, you know, for doing stupid things, and still, we did well, and so I find that should be encouraging to my students anyway, and so I always tell

SPEAKER_20: that story. Yeah, I mean, I don't concentrate on the ones I miss, woulda, coulda, shoulda, it only really matters, especially when you're looking at the stock market, what you actually did, and

SPEAKER_57: if you, if, so there's always plenty of errors of omission, and if you can minimize the errors

SPEAKER_20: of commission, as Buffett would say, that's really what to concentrate on, so, Buffett's famous line is, there's no cold strikes on Wall Street, you can let 20 go by, maybe you should have bought six of them, but if the one you bought works out, that works out well

SPEAKER_85: too, so, that's the way I look at it.

SPEAKER_05: Yeah, in a poker game, if you fold a bunch of hands and you hit the flop, it's okay, don't worry about it, like all these people who turn over their, how do you play cards, Joe?

SPEAKER_93: Well, I get the sense you play poker, I play poker, I'm just for fun, I'm not, I know who's good, so I don't like to lose my money doing that.

SPEAKER_05: But you ever have that 10 jack suited, and you're just like, I could, this is on the bubble, I could play it, and then you watch the flop, and it comes down, jack, jack, 10, and you're like, oh my god, I'm an idiot, and it's like, hmm, you wouldn't be an idiot if it came down, you know, like ace, king, and brick, you know, like, you got, you dodged a bullet, you can't look backwards like that, when we get back on this, from this quick break, I want to talk to you about education. You start the book out talking about education, and you are on fire in this opening chapter, you are tilted, to use a poker analogy, about the state of education, which I see as a trend,

SPEAKER_15: Mike Bloomberg, anybody who's done well in the markets, or in business, or in capitalism, when they see the state of education, they lose their minds, and they're appalled, but

SPEAKER_44: you have great ideas as well about education, and I want to talk in the next segment about

SPEAKER_03: some amazing ideas and fights you've had about charter schools, and then I want to ask you about income sharing agreements, something I've been looking deeply at and made a couple of investments on when we get back on This Week in Startups.

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SPEAKER_03: Embroker.com slash twist, get that 10% off using the offer code twist. All right, I want you to stop what you're doing right now. I want you to go to Amazon, Audible, or your local bookseller, whatever you prefer.

SPEAKER_103: Get the audio book, get the book.

SPEAKER_03: It's called Common Sense, The Investor's Guide to Equality, not Equity, Equality, Opportunity, and Growth. And it's a bit about markets, but it's also about how to solve society's biggest problems. If I were looking at this book, Joel, and I didn't know you, say you're thinking about running for office at some point. You ever think about that?

SPEAKER_106: No, actually.

SPEAKER_20: I thought about writing a book, which I did. You know, there's, I guess, between looking for power or influence, I'd rather have influence and, you know, maybe have some people who are braver than I am to give them some ideas, or at least the way an investor would look at the world to try to fix some of the problems that, you know, everyone pretty much sees.

SPEAKER_03: So you start out with education in the book. I thought this was actually, along with your minimum wage thoughts in the book, two things that I have been obsessed about, the minimum wage and education, because they are both so broken, and it's so easy to fix. And everybody believes that these are intractable problems that cannot be fixed, which is bizarre because you and I come from a world in which we deal with people who obsess over solutions.

SPEAKER_44: And in those two spaces, people seem to have lost their creativity or belief in testing things.

SPEAKER_03: When you look at education, and you look at charter schools, and I know you've been involved in charter schools, and you're in New York, my hometown, and Mike Bloomberg fought this fight. Tell us what your experience was in trying to just make it a little bit more equal and fair, because the people who are at the other end of this bad trade, of this corrupt crony system, are the most vulnerable in our society, the poor, the disenfranchised.

SPEAKER_112: What did you learn about education when you started rolling up your sleeves?

SPEAKER_18: Sure. Well, you know, first you have to look at the problem, what's going on, or at least acknowledge there is a problem.

SPEAKER_20: So if you took a look at our top 50 urban centers, and you looked at the kids who are low income or minority, there are odds of graduating college, which supposedly is the goal of our system, whether it's right or wrong is another question, but it's the goal of our system. The chance that if you're a poor or a minority, low income or a minority in one of our major cities, your chance of graduating college is one out of 11. All right, so a failure rate of 10 out of 11. We know that college graduates earn 70% more than non-college graduates. So we know people care about that. And the thing, I guess, that's most disappointing that people don't realize is that it's those 10 out of 11 that are failing, it's not because of lack of ability. I'm involved with a charter school network called the Success Network. It's run by a woman named Eva Moskowitz, and she's, you know, one of the great geniuses of our time. But those 20,000 kids are 87% minority, close to 80% free and reduced lunch. Those kids as a group would be the number one school district in New York State. They'd beat the kids from Scarsdale, the kids from Great Neck. They'd be number one, over 90% read and do math at grade level, which is well more than double the regular schools. If you just took the group of kids who are currently homeless that are at Success, they beat all the kids from Scarsdale and Great Neck and all the top school districts in the state as well. So I, and then I also talked about a district school that's run incredibly well.

SPEAKER_57: It's run by, he just retired, but this principal, his name is Jack Spatola. It's in one of the poorest districts in Brooklyn. And in his school, 99% of the kids passed the math test.

SPEAKER_114: 94% of the kids passed the English test.

SPEAKER_57: But I just gave you the stats for the kids who have disabilities. Okay. So 99% of the kids with disabilities at his school passed the math test. 94% passed the English test.

SPEAKER_114: Over 90% of the kids who are English language learners passed the English test. The equivalent statistic in their other district schools is 9%. Hold on. So my...

SPEAKER_09: Yeah, there's some insight there. These, you're saying these are people with disabilities. Are we talking about physical disabilities, mental disabilities, learning disabilities?

SPEAKER_55: They're, they're, they're all different kinds, but they're usually learning disabilities. So wait, wait, you're saying the learning disability school.

SPEAKER_120: The kids in his school that have learning disabilities.

SPEAKER_121: Outperform the other kids in the district who do not have learning disabilities. By more than two to one.

SPEAKER_11: Yeah. That makes no sense. Wait a second. You're saying the people who literally are coming to the table with a handicap that literally

SPEAKER_05: have a diagnosable learning disability beat their peers without that.

SPEAKER_11: What do you take from that?

SPEAKER_126: What should one take from that?

SPEAKER_57: I said, this is, uh, the, the, I found it because, uh, success had, uh, when you look at fourth grade test scores, success had 18 of the top 25 elementary schools. They have 47 schools at success. They had 18 of the top 25. Uh, six of the others, uh, were gifted and talented schools. It means you had to test into them. So there was one school left. It was a district school, a regular district school in a poor district. I said, who the heck are those guys?

SPEAKER_20: And of course, uh, it was the school I just described, uh, run by a gentleman, Jack Spatolo had been the principal for 34 years.

SPEAKER_57: And, you know, my conclusion is he's probably the best principal in the state. And that's, and you can't reproduce that. Uh, you know, these are Steve jobs. Yeah, the average principal will be average. I mean, you can't escape that, but what it shows me is with the right supports, whether you got to go to that, you know, charter network that I talked about and all the great scores there, or, uh, if you had it, you got a chance to go to a great school. Uh, what that said to me is these kids can do it with the right supports and that's huge. So if 10 over 11 are failing, it's not cause they can't do it. Um, and, and I took that and ran with it and said, with the right supports and the way our school districts are set up is, uh, by definition, if you are low income, you go to the worst schools because anyone who has means who can move out of the best school district do. I mean, uh, people with means are just the lowest income, who are not one of the lowest income, they have school choice. They can send their kids to private school. They can move to a better, uh, a district with a better school.

