Logan: Derek, thanks for doing this.
Derek: Hey, great to be here guys.
Logan: uh, we're recording. This is, uh, Thursday, April 10th. We're, uh, I guess we're, this is the day after, uh, on Liberation Day, or I don't know if we have a term for, for what actually just happened. I'm curious though, I mean, I think all of us at different points were pontificating about what was going on in the different markets.
Logan: Uh, I'm curious, Derek, what was, what was your reaction or your kind of meta takeaway from, uh, the, the six days that were all this chaos of tariffs and, you know, protectionism and all that stuff?
Derek: Yeah, I mean, I remember like one, two weeks into Trump's administration, I was talking to someone and I said like the hard thing for journalists in a Trump administration is to remember that as many things happen, even more UN happens. I. Like every time I try to record a podcast or write an essay about some aspect of Trump's trade policy, it changes between the time I write the [00:01:00] first sentence and the time that I sent it to the editor.
Logan: the art of the deal.
Derek: This is the right, well, here's the thing, it's the art of the deal. It is, I mean, Trump is confounding in some ways and fantastically simple in other ways, right? Like this is someone who told us the 1980s, I began with audacious statements to lure counterparts to the table. I use leverage to squeeze something out of them.
Derek: I get some win from my ego and wallet, and then I repeat, repeat, repeat, and then he's just like, bind skyscrapers in New York City, like, God bless him. Fine. If it works for you, let it happen.
Derek: The problem is that like this idea that Trump's uncertainty, his madman strategy is useful for bringing counterparties to the table that are like other countries, that the flip side of that uncertainty is that nobody knows.
Derek: What the fuck the tariff policy is going to be in the us. And so if you are a factory, if you are a car company and you're or, or you're Boeing and you're like, I might have to reshore my entire supply chain because this part of the Wing is built in Sweden [00:02:00] and this part of the wing is built in Germany and this part of the wing is built in Singapore or something, I had to restore that entire thing.
Derek: How do you know what the tariff policy is going to be in one year? Much less one month, which much less one day.
Derek: So one of the frustrations that I've had with a lot of people who are, you know, still defending this policy is that sometimes they'll represent Trump's uncertainty, which served him well as a real estate mogul, as something that will successfully reshore investment in American manufacturing.
Derek: And it's not just people like me editorializing saying that doesn't make any sense as sort of like a first principle. If you read the Dallas Fed survey manufacturers. Or you read about the layoffs happening to steel manufacturers in the Rust Belt, or you read all these updates from supply, um, from, uh, auto and, uh, airline suppliers in the us they're all pausing investments or even laying people off.
Derek: So the strategy to use maximal chaos in order to reshore manufacturing, I don't think makes sense at all. And it's one of the reasons I'm [00:03:00] just most pessimistic about this plan working out. You know, even if the pause on, uh, liberation Day does go on for 90 days.
Zach: I mean, even if you could operationally reshore, which you probably can't even do that for, it's gonna take like a few years for very complex manufactured goods. Boeing's probably a great example of that, but you know, nothing is simple. You have to do the build out.
Logan: I was even talking to, to someone that makes a razorblade yesterday, and they were like, I don't think we can make that in the us. And I'm like, really? You can't make razorblades? And they're like, no, no, no. It's just like too complicated. The little fine inputs that we've been able to productize with the warehouse, you know, internationally.
Logan: I was like, oh, interesting. So not even the super complicated ones.
Zach: And even if you could, and the reason you're doing it is because of, you know, a Trump administration tariff policy, which by the way, you're not going to do, but let's just say argument's sake. You, you, you, you could, he's not in the White House in four years. In three and a half years. And so you're gonna do billions of dollars in CapEx on like a temporary tariff that, [00:04:00] by the way, at like a swing of a pen, Congress can take away from him, right?
Zach: Like Congress controls the purse here, Congress is supposed to approve tariffs not currently doing that. So just like the, the logic is flawed in, in so many different places, but at least he seems to be moving. And Derek, I'm curious if you agree, but like he seems to be moving to a world where it's like, oh, no, no, no, no.
Zach: Actually the tariffs are just to get free trade agreements done with every nation except for China.
Derek: Who knows? I have no idea. I mean, go back to the beginning of the administration. I, I, it's, it's hard to keep track, but if I recall correctly, tariffs on Canada and Mexico were announced and then unannounced, and then re announced, and then re clarified, and then we had Liberation Day, and then we had Un Liberation Day.
Derek: Trump hasn't been president for three months like this, this pace. Updating our [00:05:00] geopolitical strategy is absolutely conducive to keeping Trump on the front page of the New York Times. It's not conducive to getting the suppliers of Boeing or Ford or GM to relocate their manufacturing in the us. How would you even begin to do it?
Derek: I mean, it's, it's, it's incredible to look, for example, at the stock market. Just look at a graph of the s and p 500 over the last two weeks where it's says, woo. It goes off a cliff, and then it swings back and then it goes back down. It's like nothing actually happened in the world. There was no global event that caused this.
Derek: There's just a guy in the Oval Office who's deciding day by day what the tariff rate on Lutu and Venezuela and Vietnam should be over and over and over again, and changing his mind. It is of course, possible that this turns out well. I mean, there, there's, there's a universe, there's Earth 116 where Trump's actions lead us to a world where manufacturing is reassured or something else happens that gets a bunch of us [00:06:00] allies together to create a sort of supply chain network that can take on China.
Derek: There's a world in which this turns out well, it's just very, very difficult to imagine how you're going to see any kind of significant reindustrialization in a world where Trump keeps changing his mind every four, eight hours. And the only thing that I would add to this is to say like, you know, even listen to some of the defenders of Trump's tariff policy like Orrin Cass and American Compass, who's, you know, talked to RAHA today, he's talked to the Washington Post.
Derek: He's, he's, he's talking to a lot of different people. You know, he'll talk about how it makes a lot of sense to subsidize particular industries like say the semiconductor industry in order to reassure the manufacturing of a good advanced computer chips that is essential for America's national security.
Derek: Someone was already doing that. Joe Biden already had the Chips and Science Act, and Trump has threatened to throw out the entire thing. At the same time. This tariff policy is going from 10% to 70% back to 10%,
Zach: I would take,
Derek: [00:07:00] just so.
Zach: it a step further where the logic breaks down, which is if the argument is other countries, and let's even just use China for a second, have unfair trade practices because they have in-house industrial policy. Basically the government subsidizes certain industries there by pumping a bunch of non-private money into the industry.
Zach: Solar panels, manufac whatever cars in theory with BYD, at least when they were getting started. And that is unfair. As a result, we need to tariff them to bring their prices to what a normal, rational, free trade agreement would, would be. And then we go, oh. What we should do is industrial policy in the United States to unfairly subsidize our own. We are doing the thing that we just said China should not be doing because it's unfair and because we, we like which one is it? Is are there unfair trade [00:08:00] practices or fair trade practices? But you can't have both. You can't say like they're doing this unfairly, but also we need to subsidize our own industries.
Zach: Those are the same things we call one industrial policy we call the other tariff. It's the same. It is government subsidization of private industry and central planning. And so I just, I disagree with the Biden chips Act for, for what it's worth for the exact same reasons, which is this government controlled choice of which industry we're handing money out to.
Zach: We're taking your money and my money and Logan's money and some bureaucrat is saying, this one's important as opposed to the market. Now you can argue whether you agree with that or not, but by. Doing that kind of subsidization in the United States and then complaining that other countries do it. We are lying to the world, and smart people understand this.
Zach: Maybe the average, you know, American voter doesn't get it yet. They will, but it's the same. It's the same. And I think they, they get it wrong.
Logan: Well, and that, that's the thing that I, I found most interesting about this whole discourse is there's so many people [00:09:00] that 10 years ago, 15 years ago would've been, um, patently against this policy that are now within the Republican party. And because there was no consistent stated strategy, you had the end of it, which is these tariffs are in place, here's what they are.
Logan: And then you had every talking head trying to back into the strategy of what it was. And so people didn't know exactly what the line was to, to go with No, it's reindustrialization within the economy. No, this is just for strategic goods. No, it's the art of the deal. No, this will create jobs. There was all these different. Things. And it was disappointing to me to see how many people I actually respect that were trying to back into the logic behind it all, because they
Logan: knew they had to be on the team of Trump and they couldn't poke any bears in that way. And so then trying to back solve for what the logic was, just led to all these logical inconsistencies.
