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How Money Actually Works — Transcript

by Johnny Harris · 33,087 words · 4,846 segments · language en · Watch on YouTube

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0:02[music]
0:06If we took all of the gold that has ever
0:08been mined in all of human history and
0:11put it all in one place in a giant cube
0:13here in Washington DC, it would look
0:15like
0:18this.
0:21Oh, this is it.
0:24I mean, it's pretty big, but I kind of
0:27thought it was going to be a lot bigger.
0:29So, what's all this gold even used for?
0:31Well, 45% of it is used for like
0:34decoration and jewelry. You got
0:36necklaces, you got earrings, you've got
0:39this giant Buddha that's just solid
0:41gold. There's an old Egyptian coffin
0:43made of pure gold. Largest gold coin in
0:46the world. It's got a kangaroo on it.
0:48It's 45% of all the gold. You got a
0:50small portion of all this stuff that
0:51gets used for industry. Stuff like the
0:53fillings in your teeth or electronic
0:56components that use the special
0:58properties of gold to work. But then a
1:01huge portion of all of this gold is just
1:04sitting in vaults around the world,
1:06mostly in New York and London in the
1:08form of bars gathering dust. Governments
1:11and investors have been on a gold buying
1:13spree lately. I mean, look at the price
1:15of [music] gold. President Trump is
1:16seeking more control of the Federal
1:18Reserve.
1:19>> Gold prices soar to a record high after
1:22US President Donald Trump criticized
1:24Federal Reserve.
1:25>> Russia and China have been buying a lot
1:27of gold bars and Florida is trying to
1:28make it so that gold can be used as real
1:31money again. It [music] seems like gold
1:33is having a comeback, but actually what
1:35I'm learning is that it never went away
1:37in the first place. [music]
1:39>> Would you look at that?
1:51So, how did all of this gold get here to
1:53Earth? Well, a lot of the gold that
1:55humans mined came to us on one of these,
1:57an asteroid loaded up with heavy metals
2:00that formed from exploding stars.
2:04If you zoom into one of those metals,
2:06you'll see some really weird looking
2:08atoms. The electrons are moving nearly
2:10the speed of light. This absorbs the
2:13blue light and reflects the yellow and
2:15red light. Look, it's yellow. It's shiny
2:18like the sun. No other metal does it
2:21quite like this.
2:26These gold deposits sat in Earth's crust
2:29for billions of years, undiscovered.
2:32Some rivers dug in, eroding the earth
2:34and revealing these pieces of shiny
2:36stardust. It caught the eye of some
2:38humans who noticed it was different.
2:40found this shiny rock that they dug out
2:42of the ground that they could turn into
2:44things that it didn't tarnish.
2:46>> It was a dense metal, but it was somehow
2:48soft and workable. It didn't rust. It
2:51was incorruptible. Was it eternal?
2:53>> Gold has [music] chemical properties
2:55that have proven to be very interesting
2:58and useful to many [music] societies
3:00across a kind of many centuries. And
3:03some of those properties have to [music]
3:04do with its purity. Some of them have to
3:07do with its malleability. Some of them
3:09have to do with its indestructibility
3:11and some of it has to do with its
3:13aesthetic interest.
3:16>> From China to the Andes, people
3:18independently fell under gold's spell.
3:20At first, for decoration and celebration
3:22of their rulers and their gods. Indian
3:25healers made medicine with it. To the
3:27Inca, gold was the sweat of the sun.
3:30They covered their temples and adorned
3:32their faces with it. The Greeks made
3:33statues. King Solomon plated his temple
3:36with it. And 6,000 years ago, this guy
3:39was buried with a gold bracelet, with
3:40beads, with a scepter, with a sheath.
3:43Oh, and not for his sword, but uh for
3:46his
3:48Yeah, I mean, I guess it was pretty
3:49valuable stuff. Chinese emperors
3:51ingested gold trying to become immortal,
3:53which spoiler alert doesn't work. But as
3:56humans gathered in larger and larger
3:57groups, empires grew. They became greedy
4:00and hungry for more land. The story of
4:02gold starts to evolve, helping kick off
4:04one of the most significant
4:06psychological inventions humans ever
4:08came up with. The invention of money.
4:13>> It's a commonly accepted medium of
4:15exchange that many people are willing to
4:18accept it. In early societies, one of
4:20the most common things was cattle.
4:23>> Yep, we're talking about cows. We'll get
4:24back to gold in just a sec. Let's go
4:26inside the human brain to see how money
4:28evolves. So, yeah, instead of just
4:31trading something I want for something
4:33you want, humans started settling on
4:35commonly useful things that they could
4:37carry around and that would be valuable
4:39to most people.
4:40>> Historically, lots of objects have
4:43served as monies. So, you got barley,
4:45salt,
4:46>> cows were something that many people
4:48needed for food. They were transportable
4:50because they could walk. They were
4:51pretty easy to maintain cuz [music] they
4:52eat grass. This is the most obvious
4:54version of money. Something that is
4:56practical and useful. It'll help you
4:58survive. But they also have drawbacks.
5:00Cows don't make good money. That's a
5:02weird sentence I never thought I would
5:04say. But yeah, they spoil. They're hard
5:06to divide. You can't easily bring them
5:08to far away places to do trading. So
5:10eventually, humans found something
5:12better. That shiny soft metal pulled
5:14from the riverbeds. It was easy to
5:16shape, to split up.
5:18>> So it's easy to carry around. It's
5:19easily divisible.
5:20>> And it just looks cool. I mean, humans
5:23love shiny things, so that was like a
5:25nice added bonus. It was rare, but not
5:28too rare. Like, there was enough of it,
5:29but it wasn't like everywhere, which
5:31like that's an important part of this.
5:32But gold doesn't feed you. It doesn't
5:34keep you warm. It doesn't shelter you.
5:37Yes, you can make jewelry and like a
5:39dagger out of it or something, but like
5:40it's not that intrinsically useful
5:42unless we introduce a very powerful
5:45ingredient to the mix. It's a very human
5:47ingredient called belief.
5:51>> [music]
5:51>> This guy believes gold is valuable and
5:53so does this guy. If someone believes
5:55that gold is valuable and so does
5:57another person, that belief turns metal
5:59into a system. He trades it for wheat.
6:02I'll give you gold, you give me wheat.
6:04You then take that gold and go trade it
6:07for salt or fabric. Gold becomes
6:10valuable not because of what it does,
6:12but because what we believe it means. So
6:15this is a big psychological step for us
6:17from cattle which has utility to gold
6:20which has no utility but is scarce,
6:23durable, divisible, universal and don't
6:26forget nice and shiny. And all this is
6:28made possible because of collective
6:29[music] belief. Belief that if I have
6:31this metal, I will be able to go use it
6:33to buy things that help me survive. And
6:35if everyone believes it, [music] then it
6:36works.
6:37>> Gold and silver became the dominant
6:39monies throughout the world.
6:47So the belief in gold spreads throughout
6:48the world a few thousand years ago, not
6:50just as a thing that we do to worship
6:52the gods, but as a means of trade, a
6:54currency, a money. This also happened
6:56with gold's forgotten cousin, silver.
6:59Poor silver. It just didn't get those
7:00fastoving electrons to make it shiny.
7:03And there's like too much of it, too.
7:04Anyway, soon gold was being stamped into
7:06standardized coins, being used as a near
7:09universal form of money all around the
7:11world. It was magic, but it was also
7:14mania.
7:17When [music] the Spanish landed on the
7:19shores of modern day Mexico in 1519,
7:22they met the Aztec civilization. And one
7:24thing caught their eye. Gold. Lots of
7:28gold, including these gifts that the
7:30Aztec king was presenting to these
7:32Spaniards, giving it to them for free.
7:35The Aztecs were using lots of gold. But
7:37not as a currency, but as decoration for
7:40worship, for armor, for blades. It
7:43wasn't economic. But to the Spanish,
7:45gold had become economic, a means of
7:47trade. It was wealth. And here it was in
7:50extreme abundance. And they wanted it.
7:53Or in the words of one Spanish
7:54conqueror, we suffer from a disease of
7:56the heart that can only be cured by
7:58gold.
8:02The Spanish ended up massacring the
8:04Aztecs with their weapons and their
8:06diseases.
8:08They took as much gold as they could
8:10find, these statues and masks [music]
8:11and jewelry and blades, melted them
8:14down, shaped them into uniform [music]
8:16units of value, and stamped them with a
8:18seal of authority. They spent the next
8:20century ripping through the Americas,
8:23chasing every rumor of golden [music]
8:24cities and sacred wealth. places like El
8:27Dorado, Cibiola, men fevered by greed
8:30for this shiny metal stuff, fueled by
8:33conquest and spoils [music] that built
8:35their cathedrals and ended up kicking
8:37off a race among the European empires, a
8:40race for more and more gold.
8:43>> Let's not forget what the Spanish found
8:44when they came to the new world. Gold
8:48mountains. And then of course this leads
8:50to a cottage industry of renegade
8:53sailors, sometimes hired by other
8:54empires, trying to intercept these ships
8:56going to and from the New World with
8:59hopes of finding one of these chests
9:00full of gold. Now, I was disappointed in
9:03my reporting when I discovered that most
9:06pirates weren't actually after gold and
9:08didn't find a lot of gold. They were
9:09after more boring stuff like lumber and
9:11they didn't really have these X marks
9:13the spot type maps where they buried
9:15their chests of gold. Oh, look. It's the
9:18X. The
9:20>> X marks the spot.
9:21>> That's mostly a myth, but it's also kind
9:22of a useful example of how gold inspired
9:26these like big grand stories of
9:29adventure, of jackpot, how it enlivened
9:31the imagination and inflamed this greed
9:34in people's minds. I mean, I get it. How
9:36sick is the idea of a bunch of gold that
9:39never rusts buried somewhere in the
9:40Caribbean, ready to turn a peasant into
9:42[music] a count?
9:44>> Greetings. God, I love the Countmani
9:46Crystal from the early 2000s. So, by the
9:491800s, this psychological leap [music]
9:51is complete. There was a near universal
9:54belief in gold as a currency, a means
9:57for exchange, the universal money. Big
10:00European empires had already torn across
10:02continents in search for it. And now it
10:03was the turn of regular people. The
10:04dreamers, the risk-takers, the desperate
10:07men who joined the hunt for gold. Men
10:09with nothing to lose, chasing rumors of
10:12riches and doing pretty reckless and
10:14extraordinary things. All for a shot at
10:16striking gold. A big group of them in
10:191849 fled into the western United
10:21States, helping build California,
10:23becoming the 49ers, all in search for
10:25gold. These guys are in Canada's Yukon,
10:27where it is very cold, and they're
10:29looking for gold. I mean, this happened
10:30everywhere. South Africa, Australia, the
10:32Amazon, each place the same story. Men
10:36intoxicated by the idea of getting rich
10:38off of gold, doing whatever it takes to
10:40get their hands on this stuff, even
10:42forcing others to mine it for them. This
10:45frenzy of hope, chaos, migration. It was
10:48gold fever. And it didn't just move
10:49markets, it moved human beings, entire
10:52populations. It was, as the writer of
10:55this excellent book puts it, a
10:57murderous, cruel, intoxicating, brutal
11:00adventure that swallowed an entire
11:02civilization and [music] spat it out as
11:04coins. Man, I love when rigorous
11:06historians write beautiful language.
11:09Okay, let's dive back into the brain
11:11really quick and see what's going on
11:12next. We're about to take another big
11:14psychological leap here. The leap from a
11:17belief in this soft, shiny metal to a
11:19belief in paper.