SPEAKER_28: They can afford the more expensive home. And literally our home prices are correlated with the school outcomes. So I happen to live in the Bay area in a district that has the best middle school in all of California. The home prices are 15 or 20% more because of that fact, because we are one, two, or three

SPEAKER_03: in the rankings for elementary school and middle school.

SPEAKER_55: Right. So what automatically happens is it gets sorted that way. If you, if there's a bad school in your district and, uh, people move out, who can afford to

SPEAKER_57: move out and who's left is the lowest income kids go to the worst schools. Uh, there's a big fight, as you mentioned, against opening charters, charters, uh, you can get in through a lottery, open lottery. And so that's one way out, but, uh, there's big fights, uh, the best, the best charters are in New York, Massachusetts, California, big fights, not to have any more charters in

SPEAKER_120: all those areas. Why?

SPEAKER_15: Why are people fighting success? This makes no sense. If anything, we should be studying success like you and I do for a living and placing more bets on the strategies that have previously won.

SPEAKER_114: That certainly makes sense to me.

SPEAKER_57: There, uh, why don't we say without getting into some big battle that there are a lot of entrenched interests in the system.

SPEAKER_20: Uh, it's a Soviet style system where there are no penalties for doing a bad job. And, and, and, uh, so people who were in that system like to keep their, uh, benefits. I don't, I don't want to get into too big a fight because I'm really about solving.

SPEAKER_44: For me here, I mean, if you look at it, I mean, I'll say right outright, you're talking about teacher unions. You're talking about entranced unions that are supposed to protect, um, the workers'

SPEAKER_45: interest, but they have gone so far off script that they are now crippling and giving the people who are at most vulnerable in our society, they're giving them the worst quality product.

SPEAKER_15: And you use the term Soviet style. And I literally put in my show notes after reading your book, it's almost as if we're running our school system, like it would be run in communist Russia. We're literally rewarding people for doing nothing, for not having outcomes. We've, we've disconnected the outcome from the compensation and from the strategy.

SPEAKER_09: I mean, it would be like having a basketball game and saying, it doesn't matter who scores the points.

SPEAKER_44: It doesn't matter who puts the ball in the basket or, or, or running a vaccine program saying, it doesn't matter if it has efficacy. It just matters that you showed up and worked on the vaccine.

SPEAKER_57: Right. So, but the, the big problem and why I didn't spend a lot of time fighting unions or the status quo or anything is that, you know, K through university is a trillion dollar a year business. You know, charity is not going to make much of a dent in that, uh, a trillion dollars is a lot of entrenched interests. Uh, you know, just in New York city alone, they spend $32 billion a year on the district schools. Uh, so, uh, a small band of charters, not going to win that battle. There's a lot of money and entrenched interests. And so in the book, I said, you know, something I used to tell my students at Columbia, I, you know, I would ask them, well, how do you beat Tiger Woods? And the answer is don't play him in golf. So in other words, I don't want to be a head on collision, you know, uh, with the entrenched interests here.

SPEAKER_20: What I want to do is look for solutions. I'm not saying we shouldn't try to fix the district schools or do as much as we can to fix our current system. But if we want change, certainly in my lifetime, you know, I, in the book, I took some time to point out what's going on as you were suggesting, but I'm really more interested in how do we solve these things quickly. And I think, uh, the way the world works now, I think we have a great chance to do an end run. In other words, don't play Tiger Woods in golf, do an end run around this current system rather than bang my head against the wall, trying to get crushed by a trillion dollars, uh, set up against, you know, me, you know, face the current system. So I made some suggestions in the book, uh, about how we could do that. And I actually said that, uh, companies like Google, Microsoft, Amazon, JP Morgan, these

SPEAKER_57: are the solutions. I'm not saying it's their responsibility, but I, uh, having a diverse workforce and I go through the stats of that is actually very valuable for these businesses.

SPEAKER_137: They're also under a lot of fire, you know, because they're, you know, they're semi-monopolitan, they're too powerful. They're super successful, yeah.

SPEAKER_03: When we get back from this final break, I want to talk about the solution that you came

SPEAKER_41: up with, which is absolutely stunningly brilliant.

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SPEAKER_05: And I just made an investment there for the first time. Ourcrowd.com slash twist. Joel Greenblatt is with us. The book, Common Sense, the Investor's Guide to Equality, Opportunity and Growth. You talked a little bit about a solution. Charter schools obviously are a solution. They've been ankled and people have fought them and created so much red tape for them. I mean, the de Blasio stories you go into, I mean, this guy is a complete disaster. I mean, I'm not going to make you say it, but just as a former New Yorker living in California and I'm watching this crazy behavior. I mean, they really tried to scuttle every single charter school. They said if they broke 250 students, then they had to unionize, but they kind of made double rules for them where they couldn't get around that and they wouldn't give them space,

SPEAKER_28: even though there was unlimited space available. And then forcing them to add administrators and all this cruft. I mean, not only were they, de Blasio and this cohort, content to create a terrible product, they were actively trying to destroy the innovative product. I mean, it's just dark. I'm going to leave it at that, that you read these stories in the book. And again, we're going to keep our eyes on where the puck's going and a solution and not playing Tiger Woods at golf.

SPEAKER_05: We're going to try to get them to the chessboard and the chessboard for you, as you pointed out before the break, Google, Facebook, et cetera, et al, they all are under a bunch of scrutiny

SPEAKER_112: because they've been so successful. I want to get into that. And if we should break those companies up or not in your mind, I have strong feelings on

SPEAKER_05: it, but you said, Hey, they need specific types of people and they don't care about college credentials anymore. They used to be obsessed with it. They now care about skills. And that seems to have burned a little connection in your mind. Explain it.

SPEAKER_20: Sure. So in the book, I suggested that these companies like Microsoft, Google, Amazon, you know, pursue something called alternative certification. Uh, and what that is, is I'm not, uh, that if let's just, for example, you want to get

SPEAKER_65: a job, uh, Microsoft's looking for employees in their HR department.

SPEAKER_135: And what I suggest Microsoft do is say, which tests, which courses, which certificates can

SPEAKER_57: you get in lieu of a college education, which can you pass or do well on which tests, which certificates, which courses can you take in lieu of a college degree that we will consider for a high paying job in our HR department. I'm not suggesting that, uh, Microsoft make tests. I'm not suggesting they administer tests. I am just suggesting they set standards. And if they set standards of what are these tests, what are these courses? Uh, you know, McKinsey has, uh, they could be literacy tests or, uh, certificate programs or, uh, you know, Imbalist together with McKinsey has set up game-based tests, which supposedly tell you how good you are at decision-making and critical thinking skills. Doesn't matter what these tests are, just has to correlate with what they think will make a good employee, but not a college degree. Uh, once they set these standards, it'll set up a whole ecosystem of, uh, supportive services, online resources, tutoring services to help people pass these. And we already proved with charters and the best district schools that with the right support, these kids can do it. So it's not a question of ability, the 10 over 11, 10 out of 11 who are not getting college degrees. So what can we do for them? We say, look, these are the courses, tests, or certificates that you need, and we will

SPEAKER_114: consider you for a high paying job at HR instead in lieu. And they don't have to make the test. They don't have to administer. They just have to say, what are they are. And then, uh, uh, capitalism will take over.