Zach: Derek, what's your, what's your take? 'cause I'm curious, you've done a lot of this [00:10:00] talking to Dems about this type of policy. What's
Zach: your view on this idea that like, there's Wall Street and Main Street, which we're starting to see some of the rhetoric and like, because stocks go down, don't worry, that's just Wall Street stocks and yet included in the Wall Street stocks are like home builders and Walmart and you know, essentially like people who employ the vast majority of America.
Zach: Like how when you talk to democratic senators and Republic, like how do they respond to that? Because I get, there's some populism that is like, it, it, it feels good to be like, fuck Wall Street, main Street. But in reality, like these people work for Wall Street companies. I'm, I'm curious your take.
Logan: Democratic policies or like ideas. That was one of the things people trying to own. Liberals with like, oh, Nancy Pelosi said this in 1996. You're not supporting it now. So it was funny. So I'm curious. Yeah. What's the [00:11:00] horseshoe theory in all this stuff?
Derek: Yeah, I haven't had conversations with democratic senators and congresspeople about the main street, wall Street dichotomy that you're describing. Right. The conversations that I've been having with electeds over the last few weeks have been almost exclusively about the ideas in the book, which I wanna talk about.
Derek: But frankly, I think this is like much more interesting right now. And I've had infin conversations about abundance and the tariff stuff is very fresh. So I, I wanna, I wanna
Logan: Well, and I think they tie together, by the way, which I want to do because there's, there's this growth kernel that bring 'em both together. So we'll, we'll,
Logan: we'll segue there.
Derek: here. Here's how I feel about this sort of Wall Street main Street dichotomy. I, I, I think in, in, in many cases, it's a false distinction. Like the stock market is not just a measure of other people's wealth, right? First off. More than 60% of Americans are invested in the stock market, which means that when the stock market pukes by 11% or 15% or whatever it's down year to date, that almost certainly implies that the majority of Americans have lost wealth.
Derek: That's bad for them and it's also bad for their future [00:12:00] spending because of the wealth effect. People are less likely to say, you know, go on vacation or like do an addition to their house if they feel like they're poorer. So there are economic outcomes of stock market declines that I think are are macroeconomically sound.
Derek: But also I think you agree with this. The stock market is not just a scoreboard of wealth. It is a signal of what investors willing to have skin in the game think it's going to happen to the economy. And if you go back.
Zach: it's also the companies who employ millions of Americans. I mean, even if you don't own the stock market, you may work for Walmart, you may work for a home builder, you may work for a miner. Like it's these comp, it's not just like people are like, oh, stock market, that's Google. No. No, like massive employers of, of people outside of blue liberal cities are traded in the stock market.
Zach: They're public, they're big.
Derek: I'm gonna explain why you know Michael Sist, who's this great financial analyst at JP Morgan. He produced this graph in a, in a letter to some folks this week that [00:13:00] showed how every single time he all, all the times the stock market's declined by 10%. And what's happened in the last few weeks is truly extraordinary because it's just one guy making a bunch of decisions, making the stock market yoyo.
Derek: It's not some geopolitical event like say, you know, the, the housing crash 2007. But if you go back over the last 70 years and you look at every single time the stock market declined by 10% or more. That stock market decline anticipated a recession almost every time in the early 1990s. In 2007. In 2020, equity prices tend to bottom before every other in, um, indicator, um, uh, bottoms as well.
Derek: And as a result, these kind of stock market declines tend to be very predictive of what's going on in the rest of the macro economy. And so this is one of those things where, you know, I've talked to, to Joe Weisenthal a bit about, um, our frustration that sometimes people who, somebody who somebody share my politics will say, you know, the stock market is not the economy.
Derek: The stock market is not the economy. And it's like. [00:14:00] Nothing. Is the economy like the, like the jobs report isn't the economy, the retail report isn't the economy, like the number of jobs created in the state of California over the last few months isn't the economy. The economy is 10,000 different things and the stock market is a part of it.
Derek: And in fact, the stock market's often one of the best real time gauges of what's going on in the economy because it's millions of people all over the world making expensive bets on what they think is going to happen to the future of America's publicly traded corporations.
Zach: I would, I would make the argument. I would make the argument as actually one of, if not the single best view. Of the future of the US economy at a national level, the stock market is phenomenally good at reacting to like future expectations, whether they're rates or employment. The only thing it doesn't do well is it's not localized. It's not gonna tell you how people in Pittsburgh are going to do, or like the suburbs of wherever, and it, it, it, it kind of, you know, it's, it's, peanut butter. It spreads it out across. And [00:15:00] so when people are like, oh, it's not the economy, it's like, well, sure it's not your local economy, but it does represent America and the aggregate pretty damn well.
Zach: I, I would actually argue it represents America better than GDP.
Logan: Well, and by the way, we, we, we have now new mechanisms with prediction markets that also, uh, have similar dynamics to the stock market. And you know what, like the prediction on recession this year, it peaked at 66%, I think the day before un liberation day or whatever we're calling it. Then a couple hours after announced.
Logan: It bottomed out at like 49% and you know where it back is back. Right now it's at 60%. So it's like, Hey, all this stuff. There's a bunch of different mechanisms for the leading indicators of it, but they tend to track pretty closely with one another, be it prediction markets, be it the stock market, like all this stuff is a leading indicator in some way.
Derek: I think maybe there, there, there's, there's a conflation that's being made among some people that I, I wanna be very clear about. Um. When people say the stock market's not the [00:16:00] economy, I think what they're trying to say sometimes is that the stock market is not the single most important measure of how the economy is doing.
Derek: And there are some times when I might agree with that, right? If you asked me for like my favorite statistic, like you said, GDP, and I think that's defensible. My favorite statistic would probably be something like median real income growth, right? But just be re median real income growth. Also is not the economy.
Derek: You can have rising median real income growth and have one demographic, let's say white men who didn't go to college living in the rust belt, having depressed real wages. So there is no one indicator that's going to tell you everything. I think this stock market tells us quite a bit, but ultimately to care about the economy is to care about a panoply of things and not to hang the question of how is the economy doing on any one indicator or another.
Derek: I think most people who cover the economy, most people who study the economy [00:17:00] really do know that, and they're trying to suck in as much as they can from a bunch of different statistics. The stock market is just one way to, as you said, average out those statistics in, in one kind of measure of the the health of publicly traded
Logan: I think this kind of ties into an abundance point, but the, the real median income I, I, I think, has trended up pretty consistently over the course of the last, call it, you know, 30, 40 years. I, I
Logan: just did a quick search and it said, uh, 1984, it was 59,000, uh, adjusted for inflation. 2023 estimates 2024, it's like 80,000. So we've consistently gone up, but there's this perception that is. Uh, is stated in the Make America Great again thing. And also, uh, I, I saw it over the course of the last couple days that there's this, uh, back to your point on the economy, the stock market is in the economy. There's clearly this perception that things aren't fair, that things aren't going well.
Logan: And I kept arguing with people in different ways about like, well, what do you actually need? Like, what's not [00:18:00] going well? Is it unemployment? Is it median wage growth? Is it, you know, and it seems like it's some kernel that backs into income inequality in some ways, but also I think there's housing, there's education, there's healthcare, there's a bunch of other things that are a little orthogonal.
Logan: I think the media obviously plays a big part too, in this perception that things aren't fair and it's not going well. And so, Derek, as you, as you wrote this book on abundance, I'm curious, like, as you distilled down or maybe internalized what that sentiment. Is, was there anything that you kind of came away being like, Hey, here's the one or two things when people are saying it's not fair, or things aren't going well, or make Great America great again.
Logan: Was there one or two things that you kind of thought of, this is what they're really saying? I.
Derek: I think housing and healthcare are the best things to focus on, right? You can have a situation where Americans are getting richer, but the most important spending items in their life are getting expensive faster than they're getting richer. [00:19:00] And that's what's happened to housing in a lot of markets, is that if you look at housing as a share of local median income, whereas a lot of Americans used to be able to buy a house that was, say, two x more expensive than their median income.
Derek: Now it's like 6, 8, 10 times more expensive. So housing prices are rising in many markets faster than incomes arising, and that's how you can have a situation where Logan, you're simultaneously right. That Americans are getting richer. Also the Americans were frustrated are right that some things that they want feel like they're slipping out of the typical Americans grasp.