11:22One of the problems with physical gold
11:24is that if you want to trade it in large
11:26quantities, it's pretty heavy to carry
11:28around a lot of gold. And what people
11:30decided was if they could deposit their
11:32gold into a bank, it would give them a
11:34bank note, which was essentially an IOU.
11:361 ounce of gold was worth approximately
11:39$20. So basically, if you had a $20
11:42bill, you could go into a bank and
11:44redeem it for 1 oz of gold.
11:45>> Most individuals when they got paid,
11:47they're going to pay envelopes stuffed
11:49with banknotes. So that was the everyday
11:51medium of exchange. As long as you
11:53trusted that the bank notes were good,
11:55you really didn't think about much which
11:57bank had issued the notes. They all
11:59exchanged one to one against each other
12:01and against gold and silver dollars.
12:03>> If you wanted gold instead of the bank
12:05note, you could come in and redeem the
12:07bank note and they would give you gold.
12:10So now instead of believing in gold, we
12:12are believing in banks, trusting them
12:15that if they give us this piece of
12:16paper, it actually represents the gold
12:18that they are holding safe in their
12:20vault. And that at any moment if I
12:22needed the gold, could go to the bank,
12:23get the gold. That is now a pretty far
12:26abstraction from cows, something that
12:28feeds us. We're now carrying around
12:30paper. But once again, it follows the
12:32same rule that if everyone believes it,
12:35and if the banks don't give us any
12:37reason not to believe it, then this
12:39worthless piece of paper turns into
12:41economic power, a currency. And in fact,
12:43if we can do that, it's really
12:44convenient. It makes trade way easier.
12:47Theoretically, everyone thrives here.
12:49So, oh yeah, silver. Okay. Yeah. Instead
12:52of gold in the vault, a lot of economies
12:54had silver in the vault. In a lot of
12:56economies, we're trying to have both
12:57metals, giving them each a specific
12:59value and pegging that value so that it
13:01wouldn't change too much. But this
13:02becomes a problem. It's really hard to
13:04have two metals as the foundation of
13:06your paper money. And then suddenly, if
13:08there's a big discovery of silver in
13:10Nevada or something, there's way more
13:12silver, so it throws off the value of
13:13silver, but it's pegged to the value of
13:14gold. And so all this arbitrage happens.
13:16This was a huge decadesl long debate
13:18here in the United States. Got really
13:19political. You've got this guy running
13:21for office mostly on a platform of
13:23silver. And some people think that the
13:25Wizard of Oz is an entire commentary on
13:27this debate between gold and silver.
13:30And while reporting the story, I was
13:32multiple times very tempted to go down
13:34this rabbit hole. This is a video about
13:36gold, not about silver. Sorry, silver.
13:39So, we'll save that one for another day.
13:41And indeed, by 1900, gold, this shiny
13:44metal that humans have been using for
13:46thousands of years to do trade, endured
13:48as the one metal [music] that we would
13:51base our entire economy off of, at least
13:53here in the United States, but a lot of
13:55countries, too. We set a firm standard.
13:5720 bucks gets you 1 ounce of gold.
14:00There's a finite number of gold. It
14:02doesn't fluctuate too much. Anyway, this
14:03was called the gold standard, and the
14:05United States and a bunch of other big
14:07countries were on the gold standard in
14:08the early 1900s.
14:11>> [music]
14:13>> So, it's pretty clear that the economy
14:14is like a big confusing thing and
14:17especially in the last couple of years,
14:20we have seen a pretty chaotic economy.
14:22Higher grocery bills, unaffordable
14:24housing, confusing insurance costs. But
14:26here's what's tricky. The way that we
14:28understand these changes, what's
14:31actually happening differs dramatically
14:33depending on where we get our
14:35information. And honestly, that applies
14:37to this video. I've chosen some
14:38explanations of the economy that I think
14:41are a useful way to understand it, but
14:44I've chosen the narrative here and those
14:46choices matter. That's why I keep coming
14:48back to Ground News because it's the one
14:51place that helps me separate facts from
14:53framing. Ground News is an app and
14:55website that allows me to compare
14:57coverage from many different outlets,
15:00including outlets from different
15:01countries, so that I can make up my own
15:03mind instead of inheriting someone
15:05else's narrative. Take this example.
15:07Walmart recently announced it was
15:09lowering prices. One outlet framed it as
15:12the administration successfully pushing
15:14down prices, but another outlet, just in
15:17their framing, argues that the president
15:19took credit for routine discounts while
15:21prices remain historically high. This is
15:24the same fact, the same underlying
15:26announcement, but each version gives you
15:28a completely different narrative, a
15:30different impression of what actually
15:32happened. They try to tell you whether
15:34it matters and who should get the
15:36credit. We must remain vigilant. And
15:38this is why I'm such a big fan of ground
15:40news because it's exactly how I try to
15:42approach my own coverage, my own videos,
15:45ingesting a lot of different
15:46perspectives, and making sure that what
15:49I cover includes a lot of those
15:51perspectives. This is context that
15:53hopefully allows you to come to your own
15:56conclusions. But my videos still have a
15:58framing. I'm still a person with bias
16:02and ground news is a tool that I use to
16:04make sure I'm checking those biases that
16:07I am aware of my framings. Ground news
16:09was built by a former NASA engineer who
16:11approached this as a problem to be
16:15solved, a problem with how we get our
16:17information. It's one of the few tools
16:18that I found that actually tries to give
16:20you more context instead of less of it,
16:23which I think is so important right now.
16:25So, you can get 40% off a big discount
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16:29Vantage plan which gets you in on all
16:30these features that you can check out.
16:32You just got to go to the link that's in
16:33my description. It's ground.news/jny
16:36Harris. You can also click this lovely
16:37QR code. I'm grateful to Ground News for
16:40existing for what they do. I'm also
16:42grateful that they sponsored today's
16:44compilation. And with that, let's dive
16:47back into the wild world of our economy.
16:50Okay, let's get back to the human brain
16:52because we're about to go through our
16:53third massive leap in the psychology of
16:56money. Let me warn you, this one's kind
16:57of weird. And I went to college for this
17:00one, monetary policy and economics, and
17:02I'm going to do my best to explain it,
17:04but starts to get a little bit wacky.
17:06We're also entering some controversial
17:07territory. Economists who are much
17:09smarter than I debate this stuff, what
17:12I'm about to say, and they all have
17:13different takes, and they have strong
17:14feelings about it. So, I'm going to do
17:15my best here, but like in the comments,
17:16you're going to see some strong
17:17opinions. I welcome them. Just be nice.
17:23So, it's the early 1900s. Banks have
17:26gold in their vault. They give you a
17:28piece of paper that says you're entitled
17:29to the gold in the vault. But it turns
17:31out human beings are struggling to adopt
17:34the paper thing fully.
17:36>> There [music] are a series of financial
17:37panics. You probably don't want to get
17:39into the causes of the panics. The banks
17:41had a limit to how many banknotes they
17:43could issue. So when people wanted more
17:45currency and they couldn't get
17:46banknotes, they [music] would take gold
17:48and silver coins out of the bank vaults.
17:50And now the banks are losing reserves.
17:52Now they have a problem. So here they
17:54all are at the same time rushing to the
17:56bank to pull their money out all at
17:58once.
18:01This is not good for an economy that
18:03grows when you give banks money to lend
18:06out to other people and trust that not
18:08everyone's going to try to take it all
18:10out at the same time. We made a whole
18:11video about this, how modern finance and
18:13credit works and how that multiplies the
18:15money supply in these weird ways. You
18:16can check that out. But for now, just
18:18look at this picture of a bunch of
18:20people on Wall Street trying to get
18:21their gold out and know that this is not
18:24good for the economy. So, the US
18:25government decides that having all of
18:28these decentralized private banks who
18:30are giving out paper money is just too
18:33prone to these vulnerabilities to
18:35everyone going and taking all the money
18:36out at the same time. So, they decide to
18:38make one bank, [music] one bank to rule
18:40them all, aka the central bank, aka the
18:44Federal Reserve, aka the Fed.
18:48We're just going to call it the Fed from
18:49now on. Why did the US government decide
18:52they needed to centralize this around a
18:55single bank?
18:56>> It's a federal institution that will
18:59cope with potential panics and shortages
19:01of currency and shortages of bank
19:03reserves.
19:03>> The Fed would be the big bank that would
19:05be given a bunch of power to set the
19:08rules for the rest of the banks
19:10>> by issuing more currency when it's
19:12desired. Now, it was still technically
19:13pegged to the gold standard, but a huge
19:16difference was now you couldn't just go
19:17to the bank and exchange your paper for
19:19gold. And the Fed would be in charge of
19:21controlling how many of these banknotes
19:23were floating around the economy.
19:25>> And so in the United States, we have the
19:27Federal Reserve that is the monopoly
19:29provider of dollars,
19:30>> which in turn determines how the economy
19:33works, how people spend money, how
19:35people borrow money. And their goal at
19:36first was just to make sure that this
19:38doesn't happen again.
19:42Look at this fancy machine that the Fed
19:45has. It's not a literal machine. This is
19:47completely symbolic. Don't over
19:48interpret the analogy here. So, to be
19:51clear, we're still on the gold standard
19:52at this point. It's like 1913 or
19:54something. Every 20 bucks is pegged to
19:56an ounce of gold. But now, the Fed has
19:58all of these levers to play with. These
20:00levers that invisibly incentivize people
20:03to borrow money, the interest rate,
20:05[music] to spend money. And with their
20:07new power, the Fed starts fiddling
20:08around with all of these levers. Hey,
20:10look, if you lower the interest rate,
20:12more people will borrow money. They'll
20:14spend money. They'll start businesses,
20:16more jobs. Many critics have said that
20:18they kept interest rates below where
20:21they should have been, they made credit
20:22too abundant, and so you had an
20:24overinvestment boom in the 1920s. that
20:27although there were genuine investment
20:29opportunities due to technological
20:31change, electrification, the automobile,
20:33things like that.
20:34>> Wow, look, it's an economic boom, it's
20:36the roaring 20s, the stock market just
20:38quadrupled in 5 years. Times are good.
20:41Thanks in part to the Fed pulling some
20:44of these levers. Though, this, like many
20:46assertions I'm about to say, is kind of
20:47debated. Try not to get sucked down the
20:49economic debate rabbit hole here. So,
20:51things were good in the 1920s, maybe a
20:53little too good. Uh-oh.
20:57The Fed overamplified that boom and
20:59raised it to an unsustainable pitch.
21:06>> The bubble burst, the good times ended
21:08and the US and the rest of the world
21:10falls into a great depression.
21:12>> The money supply, the early years of the
21:14Great Depression, starting in 1930,
21:16there are bank runs that drain a lot of
21:18the gold out of the banking system into
21:20individuals wallets and under their
21:22mattresses. Again, we made a whole video
21:24about what recessions and depressions
21:25are. Check that out. Okay, but watch
21:27what happens here. One of the very
21:28important levers that the Fed has on
21:30this symbolic machine is to put more
21:34money into the economy. And they do this
21:36through a bunch of different indirect
21:37mechanisms. But the result is there's
21:39more money to go around and borrowing
21:41money is cheaper. They can make the
21:42interest rate go down. So, it's like
21:44doesn't cost that much to borrow money.
21:46During the Great Depression, most
21:48economists agreed that the Fed should
21:50have done this. So, why aren't they
21:51using this? It's the Great Depression.
21:53People aren't spending money. People are
21:54losing their jobs. Lower the interest
21:56rate. Get more money into the economy.