SPEAKER_57: There'll be an ecosystem developed of, uh, supportive resources. I said, tutoring and online resources.

SPEAKER_20: They'll be rated like Uber drivers and Airbnb rentals. You know, so people will know which ones to do. You don't need any government involvement at all.

SPEAKER_57: And, uh, the costs will be much lower. Uh, and we can short circuit. We can run around, you know, we don't play Tiger Woods and golf. We don't worry about the college degree. These 10 out of 11 got screwed in the current system. How can we do an end run? Uh, and I talked about how in Africa with no resources, uh, about a cell phone company that

SPEAKER_135: set up, you know, these are, uh, uh, a cell phone company turned into a $3 billion business that got sold a few years later in, and they sold cell phones in countries that don't have roads, that don't have electricity. So who's buying a cell phone?

SPEAKER_57: Well, uh, they figured out how the locals can afford 25 cents rather than walking three days to the next village to sell their crop. It was worth 25 cents to pay for a phone call to see what the prices were. Uh, so they could start with a little bit of money to, uh, build cell towers. They had to do rudimentary roads to get to the cell towers and bring electricity and jumpstarted the whole thing. And so once there's a buyer, so that we, they found the buyer, the 25 cents, it was

SPEAKER_114: worth people. They scrounged up 25 cents to talk on the phone. Uh, and now there's a buyer, these big companies, Amazon, Google, Microsoft are now saying, we're

SPEAKER_57: the buyer past these exams, past this certificate program. We'll we're buyers. Now the supportive system sets up and it's happened at so many, you know, I quote Clay Christensen many, many times of how this happens, uh, about how disruption happens. And this is exactly how it happens. You know, the, uh, Apple computer, when it came out, as you know, probably a lot of your listeners know, uh, cost about $2,000. Uh, it couldn't compete with a $200,000 mini computer, uh, that needed 10 engineers to run. But eventually it kept getting a little better. It ran on a little different track and it was eventually able to compete. And so I would say that this alternative certification over time may not be able to compete with college degree right away, but I think very shortly, uh, it will be. And all we need is the jumpstart from these big companies. And I think a lot of other companies will take the standards set by Google, Microsoft, JP Morgan, and use those standards for themselves. Hey, this makes a good employee if they pass these exams. And I think we can sort of do an end run around the current system.

SPEAKER_160: Absolutely. If you just think about what's happened in the developer space, those companies had such

SPEAKER_28: an acute need for developers. And there was such a shortage of developers that they did this type of thing in the, in the developer space where we have had code schools, uh, you're in New York, so, you know, a bunch of them, um, just absolutely flourish.

SPEAKER_05: And they did it with, uh, charging 10,000 or $20,000 a year, but there's free code camp and there's Lambda school, which we've made a little investment in, um, and other services online where you can learn this either for pay or with this new device, a financial device called an ISA, which has existed by a Milton Friedman came out with them and they, and they did some yell experiments on them that failed because they pulled the ISAs as opposed to making them individual. And they didn't connect them to a specific job like you're proposing, but with these ISAs working in developers, we just invested in a company that's doing it for people in marketing and growth. And I think it's going to go right down the line where you start essentially a trade school and online school. It's a 10 K or 20 K ISA income sharing agreement, which means you only get paid that money as a school. If the person gets a job over $50,000 a year and they can pay it back over whatever it is, five or 10 years. And then they're released from the ISA.

SPEAKER_28: Do you, as somebody who works in finance, what do you think of this financial device of the school only gets paid if you get a job that pays over X amount?

SPEAKER_156: You know, uh, I love that model.

SPEAKER_57: I don't know how big it, uh, can get, uh, very quickly.

SPEAKER_20: I think that, uh, another way, uh, that we can get to alternative, like Google, for instance, has created six month certificates already, but they created those certificates in, in about three technical areas. So that's really a nice start.

SPEAKER_57: Uh, but those are technical areas. There's only three Google had to, uh, write those, uh, programs. Uh, and I'm suggesting something much easier. Uh, ISO would be one method to get there, but I think if we just set standards, uh, it's, it's much easier for them. Obviously they'll have to do some research. They're very good at data. I heard at these companies to look at what correlates with, uh, you know, good job performance here. And I think all they have to do is set the standards and, and there'll be many, many different ways that people can learn. It doesn't have to be taking a formal course. It could be online. You know, that's where charity can make a difference here. Uh, that's where community, uh, can get together to help people take different courses. It doesn't have to just be in technical areas. It can be in all kinds of areas. I described that in the book. Like I said, the HR department or the marketing department doesn't have to be, uh, you know, a computer programming, which I think is the first place that everyone's gone because it is a very clear avenue. And I think that's great, but I'm not asking anyone to make courses or give tests. I'm just asking them to set standards. And then the ecosystem sets up in so many different ways. And one of the great ways that could be is in these, uh, courses that get paid from people actually getting the jobs, uh, later on.

SPEAKER_155: So I love, I love that system, but I think it's going to be much broader than that. That'll just be one of the avenues people can pursue.

SPEAKER_171: Yeah. I'm looking at two other ISA investments. I don't know if you invest in the private markets, uh, but I'll loop you into them if

SPEAKER_41: I, if I get a deal structured. Um, but there are people who are now doing platforms for ISIS and this one company I was talking to, they provide, you know, like Amazon web services, almost like a cloud to anybody

SPEAKER_28: who wants to start a school. And then they don't have to worry about all the infrastructure for setting up ISIS. They'll manage all that for them and outsource it. And they actually have done it with trade schools like plumbers and electricians. So you can take this plumbing or electric or those schools already existed, but they were having a hard time getting people to sign up for $20,000 or $10,000 to take it. And then when they did ISIS, all of a sudden, everybody's like, oh, I don't have to put up the 10 K and take the risk. Great. I'll do it. We actually have a shortage of plumbers and electricians that's happening. The average age of those professions now is over 50 and nobody wants to take those jobs. They don't even know how to get started in them. And there are other places in the world where those professions are looked at as really great

SPEAKER_41: ones. Uh, let's, let's shift and move over, uh, in terms of, uh, hmm, I got two places I could

SPEAKER_173: go. So I think I'm going to go with the EITC, the earned income tax credit.

SPEAKER_03: I have been looking at the minimum wage. The minimum wage is $7.25 for those of people who don't know it.

SPEAKER_28: That's the federal minimum wage. In cities like Seattle, San Francisco, and New York, they have been, uh, in Florida, uh, recently with their ballot measure, uh, all committed to a $15 minimum wage. I think the first to get there was Seattle, San Francisco is almost there. New York's almost there. And at the same time as this has occurred, Amazon, uh, which is hated by a lot of the

SPEAKER_03: AOC crowd and the Elizabeth Warrens of the world, very personal, bitter attacks from the socialist party or the growing socialist party in America or compassionate capital, whatever

SPEAKER_28: they want to call themselves or socialists in my mind, they have been riding them hard. Amazon just got ahead of it. They said, we're going to charge $15 an hour. The gig economy was giving people options.

SPEAKER_44: And pre pandemic, we had the lowest unemployment in the history of the country. It was extraordinary, high functioning capitalism with a massive competition for the lowest paid employees. Whoever thought we would see that everybody thought it was going to be the opposite.