Derek: That's one place, and I think that housing in many cases is a relatively straightforward supply problem. We know houses, we know how they're built. Lumber is easy to get, at least before there was a 39% tariff on Canadian lumber. Drywall was relatively easy to get before there was a tariff in Mexican drywall, but we know how to build houses more or less.
Derek: Healthcare is much more complicated. Healthcare involves a third party [00:20:00] payer. Healthcare is really complex because when someone's sick, it's not like just building a house that you know how to build. Diagnosing can take a long time. Expensive medication can be expensive depending on the patent schedule.
Derek: Um, sometimes when people are at the end of their life, doctors are trying a bunch of different things on them and it doesn't, it's not entirely clear what's going to save their life. And as a result, um, end of end of life health spending is typically extremely expensive. And so, you know, I, I don't wanna put housing and healthcare in the same bucket as, um, so as to say these are both simple supply side solutions.
Derek: I think housing is often a straightforward supply side problem. Zach knows more about the, the world of healthcare than I do, so maybe he can pick up the baton when it comes to, to healthcare. But I would say as, as just a, as a matter of summary here, um, why are Americans frustrated even if they're getting richer?
Derek: The answers that the things that they often want most in the world, housing, healthcare, even sometimes a college education are getting expensive faster than Americans feel they can pay for them.
Zach: It's like, it's like, uh, [00:21:00] economic porn for me, listening to you talk about that. 'cause it's just like, it's just right. Like it's perfect. And it's funny, you're gonna, you're gonna hear at some point, I did this stupid interview with Pomp yesterday and I did, said the exact same thing, which you said, which is like, I think you can chalk up everybody's emotional feelings about how rich they are really to housing. And I think he, healthcare is a little secondary. Um, but I think, you know, if I were trying to educate Dems in, in some way, shape, or form, I would view it as your housing policies. Got you. Trump, like, I think they're linked. I think they're inherently linked. People feel poorer because their housing is more expensive now. Noted that their expectations of housing have also gone up. The home sizes are materially bigger than they used to be. We have air conditioning, we have heating. So it's not exactly the same as it used to be in terms of like, you're getting a better good, but they are also rising, uh, you know, as a percentage of your disposable income at that is, that [00:22:00] is really bad.
Zach: And it is shocking to me that this idea of like housing abundance is not yet a core democratic principle. Although thanks to you guys, I think we're moving in that direction. You know, you're seeing it a little bit in New York with Adams and others. People are finally getting it and you're seeing a little bit of changes in, in, in major democratic cities, but it's not fast enough and until they fix it, I, I don't think you're gonna see people feel we wealthier. Healthcare is weird. Uh, and I'll just talk about like maybe three dynamics. I think of healthcare that make it more, way more complicated than, uh, than housing One, you tend to not. Realize how much your income is. Dere is like deprecated because of healthcare costs, because you don't
Zach: pay for it directly unless you're, if you're 65 and older, it's Medicare.
Zach: We're gonna leave that out for one second, the vast majority of Americans under 65 get their health insurance through their employer. And there isn't a line on your pay [00:23:00] stub that's like, oh, by the way, we also paid our, you know, health insurer $3,000 this month, or $2,000 a month. So you don't appreciate the fact that you are getting a benefit.
Zach: Like your income, if you will, is actually more than you realize
Derek: Or your compensation.
Zach: your compensation
Zach: Yes. Not your take home income. Fair, good point. Yes. Like your compensation and, and you're getting more value over time because you are getting healthcare behind the scenes, and even as incomes are rising, you're still getting the healthcare benefit, right?
Zach: Like there's, there's some hidden, uh, benefits and people, I just don't really. Think, understand. And by the way, I'm pretty sure, and you can correct me if I'm wrong, when we do real median income statistics, I don't believe it takes into account the healthcare benefit that you get.
Derek: There's actually, I, I, I want you to keep rolling here because I, I, I like where you're going, but there's work from, I believe, the center on budget and policy priorities and a couple other liberal think tanks that have over time looked at the share of overall [00:24:00] compensation that has been, quote unquote eaten up by growing healthcare premiums.
Derek: Uh, there was a whole, um, news cycle I remember in like 2000 8, 9, 10, right as the Affordable Care Act is really like the front page news for policy wonks like me, where a lot of people are pointing out, if you feel like you are not getting a raise, the reason is that healthcare inflation. Is eating your raise.
Derek: So in a way it's just what you said. Your compensation might be growing, and so your employer feels like they're paying you more, but you don't feel like you are being paid more because a lot of that payment isn't going to you. It's the employer side premium that is allocated for you, that is actually going to the healthcare insurer.
Derek: And so that's a way in which healthcare inflation can sometimes in, in, in almost a literal way, seem to steal a raise from the American consumer.
Zach: Beyond that too, it's regressive by nature because whether you're rich or poor, your healthcare premium is the same. And so as an employer, right, you know my last company, we employed a [00:25:00] thousand people. We have a hundred people now in the new one, like. Our average healthcare expense as the employer. So sitting on top of your salary I think is somewhere in like the 20 to 30,000 range. But that number change whether you make 40 grand, 60 grand, or 7 million. It's the same number. And so when you think about the healthcare benefit as a percentage of your income, the less you make, the higher that number is. So as a percentage, like your income is getting eaten up by extremely expensive employer healthcare costs.
Zach: And it's unfortunate because people don't realize that. I actually think one of the best things we could do is just stick a line item in your pay stub that tells you how much money your employer is also contributing to your healthcare benefit, just so people understand it, right? Like at a base level.
Zach: I'm not defending if it's a good or bad system, but just there's a complete lack of understanding of the amount of money that's actually being spent on healthcare behind the
Derek: What would probably, what, what might happen there is, Zach, is that, um, if [00:26:00] people could see the employer sponsored health subsidy. On their pay stub every week. It might create so much anger in a period of rising healthcare inflation that you're going to build a lot more agitation for single payer, um, that
Zach: by the way, I think,
Derek: be the, the, uh, unintended or intended, uh, side effect of this policy.
Zach: I think it's where you should go. And I, and I have a very unique single payer view. Um, but yes, I think it will cr I I think people will get angry. I think they'll say, what the fuck? Like, how are, how is $20,000 of my money
Derek: Right?
Zach: healthcare costs? This is insane. Where can I get healthcare costs cheaper?
Zach: And everyone's gonna go, well, Medicare is cheaper. 'cause it is. And like, wouldn't it be interesting if as an employer I could opt my population into Medicare, not forcing you into Medicare? And I think this is where the Dems get it wrong. It shouldn't be single payer, it should be Medicare option for
Zach: all
Derek: option.
Zach: Just let, let the employer and you have to do it on employer by employer basis. They can decide, [00:27:00] I'm gonna take my entire employee base, I'm gonna opt into Medicare. 'cause the rates are lower, it's gonna cost them less. And then if I wanna give supplemental benefits because Medicare has some limitations, then fine, add it on.
Zach: Right? Feel free to do some like premium benefit on top and pay for it. If you're Google, you make a lot of money, you can do that. But it, I, I do think the agitation will come. Uh, one other, which is part of why I like it. I think people will start to realize, you know, like what's going on with all my money. Uh, the other thing about healthcare, which is not like housing, and this is where some of these analogies break down, which is that as you get better at housing, theoretically, right? Building housing, the prices should come down
Zach: you're starting to do things at scale. You get operational efficiencies, right?
Zach: You're buying more loan. Like it theoretically, at least they shouldn't grow at the rate that they're growing today because that's just a supply constraint. Healthcare is different. Because the better we get at keeping you alive, you actually see rising [00:28:00] costs. Because now we are keeping people who previously, this is a little morbid, may have died or just didn't have the meds that we now have available to them.
Zach: And actually as the science of healthcare and really biotechnology. But it's also things like diagnostics and, and, and, and procedures that we get better at it. It costs more because you use more of it. That it's, it's really simple. You, you have one house, you build one house, you live in that house, you're not using more of your house.
Zach: As that house gets better, healthcare is not like that. And we actually end up paying more because we're better at it. And this is where people are gonna hate me for saying this. I actually view healthcare as a luxury good.
Logan: No, it is.
Logan: I mean, the, the be. Hater follows the same as education and travel, where the richer the country is, you spend more on it and, and because it's a service based thing, then it's kind of the wages rise and therefore it ends up being a higher percentage of GDP. And [00:29:00] I mean, we can talk about the, the life expectancy thing, which I know is a favorite of yours, Zach as well.