21:58But look, they can't really do that very
22:01much. The money supply is fixed to gold.
22:05>> If the Fed started to issue more notes,
22:08it could reach a point where it was
22:10constrained by not having enough gold to
22:12back them.
22:13>> If you lower the interest rate, then
22:15people are going to borrow a bunch of
22:16money. But then what if they show up to
22:18the bank with all that money and demand
22:20gold bars in exchange for their paper?
22:23They might do that. Everyone's kind of
22:24panicky. So the Fed is envisioning this
22:25nightmare scenario where all of their
22:27gold goes away and the whole system
22:29falls apart. So instead of lowering the
22:31interest rate, they hike it up. They
22:33defend their gold. The historians who
22:35debate this stuff don't agree on all of
22:37this, but they do agree that this course
22:39of action made the whole thing worse.
22:42Made the Great Depression last a lot
22:43longer. 10 years of misery. And so the
22:46Federal Reserve instead of saying, "Hey,
22:48we made a big mistake, uh, we shouldn't
22:50have caused this bubble in the economy,"
22:52they said, "You know what? We need even
22:54more power to control the money supply."
22:56And that's what happened.
22:57>> That resulted in the president coming
22:59out and saying, "Hey, the gold standard
23:01really just screwed us over. We weren't
23:03able to pull all of our levers because
23:05we were pegged to this obsession with
23:07being backed by gold. So, let's be done.
23:09Enough is enough. We need flexibility in
23:11a crisis." And if you want to go way
23:12down the technical rabbit hole, look up
23:14the unholy trinity. That's a very
23:17technical explanation of what's going on
23:18here. All the sources are in the
23:20description as always. So, it's 1933 and
23:22FDR comes out with an executive order
23:25saying that Americans need to turn in
23:27their gold bars in exchange for flimsy
23:30dollar bills. And the government could
23:33now print as much or as little money as
23:36they wanted to guide the economy's
23:38behavior to keep it humming along. and
23:40hopefully keep prices stable. Now you
23:43don't have a finite thing called gold
23:46that is like there's only so much of it
23:47because now you just have an infinite
23:50thing called dollars and a central bank
23:53who can effectively print as much of it
23:55as they want. The more they print, the
23:57less each is worth. So prices go up.
23:59That's inflation. Anyway, let's go back
24:01into the brain because this is like the
24:03biggest psychological leap of them all.
24:05Money is still belief. But without the
24:08gold standard, the belief is in the
24:11government, in their paper, even if it's
24:14not backed by anything. It is a belief
24:16in the government's ability to run this
24:19machine properly. This is called fiat
24:21money, and it's a whole lot different
24:23than cows where we started. But starting
24:25in 1933, this is how money was valued in
24:29the United States by a decree from
24:31above. [music]
24:33Now, full disclosure, I went to Brigham
24:36University, studied econ, and studied
24:39under a school of thought that was very
24:40much like pro- Fed. The Fed and fiat
24:42money is sort of like the best thing we
24:44got going. It makes mistakes sometimes,
24:46but like it's better than the gold
24:47standard. I intentionally talked to two
24:49economists for this story who were like
24:51a little more skeptical of that take to
24:53kind of help balance me out. And my hope
24:56is that the story I just told you about
24:57this moment in time is a fair
25:00characterization. But if there's any
25:01professional economists watching, I
25:02would love your take on this. Like I
25:04would love a good faith critique or like
25:07alternative view or whatever. Like this
25:09is economics is not science. It is
25:11psychology. And so we get to debate it
25:13endlessly. So gold is out. And so what
25:15are we at? The end of the road for this
25:17shiny metal, this thing that humans have
25:19loved forever. Not so fast.
25:24So 1944, World War II is winding down.
25:29The US is realizing that in just a
25:31matter of years became the most powerful
25:34country in the world and defeated the
25:35two rising empires and was now on top of
25:38everything. So they get all of their
25:40ally countries together, couple dozen
25:41countries in a hotel in the mountains of
25:43New Hampshire with the goal of designing
25:45a new global economic system, a set of
25:47rules that everyone will play by.
25:53And the US of course takes the lead on
25:56what this system will look like. They
25:58proposed that instead of creating some
26:00universal global currency as some were
26:02proposing, the world should instead opt
26:04for the US dollar to become the
26:06universal globally accepted currency
26:08that everyone else's currency would be
26:10like attached to. And the rest of the
26:12countries are like, um, seems kind of
26:14sketchy that we're just trusting you and
26:15your dollar. And [music] the US says,
26:17okay, but remember, all of our dollars
26:19are still backed up with gold. Normal
26:21citizens can't turn it in for gold, but
26:23we promise to you countries that all of
26:26your dollars can be turned in for real
26:27gold bars. $35 per ounce. You can come
26:30to us and exchange in for gold whenever
26:32you want. And we promise we'll keep it
26:34in the vault. Speaking of the vault,
26:36look at our vault. This is Fort Knox.
26:39It's in Kentucky. This is where we keep
26:40our gold. And we have a lot of it now
26:43because a lot of you all [music] world
26:45gave us your gold in exchange for
26:47weapons we made for you during the war.
26:49So, the dollar is king and we'll back it
26:51up with gold. Take it or leave it, guys.
26:53And they indeed took it. And the dollar
26:55became the king of global trade and
26:57investing. And gold was once again at
27:00the center of our concept of money. But
27:03not for long. Turns out the US couldn't
27:05keep its promise to back up all of its
27:07dollars with gold in its vaults. They
27:09were printing more money. They were
27:11giving it out. And the world catches on.
27:13And some countries get kind of pissed
27:15>> until finally there were so many dollars
27:17that they started to redeem them.
27:18Germany and France in particular,
27:20>> like France apparently sends a Navy ship
27:22in the '60s to show up to New York to be
27:24like, "Hey, we're going to give you our
27:26dollars. We want our gold."
27:27>> And the Treasury ran out of gold and we
27:29shut the gold window in 1971.
27:31>> I had directed Secretary Connley to
27:33suspend temporarily the convertability
27:35of the dollar into gold or other reserve
27:38assets. And finally, the president at
27:39the time, who is President Nixon, comes
27:41out and is like, "Okay, okay, okay. Yes,
27:43we don't have the gold anymore. You got
27:44us." But guys, come on, be reasonable.
27:47We're all used to using the dollar by
27:49now. The whole global economy is used to
27:51this. We're America. We've proven that
27:53we're stable. You can trust us. I mean,
27:55look at our economy and look at our
27:57military. We are safe and stable. Use
28:00our currency. Invest in our government
28:02and you can sell those bonds whenever
28:04you want. will give you dollars and you
28:05can use that to buy like oil and
28:07whatever you want in the global economy.
28:08We promise we're good. And the world
28:10without much choice was like, "Okay,
28:13fine."
28:15[music]
28:17And just when we thought we couldn't get
28:18any further away from cows, here we are.
28:21Our concept of money takes one more
28:23bonus step to here where so much of the
28:27global economy runs on a currency that
28:29is built off of collective belief in a
28:32story in a system in an S with a line
28:35through it. been [music] 19 people who
28:38sit in a fancy white building in
28:40Washington DC and try to accurately
28:43predict [music] the future and make
28:44decisions to pull proverbial levers to
28:48ensure that the dollar doesn't lose its
28:50value [music] in all of our minds.
28:56So, have they done a good job? Well, a
28:58lot of people say yes.
28:59>> People from the Fed would say, "Look,
29:00we've done a great job. You know, the
29:02Federal Reserve is better than putting
29:04this in into a private market like we
29:06had before the Fed
29:07>> that being able to create new money in
29:09the economy helped us recover relatively
29:11quickly in the 2008 crash or during co
29:14but a lot of people say no that the Fed
29:16does a terrible job.
29:16>> But I think the evidence says that
29:18actually they have not done very good.
29:19You know, the Fed basically caused the
29:21Great Depression.
29:22>> That inflation is out of control and
29:24that the people running it are never
29:26faced with the consequences for not
29:27doing a good job. Several economists I
29:29talked to think that it's a lot of power
29:31to put in a government agency that isn't
29:34incentivized by the free market. But
29:37most monetary economists, the people who
29:39study this stuff, like the vast majority
29:42think that, hey, the Fed's not perfect,
29:45doesn't get it right all the time, but
29:46like this is the best version of a
29:48modern complex economy and it generally
29:51works.
29:51>> What you described as the Fed has made
29:53some mistakes, but we can't imagine
29:56living without it. That's probably 90%
29:58of the econ profession or maybe higher.
30:01But everybody now has grown up in a
30:03world where it's hard to imagine what
30:05things would look like without the Fed.
30:07>> And it's especially hard to imagine once
30:09you're on a fiat money standard. If
30:11you're on a fiat money standard,
30:12somebody has to control the quantity of
30:13fiat money. And if it's not a central
30:15bank, uh, how do you do that?
30:17>> I'm actually not going to have an
30:19opinion on this. I'm still kind of
30:21making up my mind.
30:25So, let's wind this video down by
30:26[music] getting back to the central
30:28question at the beginning that we
30:29started with, which is why are people
30:31buying gold again? Why is this
30:32happening?
30:33>> The price of gold is near an all-time
30:35high.
30:35>> Have you seen the price of gold lately?
30:38>> Gold is up more than 13% this year.
30:40>> So, since we've gone totally off the
30:41gold standard uh since 1971 and in fact
30:44even even before that, people have
30:46started holding gold as a hedge against
30:48inflation. Despite all of these mental
30:50[music] leaps and these vast
30:51abstractions of economic value, here we
30:54are turning back to gold. First off,
30:56foreign governments never got rid of
30:57their gold. The US still has huge stores
31:00of thousands and thousands of tons of
31:02gold in Fort Knox and other [music]
31:04facilities, and so do a lot of other
31:05countries. A lot of countries store
31:07their gold in the United States, in New
31:10York City, in this gold reserve that is
31:12[music] buried like 50 ft into the
31:13bedrock of Manhattan. and it just sort
31:15of sits there gathering [music] dust and
31:17being a little reserve, a just in case
31:19type of thing. But a lot of regular
31:21people, investors buy gold, too,
31:23whenever they start to feel a little bit
31:25sketchy about the big psychological
31:27bargain they've made with the
31:29government. This all of this is pretty
31:31actually kind of squishy. It's very
31:33mental. All of this requires us to
31:35believe, but over here really requires
31:37us to believe and even trust. Trust a US
31:40government and an economy. And recently,
31:42that trust has been waning. America has
31:44rival nations that are trying to get the
31:46world to stop trusting the dollar. They
31:48want to replace it. They don't like how
31:49much leverage it gives the US. The US
31:51economy and government have also been
31:53kind of all over the place recently. The
31:55stop and go and stop and go of tariffs
31:58from the Trump's administration's first
31:59few months in office got people really
32:02spooked. Like, can we trust these people
32:04with our entire sense of value in our
32:07currency? And now that Trump is
32:09attacking the Fed and threatening to
32:11control it, people are turning to gold
32:13in a bigger and bigger way. [music]
32:16And for at least for now, while I'm
32:17recording this, there seems to be some
32:19trepidation about people believing in
32:21the dollar. So that's why you see this
32:23kind of going back in time on the
32:25psychological leaps. [music]
32:27In the last few months, well, since the
32:30start of the Trump administration,
32:31there's been a loss of faith in the
32:33dollar visav other fiat currencies.
32:35People are worried inflation may go up
32:38either because of real shocks like the
32:41imposition of tariffs.
32:42>> So people are rushing to other stores of
32:45value that don't rely on a central
32:46government. The shiny metal gold is one
32:48of them. But there's another currency
32:50that people are opting for that kind of
32:52looks a little bit like gold, at least
32:54mentally.