SPEAKER_05: What happened in the marketplace where companies got into this rabid competition for low end

SPEAKER_28: employees, entry level, whatever you want to call them, um, that drove companies.

SPEAKER_05: I think Walmart also went to 11 or $12 as their minimum wage because they're getting crushed because they can't find employees and even McDonald's, which I don't know how you feel about that company. I have ties with them. They were actively fighting minimum wage increases for the last two decades and they just agreed to stop fighting the minimum wage. So they haven't decided to advance it, but let's, let's open up minimum wage and start with pre pandemic. How did we get to the place where capitalism worked and you had a rabid, um, absolute dog fight to get gig workers and entry level employees? What went so right?

SPEAKER_44: Sure. Well, or, or is it right?

SPEAKER_55: Did it go right? Sure.

SPEAKER_20: Well, the, the, the general economist problem with minimum wage is that if you're, if you're contributing $8 worth of value and you force people to pay you $15, uh, a few things happen. One, you know, those places go out of business or they're not competitive or two, they use technology to, uh, substitute as much as possible because, uh, you know, that's not a, that's not a good economic bargain. If, if someone has $8 of skills that they can contribute and you're forced to pay them $15 and so what I talk about in the book is, uh, earned income tax credit, nothing I invented. It's actually our third biggest social welfare, uh, program in the country where basically, uh, for mostly people with families, we give them extra money. If you're willing to get a job and you, and, and willing to work, we'll pay you more. Okay. And it would be nice if we could pay everyone 15 to $20, you know, with the earned income tax credit, we, uh, in 2018, which is the data I use in the book, we spent $68 billion, third biggest, uh, social welfare program in the, in the country, uh, you know, uh, but,

SPEAKER_57: and, and it's a great program. I mean, we take 6 million kids out of childhood poverty with that 68 billion.

SPEAKER_20: Uh, but there are studies that, uh, university of Chicago that show that, uh, actually the net cost is closer to 9 billion. We spent 68 billion, but I, I took the view of an investor in, you know, all of the chapters in the book. And on this one, it turns out because of the extra employment taxes, the sales taxes, we collect the lower social welfare costs for getting people that working that wouldn't have worked because we're paying them more with the earned income tax credit. Meaning it's kind of reverse income tax. If you're willing to work, we'll give you a little more money. Uh, uh, and we, we give that 68 billion because of the lower social welfare costs and the low and the more taxes we collect, the net cost actually works out to $9 billion.

SPEAKER_57: And so, you know, I suggested that if we wanted everyone to, who is willing to work, that's why I'm not for universal basic income, but if you're willing to work, I think everyone should get paid well. It's just, you can't force businesses to pay people more, at least from an economic standpoint, it's not going to work out well. If someone's contributing $8 and you're forcing them and you're forcing a business to pay them 15. So what I'm suggesting is you're willing to work, uh, if we could pay everyone 15 to

SPEAKER_20: $20 an hour, uh, minimum, uh, supplement their incomes from the private sector with the government extra funding to 15 to $20. Now that would cost a trillion dollars. We're spending 68 billion that would cost us a trillion dollars. But if you go through the same logic, the net cost after the extra taxes we collect in the lower social welfare, other social welfare programs that, uh, people are now working at would net costs would be about 600 billion.

SPEAKER_57: But here's the thing we now have, uh, there was a study at the, uh, Washington university that looked

SPEAKER_20: at the cost of childhood poverty, uh, and, and that's, uh, child, poor childhood, health care,

SPEAKER_65: poor education, crime, incarceration, uh, homelessness, social service costs. That's actually costing us right now a trillion dollars a year.

SPEAKER_28: So we're basically making bad bets on, um, backstopping the impact of this low, uh, these low wages when we could just solve it at the front end. And, and you don't bring up race in the book, but we do have a race issue in this country. We've seen it explode during the pandemic. Um, and it is, it is an open wound in this country. I think we'd all agree that we want to heal. Uh, and a lot of this is economic inequality. I think everybody would agree, of course, as policing and other things that are unfair.

SPEAKER_15: Uh, but if you solve the economic problem, I think you would have less people feeling

SPEAKER_05: like the system is so rigged against them. And instead of incarcerating people and having a horrible education system that ankles them from ever succeeding, or it makes it unlikely 10 out of 11 don't succeed. You could just put, redeploy that money and just take the wager that if we, if we give them the earned income tax credit, which right now, just so people get an idea of just how de minimis this is, we're talking about for a single cup, a single or couple, $538 a year, one child, $3,500 a year, two children, $6,000 a year, and three children plus $6,600 a year. It's not like people are taking this money and, uh, putting it in a savings account. They're spending it to live. So all this does is increase monetary velocity, right? It's in everybody's interest to put this money into people's pockets. And during the pandemic, we had a dry run of UBI. We just airdropped $1,200 into everybody's account.

SPEAKER_28: And did you, didn't you find it interesting? I don't know. I found it fascinating.

SPEAKER_03: Everybody debated UBI, uh, you know, people's motivation. Oh, is it sustainable? Let's look at Alaska. Let's look at other places, UBI, Saudi Arabia, other places that exist. It causes all these problems and people stay home, they get into substance abuse, domestic violence, all this kind of stuff.

SPEAKER_28: They don't have motivation to live, yada, yada. And then we just airdropped $1,200 into everybody's account.

SPEAKER_44: And not one person complained about it, including conservatives, Republican, physical, fiscally conservative people. We did it and it worked. It did. What did you take from that UBI experiment?

SPEAKER_28: If you could call it that, or an earned income tax credit in the case of the PPE, was it PPE loans? Yeah, PPE loans. That was in a way like an EITC, right?

SPEAKER_20: Well, I think a lot of those people really had a, you know, when you hide in your house and don't go to work, some of the lower income people don't get paid or lose their job. And so that's a lot different. Universal basic income would be you get a certain amount every month, no matter what, whether you work or you don't work or whatever. And we can argue about that. I'm just saying, if you're willing to work, we could get everyone paying, we could get everyone earning $15 to $20 an hour with this supplement. And I go through the math in the book that we'd actually make money. We'd get rid of about half a childhood poverty. We'd get $400 billion more in taxes. We'd have $200 billion less than adult medical costs. And so it actually, we would make money. So as an investor, we can take that money and make everyone earn $15 to $20 without making the private sector do it.

SPEAKER_57: As far as the UBI is concerned, I like to encourage work. We can get into the discussion. I'm not against it. But I don't think this was a very good, COVID was not a good experiment for, it was really

SPEAKER_195: making up a giant hole that people lost in income.

SPEAKER_28: So we don't actually get the proper results from it to actually know if it works. The UBI, the reason to be against UBI, I think we're both simpatico on this is, I mean, I've had weeks of vacation or been in between companies and for two or three weeks, I lose my mind if I'm not productive. Human beings, we build, I mean, the definition of humans as a species, we build tools and we're productive and we build a society. That is what differentiates us from other mammals and, you know, beings on the planet. If you take away purpose and something to wake up to do and find meaning, I think people lose their minds and it's chaos because we can see that right now. Talk about an experiment. People being at home, the amount of depression and mental illness that we're seeing from people

SPEAKER_05: just having to stay home and some people are lucky enough to work, some people aren't. I mean, UBI would be a disaster for human motivation. What will happen to these people's minds if they sat for 12 hours a day and just left to their own devices? I think the experiments we've had, it's resulted in, in some places, radicalization because you have nothing to do all day. People have been radicalized in the Middle East who have had UBI and then in Alaska and other places, UBI, it's led to people having nothing to do in substance abuse.