Logan: But the cost thing is a little bit of a misrepresentation. Uh,
Zach: some really interesting papers coming out. I just saw one yesterday that talk about the rise of chronic disease in the United States, which clearly we have in particular in cardiology and autoimmune. Basically, you know, people have longer term chronic issues they have to deal with, means they're on meds for longer, they see their doctor more often, their healthcare costs go up.
Logan: I assume they say it's the dyes in our food.
Zach: Right, exactly. It's food does. I mean, don't get me wrong, there's. American culture in particular around food and exercise that do cause this stuff like that. It's, I'm not saying that doesn't cause many of these things, but one of the reasons why we have more chronic disease is because we can keep most people alive longer. And like if the longer you live the more chronic disease you naturally get through aging. And so some of the things that we're seeing now [00:30:00] in terms of people living with chronic disease, it's actually because we're just pretty good at keeping you alive with said chronic disease because we've gotten better at treating it.
Zach: Whereas before you may have died. And those little nuances I think are really difficult for people to understand because healthcare feels like a right, but it's not like free speech where like the more free speech you get, it costs the same, right? Like here, the more you get it, it does cost more. And this is where you have to have a booming growing economy to be able to afford. All the healthcare stuff because it is going to get more expensive over time as we get better at keeping people alive and treating disease. And these drugs are not cheap and expensive. Actually, they, they're not cheap. Eventually they do go generic. The docs don't go generic. I don't, have you ever met a generic doctor? Right. So like there's some real, there's some real cost in here anyway that I I agree with your like macro thesis, healthcare, housing, they're different beasts and each one has to be tamed [00:31:00] differently. Uh,
Logan: Zach, I, I think we should, the life expectancy thing as well, I mean, we've talked about this in the past, but if you need to net out opioids, guns, and
Zach: yes. That life statistic and everyone quotes, it's, it's fake. It's not right.
Logan: if you take out fat, by the way, if you take fat out as well, which we can talk about diet and all that, it's like, you know, our life expectancy is far, far better than other countries. And so that's the one thing I, I didn't want anyone to say, well, yeah, why are we spending so much on getting less well worse outcomes?
Logan: It's like you have to tie that out. So it's kind of two complicated factors together, but.
Zach: One thing just on that stat to really be specific about it. 'cause everyone's seen that little chart, right? Like us expectancies. Um, we definitely have a country of haves and have nots, right? If you take that chart and you break it out by state, it looks very different. And you know, it's exactly what you think, right?
Zach: Like,
Logan: Mississippi versus California.
Zach: yeah. I mean there's there in our poorer states, they die earlier and in our richer states they don't. And there's a variety of [00:32:00] reasons why different drivers of this. Some of it is diet and culture, some of it is wealth, right? Uh, there's also a few other things going on here that statistic. One of the things that I think is really important is the United States a very different country than the rest of the world. And we have a few things that are very different. One, we drive a lot and we have way more auto accidents than every other country, which causes people to die early. And when you die early, when you're doing average, average it, it pulls that number down, right? Like early deaths, pull that number down. So we, we drive a lot, we do more drugs. So we have early deaths from opioids, we have early deaths from drug overdoses, and we have guns. We kill each other and we tend to kill each other at younger ages. And all of these things pull those stats down and it's just like a bad statistic. It's not that it's wrong, it's that it doesn't actually represent healthcare in America. It represents life expectancy, but it also represents at the [00:33:00] aggregate level. And you need to break that down by like state and culture. Uh, so I hate it because people use it to represent like how terrible our healthcare system is, and it's just simply flat out wrong. Especially when you go and talk to people who have had to experience healthcare in Canada and Europe. Not on a cost perspective. I'm not gonna say our cost system, but from a quality perspective of intelligent people who understand the healthcare system, if they get sick, the United States is a better place to go. It, it, it just, we are a better system when you get it right. That doesn't make it a good system, but that whole idea that our system is, is, is not as effective in terms of keeping people alive.
Zach: It's just flat out wrong. It's a cultural issue. It drives, we have other drivers of early death and early death really pulls that number down. So I hate people repeat it. It's that whole stat of like, nobody has more than like a few hundred bucks in savings. It's also wrong. Uh, which was basically like a a a u gov survey of, of a few people.
Zach: It's not actually based on financial data and Bernie Sanders is moron team keep repeating it [00:34:00] over and over and over again, even though they know it's wrong, which to me makes him even worse than Trump. 'cause he's, he's just lying to his own constituents and his staff knows that
Derek: On constituents once or twice.
Logan: Derek, I guess a question on the housing thing, um, one of the points that, maybe I missed it in the book, but, um, you, there was a lot of discussion about the impact of housing and all the things that, that have occurred from a regulatory standpoint over the course of the last 50 years or whatever. If you were to distill down the cause, like how did we get in the morass of not building nimbyism regulations?
Logan: I'm sure it probably started well intentioned at a small scale and then sort of spread out, but like, is there a moment in time that you feel we sort of transitioned to this mindset of we need a control. All these things.
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Derek: Yes, there's a moment in time. No, it's not an easy story. I think the moment in time is the 1960s, 1970s, [00:35:00] but the reason why our housing paradigm shifted in those decades is really at least threefold. So number one. Zoning laws have existed in the US for more than a hundred years. The first zoning laws are from California, uh, California cities, essentially after the gold rush, trying to zone Chinese launderers to far away parts of the city so that they couldn't live near the rich white people.
Derek: So that was the origin of zoning. It was literally just like carving, uh, out cities like little, you know, pizza pies and saying like, you know, the Chinese have to live here. Black people have to live here. Zoning changed around the 1960s, 1970s, where it became less about saying what kinds of industry or what kinds of people could live here and here, and more about creating entire rules for entire cities.
Derek: That said, exclusionary zoning, you can only build single family houses in this entire area. You cannot build apartments this entire area. We have historic preservation rules that mean that you, you know, can't tear down whatever [00:36:00] this church or this strip mall if it has some historical, you know, resonance to the neighbors.
Derek: So part one is that zoning really changed in character in this decade.
Logan: Was there a pause of that? I mean like what actually caused that? Was there a Chicago fire or something? Event?
Derek: Um, the, the, the theory that I put the most stock into, so Yoni Applebaum wrote a book called Stuck My Colleague at The Atlantic, which is really good. Uh, a theory that, that I put a lot of stock into is William Fish, who's an economist who's studied this period. Why did the 1970s change zoning laws so much?
Derek: And his theory is basically it had a lot to do with inflation. During the stagflation crisis, the 1970s, um, real estate became a much higher share of the typical family's budget, and as a result, residents began to agitate for zoning laws that constrained housing built around them. And this happened at the same time that I would say, you know, track number two happens.
Derek: So like number one is zoning. Number two is that in the 1960s, 1970s, Ralph Nader. Um, and I don't wanna blame everything in Ralph Nader, only most things in Ralph Nader. Ralph Nader, um, [00:37:00] created this sort of new paradigm in progressive legalism, which said that the way to express your bonafide as a progressive was to sue the state and to sue companies to stop them from building things.
Derek: And you really saw this explosion of what is sometimes called adversarial legalism, which made it easier for individuals to sue cities and states to stop them from building any kind of thing, right? A nuclear power plant, a new apartment building, a new, you know, solar farm, uh, you know, behind their, um, behind their property.
Derek: And so there was a legal revolution that came up alongside, um, this, uh, this environmental, sorry, this, this zoning, um, uh, revolution. And then part three is that there were real changes in environmental law. Like we, we stated very clearly in the Book America, in the 1940s, 1950s was absolutely frigging disgusting.
Derek: And you needed a clean air act, and you needed a clean, a clean water act. And we also passed things like the National Environmental Policy Act, nepa. What we didn't realize we were doing was that we were creating a process by which individuals could use environmental review to slow the construction of anything in the physical world.
Derek: And [00:38:00] so when you put all of this together. Changes in zoning, giving neighbors more legal power to stop the construction of stuff around them, and new environmental laws that really outfitted these individuals and outfitted lawyers with the ability to stop construction around them. And you just have this explosion of zoning and permitting and environmental review and you put it all together and it just makes it harder to build things in the physical world.