32:55>> Bitcoin is essentially the new gold.
32:57>> It's becoming really the true digital
32:58gold.
32:59>> I think a lot of young people are
33:00comfortable with digital assets and
33:02digital currencies and would switch over
33:03to Bitcoin or something different.
33:05Either one of those things would provide
33:06a check on the Federal Reserve because
33:09people would have an alternative and the
33:10Fed would know that if they created too
33:12much inflation, people would switch
33:14over.
33:14>> Bitcoin and other cryptocurrencies may
33:17represent a future path for this
33:20psychological journey of money that
33:22we've seen here, but seems to be too
33:24early to tell. But it does seem like we
33:25are entering a new chapter on this
33:28journey of our sense of value and
33:31currency and trust and belief. I'm not
33:34sure what it's going to look like. I
33:35don't presume to know. But as we've seen
33:37in this story, I think it's a pretty
33:39good guess that no matter what happens
33:41next, no matter what we invent with
33:43crypto or whatever, that shiny metal,
33:46that thing that has fascinated us for
33:48thousands of years, the thing that can
33:50be divided and stored and doesn't
33:51tarnish and that shines like the sun,
33:54gold, I think, will always remain in the
33:56background as this thing that we turn to
33:59when things feel uncertain. One of the
34:01things that making all these videos has
34:03taught me is that facts are vital.
34:06They're important, but they aren't the
34:09fullness of how a story gets made, how a
34:12story gets told. Framing and narrative
34:14matter, which is why I keep coming back
34:16to ground news. As a viewer of my
34:18channel, you can get the same Vantage
34:19plan that I use for 40% off if you head
34:22to ground.news/jny
34:24harris. All right, let's get back to the
34:26next one.
34:27[music]
34:29This is me if I lived in 1955.
34:33Here I am in 1975
34:36and 1995,
34:382015 and then today. I'm going to put
34:42myself in the shoes of a middle income
34:44earner in all of these decades. To
34:47answer a very important question about
34:49the United States, is the average
34:51American better off today than they were
34:54all these decades ago? Does the typical
34:56American make more money, have a better
34:57chance of owning a home? It's an
34:59important question because this graph
35:01shows that our economy has grown
35:03immensely since the ' 50s. I mean, we've
35:06got the largest economic pie on Earth.
35:08And even when you account for inflation
35:11and the fact that our population has
35:13grown, you still see immense growth. I
35:16mean, look at this. We've added tons of
35:18prosperity in this country that
35:19theoretically every person is entitled
35:22to some part of or as some economists
35:24put it. Has our country produced shared
35:27prosperity?
35:27>> When I think about how well the economy
35:30delivers, I think about how well it
35:32delivers for the people, for the workers
35:34and their families. How well are they
35:37receiving that prosperity? I'm going to
35:41show you how all of this economic
35:43prosperity we've created has been shared
35:46or not shared.
35:49[music]
35:54[music]
35:56And in all of this, I want to get to the
35:58bottom of perhaps one of the most
36:00important questions in our country,
36:01[music] which is, is everyone able to
36:04move up if they work hard enough or if
36:05they get educated? Can you climb the
36:08economic ladder here? Are you going to
36:10do better than your parents? [music] Can
36:11you reach higher levels of income? Can
36:14you change your relative position?
36:16>> The American dream, we sometimes call
36:17[music] it, a quote, dream of a better,
36:20richer, happier life for [music] all
36:23citizens of every rank. Is that still
36:25alive? And if not, why? I believe that
36:29answering these key questions is
36:32incredibly important for the future of
36:33this country, which is why [music]
36:35we've been deep in all of the data, and
36:37I'm going to try to lay it out as
36:38clearly as possible by traveling through
36:40time. As always, all of the assertions
36:43in this video are fact checked and
36:44linked in our sources. So, with that,
36:47let's start traveling back in time.
36:49[music] You can't repeat the past. Why,
36:52of course, you can.
36:54>> Okay, so I'm traveling back towards the
36:561950s. As we move through time, I'm
36:58going to be keeping an eye on this main
37:00graph. This graph is kind of our anchor.
37:03It will be showing how the economy has
37:05grown over time. And again, it's
37:07adjusted for [music] prices and
37:09population growth. When this graph goes
37:11up, it means that there's more economic
37:13prosperity [music]
37:14to go around. We're going to see how it
37:16gets divided up. And for each decade,
37:18I'm going to be looking at these four
37:19economic indicators. Am I making more
37:21money? Can I afford a house? Is this
37:24economic growth being shared equally by
37:26everyone? And how likely am I to be
37:28making more than my parents? Oh, look.
37:31We're arriving to the 1950s.
37:36So, it's the 1950s here in America, and
37:38I, the middle income earner, have just
37:40returned from fighting in the most
37:42devastating war of human history. But we
37:44Americans came out on top, and our
37:46economy is booming. I work in this car
37:49factory. It's one of the many factories
37:50that was converted from making weapons
37:52to now making valuable stuff that we're
37:54shipping around the world. Our country
37:56is getting rich. I am making an average
37:59income. So my income right now is
38:01$4,400.
38:03In today's money, that's more like
38:05$41,000. We're going to adjust
38:07everything for modern dollars. In this
38:09case, $20, $23. Prices are higher these
38:11days, so our money is more valuable to
38:13make it all make sense. Hey, wait,
38:14pause. I'm not going to do that every
38:15single time. Like talk about the
38:17inflation. I'm just going to say
38:18everything from now on in modern
38:20dollars. It'll allow us to compare a lot
38:22easier between the decades. Okay, with
38:24that, let's get all the magic going
38:26again.
38:27Pretty cool, right? Let's meet my
38:29family. So, my wife doesn't work. Only a
38:32third of women did back then. And
38:34really, she doesn't need to. My factory
38:36job [music] supports the whole family.
38:38And look, I own that home. I paid
38:41$84,000 for this thing. Again, in modern
38:43dollars, that's actually not that much
38:45more than my yearly salary. This is
38:47considered very affordable. And a major
38:49reason why is because the government is
38:50helping me pay for a lot of this. And
38:52they've got the cash to do it. I mean,
38:54look at the top tax rate for the rich.
38:58So, a booming economy and all this tax
39:00revenue means that the government is
39:01helping build all of these suburban
39:03homes and is giving us veterans good
39:05deals on mortgages so that we can get in
39:08on the prospering US economy. Start
39:10building wealth by owning a home. how a
39:13returning serviceman [music] who was
39:14starting his own business would get a
39:16financial boost from the government. How
39:19money would be advanced to buy property
39:21or a home. We're coming out of World War
39:23II. Uh [music] there are absolutely lots
39:25of public programs. Policy makers today
39:28and back then had a lot to do with how
39:31typical workers and their families were
39:32doing.
39:33>> Okay, so the economy is booming. Let's
39:35see how all of this prosperity is being
39:36shared. And for that, I'm going to show
39:38you this amazing graph. I love this
39:40graph. We're going to see it over the
39:42decades and it tells a very useful
39:44story.
39:46This is my income, the median earner.
39:48Here's the income of the top earners and
39:51this line is the low income in America.
39:53And down here is like years. Okay, watch
39:56what happens. Ready? Go. [music]
40:01Look at this. Look what's happening. All
40:03three of these income brackets are
40:05increasing their income at the same
40:07rate. We are all getting in on this
40:10prosperity. We are sharing the spoils of
40:12a booming economy. Nice.
40:14>> In the roughly two, three decades
40:16[music] after World War II, we saw what
40:18I would consider broadly shared
40:19prosperity. As the economy grew, as
40:22workers became more productive, workers
40:24across the board were actually seeing
40:27gains in their living [music] standards.
40:29>> This is a great indicator that income
40:30equality in the United States is good
40:32and healthy. Okay, last thing for the
40:341950s. Let's check in on the American
40:36dream. Can I move up the ladder? There's
40:38a really nice data set for this that
40:40says that I am nearly 100% likely to
40:43earn more than my parents. There is
40:45upward motion in the economy. The
40:47American dream is alive, at least for
40:50me, which is an important caveat here.
40:52Women were mostly left out of this
40:54economic version of the American dream.
40:55And so were people who weren't white.
40:57Like black Americans, 10% of the
40:59population, over a million of whom
41:01fought in the war, but upon returning
41:03were met with these custom maps that
41:05were drawn to determine where they could
41:08and could not buy homes. They were
41:10largely left out of all of this
41:11government help that allowed me to get
41:12education and buy a home and build
41:14wealth. But if you're just looking at
41:15the numbers, the 1950s was a really good
41:18time for the median income earner. You
41:20could have a family, work in a factory,
41:22and be loaded with opportunities to move
41:24up the economic ladder. thanks to a
41:26booming economy and a bunch of
41:27government programs. So, now let's move
41:29forward in time to the 1970s.
41:37>> Welcome to the 1970s. A lot has changed.
41:40The economy is producing a lot more
41:43prosperity to go around, as you can see
41:45by this graph. And we'll see how that's
41:46all being distributed in a second. But
41:48first, let's check in on my pay. I'm
41:50still working in a factory. I now earn
41:52about $66,000. That's an improvement
41:55from the ' 50s. Or should I say we. Like
41:57millions of other women, my wife has
42:00entered the workforce. They still only
42:02earn 60% of what men do. But look,
42:04they're breaking into the workforce.
42:06Nearly half of all women are going to be
42:08working by the end of the decade. Partly
42:09as a push for freedom and economic
42:12autonomy, but partly as a necessity.
42:14It's becoming harder for a family to be
42:15supported by a single earner. The result
42:17is that our income is better off than it
42:20was in the '50s. But things are also
42:22kind of expensive right now. Inflation
42:24is up partly because there's war in the
42:26Middle East and they're cutting us off
42:28oil. So, there's long lines at these gas
42:30stations and everything is more
42:31expensive. Anyway, check out my house. I
42:33had to pay $230,000
42:36for this house. Housing is getting more
42:37expensive and the government is raising
42:39the interest rate to slow down
42:41inflation, which is making my monthly
42:42payment a little more expensive. Home
42:44purchasing is becoming a little less
42:45accessible to the median, but I still
42:47have this cool house. Okay, let's go
42:49back to this super useful graph that
42:50tells us how the economic spoils are
42:53being shared. Remember that's me, the
42:55median income earner.
42:57[music]
42:58And look, my income continues to grow at
43:00the same rate as the high income and
43:02lowincome earners in our country. The
43:04growing economy is being shared by these
43:06different income groups. It's actually
43:08pretty impressive how like tight
43:10everything is moving together as the
43:12economy grows. Oh, and look, they've
43:13started collecting data on how much more
43:15CEOs are making than the typical
43:17employee. Looks like by the middle of
43:19the decade, it's about 26 times more.
43:22Wait, are CEOs making too much? Is that
43:24bad? What do you think? I don't know.
43:26Let's keep an eye on this chart as time
43:28continues. We can assess if we think
43:30this is unfair. Okay, but what about the
43:32American dream? How easy it is to make
43:34more than your parents. Well, if I'm an
43:35adult in the 1970s, it means I was born
43:37in the 1950s, which according to this
43:40data set means I'm 80% likely to earn
43:42more than my parents. I mean, pretty
43:45good. The American dream seems to be
43:46doing pretty well. So, I would say that
43:49economic life in the 1970s is better for
43:51the median earner than it was in the
43:5350s. And something that we're not
43:54covering here because we're looking at
43:55the cold hard data is that there's also
43:57a revolution happening that's making it
43:59more equal and more fair for minority
44:02groups in the United States. So, these
44:03are good trends. Let's see how they
44:05continue as we move on to the 1990s.