SPEAKER_200: That is, that is the truth of this, isn't it?

SPEAKER_201: You know, I, I, that's my concern with it. I, I, you know, I'm all for experimenting because, uh, you know, I, I would love to see

SPEAKER_20: the results of that. I would just say that when you have a job, as you say, there's purpose, you learn skills, you can develop, you can move up. Uh, and I, and I would rather, you know, unless there's obviously if you have some kind of disability that prevents you from working, I completely understand and we should be helpful, but if you are able-bodied and can work, uh, and you can find any job and you could make at least 15 to $20 an hour, I'd rather encourage that because keeping people in the workforce, uh, with a purpose, uh, uh, contributing, uh, learning, uh, I, I think that would be a great, great thing for our nation. I think we can afford to do it, not only afford to do it, but actually I show in the book from an investment standpoint, make money doing it. So that would, that's pretty cool.

SPEAKER_28: That's what's so convincing about your book, Joel. This is why this book is great is because you actually not only like, it doesn't, you seem a political to me in this regard. You just want to see the problem solved by the most efficient model possible, which comes from years and years of placing bets and managing money. And you just, you get to hang out with really smart people, right? In the job line that you and I both have, you get to hang out with people who've solved problems all day and if something's going to rub off because you're making bets on them, Elizabeth Warren, uh, seemed to resonate with the large number of people.

SPEAKER_107: She actually believes in vouchers and charter schools, which is very interesting, right? Or she didn't?

SPEAKER_55: Uh, well, that's very interesting.

SPEAKER_57: So I point out that in 2004, I believe it is, she wrote a book, uh, that was in favor

SPEAKER_20: of school choice. Uh, when she ran for president, she totally, uh, uh, changed her tune and, uh, is only for, uh, is not for school choice, is for just, uh, because she believes it, it takes money out of the district schools. So I do talk about that, that she's had a total 180 degree turn.

SPEAKER_195: Uh, but she certainly understands the problem. I mean, the way our schools are.

SPEAKER_13: Come on. She sold out. She, in order to be a Democrat and get the, and to get for a Democrat to actually get the

SPEAKER_05: nod, you can't be a business person. You have to be woke and you have to be, you have to toe the party line, which is every time you give people choice, it results in the, this existing corrupt school system to get worse that now that might be true, but it's already terrible. So what do we have to lose here?

SPEAKER_127: Like people are protecting a system that is failing. It's infuriating.

SPEAKER_20: Um, well, you know, I think most teachers, uh, are educated, uh, they might be able to get, uh, many of them could get better jobs in better places. So they're very dedicated. But if you put them in a, uh, a failing system, one, uh, you know, if you're teaching seventh grade and your kids are reading third grade level, uh, you know, who's to blame for that? It's a very hard job, but teaching you should, you know, I just been more involved in schools and teaching is a really hard job. And I tip my hat to the teachers, but they are stuck in a system. That is a Soviet style system that doesn't have the usual, uh, consequences to poor performance.

SPEAKER_57: And so, uh, you know, I was thinking of it more the other day. I was trying to think of an analogy and let's say that you moved into, uh, you had to eat at the same restaurant every day. And, uh, let's say there are some restaurants that, uh, have bad service, uh, bad food and bad atmosphere. And you have to go to the restaurant that's in your neighborhood and that's where you have to eat every meal. So who's going to end up in that neighborhood with the bad food, bad service and, uh, people with no choice. The people with no choice, the, and that's what happens with schools. It's very, very, uh, unfair. Uh, so all I would say is I'm for school choice to fix that system. But I do think the great thing, the optimistic thing is these kids can do it. The, the best charters, the best district shows the kids can do it. And I think we have now with the internet and, and the ability of these large companies to put together standards and, and all the opportunities for tutoring services and the, and the way education is being developed all over the place. Um, I'm really optimistic actually about, uh, the opportunity set, uh, and it won't be through the traditional system.

SPEAKER_55: Um, hopefully that a pressure that'll put the Soviet system under stress, meaning if we

SPEAKER_135: can run around the system, if there's, if, if they can produce results, uh, outside the

SPEAKER_214: current system, I think it'll help make the current system better. And that that's maybe the push that we need.

SPEAKER_03: She, she was also for this wealth tax insanity, at least in my mind, I'm using the word insanity. We saw wealth tax in France and how that went to all the top earners left. We're seeing California and New York raise taxes and, uh, the, and New Jersey. And the more they squeeze, the more people go to Miami and Austin and low tax states. What do you think about these wealth tax proposals where you have to then go take every

SPEAKER_28: asset you own, get a valuation of the piece of art on your wall, the car in your driveway, the, everything you own. And then even if you want a private company, you have to then get the company valued and

SPEAKER_05: then pay 1% of its value, even though it's illiquid, even though the painting on your wall that may have appreciated is illiquid is the wealth tax. And I mean, do you agree with me? The wealth tax is like an insane idea and there's the, the would create chaos and move people out of, cause people can move. People forget that, but we're seeing it right now. My contemporaries in the Silicon Valley, your contemporaries in New Jersey and, and New York city are fleeing to save 12, 13% tax of 1% wealth tax compounded is, is, is a, is a similar

SPEAKER_45: tax over a decade. Do you believe in it or not? Yeah.

SPEAKER_218: If I had one word, I'd say, no, it's ridiculous. It's never worked anywhere.

SPEAKER_57: Uh, it would destroy the public markets because who would ever go public again? If you had a daily quote that moved up and down, let's just say they were wrong. And, uh, you know, it's very interesting, you know, as at least in the private markets

SPEAKER_20: and the same things happened in the public markets, you know, if you owned, we work one week and it was worth $47 billion and a week later it's on the brink of bankruptcy. And then you try to apply a wealth tax to one of those valuations on the wrong date. Uh, I would just say it would be interesting, but it's also unworkable. So I think it's really just sort of a political discussion that people have when they're running for office. But in practical sense, it would, I would hope that it'll never happen wherever it's been tried. It's been a complete failure. Um, don't think we'll have to discuss it very much. I mean, other than in a theoretical sense. And then when people go through all the practical problems with it that you were discussing and all the disaster will cause people spending time doing things that are completely unproductive. Uh, you know, that's fine. Look, I, and for people paying their taxes and I think we should have a fair taxes, but, you know, some of the things that have been discussed that get your tax rates, you know, in some of these cities up in the, uh, high fifties or low sixties, uh, seem not sustainable for

SPEAKER_221: those states anyway. And I think that's crazy.

SPEAKER_222: I mean, California is, they, they are, have, we have out of control spending, San Francisco

SPEAKER_03: out of control spending, and then they want to layer on top of this higher taxes in a dysfunctional society. It doesn't make no sense.

SPEAKER_135: Well, we have a, let me just answer real fast. One of the great things we have is 50 states.

SPEAKER_57: And so there'll be some canaries in the coal mines that, you know, explain, you know, Illinois might be first. I don't know, but that'll fall under the weight of ridiculous taxes and regulations and, uh, overspending. And so hopefully people will learn from the canaries in the coal mine. It won't happen to all 50 states. That's all.

SPEAKER_28: We, I mean, when I was, when I first made a little bit of money, I, uh, got obsessed with trying to protect my downside because I grew up poor and I was so scared. I was trying to figure out where to put this money that I wouldn't lose it. And I found out about these municipal bonds that were revenue backed.