Derek: And so the legal paradigm that we live in in the 2020s, there's no resemblance to the legal paradigm that existed in the 1950s when America was building like crazy. Some of our reaction to sort of the, the, the growth machine of the 1950s was totally appropriate, but some of that is that like. We accidentally solved the problem of the 1950s and created the problem of the 2020s, right?
Derek: Like we built an anti-growth machine that has now taken over our cities, taken over this country and made it harder to build as Ezra and I say, the stuff that liberals themselves say they want more of houses, clean energy, infrastructure, bridges. And so that's really the, the [00:39:00] tragedy here. And in many ways it's, um, it's a tragedy of, of good intentions.
Zach: Do you think you can convince, not you, but we can convince
Logan: the three of us.
Zach: the three of us right here, right now?
Zach: That the manufacturing boom, that, you know, we're all hoping for. I mean, everybody would love more good jobs, right? Like whether they're your jobs or not is actually just home construction in the United States.
Zach: Like that's it. You want to, you wanna have a boom, let's just like build everything domestically here you have construction workers, plumbers, electricians, drywall, but you know, like why do we have to make t-shirts when we can make homes for Americans?
Derek: I love that line. Uh, make, make, make Holmes not t-shirts. Uh, do I think we can convince them? No, I, I, I, I, I think that Trump look, when, when you say like, convince Republicans, right? Let's just, let's just take stock of and be realistic about what we're dealing with, with the executive branch, right? Trump has not only disinvited.
Derek: [00:40:00] All the people like the Mnuchins and HR McMasters, who in the previous administration orbited around the president and stole from his desk the white papers and memos that were truly effing crazy. He's kicked them all out of the administration, and the administration right now is organized around creating as little friction as possible for Trump.
Derek: So that his proclivities on an hour to hour basis can essentially govern the entire state. Right. Republicans, the Senate are scared of saying no. Republicans in the house are scared of saying, no, you certainly don't have like the Department of Energy standing up against Trump when he does something they don't like.
Derek: Uh, you know, no one from like the Department of the Interior, like the Department of Labor is gonna tell Trump not to do what he wants to do. The entire government has essentially been organized to allow this man's proclivity to just run wild and govern the entire country. That said, what I like about this idea of make houses not t-shirts, is it, it seems to me like there is a part of this administration's agenda that's all about [00:41:00] like, make America manly again.
Derek: Right? Like, what's so great about manufacturing? Well, it was highly unionized. We were making stuff, but also just kind of represented like, you know, like sweaty guys working on a line making steering wheels in Flint, Michigan. And I like this idea of like. Funneling that energy toward housing. I mean, construction in some cases, like pays just as well, if not better, um, than manufacturing.
Derek: Um, and, you know, there it might be more unionized if that's something the Department of Labor cares about. So in many ways, I, I I, I like this idea of like asking administration to care a lot less about reshoring, textile, um, factories. And to care more about, like Trump, you were elected because of an unaffordability election, actually make housing more affordable.
Derek: Stop, like race the tariff on Canadian lumber by 39%.
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Zach: By the way, we have this weird picture in our head of like construction being like a bunch of guys, you know, nailing wood panels together and there are pieces of that, but construction also has trades. These are high paying jobs, [00:42:00] plumbers, electricians, you have, people have to do like the engineering design architects, like this isn't just day labor wages.
Zach: I mean, there's some of that for some of the, you know, lower skill work if you will. But it's good jobs, uh, for, for high paying jobs for many people. Uh, that would be my push. 'cause I think they can get behind the construction thing. I'll give you one other driver of, uh, of housing costs in America and really more about like exclusionary zoning, which I agree has to do with like people's perception that their wealth is in their home.
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Zach: We did one really weird thing in America, and it's done in other countries as well, which is we said the American dream is owning your own home. And we told people that owning your own home. Is one of the most important wealth creation things that you can do, and it's your independence and all of these things. So we culturally said that matters as opposed to renting.
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Zach: And then two, we created the [00:43:00] fixed 30 year mortgage, which is a not a global thing, like there are, most countries do not have a fixed rate 30 year mortgage. And part of the reason why the United States has that, and you can think of that as a subsidy of demand, We said, you need to own your own home. And oh by the way, we're gonna make it really cheap or cheap enough for you to do this. 'cause there were lock rates for 30 years. We did that by basically creating a federal guarantee on those loans with Fannie and Freddie. So we created culture to do this and we created basically a giant insurance company through taxpayer money. To say we're gonna lend any American at whatever, 3% for 30 years. I mean, the mortgage I have like, I dunno, it was like two and a quarter for 30 years in this apartment, which is insane that I could ever get that rate. And we did all of those things without unleashing the supply side of this.
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Zach: And so we told people, this is important, by the way, the actual performance, if you look at owning your home versus owning the s and p 500.
Zach: So if you go [00:44:00] all the way back.
Zach: That is a bad economic choice. Like, it, it, it blows people's minds with like, yeah, but my home is worth so much more. And you're like, yeah. Have you seen the Nasdaq the last 20 years? You would be way richer, way richer if you took that money rented and invested it in the American stock market over the last 20 to 30 years.
Zach: And nobody realizes that. And so we didn't only just create this massive weird demand crisis where, where prices are kind of coming up. We also told Americans the wrong advice on how to build wealth. And we all at the same time, and this all started in like the seventies and the eighties and here we are.
Zach: I.
Logan: Derek one, one, I mean on the, the, the Trump thing's. Interesting. But I guess I'm curious on the democratic side, like there's, there's this, this inputs versus outputs and I think Democrats in general kind of get caught up in some of the process related things, uh, and we can talk forever about that. But I'm curious, do you think there's like a lane for pro-growth? Democrats [00:45:00] going forward. Obviously that's a message you guys have in this, in this book, but like how has it been received? Is there a willingness to deregulate a lot of the, the zoning and, you know, the governance mechanisms that exist with housing today? I.
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Derek: I mean, look, the, the book has received a lot of criticism, and, and I don't want to, uh, don't deny that, but from an elected perspective, I think the reception's been way better than I could have possibly dreamed. I mean, not just senators like Cory Booker calling out abundance during his, you know, 17,000 hour address.
Derek: Um, Kathy Hoel told her entire staff to read abundance. Um, Richie Torres, uh, in response to Ted Herndon of the New York Times saying, where's the Democrats? Product 2029 just tweeted the cover of abundance. Like, we're talking to senators and congresspeople who are asking their entire staff to read this book.
Derek: And it, it's, it's an awesome honor and at least suggests that the book is, is detonating in an interesting way. Um, you know, ultimately two other observations, like one, [00:46:00] there, there's only two, you know, only, only a handful of Democrats that have been elected president in the last, what, 30, 40 years. Uh, you've got Bill Clinton, Barack Obama, Joe Biden, um, all these guys have been like fairly.
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Derek: To rather pro business, um, right, like this, this idea of a pro business democrat, or at least I should say a Democrat who acknowledges that if America is going to do great things and is going to build great things, it's probably businesses that are going to build them, right? This is not 1932. We're not about to hire 5 million people from the worst progress administration.
Derek: It's like, build all of America's houses. Sorry, like we don't have that kind of money. We've got a deficit, and this is a free market economy. A lot of the things that we want to happen, building houses, building clean energy, building chips, it's gonna, it's gonna be done by companies. Um, I, I think that there's a, there's a record of, you know, center left Democrats who acknowledge [00:47:00] that business is going to have to be a partner of government to build the things that progressives find most important.
Derek: I would say that's true as well. And then finally, you know, it's no one ultimately. Sometimes when people will say like, you know, how, how is this, how is, how is this book going to play in like the whatever the midterms or 2028, no one votes for a book. Like very few people even vote for ideas like this.
Derek: Ultimately re redos to the question of who's gonna pick up this idea and figure out like the right mixture of identity and charisma and message and policy priorities that captures people's attention. And that's impossible for someone in my position to like predict or prescribe, right? In kind of the same way that like in the 1970s, like were like in 1980, like people weren't voting for Milton Friedman.
Derek: They were voting for Ronald Reagan. Ronald Reagan just happened to have read Milton Friedman and had a lot of like freedman e ideas, right? Same way, [00:48:00] 1932 were Americans voting for John Maynard Keynes? No. They were voting for Frank d Roosevelt, a guy who happened to agree with Keynes in economics, and therefore implemented a lot of those ideas in policy.
Derek: So, you know, ultimately people vote for people, um, not for books. Um, but I've seen a a lot of really promising folks pick up, pick up these ideas and run with them.