44:08>> Guess you guys aren't ready for that
44:10yet, but your kids are going [music] to
44:12love it.
44:14To get to the '90s, we have to go
44:16through the 80s and look at all of this
44:18economic growth. The president has been
44:21very busy slashing taxes, getting rid of
44:23regulation and social programs, and
44:25rejiggering the economy to benefit
44:27businesses, making it harder for workers
44:29to like gather and get leverage over
44:31their employers.
44:32>> Ronald Reagan, the actor.
44:34>> And look, we are arriving to the 1990s.
44:37What a great decade.
44:43The big standoff between the United
44:44States and the Soviet Union is over and
44:46people are stoked. We enter the 1990s
44:49with this little recession. We're
44:50getting ready for a big surge of more
44:53growth thanks to the rise of the
44:54internet. Remember, I am still playing
44:56the role of the middle income earner.
44:59Okay? So, it's not like I was like born
45:00back in the 50s and I've been growing
45:02up. I am a young adult who is the middle
45:05income earnner. How am I doing? So, I
45:07still work at a factory. America is
45:08still a manufacturing powerhouse here in
45:10the '9s, though that is literally right
45:13about to change. I wish I could warn
45:14myself. My household brings in $76,000 a
45:17year, which is definitely better than
45:19the '50s and60s. But you can kind of see
45:22that things are flattening out. And in
45:24fact, I'm not making that much more than
45:27I was in the late '7s. Check out my cool
45:29'90s house. Cost me $273,000.
45:33That's almost four times our yearly
45:35income. Way more expensive than in the
45:37'50s. Housing is getting a little less
45:39affordable. Okay, the economy is doing
45:40well. How are we sharing all of this
45:42economic prosperity? Remember, we
45:44started back in the ' 50s and we saw how
45:46the high income, the low income, and me,
45:48the middle income, we all saw similar
45:50growth in our income gains. We all got
45:52in on economic growth equally. That
45:54continued through the 70s. But wait,
45:57look what happens right here.
46:01Whoa, they're diverging.
46:04It's around the 1980s when you see the
46:07top earners start to pull away from the
46:09rest of us. Their income is going up
46:10faster than mine. And my income is going
46:13up a little faster than the low-income
46:14population. Okay, that's unsettling. I
46:17liked it more when they were all kind of
46:18like on top of each other, growing at
46:19the same rate. We'll keep an eye on this
46:21graph, but there's a bunch of other
46:22graphs starting to come out. Another
46:24divergence happening on how productive
46:26the economy is versus how much I get
46:29paid. They're both going up at the same
46:30time. I'm more productive. I get paid
46:32more. Cool. But around the same time,
46:34the same split happens. My pay starts to
46:37flatline even as productivity continues
46:39to go up.
46:40>> So then there's this period that starts
46:42around 1979 in the [music] early8s where
46:46we see this pulling apart between
46:48economic growth and what typical workers
46:51and [music] their families receive from
46:54that economic growth.
46:56>> So who's getting in on all this extra
46:57productivity, this growth that's
47:00happening in our economy, if not me?
47:02Well, let's check in on those CEOs. So,
47:04remember back in the 70s, CEOs were
47:05making like 25 times more than the
47:07typical worker. Kind of seems like a
47:09lot. Let's see what happens here. Oh my
47:11god, look at this. Okay. Wo. By the end
47:13of the '90s, CEOs are making almost 400
47:16times the typical worker. And I thought
47:1820 times was a lot.
47:20>> Those at the top are receiving much
47:23larger shares of that growing economy
47:26than those at the middle or at the
47:28bottom of the wage distribution. So that
47:30pulling apart, that increasing economic
47:33inequality is apparent no matter how you
47:36look at it. That pi is going
47:38increasingly to the very top. Okay.
47:41Okay. But isn't inequality often seen as
47:44a byproduct of rapid economic growth?
47:47Could this be a good thing for our
47:49economy? Yes, people are getting really
47:50rich really fast, but it's because
47:52they're innovating and making our
47:54economy more productive. And plus,
47:56everything I've shown you is before
47:57taxes, guys. So, like the rich pay a lot
47:59of taxes. Okay. So, let's see what
48:01happens to the income of the rich people
48:04after taxes. Here we go. Oh, okay. Well,
48:10um,
48:13the taxes didn't do that much. [music]
48:17There's something going on here. The
48:18rich are getting really rich really
48:20fast. I mean, what these lines all show
48:23is that 1980 was kind of this inflection
48:26point in our economy where the top
48:28earners kind of started to get in on
48:31most of the prosperity. And yes, there
48:33are economists who argue that inequality
48:35isn't bad for an economy. It actually
48:37spurs [music] growth and investment into
48:39the economy and eventually that raises
48:41all boats. It trickles down. And
48:43advocates for this way of thinking say
48:45that we shouldn't focus on inequality,
48:46but instead on poverty reduction. Okay,
48:49poverty reduction, how we doing? Poverty
48:52plummeted after World War II, [music]
48:54but you can see that at this time in
48:56like 1980 when inequality starts to get
48:58really bad, poverty basically stays the
49:01same, goes up for big series of years.
49:04So, this is concerning and this is my
49:07interpretation of the data. I'm sure
49:10some of you have very different
49:11interpretations and I would love to see
49:13it down in the comments. Anyway, let's
49:15check in on the American dream. America
49:17is all about big risks, big rewards. So
49:19yeah, inequality is happening, but like
49:21if you can go from rags to riches, maybe
49:24that's very American and okay. If I was
49:26born in 1970s, I'm now an adult in the
49:281990s. And the data says that 59% of us
49:31born to the middle income will outear
49:34our parents. So that means that 40% of
49:37my peers here in the middle income will
49:40earn the same or less than their parents
49:43even as we are seeing all of this
49:44economic growth. I mean, you can see
49:46this trend here. The American dream of
49:49being able to move up the ladder is
49:51becoming less and less a reality for a
49:54bigger and bigger portion of the
49:57population. Okay, so that was a big
49:59change from all the trends. Let's see
50:01what happens next.
50:03>> People assume that time is a strict
50:05progression of cause to effect, but
50:07actually it's more like a big ball of
50:09wibbly wobbly tiny wimy stuff.
50:11>> Okay, we're moving into the new
50:12millennium. America's fighting a couple
50:14of wars. The economy is actually doing
50:16pretty well until whoops. Whoa. The
50:19bankers got a little loosey goosey for a
50:20couple years, making obscene amounts of
50:22money and crashing the entire world
50:23economy. But, okay, let's move on from
50:26the biggest recession of our time. We're
50:28arriving to the 2010s. This is a world
50:30that most of us are familiar with. Let's
50:33see how the median income earnner fares.
50:35[snorts] I don't work in a factory
50:37anymore. All of those jobs have dried up
50:39and been shipped to Asia. So, I now work
50:42as a middle manager at an insurance
50:43company, and my household income is
50:45$81,000 a year, which is, wait a minute,
50:48same as 1997. But wait, during this same
50:5113-year period, from 1997 to 2010, the
50:53economy grew by this much. I mean, that
50:56line's going up. The economy is making
50:58more stuff. There's more prosperity.
50:59Even when you adjust for inflation per
51:01capita, the economy grew. There should
51:04be more to go around. But my household
51:06pay is the same as it was 13 years
51:09previous. [music]
51:10Why? Well, we'll see in a second, but
51:12first, let's talk about my house. I
51:14always love talking about my house. Look
51:16at this beauty. I can still afford a
51:18house. In fact, here in like post
51:21recession America, housing prices are
51:24actually pretty low. The bubble burst.
51:27Interest rates had to go down to
51:29stimulate the economy. And so, home
51:31purchasing was actually pretty
51:33accessible for a few years. But don't
51:34worry, housing prices will be back on
51:37the rise in a second. And in fact,
51:38they'll start rising faster than my
51:41income, making housing less and less
51:43affordable. And home ownership still
51:45seems to be available mostly for certain
51:48groups [music]
51:49and not as much for others. In fact,
51:51that hasn't changed much since the
51:53segregation days. Meanwhile, I think I
51:55know what's going to happen to this
51:56graph. Yep, the rich are just getting
51:58richer faster than my income is going
52:01up, and my income is kind of stagnating.
52:04Okay, what about the CEOs? They do they
52:05pay a price for the big bubble person?
52:07Nope, they didn't pay. I mean, they kind
52:09of did up and down, but they're still by
52:11the end of the decade getting paid
52:12hundreds of times more than me. Maybe
52:14they think they are hundreds of times
52:16more productive and they deserve it.
52:20I mean, you get the point on the
52:22inequality stuff. This is what we've
52:23been hearing about for a long time. All
52:25of these graphs have the same shape,
52:27this great divergence that happens in
52:30the 80s where the economy is growing,
52:33but the wages for the average person
52:35just kind of flatten while the top
52:37earners just sort of get in on all of
52:40that prosperity. Okay, but the American
52:42dream, you can climb the ladder, right?
52:44So, if you're born in the 1980s, which I
52:47was, you're now an adult in the 2010s.
52:49And [music] it looks like for the median
52:52earner, the majority of us will earn the
52:56same or less than our parents. Yeah,
52:58this is a problem and probably doesn't
53:01seem fair to a lot of people. But wait,
53:03there's hope.
53:04>> Star Trek, Terminator, Time Cop, Time
53:06After Time, Quantum, Wrinkle in Time,
53:08Somewhere in Time, Hot Tub, Time, Hot
53:10Tub, Time Machine.
53:11>> Okay, I'm back. 2025, that's when I'm
53:14making this video. So that's modern day
53:16for me. We went through a pandemic. the
53:18economy kind of got freaked out for a
53:20little bit and the median income earner
53:22actually started to see some gains after
53:25years and years of flatlining. So, you
53:27do see some potential movement here,
53:30some hope. But let's get back to the
53:32original question that we started this
53:33video with. Is the average American
53:36better off now than they were back in
53:38the ' 50s and over these decades that we
53:40talked about? In a lot of ways, the
53:43answer is yes. especially if you are a
53:45woman or not white, then the answer is
53:48yes. At least in terms of economic
53:50opportunity. But what we've seen on this
53:52journey is that the American economy has
53:55produced an incredible amount of
53:57prosperity and growth over these last
53:59[music] seven decades. And that was
54:01shared broadly by all of us for a time.
54:05But in the last 30 40 years, the data is
54:08very clear that the fruits of the
54:10economic growth these days have not been
54:13broadly shared. One group is collecting
54:16most of the growth. And I didn't even
54:19talk about wealth, like the stuff you
54:21just own and how that makes money. We
54:23were talking just about income on this.
54:25Now, this isn't the first time that
54:27we've been in this situation. The top
54:2910% collected almost half of all the
54:32income way back in the early 1900s
54:34before World War II. But we changed
54:36that. Look, [music]
54:40and the income starts to be distributed
54:42more equally. But this graph tells the
54:45same story. Look, 1980, boom, here it
54:47goes. We're back.
54:49We're back to where we were.
54:52Now, does this mean that our economy is
54:54[music] broken? No. Actually, our
54:56economy is not broken. It is working
54:58exactly how it was designed [music] to
55:00work. And this and this and this and
55:03this, it's the result of [snorts]
55:05changes to the rules, policies [music]
55:08that end up determining who gets the
55:09money and who doesn't. These policies
55:11are made by people that we elect. And if
55:14we don't think that this is fair, we
55:17have the power to pressure them to
55:20design a system that is fair. Now, the
55:22medium income earner doesn't have nearly
55:24as much power these days. the top income
55:26earners and the corporations have really
55:29gotten their foot in the door [music]
55:31for the people have the power to set the
55:32rules. So, it's harder than ever, but
55:34this still is a democracy. And if we
55:36don't think a system is fair, we still
55:38have the power to pressure our
55:40politicians to change it. And it's not
55:42actually just about income inequality.