SPEAKER_05: And I was like, wait a second. You're saying that everybody who goes over the Verrazano Narrows Bridge, that money first

SPEAKER_28: goes to the bondholders. Oh my God, I need that bond. And when I talked to them, like, you're kind of crazy, Jason, these other bonds that are not revenue backed. We've never had, we've never really had a major jurisdiction go bankrupt. It's happened like, you know, in small towns in Texas, somebody has a $25 million lawsuit and the towns only got $5 million in revenue. They, they went bankrupt, but we never see these bonds go bankrupt. We could see a San Francisco and New York and Illinois, like you're saying reached, reach a breaking point. Is that even possible that a major city could go bankrupt?

SPEAKER_20: Uh, you know, I think we'll see at some point that happen. And like I said, there's a lot of cities and, and some are more responsible than others.

SPEAKER_57: And so hopefully the canaries in the coal mine will be lessons for the rest that, uh, it has to stop.

SPEAKER_55: You know, the, the only guys who can print money are, is the federal government and the state governments can't print.

SPEAKER_155: So I think, you know, the facts will come home to roost at some point for some of the more irresponsible states and cities.

SPEAKER_233: All right. We're rounding third base here.

SPEAKER_03: Joel, you've been very generous with your time. Mr. Greenblatt, this book is incredible. It's concise.

SPEAKER_28: And you get into one of my favorite topics, another hot potato, uh, topic that people just feel very uncomfortable talking about for some insane reason, which is immigration and other high functioning societies. And also this dovetails with, uh, pensions and savings. One of my favorite places to go on the planet, Australia has figured out both of these things. And I was reading your book on, wow, he must know a lot about Australia. I bet because, uh, having spent some time there myself, I've been there three or four times. They have some of the highest function cities, the best places to live in the rankings of cities around the world. And they've gotten two things, right?

SPEAKER_41: One is they force people in something called super, uh, which stands for super, what is it called? Annuation.

SPEAKER_44: What is it? Super annotation, right? Annuation. Yeah. Annuation. Super annuation.

SPEAKER_05: They get right. I think. I'm going to see. I think you agree. And the other thing they get really well, although it's controversial is they like Canada and other

SPEAKER_28: people have a point based system for immigration.

SPEAKER_05: And they really have thought deeply about immigration and who to let into the country first. Obviously you have to have some compassion in there. And then you have Japan, which is just like, nobody can come here. Nobody can get citizenship. And, and nobody looks at Japan and says, oh my God, this is a terrible society. These are horrible people. But here in our United States, it's become so polarized and so tribalistic. You can't even have a reasonable discussion about pensions and savings or immigration.

SPEAKER_03: What can we learn from what Australia did right in these two instances? And what should we be doing here in America?

SPEAKER_18: Sure. So, uh, great question. So we can take on immigration first.

SPEAKER_20: And what I talk about in the book is skilled immigration, uh, because that's easy.

SPEAKER_57: Uh, according to the business round table, we come in second to last. Welcoming, welcoming, skilled immigrants. We only beat Japan and Japan.

SPEAKER_20: Uh, that's embarrassing because Japan actively discourages immigrants and you have to speak Japanese really to make it in Japan. We, you know, English is a universal language of business and science. And so we have a huge advantage there.

SPEAKER_57: So to come out of second to last only to Japan out of all the developed nations in welcoming skilled immigrants is crazy because they're a free gold mine. Uh, if you look at the data for every skilled immigrant we take in, uh, we make, uh, between a half a million to a million dollars. That means we collect more in taxes versus the service we give them, uh, in current dollars. We, you bring one in, we make half a million to a million dollars and we get almost two. They're profitable. It's a profitable deal. It's a, it's a money-making business. And, and we not only get, they don't take our jobs. They create two new jobs for everyone we take in. And then, and, and these are the stats. It's a free gold mine. So here's some amazing stats. Immigrants founded 51% of us startups over a billion dollars. Of course. Twice as late. Twice as late. Yes, exactly. Twice as likely to start a business as natives responsible for a quarter of productivity growth of the last 20 years. And immigrants or their children founded 216 of the 500 fortune 500 companies.

SPEAKER_226: Steve jobs was an immigrant's son.

SPEAKER_55: So those are all incredible stats. So it's a free gold mine. We're throwing it away. We came in second to last.

SPEAKER_57: We have this ridiculous H-1B program that fills up in the first five days. We go three times over our limit on taking people in H-1B. And there's a much simpler solution. And we actually have a leg up over Canada and Australia. We have a much better solution than, uh, that we're able to do than they have. They have a point system as you described. And, you know, just because you're good at, uh, you have a degree or you have some skill set doesn't mean you're ambitious. Doesn't mean, you know, there's a good fit for you with a job. You could have bought the degree.

SPEAKER_171: Let's be honest, right? You could have bought your degree in another country.

SPEAKER_55: And the government standards are set. That doesn't mean that they're good government standards for who we are going to let in or whatever. So our system in this one sense is better. Our H-1B system is an employer wants to hire you. So it's a one-to-one fit. We have someone who wants to hire you. So all I suggest is if you're willing to hire some, if, uh, if you can get a job, you're an immigrant, skilled immigrant, an employer wants to get you, give you a job for 60 or $70,000 a year, which means you have some skill and you're, and the employer is willing

SPEAKER_57: to pay a 20% tax on top of that. They can take as many skilled immigrants as they want. Obviously. Perfect solution. Obviously, if you can hire someone domestic and you don't have to pay the 20% tax, you'll still do it. You're not taking that job.

SPEAKER_28: It's right above the 15% benchmark of meaningful to somebody, right? You got to really think about 20%. 10% you wouldn't think about 20%. You got to think it through. And the H-1B visa, by the way, is completely fugazi. When I was in IT, they would say every meeting would occur. How much cheaper is that employee? Is it worth the $5,000? And then we will be able to give them low raises because if it's so cruel, the H-1B visa, if you lose your job, you have to leave the country within, I think, 30 or 60 days.

SPEAKER_05: So we've created this perverse, I don't want to say indentured servitude because these are high-paying jobs and it's maybe a little offensive to say it that way. But in a way, you create such a weird incentive where the employer has so much power over these IT people who typically were coming from India and then Americans were losing their jobs and every conversation I ever heard on the board of a company when they brought up H-1B was cost savings. They were doing it explicitly cost savings. So your solution takes that perverse incentive out of it and incentives, as you talk about in the book, matter.

SPEAKER_20: So, you know, people leave their countries for political freedom or safety, lack of opportunity,

SPEAKER_57: and we have those things in spades. So those countries who have those things have brain drains, what's called a brain drain. We should be a brain magnet. We have all those things in spades. The only thing I would say about immigration is, you know, obviously, what about people who want to seek refuge here or a better life? And what I suggested in the book is, if we take in two skilled immigrants, we can take in eight. It costs us money to take in an unskilled immigrant. Sure. And if you want to take that money, between the extra jobs we get, Bill Gates says, we get four, we create four new jobs for every skilled immigrant we take, okay, over at Microsoft. But if we take two skilled immigrants in and you want, and you think it's important, we should take, we can take, we can afford to take eight to 10 unskilled immigrants in, or if you take eight to 10 kids who are already here out of childhood poverty, we could spend the money on that. And I don't want to get in that argument. All I said in the book was, we should take the free money and then decide what to do with it. Yeah. So that's-

SPEAKER_28: Take the money and then split it up 50-50, flip a coin and figure out how you're going to disperse it. And then we have 10 million people here who are illegal already. This could be a path to allowing those hardworking people who are, again, incredibly vulnerable and it's unfair. We could work towards getting them to be, yeah.