Zach: Hopefully we get a slightly Manly or Josh Shapiro, like he's got it. He's got the opportunity. I think democratic
Derek: Do you wanna
Zach: need like a little dose of testosterone.
Derek: with like, with like lasik? Is it like you think the
Logan: Yeah, I don't know. Do you wanna
Logan: like send him
Zach: too nice. He's,
Zach: he? No, he's too nice. They're all too nice.
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Zach: They use fancy language. They're not angry enough. Like they need to be aggressive. They need to shout down bad ideas. They need to call people names when they say bad, like, and they're just, it's like we, we, we like took a bunch of Democrats for the last 20 years and we say, could you be a little quieter? Could you just like not yell as much? And then they all did it. They all did it. And it's, [00:49:00] it's sad. Like we need somebody who actually speaks their mind and is aggressive about saying, this is bullshit. This doesn't work for us. And like we just don't have that. It's hard to be angry and moderate.
Derek: Yeah, I think that's true. I was gonna say, you know, you're, what you are describing here narrowly is Bernie Sanders, right? I know that his politics aren't your politics, but you know, you cannot take this away from Bernie. The man knows how he feels about capitalism. He knows how he feels about the oligarchy, he knows how he feels about income inequality, and he is willing to shout about it to whoever is willing to listen.
Logan: By the
Zach: it's really, it's really easy to yell and say everything's broken, and that's part of why they do it. And, but it's like, it's hard to yell, to say, Hey, this system is actually pretty good. We just have to reform it in a few ways. That is not a, not like you can't say that out loud and
Derek: I think no. Hopefully 1, 1, 1 job that this book does, and this is like my interpretation and, and maybe others disagree, but like my interpretation of one way that this book works is [00:50:00] that we've offered a, and I'm gonna use fancy language here, but I'm not fucking running for president, so who cares? Um, we give Center Left Democrats a permission structure to run against the Democratic Party.
Derek: The hardest thing for the center left to do is to run against the party. How did Donald Trump take over the Republican party by running against it? Why is Bernie Sanders so popular in the left? Because he does nothing against, except run against the party that he caucuses with. But moderate Democrats can't do that.
Derek: We think of ourselves as like the keepers of the institution, the guardians of the establishment, the defenders of the status quo. Americans fucking hate the status quo. They hate his institutions. They hate the establishment.
Zach: can I, can I
Derek: wait for permission structure to say, I am a Democrat. But sometimes being a good democrat means pointing out where Democrats fail.
Derek: Here's how Democrats fail, and here's how we can getting back, get back to building stuff in America, and not just adopting this politics of moralizing language and [00:51:00] blocking projects that would help Americans.
Zach: I'm gonna critique your book for one second. I do love it, by the way. And I think it's great. And I'm so happy it came out at the right time. 'cause it is the right direction. And I think you guys, maybe it's your next book, but I think you missed one concept. I. You could have nailed a little better. And it's related to abundance and, and, and it's there to be very clear.
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Zach: It's just not as clear, which is if you think of the US economy pie that can grow. And I'm the grow the pie guy here. So your next book called Flick can be called Grow
Derek: Ezra, Ezra hates Ezra, hates pie metaphors. He, he, but
Zach: I get it. But it works for people.
Logan: You referenced it in the book of like how a pie metaphor is their shitty
Zach: Okay. Find a better one. But the general idea of if the pie is bigger,
Zach: we have more money to redistribute. I, I just think that concept is so important because it's like we can, as Democrats can get behind taxing and moving money around within the pie. Like [00:52:00] I'm happy to pay slightly higher taxes to help people afford SNAP benefits and Medicaid.
Zach: Totally. But if you think of it as like we have a hundred dollars to move around and we only will ever have a hundred dollars to move around. You lost me. If you want this to be more effective, you want Medicaid budgets to be bigger. If you want snap benefits to be bigger. If you want the ability to help bring people up who are poor today, a $200 pie is a lot better than a $100 pie. And if we just go back to like growth helps people in need because it gives us more money to redistribute, I actually think you can play to the progressive part of the party, which is really about inequality. At the end of the day, they think it's bullshit that there are really rich people and there are poor people and we should move one one to the other.
Zach: And that's fine. Like I'm okay with that, but can we at least say lots of really rich people give us more money to move around? And like that little piece of it I think is missing. They view rich people as bad, as opposed to like a source of wealth to move back. That's the key.
Derek: I had to stand [00:53:00] up for Ezra here and try to push back against pie metaphors, but I like the general idea. And so the way I would reframe it is a rich welfare state is better than a poor welfare state. Right? Like that's, that's the message. And progressives, the left should, should root for a richer welfare state because the, the welfare state will grow commensurate to.
Derek: The wealth. And so I, I don't see, you know, sometimes there's a, there's a tension or, um, or a fight sometimes in the left over like what to focus on. Like should you focus on oligarchy or focus on housing regulation or focus on the, uh, sometimes I get frustrated maybe because I'm just an agreeable person who doesn't like to fight people that much because I so see the politics of redistribution and the politics of growth as being two flavors that go well together and two flavors that go so well together that I can't even believe that folks are arguing that chocolate and peanut butter are somehow enemies.
Derek: It's like we know they work together. We [00:54:00] know that when the economy grows, even with a stable average tax rate, you are inevitably growing the amount of money that is created by income taxes that can be, um, redi redistributed to people who are lower income. And by the way, when economies grow, low incomes tend to grow as well.
Zach: Please just don't call it a welfare state. Just don't do it. You're gonna lose like 60% of the country with the word welfare. Like it just can't be in the termin. Like throw that word out. It doesn't exist. Like maybe he doesn't like pi, he's wrong about that. I, we should talk to asthma. Bring him on. He's wrong.
Zach: About the pie metaphor. And the reason the pie metaphor is good is because my 7-year-old can understand it. I'm not calling all Americans seven year olds, but there's a lot of us who aren't necessarily like paying attention and they're not always the brightest. Like if you teach people things that in simple terms, they will get it.
Zach: And my 7-year-old knows that the large pie is better than the small pie like welfare and redistribution. Feels like a little bit of a third [00:55:00] rail maybe it's not a pizza pie.
Derek: I'm just, I'm just, I'm just talking to friends on a
Logan: Yeah. Yeah, this is good idea. He's not running for operas. Well let Steven A. Smith internalize how to communicate this stuff. Uh, I was just gonna say, I mean, one, one thing we were talking about Bernie Sanders, uh, Zach, and I think one of the things that the amount of people that supported both Bernie and Donald Trump, I think proves how vibe based a lot of people are on this, where it's an authentic person that wants to blow up. Uh, the status quo in some ways. And it's actually like, it was interesting. I was listening to John Favreau and Sam Harris talking about, um, you know, the, the state sort of postmortem on the election and where we are and all this. And it was interesting. I didn't realize that I. News consumption and how closely you followed things actually correlated.
Logan: Uh, the more you watched, the more likely you were to be the Harris voter. The less you watched, the more likely you were to be a Trump voter. And I think there was something so visceral that both [00:56:00] Trump and Bernie capture, which is just like the, the vibe and the sentiment, and there's an authenticity to them, and they are who they are. And so in some ways when we talk about all these policies, and I agree, but it's almost like we need the cult of personality that is just gonna galvanize behind it. Because there's so many things that Trump is doing now that are so antithetical to the, to the previous generation of the Republican party, but he, he's captured it and he's, he's made people back into the logic that supports, okay, well this is what he's doing, and so therefore he's the, he's the person that knows all.
Logan: And so let's figure out what the inputs are that led to that. And so that's the one thing is I feel like similar to Barack Obama, the Democratic party has this thing of like, whose turn it is in the fairness and, no, no, no, it's Hillary's turn. Well now it's Joe Biden's turn. And you know, now it's Kamala's turn, uh, Kamala's turn. And I think that we just need that cult of personality that's gonna capture people. And whatever the message is, I think they should be able to articulate it rather than, you know, the welfare state or any [00:57:00] of those things. They're gonna intuitively nervous.
Zach: They're angry.
Logan: So who's the angriest politician?
Zach: That's the problem. We don't have one.