55:44Yes, that has risen. The rich get richer
55:47much faster. It's also about the
55:48American dream. And this idea of being
55:50able to move up, if you get educated, if
55:53you work hard, [music] as inequality has
55:56gone up, the American dream has gone
55:58down.
56:00These graphs are built on robust data.
56:02[music] And this is the story that it
56:04tells. The rungs of the economic ladder
56:07have gotten wider and wider apart. And
56:10that American dream, ironically, a term
56:13coined by a rich investment banker born
56:15into a rich family in New York City,
56:17[snorts] that dream is looking more and
56:20more like a myth.
56:26This is what a $25 million a year salary
56:29looks like versus a $25,000 a year
56:32salary. About 20% of Americans [music]
56:34live on this amount of money or less. I
56:37want to show you the lifestyles of
56:38people who make this much money versus
56:41this much money and everything in
56:43between. The reason I want to look at
56:45these differences is because of this
56:47graph. It's going up, [music]
56:49which is a problem. Let's start with
56:53$25,000 a year. [music]
56:57All right, so let's say my name is
56:58George. I live in Atlanta, Georgia. I am
57:01single and I have no kids and I'm
57:03looking for a job. After some searching,
57:05I found this job as a security guard at
57:07a TV studio in downtown Atlanta. It'll
57:10pay me $12.50 an hour, which is quite a
57:13bit more than the minimum wage of $7.25
57:16an hour. Let's assume I work 40 hours a
57:18week, and I work every week except two
57:21that I set aside for holidays, sickness,
57:23and vacation. This means I make $25,000
57:26a year. At this level, around 29% of
57:28Americans earn as much or less than me.
57:31So, how will I spend it? This comes out
57:32to be just over $2,000 a month that I
57:34have to spend. I got to pay taxes. That
57:36brings me down to $1,764
57:39to live on [music] this month. To
57:41calculate this next part for this income
57:43and all of the incomes we're looking at,
57:45I used some data from the US Bureau of
57:48Labor Statistics that shows that people
57:50in this income bracket spend about 41%
57:52of their pre-tax income on housing. I've
57:55got about $850 for all my housing
57:57expenses. That's nearly half my after
57:59tax budget. I'll definitely be renting
58:01instead of owning a house at this
58:03budget. A lot of landlords these days
58:05require you to earn three times more the
58:07monthly rent, so I'm probably going to
58:09need roommates if I'm going to get
58:10approved for an apartment. All right,
58:12let's look at Craigslist. I really can't
58:14afford to live downtown, so I'm going to
58:16look in the outskirts. And I found this
58:18place right outside the city. This is
58:20going to work, and it's within my budget
58:22for rent and utilities. So, how am I
58:24going to get to my job, which is in
58:26downtown Atlanta? That's 20 minutes away
58:29from where I live. And like most
58:30American cities, there's not great
58:32public transportation here. So, I'm
58:34going to need to have a car. Let's just
58:36say in this assumption, and it's kind of
58:37a big assumption, that I already have a
58:39car. And let's assume it's this car.
58:42It's a 2004 Toyota Cara that I got on
58:44Facebook Marketplace. Lower income
58:46Americans spend more on their income for
58:48transportation than any other segment of
58:50the population. The data we'll use says
58:52about 15% of pre-tax income is spent on
58:55transportation. So, that's $313 for gas,
58:59insurance, parking, and saving up for
59:01maintenance and repairs. We got to be
59:03pretty careful about how much extra
59:05driving we do, and hope that no big
59:07maintenance issues arise. According to
59:09this BLS data, I spend about 15% of my
59:12income on food. That includes both
59:14groceries and eating out. That's $313 a
59:17month for food. A lot of people think
59:19that this income bracket just [music]
59:20goes to McDonald's all of the time, but
59:22the reality is the average order amount
59:24at McDonald's is between seven and $8.
59:26So that will not get me through the
59:28month. That will get me through 13 days
59:29worth of food. So I got to go to the
59:31grocery store. Unfortunately, in most
59:32lower income areas in this country,
59:34there aren't a ton of grocery stores,
59:36and the ones that are available are much
59:38less likely to carry fresh produce or
59:40other nutritious food. So, I'm going to
59:42see what I can do by stocking up on
59:44beans and rice, peanut butter and jelly,
59:46Wonderbread, Top Ramen, freezer meals.
59:49For fresh options, I'll be looking at
59:51potatoes and some of the cheaper
59:53produce. And no eating out, or rarely,
59:56occasionally on special occasions,
59:58eating out. If I do, I'll be looking at
1:00:00the value menu at a fast food
1:00:02restaurant. I'll be looking for
1:00:03discounts, checking every price in the
1:00:05convenience store. Okay, but wait, don't
1:00:07I get government assistance for food,
1:00:08like food stamps? So, from my research,
1:00:10I can see that to get government
1:00:11assistance, I need my savings account to
1:00:13be less than $2,000. Check. My income
1:00:16needs to be lower than
1:00:19$19,578,
1:00:22and I make $25,000. So, nope, I don't
1:00:25qualify. Okay, so we've covered our
1:00:27basic needs of housing, food, and
1:00:29transportation, but I still have a lot
1:00:31of expenses.
1:00:32We hear a lot about healthcare being a
1:00:34massive personal cost in the US, but
1:00:37what does that actually look like?
1:00:38Georgia's Medicaid website says that I
1:00:40qualify for government help. But even
1:00:43with that, I will be paying around 10%
1:00:45of my income on health rellated expenses
1:00:47like medicine, doctor visits, getting
1:00:49care that isn't covered by this
1:00:51government insurance. This is one of the
1:00:53reasons why people in my income bracket
1:00:56live around 7 years less than the
1:00:59richest Americans. After all these main
1:01:01expenses, I'm left with a small amount
1:01:03of money for everything else. And
1:01:05there's a lot more that I need to spend
1:01:06just to live. laundry, internet
1:01:08connection, cell phone. Conservatively,
1:01:11that adds up to $105. Not taking into
1:01:14account the overcharges and hidden fees.
1:01:16Like, you're starting to see what's
1:01:17happening here. This doesn't add up.
1:01:19Entertainment, fitness, and travel just
1:01:22isn't feasible. I have no emergency
1:01:25savings, no rainy day fund, and live in
1:01:27stress of an unexpected car repair, a
1:01:30health emergency. Any of these
1:01:31unexpected charges could be a major
1:01:34setback. I'm probably going to have to
1:01:35join the huge number of Americans that
1:01:37rely on debt to get through the month.
1:01:39Whether that's credit card debt or
1:01:41short-term loans with high interest
1:01:42rates. Maybe I'll need to move back in
1:01:43with my parents or take on a second job.
1:01:45Maybe I'll start driving Uber or Door
1:01:48Dash. But what's clear is that my
1:01:50full-time job, which pays much more than
1:01:53the minimum wage, is still not enough to
1:01:56make it through the month. All right.
1:01:57Now, let's see what we can do with
1:01:58$40,000 a year. Now, my name is Simon. I
1:02:01am the representative of the median
1:02:03American income of a single earner. I
1:02:06make $40,000 a year as an event
1:02:08coordinator at a country club in
1:02:09Atlanta. My $40,000 salary gives me just
1:02:12over $3,000 a month. After federal and
1:02:15state taxes, I'm left with just under
1:02:17$2,700.
1:02:19Using that same data set, my budget for
1:02:21housing is $1,133.
1:02:25I'm kind of feeling this one-bedroom
1:02:26house. Let's say between rent for this
1:02:28house and my utilities, I'm paying 1133
1:02:31for my monthly housing expenses. The
1:02:34country club is kind of far from my
1:02:35house, and because there's no public
1:02:36transportation, I'm going to need a car.
1:02:38I saved up and purchased this 2011
1:02:41Subaru Forester on Facebook Marketplace.
1:02:43I got it for $4,500. So, like George, I
1:02:47spend about $136 a month just on gas to
1:02:50get to my job. This leaves me with a
1:02:52little over $400 for everything else.
1:02:54Guys got to eat. What am I going to do
1:02:56for food? According to the BLS data,
1:02:58someone like me spends around $467
1:03:01a month on food. I typically spend about
1:03:03$100 a week on groceries and can use the
1:03:06rest on a dinner out or two. I've got a
1:03:08Kroger grocery store 4 minutes away from
1:03:10my house. And at this point, I'm
1:03:12definitely cognizant of every price on
1:03:13these shelves. I'm using coupons, trying
1:03:15to get the best deal, but I have leeway
1:03:18to spend a little bit more on maybe a
1:03:21decent cut of meat or some fresh
1:03:23produce. Maybe I buy organic every once
1:03:24in a while. I can comfortably feed
1:03:26myself if I'm smart about how I spend
1:03:29and I don't eat out too much. This
1:03:31income level is right on the threshold
1:03:34where employers start to sponsor your
1:03:37healthare plan. They start to subsidize
1:03:38it. That's a thing here in America. And
1:03:41luckily, my employer does. But even
1:03:43still, I spend $300 a month on health,
1:03:46medicine, out-of- pocket doctors,
1:03:48predeductible expenses, and now I get to
1:03:51pay for a gym. I signed up for this
1:03:52lowcost gym for 10 bucks a month. So,
1:03:54after covering these basic needs, I have
1:03:56$231 left for everything else. All of my
1:03:59other essentials, laundry, cell phone,
1:04:01internet brings me down to $126. I will
1:04:04try to put some of this away for an
1:04:06emergency or a trip. Put it into a
1:04:08savings account with a good interest
1:04:09rate so it will grow over time. But to
1:04:11be honest, I'm probably going to spend
1:04:12this on entertainment. Like, I want to
1:04:14go out and have fun. I want to go to a
1:04:16movie. I want to subscribe to Hulu and
1:04:18Netflix. I might buy a book. Might go
1:04:20out with some friends. And after all of
1:04:22that, I end up around zero. So, all in
1:04:25all, I'm doing better than George, but
1:04:27not that much better. I've got some
1:04:29money left over at the end of the month,
1:04:31but an emergency expense would still
1:04:33leave me in debt. All right, let's up
1:04:35this to 100 grand a year and see what
1:04:38our budget looks like. Okay, now I'm Tim
1:04:40and I just found this job in sales. It
1:04:42makes me $100,000 a year. I'm officially
1:04:45in the six figures. I make four times
1:04:47more than George and double the median
1:04:50income that Simon makes. I'm now near
1:04:52the top 10% of earners in this country.
1:04:54My salary gives me $8,333
1:04:58every month. $2,200 of that is going to
1:05:00go to taxes and I'm left with just over
1:05:026 grand. In this income bracket, you see
1:05:05that people spend around 30% of their
1:05:07income on housing. Until recently, this
1:05:10salary would have been more than enough
1:05:11to buy a house, but these days, not so
1:05:14much. But for the case of our
1:05:16assumption, let's assume that I, Tim,
1:05:18have been saving for 10 years, and I'm
1:05:20finally ready to purchase my first home.
1:05:22Zillow is telling me that I can afford a
1:05:24house that's around $314,000.