SPEAKER_41: So let's close on the 401k.

SPEAKER_101: Yeah.

SPEAKER_28: And then I got to have you back on the pod in a year to just talk about everything again, because you are a super guest. I put you in the category of super guest. Like you're so insightful and concise with the answers.

SPEAKER_41: I love it. When we look at, pensions are gone. I mean, the only people have pensions is, you know, like firefighters and people who are at super high risk, running into burning buildings and stuff like that, that's kind of going away.

SPEAKER_09: But when I was in, I spent my time in Australia, they kept talking about the super funds, the

SPEAKER_28: super funds. And it was a little controversial. Some people were like, ugh. And there were maybe some issues where people were maybe skimming too much fees and people have multiple accounts. Like we had a problem here with some of the banks doing that kind of fugazi stuff on the side. But overall, people are very calm with their 15, it's actually a $20 minimum wage, basically in American dollars. People, they're unhappy.

SPEAKER_05: They got essentially a $20 minimum wage and they don't worry about their retirement. They feel good about it because they're participating in the markets because they have super. Explain why this is working so well and how this is a potential solution for us as we

SPEAKER_112: wrap.

SPEAKER_55: Okay. Well, there's things we can learn from Australia. They mostly have private savings and they take advantage over there.

SPEAKER_57: The most important thing to have good retirement savings is to be able to use compound, the power of compound interest or compound investing to get money. If that doesn't work out for you because you either made bad decisions or just investments in general didn't do well, Australia has a supplemental system that makes up for it so that you end up with enough savings. It's kind of like a guarantee to get your superannuation fund if you didn't save enough before you retired. They'll top you off. They'll top you off. So they automatically, it's moving up to about 12% of what you earn instead of Social Security. It goes into your private savings account. You can choose from a lot of different superannuation funds. You can do that. So what I say in the book is people love their Social Security. We're not going to stop that program. So we can waste, I could waste a lot of your time discussing how we can make a better program. But Social Security is here to stay. The only problem with Social Security is if you make $10 or $12 an hour, you're going to end up with about $9,000 a year in retirement. And that's a real problem because nearly half of all working age families have zero retirement savings. The median family between ages 32 and 61 have $5,000 in retirement saving. The average working age, low income, Black, Hispanic, or non-college graduate have no retirement savings. The nine in 10 families in the top fifth of income have retirement savings. Nine in 10 in the bottom fifth do not have any. So we need to do something in addition to Social Security because $9,000 is not going to cut it. No way. And so what can we do? And I suggest being an investor that compounding is the answer. Having people start saving early. With what? Because if you're low income, you don't have a lot of money to save. You need that money to live. If you're young, which is when compounding matters, I go through the compound interest tables in the book. That was incredible.

SPEAKER_35: If people started early, they would retire early. And the compounding is such a, the rule of 72.

SPEAKER_03: Like, my God, if you, if you can compound at seven, eight, nine, 10% a year, oh my Lord,

SPEAKER_13: and double your money every seven years. Yum, yum.

SPEAKER_57: Well, the example I gave in the book is just saving a couple thousand dollars a year and earning 10% on it. If you started at age 19, put in seven payments and stopped making any payments at all at age 26. That's one person. Or someone who starts at age 26 and puts in 40 payments of $2,000 a year over 40 years. The person who started at age 19 and put in seven payments and never put in another nickel because he started earlier, ends up earning more than the person who saves for 40 years, but started a little bit later.

SPEAKER_03: As we both know, as investors, those last couple of double ups are the ones that matter.

SPEAKER_28: Warren Buffett became a billionaire at 67, I think, or something like it was that last, those last couple of double ups really add up.

SPEAKER_273: All right.

SPEAKER_121: One, one good reason to get older, I guess. So I've long enough to see your wealth double. So, so what can we do?

SPEAKER_57: We, people have to start saving early. How can we do that? Well, I don't suggest we raise taxes any more than we have on wealthier people, but I do suggest that, you know, uh, putting it to social security stops at $128,000. I think that's going up this year, $137,000 actually. Uh, you don't, you don't get taxed on social security above that because you don't get any more money from social security. It's kind of based on the way the program was set up. What you put in rhymes with what you get out. Uh, if you kept taxing at two unlimited amounts, uh, of course it wouldn't do that anymore. Uh, so what I do is I suggest that you get to keep saving. If you make more than 137, these are the wealthier people. They get to save, but we take some off the top. We'll take 15 to 20% off the top. We'll let the rest compound, you know, with tax advantages to make up for that. And we'll take that money and give it to people who are, uh, low income and young and let them start coming. And that'll be a lot of money for them and let them start compounding. And we can do that either by, uh, increasing the limit on 401ks where you can make it voluntary or involuntary. It doesn't matter. It's not a higher tax. It's just letting people put in more to their 401k, but taking 15 or 20% off the top because you're getting that tax benefit of having the rest compound. It's winning, winning, winning who need it, give people who need it younger, take advantage of compounding. It's the only way out of this mess. We're not, you know, we're not going to change social security. So how do we get those people when they retire to have money, force them to start saving or give them money when they don't have, uh, any money when they're young or they're low income, let them take advantage of compounding. And hopefully that'll help.

SPEAKER_171: All right. Listen, it's brilliant.

SPEAKER_03: Uh, I love the idea. It's a win, win, win, because the person who's putting that extra money away, they're happy

SPEAKER_28: to give up the 10, 15% because they got all the other tax savings, right? They're saving another 15%, I'm sure on paying if it was capital gains or whatever, you know, depending on which jurisdiction they live in. And then the people who are coming up short win and the government wins because they're not on the hook for managing something. The government sucks at managing these things. What about putting a super fund in parallel? Cause that was what I was thinking where you were going with this, which is, Hey, we're going to start super. Now, everybody's responsible for putting just 1% of their paychecks into a super.

SPEAKER_05: And the thing with the supers is you can't pull that money out in a 401k. You can pull it out and pay all those penalties. But my understanding of the super funds in Australia is you can only pull money out in the case that you are disabled and can no longer work or you hit a certain age. Correct. So we could have like a forced 401k super kind of program. And what I love about the super program is the financial literacy of people in Australia is off the charts because they have to pick their super and they're watching it. So it's almost as if you forced everybody above 18 or 19 who's working to understand 401ks and 401ks in the United States, when you start a 401k program at your company, you can't force the employees to be part of it. I never understood that. Like we should be putting a gun to people's head and saying, you have to learn about your savings. You have to have financial literacy, just like you have to have a goddamn driver's license to drive a car.

SPEAKER_15: We let people drive cars and we force them to go to school and then we're on the hook for their retirements and we don't force them to have any literacy.

SPEAKER_120: Sure. So I love that program and you have me convinced.

SPEAKER_57: I would just say I live in the real world and it's not going to happen here. People love their social security. I looked at all the political discussions here and I tried to come up with something that was actually doable. As much as I love what Australia does, as much as I love what you're suggesting, I wanted to come up with things in my lifetime that might be helpful and what I could see happen. So, you know, I'm trying to be realistic with the alternatives that I suggested. But if I were starting from scratch, I'd go exactly where you are discussing.