Derek: The anger is, um, the anger is a part of it. I also think, and maybe this is a controversial view, like. Donald Trump is a bullshitter extraordinaire, but there's something very sincere about his hatred of democratic liberal elites, right? You, you get this sense that for 40 years, this is the guy from Queens who always felt like he was being held at an arms distance from the Manhattan Elite, and he just could not wait to get one over them on the national stage.
Derek: And it just, it just, it communicates so cleanly to people who themselves feel whether they live in California, Kentucky, Mississippi, like they also hate the liberal elite and feel like they've gotten one over them for the last few decades. And so, just as Bernie Sanders is incredibly sincere and incredibly clear about what he finds.
Derek: So distasteful about American [00:58:00] economics. Donald Trump also underneath all of the bullshit, I think has this like kernel of sincerity. And for me, like when I think, you know, not to over extrapolate my own experience, but like when I think when I get like really angry, I'm not, I'm pretty soda anger. But like for example, like when I had like an absolute aneurysm on C-N-B-C-A few days ago, like that was partly because it was so fucking obvious to me that to root for the stock market to go down to root for recession, to root for a housing crash.
Derek: It was so freaking stupid that I couldn't believe I was hearing it. And so like the anger flowed from a clarity of opinion and what I think someone on the democratic side needs, if they were gonna have like, you know, a moderate run on this message and really take it all the way, is that they need to be a true believer, right?
Derek: This can't be someone that we like persuade to change all of their views that they've, you know, communicated the other side of for the last 20 years. And they're like, oh, abundance seems to have some momentum. I guess I'll pretend to be an abundance liberal for a while. No, the voters will smell that.
Derek: They will smell it [00:59:00] on you. And also by the way, the opposition will be able to drag up a bunch of quotes that are the exact opposite of what you're claiming. We need people
Zach: they need to.
Derek: and automatically in their bones and in their genes upset about the fact that Americans know how to build houses and just don't do it.
Derek: And that we have an unaffordability crisis and Donald Trump's doing the exact opposite of what we need to do. Like the anger needs to like pour out of them the indignation and just has to come naturally. I think it can, because like a lot of this stuff just does suck.
Zach: I'll tell you where it falls down and why we don't have anyone like this yet. I agree with everything you're saying. We don't have a Democrat that hates the government. We need somebody that fundamentally hates government and believes that like less government is better. It's not no government, but it's the right amount of government for the right problems.
Zach: And then get the fuck out of the way because the best growth engine of the United States is private business. And if you want that pie to be bigger, sorry about the pie analogy, and you want the redistribution that you're going to get, like the government is primarily the problem in many of [01:00:00] these areas.
Zach: We talked about it in housing. There's so many examples I can give you in healthcare. And people who run in the Democratic primaries and wanna be democratic leaders love government. And I think that's where you get that tension. Like, it's so easy for me to hate Bernie Sanders because I fundamentally know he's wrong, but he believes it.
Zach: He thinks the system is corrupt and fail. All Bernie Sanders wants are fewer jobs and higher prices. He doesn't realize that. And, but like, these are the kind of things I think I, I agree. They have to believe it, but they can't believe that the government creates abundance. that's my critique of this thing, which is like the government is the thing that prevents abundance and it needs to figure out how to get the fuck out of the way because central planning, centralized, this stuff doesn't work.
Zach: This is the same thing we critique China about, right. Central planning. We, same thing. We used to critique Russia about, and communism, central planning. Same idea. Until we get somebody who's like, oh man, more government, more rules, more like I, I don't think they're gonna genuinely believe. The [01:01:00] kind of things you are saying because if you read your book, it is again, it's awesome and you trace a lot of the source of the problems that you articulate very well. They come back to government, they come back to rules, they come back to regulations. And this is government in a nutshell. And there's, I think that's the gap. And I have not seen somebody in the party, party, maybe Shapiro at the, you know, at the high end here, who is really willing to be like, we gotta get outta the way.
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Derek: I think it's less about get the government outta the way and more empower the government to get shit done where it's the government's job to get shit done. Right. So I see, for example, in, in healthcare, there is an enormous role for government to run not only Medicare and Medicaid, but also maybe play a larger role in offering a public option When it comes to something like municipal infrastructure, like I don't think that the private sector should be exclusively in charge of building roads and bridges and local transit.
Derek: Like this is a public good and the benefit of building good local infrastructure [01:02:00] isn't captured by the number of tickets that you're selling on a train. It's captured by the overall municipal, domestic growth that happens when you have good transportation that gets people from their houses to work so that that's another public good.
Derek: I think energy in many cases can also be a public good, and so I, I, I wanna empower government to help America get richer. Sometimes that means knowing when take a step back, and sometimes it means stepping up. Like we might disagree on the Chips and Science Act. I think it's, I think it's worthwhile for the government to subsidize the reshoring of the manufacturing of one of the most important goods in the world that currently is so concentrated in an island just off the coast of our geopolitical nemesis, that it doesn't make any sense to just allow the free market to continue to play a role in concentrating high-end semiconductor manufacturing in Taiwan.
Zach: But here's the, here, here, here's the problem with these policies.
Derek: government should fit, but ultimately what I do agree is that sometimes government needs to understand [01:03:00] that if we want energy to be built or if we want houses to be built, most of those developers are gonna be private and most of those energy companies are gonna be private. And so we need to write rules that allow the private sector to efficiently produce outcomes that we consider, you know, that, that I consider liberal and beneficial to the country.
Zach: This is where I, I just like, yes, the government needs to be involved in the military. There are certain places where the government is useful as like a large insurance company as it relates to Medicare and it should enable large infrastructure product projects, in particular multi-state projects. Sure.
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Zach: But then you get into industrial policy like this CHIPS act, which is, this is the problem with government. You give it tools. It uses tools. And to your own point about the tools we gave the government in the 1970s around regulatory issues, in environment, they were not meant to do this. And then someone goes, Hey, we've got this tool because government likes to do stuff. And those tools get used and abused and you create crises. And the more tools we give government, the more they will be used. [01:04:00] And so I agree conceptually, efficient government sounds great, but that's like saying flying pigs sound awesome. It's not a real thing. And I think what you're gonna find is any new rules we add in 20 years or in 10 years, they will be abused.
Zach: And the CHIPS Act is such a perfect example of like a, the Idiocracy of central planning, which is we've decided as a United States government that chip manufacturing, not design, not design, where all the IP really lives making the chips, the actual like labor jobs on the bottom of the totem pole are the most important thing in semiconductor supply chain. And it is flat out wrong. Like you do not get growth in America by putting the chip together at the end, which is what the TSMC facilities that they're building in Arizona are focused on. All of the important chip manufacturing work is in the design. It is in the engineering. It is the stuff that happens in, here's how we design these fabricators, here's how we quality control them.
Zach: It sits in [01:05:00] Taiwan, whether they're building it here or not, with higher cost labor does not make America more resilient. It doesn't. Plus you have a supply chain of materials that are global in nature. So who fucking cares about putting it together in Arizona, even if the world goes to shit, you don't even have the materials to build that chip in Arizona.
Zach: Why? It's the wrong part of the supply chain. And the reason this thing doesn't make any sense is because the government decided this, course, they got it wrong. They don't understand how any of the, they just wanna hand money out and, and, and, and it's not that I, this is where the nuance comes in. Do. I would, I love the idea of like American dominance, dominance and semiconductors. Absolutely. But we pit the wrong thing to dominate because the government is an inefficient decision making machine. It makes the wrong decisions consistently over and over. The other thing I would tell you is like America already dominates in designing chips, right? We have Apple designing chips, we have Google designing chips, we have, Facebook is designing chips right now.
Zach: You have a small, like, [01:06:00] really, really good at this. Why did we decide that the last mile labor is the thing that matters? And it's, it's because you're handing free money out from central planning. That's why I don't like government. I don't like that giving them too many tools. Not because I think government is bad, but I think the tools get abused in the decision making falters.
Zach: And you have to remember, we put stupid people in charge all the time. We did it. There's a guy in there right now who's really stupid and you have a bunch of people around him who are also really stupid. Why do we wanna give these people more power? We want to take that power away from them. And this is where I hate, like United States industrial policy is misguided.
Zach: It is a waste of money. And it's also the same thing we are complaining about the Chinese doing. I, I just feel like
Zach: why is it good when we do it and bad when they do it?
Derek: it's, it, it, it's a good debate. Um, my preference for industrial policy is on a handful of goods. Semiconductors are absolutely one of them. My, my brief reply would be, I think [01:07:00] markets are very good at seeing what part of the supply chain has the most value. Right. You mentioned that the value that we wanna have in the US is the design of the chips, not their manufacturing.