1:05:27I'm going to buy this nice one-bedroom
1:05:28townhouse in Atlanta. It's got these
1:05:30nice wood floors, all of this natural
1:05:32light. Oh, wait, no. Looks like there's
1:05:34a condo fee, $426 per month, probably
1:05:37for that fancy workout room. Okay, we're
1:05:39going to have to keep looking. [music]
1:05:42Okay, I found one. It's a one-bedroom
1:05:44condo. It's got a fireplace, access to a
1:05:47pool and a fitness room. It's in a
1:05:48pretty good location, and it's just
1:05:50under $260,000. With the condo fee, I'll
1:05:53be paying around $2,700 per month, which
1:05:56is about 32% of my income for housing. I
1:05:58get to spend more on housing than George
1:06:01and Simon make in a month. Oh, and by
1:06:03the way, I will have to cough up
1:06:05$20,000, which is my whole savings, for
1:06:07a 5% down payment and closing cost to
1:06:10make this house purchase. Thanks to my
1:06:11good credit, I can qualify for a good
1:06:13car loan that allows me to buy this
1:06:15beauty, a $50,000 BMW. It'll cost me
1:06:19$754 a month for 5 [music] years, and it
1:06:22will leave me with $579
1:06:24every month to spend on gas, repairs,
1:06:26[music] and insurance. I'm even starting
1:06:28to be able to afford to bring it to a
1:06:30professional car wash place, get it
1:06:31detailed every couple months.
1:06:34I am upper middle class now, so I only
1:06:36have to pay 11% of my income on food per
1:06:39month just to feed myself. I get to eat
1:06:41out a lot more lately. When I'm at the
1:06:43grocery store, I get to peruse the fresh
1:06:46and nutritious food much more
1:06:48abundantly. I can buy nice meat and nice
1:06:50produce. I'm not overly concerned about
1:06:53the prices. [music] And lately, since
1:06:56meal delivery apps have become more
1:06:58common, I'm ordering Door Dash like once
1:07:00or twice a week. I'm starting to be able
1:07:02to use money to save myself time and
1:07:05stress. My job pays for a lot of my
1:07:08health insurance and yet I still pay
1:07:10$500 a month on health medicine and
1:07:13these kind of expensive supplements I've
1:07:15been buying. I'm able to save money at
1:07:16this point so that a minor medical
1:07:18emergency isn't a huge deal. But the
1:07:20doctors I do go to have to be covered by
1:07:22my insurance plan. I can't go out of
1:07:24network. It would be too expensive to
1:07:25pay out of pocket. With all my big
1:07:27expenses covered, I still have $665 to
1:07:30cover Wi-Fi, unlimited data on my phone.
1:07:33And since laundry and a gym are in my
1:07:35apartment, I actually don't need to use
1:07:37much cash for that. So, even after all
1:07:38of these essentials, I have money to
1:07:40save and invest. And even still, I have
1:07:43cash left over to go out with friends.
1:07:45Every few months, I'm able to save up
1:07:46enough to go on vacation. My work pays
1:07:49me even when I'm taking time off, so I
1:07:51don't need to worry about that. I do
1:07:52have to strategically choose my travel
1:07:54locations to make sure that they're
1:07:55affordable. Because I chose a cheaper
1:07:57place, I'm able to enjoy drinks and food
1:08:00while I'm there. When I come home, I do
1:08:01have to save and scrge for a couple of
1:08:04months to recuperate, but it's not too
1:08:06stressful. Not bad, and in fact, much
1:08:08better than the vast majority of
1:08:10Americans. All right, now let's up this
1:08:12to a million dollar a year and see what
1:08:14our budget starts to look like. Hi, my
1:08:16name is Noah. I am a junior managing
1:08:19director at a big private equity fund.
1:08:22I'm in finance.
1:08:23>> I'm looking for a man in finance.
1:08:24>> I work 70 hours a week. I make big
1:08:27deals. They're very important. And I am
1:08:29earning $1 million a year. That is
1:08:32$83,000 a month. After taxes, it's more
1:08:35like $48,000 [music]
1:08:37a month. In one month, I'm making double
1:08:40what George makes in an entire year. In
1:08:433 years, I'll make more than he makes in
1:08:45an entire lifetime. I've got some
1:08:47serious money to work with here. Like,
1:08:49I'm officially among the top 1% of
1:08:51income earners in this country. And I'm
1:08:53very lucky because my income and wealth
1:08:55are increasing at a faster rate than
1:08:57everyone else's. And we'll see why in
1:08:59just a second. Making this much money, I
1:09:01can get a really nice house by spending
1:09:0328% of my income, which means I can
1:09:06afford around a $2.6 million house.
1:09:09Wow, this one's kind of nice. this five-
1:09:12bedroomedroom, fiveb home in this quiet
1:09:15Atlanta suburb. Man, it is nice here.
1:09:17Look at this kitchen. Oh, and this
1:09:19beautiful yard out here. I might pick up
1:09:20croquet. And it even comes with this
1:09:22little friend. Hey, bud.
1:09:25I've always wanted my own taxiderermy
1:09:26fox. This house is going to cost me
1:09:28around $19,000 every month for [music]
1:09:31the mortgage and other expenses like
1:09:33house cleaners that come once a week to
1:09:35clean my entire house and [music] do my
1:09:37laundry. My yard is maintained by a
1:09:39local landscaping company. I'm spending
1:09:4116% of my income on transportation,
1:09:44which means a little over $13,000 a
1:09:46month on everything cars and planes.
1:09:49Instead of owning a car, I lease one in
1:09:523year periods so that I can always be
1:09:54driving the newest, fanciest car, like
1:09:56this Rivian. It's going to cost me about
1:09:58a,000 bucks a month allin. I can totally
1:10:00afford that. I'm also taking a lot of
1:10:02taxis lately because I can afford it and
1:10:04I can afford a private driver here and
1:10:06there I don't have a full-time private
1:10:08driver. I can hop on a flight too
1:10:09whenever I want. And when I fly
1:10:11internationally, I even splurge on
1:10:13business class. Still pretty expensive,
1:10:15but I've got all of these airline miles
1:10:17that I've racked up from all of my work
1:10:19travel that I actually get upgraded for
1:10:21free often. And now I'm actually pretty
1:10:22hungry. So, let's talk about food. My
1:10:24budget for food has ballooned. Based on
1:10:26the BLS data, I could technically afford
1:10:29to spend $8,000 on food every month, but
1:10:32I'm not sure that's totally common among
1:10:34this income bracket. There's not a ton
1:10:35of good data on like the 1enters. So, I
1:10:37estimate that somebody in this bracket
1:10:39is spending more like $3,500 per month
1:10:42on food, which is still a lot. I'm
1:10:44officially deep in the don't look at
1:10:45food prices, don't shop for my own
1:10:47groceries, don't worry about ordering
1:10:49takeout whenever I want [music] kind of
1:10:50rich. I could pay 20 bucks for a salad.
1:10:52I can pay $16 for a smoothie. I could
1:10:55even drop $300 per person on a nice
1:10:58restaurant and not really be too
1:10:59stressed about it. Now, I can't afford a
1:11:01private chef yet, but I have opted for a
1:11:04high-end meal service that delivers
1:11:06dinners to my house. I have to work a
1:11:08lot. [music] The difference is that per
1:11:10hour, my hours are much more financially
1:11:13valuable. George, Simon, and Tim all
1:11:15have to spend a lot of their hours
1:11:16cooking and cleaning and traveling
1:11:18around, but I can just pay to get a lot
1:11:19of that time back. I could technically
1:11:21afford to spend $4,000 a month on
1:11:23health, but again, we estimate that it's
1:11:25a little bit lower, more like $2,500,
1:11:27which would still mean a totally
1:11:29different healthcare world. I can go to
1:11:31any doctor. I can pay for a therapist
1:11:33out of pocket. I can easily afford to
1:11:35see a specialist for any kind of
1:11:37preventative care, physical therapy,
1:11:39elective surgeries, even stuff that
1:11:41isn't in covered by my very good
1:11:43insurance. I can pay for it. I can pay
1:11:45out of pocket and it's not too crazy for
1:11:47me. And even though I have a gym in my
1:11:49house because I converted one of the
1:11:51many rooms into a gym, I actually pay
1:11:53for another nice gym membership at this
1:11:56luxury spa and gym so that I can use
1:11:58their hot tub and sauna. I also get in
1:12:00on their personal trainers who are
1:12:01really great. I recently signed up for
1:12:03this fancy doctor's office where I pay a
1:12:05monthly fee and I never have to wait
1:12:07more than 10 minutes in the waiting
1:12:08room. Remember, my time is extremely
1:12:10valuable and this is one reason why my
1:12:12life expectancy is way up here. I'm
1:12:14probably going to live seven or eight
1:12:15years longer than George. laundry, cell
1:12:18phone bills, Wi-Fi. [music]
1:12:20These are all negligible costs for me.
1:12:21I'm left with at least $10,000, and it
1:12:24could be way more if I reduced some of
1:12:27these assumptions, like spending
1:12:28thousands of dollars every month on food
1:12:30for just me. So, what do I do with all
1:12:31this leftover money? Well, I do have a
1:12:33semi complicated investment portfolio
1:12:35that I love to talk about. My money is
1:12:38in the stock market 24/7, growing,
1:12:41compounding into more and more wealth.
1:12:43It allows my wealth to grow much faster
1:12:45than those who don't have extra money to
1:12:47invest. [music] I go on vacations,
1:12:49though they do get interrupted by work.
1:12:51My job is very important. For
1:12:52international trips, I do sometimes
1:12:54splurge on business class tickets so I
1:12:56can lay down on the flight. What's
1:12:58interesting though is that even at this
1:13:00crazy income bracket, people can still
1:13:02blow their money every month, trying to
1:13:04keep up with their expanding lifestyle.
1:13:07But let's be clear, they're living
1:13:08unrecognizable lives to the previous
1:13:11income tiers we've talked about. So,
1:13:12let's see what happens next. All right.
1:13:14Now, let's see what happens when we turn
1:13:15this into $25 million a year, which is
1:13:19an amount of money that some people in
1:13:20this country actually make every year.
1:13:22Let's see what their budget looks like.
1:13:24My name is Robert. You'll never hear
1:13:27about me because I am the owner of a
1:13:29highly successful national car wash
1:13:32chain. Or maybe I'm the CEO of Zillow or
1:13:35Chevron. Or maybe I'm a pretty famous
1:13:37celebrity and I make $25 million a year.
1:13:40Noah was already in the top 1% of income
1:13:42earners, but now I am truly in the ranks
1:13:45of the global elite. And we need to
1:13:46pause and talk about how rich people
1:13:48think about their wealth. At this point,
1:13:51we have to start to rethink money
1:13:52because people at this income bracket
1:13:54think less about their yearly salary
1:13:56[music] and more about the total value
1:13:58of all of the stuff they own, their net
1:14:00worth. Most of my pay is in stocks, not
1:14:03cash. I spend money knowing that I have
1:14:06all of these assets that I could sell if
1:14:08needed, even if it doesn't come to me in
1:14:10a paycheck every month, which is
1:14:12actually really great because I'm not
1:14:14taxed on this stuff unless I sell it for
1:14:16cash. And even then, I'm taxed at like
1:14:1815 to 20%. Which means that in a lot of
1:14:21years, my tax rate will be less than Tim
1:14:24who makes $100,000. I'm paying less of
1:14:27my income in taxes than he is. This is
1:14:29very good for my net worth. So, let's
1:14:31see what I can buy. Now, given my
1:14:34gargantuan income, I could technically
1:14:36afford this house.
1:14:39It has a pool. It's got this really cool
1:14:41statue and this garden that looks like
1:14:43it's straight out of Princess Diaries.