SPEAKER_162: You've been super successful in this career, huh? You made a ton of money, a ton of money.

SPEAKER_36: You know, I was born at the right time, started in a, you know, born to parents who were able

SPEAKER_57: to give me a great education, you know, where we moved and born in a great country. So, and I got out of school at a time where the market was, hadn't moved up in 13 years and, and so it's been flat, you know, well, yeah, I lost 13 years. And so I started at the exact right time and, you know, coincidence of coincidence, a lot of people I went to school with also did pretty well. Yeah.

SPEAKER_161: So, you know, I think I, we've done a pretty good job where we are, but I have to.

SPEAKER_41: You got a third act in you, you think in politics, we think of philanthropy, what are you thinking of the, or you just love what you do going to work every day, you know, grinding it out in the markets, you got a third act?

SPEAKER_57: Uh, you know, I've, I've been writing and teaching for a long time. I love, I love writing and teaching. And so I'll, I'll think I, I, that's where I'll spend my time. I, you know, I'm, I'm very excited about putting together programs. I'm doing something where you can invest $5 a day, you know, along the lines of what I think, uh, you know, I've been very involved in school reform, so that's a lot of fun for

SPEAKER_36: me to learn about. And so, you know, wherever I can be helpful, it'd be fun. But politics won't be one of the places, but, uh, you know, maybe sharing ideas and hoping that someone listens, uh, you know, we'll be fun.

SPEAKER_28: You're a great writer, by the way, just from one writer to another, your book moves very quickly. You're succinct.

SPEAKER_05: I don't know if you've got a great editor or you just believe in the economy of words, but this book in 200 pages accomplishes more than a lot of the dipshit books. My friends are writing who have no experience in life and they spend 500 pages wasting your time. It's intentional that you write these books concisely, right? You, you suffer over these words. I can tell.

SPEAKER_161: Yeah. It's so much easier to write a shorter book.

SPEAKER_285: You know, there's less pages and everything, but it also, uh, makes you be more simple and more, uh, direct.

SPEAKER_28: So it's so direct, your writing style. I wish the only thing I got is you didn't read the book. Somebody else read it, right?

SPEAKER_288: You know, I didn't listen to the audible, uh, go do that.

SPEAKER_03: You have to talk to your publisher. They always want some smooth, silky talking voiceover artists.

SPEAKER_28: No offense. I'm not trying to, you know, ankle your business as a voiceover artist, but you should redo it with your voice. When it's the author's voice, it resonates so well and you get that intonation. And I hate the, like, monotone of these, like, uh, professional voiceover artists.

SPEAKER_41: You got to read the next one or just read this one when you republish it. I would have rather heard it in your voice because you're good.

SPEAKER_28: You're a good podcast guest, by the way. I heard you on another podcast, Capital Allocators. That's a great podcast too. If you haven't heard, if you didn't get enough of Joel in this hour and a half, go over to my pal Capital Allocators, which is a wonky podcast for people who are LPs and funds like mine and I guess Joel's and, um, it's a good podcast. You like that podcast?

SPEAKER_291: Yeah. Ted's great.

SPEAKER_28: Ted's awesome. He was just a guest on here. All right.

SPEAKER_05: Listen, Joel, uh, hopefully someday this pandemic is over and me, you and Ted and some other folks can have dinner or something. Uh, I, I really was taken by the book and I'm going to go backwards into the archive. If I was going to read another one of your books, which one you suggest?

SPEAKER_284: Uh, if, if you're not that, uh, knowledgeable about the stock market, the little book that

SPEAKER_36: beats the market, if you want to go to next level sort of graduate school, you can be a stock market genius.

SPEAKER_41: I'm going to, I'm going to, I'm going to have to go to the, uh, graduate school one and try to figure it out. Uh, the market is completely, uh, overvalued right now, you think, or is this makes sense

SPEAKER_03: because of inflation?

SPEAKER_161: Uh, you know, it's, uh, a market of stocks, not a stock market.

SPEAKER_57: So, uh, what I would say is the Amazon, Googles and Microsofts don't bother me. Uh, we own a bunch of those. I think those are some of the best businesses we've ever seen. Uh, but there are hundreds of businesses that lost money last year. And on average, if you bought everything that lost money last year, uh, you'd be up, uh, almost a hundred percent this year. So, uh, you know, about all hundred, a hundred, something of those kind of 261 companies that have market caps over a billion. Uh, if you bought them all that lost money last year, the pre COVID, uh, you would have been up, uh, a medium 50% and, and on average over a hundred percent. So that's a little frothy, I would say.

SPEAKER_301: So, uh, that, that portion of the market's frothy.

SPEAKER_09: This is like, you got that, uh, nice cappuccino, but they put so much froth on it.

SPEAKER_28: You, you might spill it or you might drink it. It's really hot under there. There's some analogy to that over frothy cappuccino. Be careful with that. Uh, like, yeah, I was like, I love this company Peloton. I don't know if you got a Peloton. I'm in like love with my Peloton. I want to buy the stock. And I was like, their, their current market cap is like 30 or $40,000 per subscriber. And I'm like, well, I'm my lifetime value is like 10 or 20 grand, like at best. And, and I just, I want to buy that stock, but I can't figure out the math and I'm, I can't figure out if I'm an idiot or I'm a genius. It's humbling the public markets.

SPEAKER_161: Well, we don't, we don't have one, but we're going to get one. So, you know, that's more growth. I don't know.

SPEAKER_28: The treadmill is next level. It's got a monitor. I kid you not, Joel.

SPEAKER_05: It's, it's like the size of your computer monitor in front of you. Now it doesn't play Netflix. That's one thing that I don't like about it, but you drive a Tesla, I assume.

SPEAKER_235: I do not.

SPEAKER_306: What? I'm old school. I'm old school.

SPEAKER_44: What are you pushing? A range? You got a Land Rover or something? You seem like a range or a BMW.

SPEAKER_307: I have an SUV. Don't, don't even ask it.

SPEAKER_308: Oh, Porsche Cayenne. Okay. All right. That's, that makes sense to me. It's a Porsche Cayenne, isn't it? Yeah. I knew it.

SPEAKER_28: Um, you gotta, you gotta, you gotta get the Model Y, the electric car, but that same Porsche experience, I would say Peloton is like a Porsche or a Beamer or a Tesla in that it just feels tight, you know, like that Porsche feels tight. Everything is in the right spot. You know, you can reach the controls, the knob, but yeah, yeah, yeah.

SPEAKER_308: You're, you're an old school 80s, like a wall street guy. The, the Porsche Cayenne is just a no brain. No, don't say that, but go ahead. Yeah.

SPEAKER_311: That's what it is.

SPEAKER_28: I'm telling you, you guys all get the BMWs and the Porsche, just like my, my boy, Bill Gurley's, uh, pushing that Porsche Cayenne. All right.

SPEAKER_15: Listen, Joel, this has been great. Pleasure. Everybody.

SPEAKER_03: If you hear my voice, stop what you're doing, pull over. If you're self-driving, maybe you don't need to pull over. I don't know. I can't give you advice on that. And buy the book.

SPEAKER_41: Common Sense, The Investor's Guide to Quality, Opportunity, and Growth. Joel, I wish you ran for office because I can't deal with the shenanigans of this current party system, but God, I don't know if they would, you would, you would be a Democrat. I think you would run as a Democrat and they would never have you because you make too much sense. All right. This has been great. And we'll see you all next time.