Derek: Where I think markets are not as good at seeing are low probability geopolitical risks, and the risk of China invading. Or enacting an embargo around Taiwan and blocking off the US or the world from the manufacturing or supply of the most high tech chips in the world is a risk so high, but also of such fudgy probability
Zach: But they
Zach: already make, they already make the chips outside of Taiwan. They already do this.
Derek: what's 80? What, what, what percent of what? Percent of the world's, uh, highest tech
Zach: But they're putting, they're putting, they're
Zach: putting factories. They're putting factories in Europe. They're putting factories in other Asian countries, or they are putting factories in the United States. If they invade Taiwan and they take TSMC as a company, your little factory in Arizona doesn't know how to build another factory. The Taiwanese people [01:08:00] know how to build the factories. We don't actually have the knowledge. We're like, oh, isn't it amazing we can do
Zach: this last mile
Derek: that? Why? Isn't that why we would want to?
Zach: No. If you really wanna resor it, you have to move.
Derek: there's an
Zach: No, you have to move all of TSMC. You have to move the design, work, the knowhow. You have to recreate TSMC corporate, right?
Zach: Like it's not the labor. It's not the labor. We keep getting this wrong. Like that's not the hard part. I mean, it's hard, but it's how to use the labor in the first place. It's the architecture of this stuff. And that is not what we are moving to the United States. I agree. That it is a giant threat. If China comes in and takes Taiwan, which they very well may do, and they basically say, Hey, you wanna call TSMC and figure out how to like debug this problem in Arizona?
Zach: And they're like, guess what? TSMC is now the Chinese TSMC. I'm like, they're not fucking answering the phone. That's gonna be the problem. And I, I just like, it's a classic democratic problem you guys. And I [01:09:00] say, you guys not really it, the problem right. They get the solution wrong
Derek: So what's, what's the
Zach: and over.
Derek: libertarian market-based solution to distributing TSMC knowledge? In such a way that China doesn't hold a choke point in the possible embargo of invasion of Taiwan. What's the market,
Zach: single Taiwanese person a US passport tomorrow. Every single one of them. If you live in Taiwan, you can move to the United States. Let's, let's brain drain the shit outta them, right? Let's bring the actual people who know what they're doing to America and one of them will start a competitor. I mean, this is how we got Nvidia, right? We got Jensen to America and he is like, oh, maybe I should start a, the United image,
Derek: especially like, you want to import the knowledge
Zach: the
Derek: but you don't want to, but like I, I feel like that's part of the goal of the Chips in Science Act is to import the knowledge of
Zach: No, it's The Chips and Science Act is a construction act. It's a, it's a, it's a giant subsidized construction act. And it's just [01:10:00] like, again, right problem, wrong solution. By the way. It's gonna handle a whole bunch of money to Intel. Intel is not the solution. Like what we really wanna do is, if you wanna like have new chip design here, get the people who know how to start these companies and get them to America.
Zach: Give them access to talent. Give them access to cheap real estate for that talent. Give them good healthcare. Like we are a knowledge economy and the manufacturing part of this is important, but it's the last mile. If you don't do the knowledge part, the last mile doesn't matter. And we keep focusing on the, the, the, the last piece of this and not the hard part. You want more chip design companies here? Get the people who know how to do it. Give 'em, give 'em safety and security.
Derek: We, we agree about this there there is a combination of explicit and tacit knowledge embedded in the work of designing and manufacturing The. Most high tech ships in the world and the US I think should have a strategy to de-risk [01:11:00] ourselves by moving some of that to the US or to other friendly neighbors.
Zach: But the sum of that is not a physical, it's not a physical thing. We're not moving a physical thing. It's people. It's people. The knowledge of how to design that facility in Arizona. And they did a really good job, by the way. Like they actually built it. It's producing ships. Like it's, it blew my mind.
Zach: I didn't think that the TSMC would be able to pull this off, but like. Man, you, Taiwan, and the people in Taiwan are absolutely incredible people because they're constantly under threat of war. And so they're really fucking creative and wise. It's like Israelis, you know? It's like when everybody around you hates you, like you, you show up, right?
Zach: Like these, these economies are very similar in that way, which is like they're tiny, small nations constantly under threat and that's why they innovate. And if you want to have the actual knowledge of how to build that facility, it's not the people in the facility, it's the people who designed it and they're not
Derek: We agree that the, we agree that the status quo is too high risk and that we need a policy intervention. We disagree about how exactly that policy intervention works, whether it's sort of fiscal subsidies, or whether it's [01:12:00] just a bunch of, you know, gold cards, uh, to get,
Zach: uh, well, the other thing we disagree about is that the CHIPS Act is good because there's like diversity requirements in the hiring of the people to
Zach: build. Like, come
Derek: explicit, we
Derek: explicit, we explicitly say that, that the implementation of the Ships and Science Act had a bunch of problems in, in
Zach: wait, telling me that government implementation is bad? So surprising.
Derek: I, I'm the person telling you the government does go, is important for certain purposes, but often achieves those purposes through bad ends. Yes,
Zach: Yes. That's my problem. Yeah.
Logan: I know, I know you ran along with us here. I feel like we could go for another, uh, two hours maybe, maybe another time we will do that, but, uh, yeah. Thanks for, thanks for,
Derek: was, I was worried in the first five minutes that you were gonna agree about everything. So it was, it was, it was fun to be able to spar,
Logan: yeah. Well,
Zach: Well, I think, I think one thing you guys nailed.
Logan: as a Democrat. Uh, you know, actually he's a libertarian.
Zach: No, I think, I think the thing that's most important that you guys nailed, and I do, I do really like it, uh, is like we have to think about [01:13:00] more stuff. we've got away from this, like the Democratic party was like, how do we move the stuff around and as opposed to creating more stuff. And that is a really important point in, in the book.
Zach: I think it's, I think it's really, really good and like plus the identification of like mostly housing is the only thing. I fundamentally agree with that.
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Zach: By the way, one of the biggest problems we have here, here's like a real example. I know you have to jump New York City where I live. So we have a, you know, I, I run a biotech fund.
Zach: It's a billion dollar biotech fund. All of our people are in Boston
Derek: Or in Boston.
Zach: and everybody's like, why aren't there more biotechs in York? And I can tell you exactly why, because if you wanna be an incredible scientist, in particular, a chemist or a biologist is what you need for drug discovery. don't make a dollar until you're like 34 because you have to go to school, you have to go to your PhD, you have to go to your postdoc, and you have to write a postdoc.
Zach: You're, you're in your thirties and do that entire time. You make like $25,000. the fuck in New York City [01:14:00] are you gonna live on 25? It doesn't work.
Zach: And so actually I, my honest argue, 'cause I've, I've been asked by like, people who work for the city of, city of New York, of like, how do we get more biotech in here?
Zach: And I'm like, cheap housing because they, they can't live here. And then if you live in Queens. Or you live in Westchester, New Jersey. The commute is such a bad commute. You're like an hour away from the city in Boston. I dunno. If you spend any time in Boston, you can be 40 minutes outside of Boston and rent a pretty nice apartment for like a thousand bucks a month.
Zach: And you can commute in and, and so like Boston has just done a decent job of like making, being a postdoc
Derek: Hmm.
Zach: a, a decent lifestyle. And so then they all accumulate there and it's really, really difficult to get people from Boston to New York because of the money,
Zach: because of the costs. We, we have plenty of smart people.
Zach: We have a much cooler, have you ever been to Boston? It's the most boring city in the world.
Zach: So
Derek: I, I like, that's
Zach: Oh my God. Everything shuts down at 11. The food sucks.
Zach: Like, but, they live there.
Zach: They live there. So IIII view it as a housing problem at, at, at it, [01:15:00] at its core. It's not like we don't have good ideas and universities here, we have a lot of universities.
Zach: We just, we just, it's so, I mean, I, I pay like $400,000 a year to live in my own apartment that I own, that I own.
Logan: we'll bleep that amount, uh, out, uh, here
Zach: No, I don't care. I'm feel free to share that with the world. I mean, it's not 400, but it's like, it's like two 50 or something, and that is the taxes on the thing I already own.
Logan: Yeah. All right.
Logan: Well, Derek, thanks for doing this. I'm gonna press stop here.