1:14:45>> I don't want to be a princess.
1:14:47>> But because I'm planning to buy my
1:14:48summer house in Italy this year, I'm
1:14:50going to go with something a little bit
1:14:51more modest, like this one.
1:14:55>> I really like this house. the doororknob
1:14:57in the shape of someone's hand, the
1:14:58animal print details, the golf room. I
1:15:01love this golf room. I mean, what can I
1:15:03say? I'm Robert. I'm an eccentric boy.
1:15:06This house has a pool. It's got a gym.
1:15:08It's got this wooden tub, which is
1:15:11something I never thought I needed, but
1:15:12I absolutely do. What you'll start to
1:15:14see with this house and everything else
1:15:16in this income bracket is how it allows
1:15:18me to physically isolate myself from the
1:15:21concerns that most people have. I don't
1:15:23have to think about crime, homelessness,
1:15:25noise, pollution. I can live surrounded
1:15:28only by people who are wealthy like me.
1:15:31Getting around is really easy for me.
1:15:33I've got a couple of cars. I rotate
1:15:35driving them every once in a while,
1:15:36except for this one. This one I don't
1:15:38drive because it's an antique and I just
1:15:40like to look at it. Oh, and did I
1:15:42mention I have a full-time driver? I pay
1:15:44him $51,000 a year. He whisks me around
1:15:47from important meeting to important
1:15:49meeting. I'm spending two times what
1:15:51George makes in a year to pay for this
1:15:53and it's totally worth it because it
1:15:55saves me time. [music] When I travel, he
1:15:57drives me right onto the runway where I
1:15:59jump into a private jet. Now, I don't
1:16:01own this jet yet, but I do charter
1:16:03private flights like when I need to fly
1:16:05from Atlanta to New York. Cost me about
1:16:07$27,000 for this 2-hour flight. I can
1:16:10easily do that. 27 grand feels to me
1:16:13what $43 feels like to Simon. I'll pay
1:16:17that for a nice private jet. Now, I
1:16:18don't fly private all of the time. I do
1:16:20fly commercial if I'm going on vacation
1:16:22[music] to Paris. I'll be flying first
1:16:24class, obviously. I have a separate
1:16:26security checkpoint, my own lounge, and
1:16:28when I get on the plane, I get one of
1:16:30those little cabins all to myself. By
1:16:33the way, this ticket costs me $31,000.
1:16:35When I get to Paris, I usually book the
1:16:37penthouse in one of my favorite hotels.
1:16:39I have hotel staff available at any
1:16:41moment. Do I cook? No, I do not cook. I
1:16:45enter grocery stores only when I feel
1:16:47like it would be fun to feel like a
1:16:49regular person for a moment.
1:16:50>> Hey, chef, do you want to cut this up
1:16:52for her?
1:16:52>> And yet, magically, when I open my
1:16:54refrigerator, everything I need is in
1:16:56there. It's all been fully designed by
1:16:58my nutritionist, purchased by my house
1:17:00manager, prepared by my personal chef.
1:17:03And yes, you can see I have a whole
1:17:05staff of people who help me manage my
1:17:08life. My house manager is really good at
1:17:10just making this all disappear. like the
1:17:12landscaping gets done, the pool gets
1:17:14cleaned, [music] and a bunch of other
1:17:15stuff that I don't even know. I'm sure
1:17:17all of this costs a lot of money, but
1:17:18honestly, I've never even thought about
1:17:20it. I've got my friends over and our
1:17:22personal chef is putting together a
1:17:24beautiful meal, and he's even doing the
1:17:27wine pairing tonight, selected from my
1:17:29collection of quirky cult wines in my
1:17:32temperature controlled cellar. I don't
1:17:33pay attention to prices for food or
1:17:35wine, except when knowing the price of
1:17:38this bottle, for example, helps confirm
1:17:40how rare and special it is. I think we
1:17:42spent $16,000 on this bottle, or this
1:17:45other one that I splurged on for
1:17:47$150,000.
1:17:49I go out to restaurants, but it's a
1:17:51little different than the rest of the
1:17:52world. [music] I have connections that
1:17:54allow me to get into the private back
1:17:56room of whatever restaurant I want.
1:17:57Okay, this is insane. And while these
1:18:00costs are very feasible for someone who
1:18:03makes $25 million, not everyone who
1:18:05earns this much money lives like this.
1:18:07In fact, a lot of super rich people are
1:18:09incredibly frugal, making their high
1:18:11earnings that much more impactful
1:18:13because they can get rich much faster.
1:18:15But what we see with Robert is that you
1:18:18actually could spend this much money on
1:18:21food and housing given your income. And
1:18:24many do. So, in addition to my
1:18:25nutritionist and chef, I have a personal
1:18:28trainer and health coach who comes to my
1:18:30house every day and guides me through my
1:18:32workout. He even travels with me to keep
1:18:34me exercising while I'm on the road. I
1:18:35have a private doctor who is on call who
1:18:38comes to my house. I pay her 20 grand a
1:18:40year just to be on call. She's available
1:18:43and she'll come do whatever I need, like
1:18:45a quick steroid shot to my bum knee
1:18:48before I play a game of tennis. My
1:18:49health care is mostly preventative. I
1:18:51get all the scans and tests and routines
1:18:54done to ensure that I'm in tip-top
1:18:56shape. I can afford any surgery or
1:18:58healthcare routine or procedure that I
1:19:00want. And last year, I fully replaced
1:19:02all of my front teeth with veneers. It
1:19:05only cost me $28,000. And remember,
1:19:08$28,000 for me is what it feels like
1:19:11when Tim spends $112 or what George
1:19:15feels like spending $28. Not nothing,
1:19:18but not a huge deal. Even after spending
1:19:20on all of this, I still have lots of
1:19:23money that my financial manager funnels
1:19:25into sophisticated investment portfolios
1:19:28that just keep on growing. Investing can
1:19:30be really fun for me at this point. I'll
1:19:32just take 30 grand here and there to buy
1:19:34collector's items that I'm into. A
1:19:36couple weeks ago, I paid $5,000 for this
1:19:38authentic World War II helmet. This
1:19:41piece of art cost me 50 grand, but it's
1:19:44a great investment because the artist is
1:19:45actually going to be the next big thing.
1:19:46So, this stuff is fun, but it also
1:19:48contributes to my net worth because all
1:19:50of this retains and grows in value. And
1:19:53my clever accountant has recently
1:19:55mentioned that he found a way to
1:19:57occasionally sell this stuff and get a
1:19:59nice tax break on the profits. Now,
1:20:01listen, I make a meaningful difference
1:20:04in my community with philanthropy. Like,
1:20:06I'm donating a half a million dollars to
1:20:08my family foundation, which is promoting
1:20:10education in the city. Funneling money
1:20:12and assets into this foundation allows
1:20:15me to get some really nice tax breaks,
1:20:16helps me avoid capital gains tax, and
1:20:19gives me a buzz of feeling like I'm a
1:20:21generous millionaire. I even donated a
1:20:23few hundred,000 to my nephew's private
1:20:25school last year. They didn't really
1:20:26need the money, but now they're putting
1:20:28my name at the top of their donor list,
1:20:30which is like really great. And even
1:20:31after all of this, I've got tons of
1:20:33leftover income. I'm easily
1:20:35[clears throat] able to cover the
1:20:36mortgage on my secondary property in
1:20:38Lake Ko. It's only $30,000 a month. And
1:20:41the views here are just chef's kiss. I
1:20:44mean, look at it. One of my favorite
1:20:45parts about this level of wealth is how
1:20:47much access I now have to obscure
1:20:49[music]
1:20:49elite clubs like this one in New York
1:20:51called Core. I had to pay 50 grand for
1:20:54an initiation fee and then $17,000
1:20:56annually. But it allows me to rub
1:20:58shoulders with really important people.
1:20:59And yes, there are echelons above me
1:21:02that someday maybe I'll reach. But I'm
1:21:04still existing on a fully different
1:21:06plane than most every single person in
1:21:08the world. Almost every stressor that
1:21:10you can think of, I can pay away. And
1:21:12the ones that I can't pay away, like
1:21:14heartbreak, grief, and social anxiety, I
1:21:17won't be able to pay that away at any
1:21:19level of wealth. I am protected
1:21:20financially from just about any
1:21:22emergency that could occur in my life.
1:21:24And so long as I manage my finances
1:21:26responsibly, I will never experience
1:21:28life below this level of wealth. The
1:21:30difference between these levels of
1:21:32income, it's kind of hard to fathom. If
1:21:35you're in the $25 million camp, you make
1:21:37more in one hour than George makes in 6
1:21:41months. In just one eight hour workday,
1:21:45you're making more than George makes in
1:21:474 years. A 100 years ago, the divide
1:21:50between the rich and the poor was
1:21:52incredibly stark in this country. The
1:21:54top 1% would bring home 20% of all of
1:21:57the income. But then look [music] what
1:21:59happened. We kind of fixed it. We taxed
1:22:01the super rich. The working class
1:22:03organized and rose up, fighting for fair
1:22:05pay. And by the 1980s, it was more like
1:22:0810% of the income went to the top 1%.
1:22:11But watch what happens next.
1:22:16We're going back up and we're leaving
1:22:19people like George in a trap. It's not
1:22:22hard to see why someone like George
1:22:23would have lost faith in our government
1:22:26and our institutions and the concept of
1:22:29an American dream. The system is not
1:22:31working for George. Each cost leads to
1:22:33another cost, creating a poverty trap
1:22:36with no chance of getting out. Expensive
1:22:38housing far from work means a car. A car
1:22:41means maintenance and insurance and
1:22:42fuel, which means less money for food
1:22:44and healthcare. [music] He makes too
1:22:46much for government assistance on any of
1:22:47this. How is George supposed to have the
1:22:49time, [music] the money, or even the
1:22:51brain space to think about school or
1:22:54improving his skills? His social
1:22:56mobility is limited. We often think
1:22:58about America as this land of
1:23:00opportunity. If you work hard, you can
1:23:02[music] move up. But the data shows us
1:23:04that that that just isn't the case
1:23:05anymore for someone like George or for
1:23:08the tens of millions of Americans like
1:23:10him. The gap is getting wider and it's
1:23:12getting harder to close. And that's bad.
1:23:14Not just bad because it's unfair, but
1:23:17[music] it's bad for our economy. It's
1:23:19bad for our politics. And it's bad for
1:23:21the 44 million people who live in the
1:23:23richest country in the world but don't
1:23:24have enough food every day. The people
1:23:26who only have access to credit via
1:23:28predatory lenders. The people whose
1:23:31lives are rocked when [music] they get a
1:23:32$25 overdraft fee or who can't afford an
1:23:35oil change. It's time for the people in
1:23:38charge in this country to do what
1:23:39[music] they did 100 years ago and
1:23:41reverse this curve before it becomes too
1:23:44late. The
1:23:44>> top 1% hold nearly 10 times [music] more
1:23:47wealth than the bottom 50% combined.
1:23:52>> There's people getting rich off this
1:23:54graph.
1:23:55>> [music]
1:24:00>> What we're looking at here is the number
1:24:02of Americans that don't make enough
1:24:04money for basic survival. So like a
1:24:06family of four, two parents, two kids
1:24:08living off of $31,000 a year or less.
1:24:12[music] That's considered poverty in the
1:24:14United States. And there's millions of
1:24:15people who live with that kind of
1:24:17income. The US government spends about
1:24:19[music] a trillion dollars every year
1:24:20helping these people meet their basic
1:24:22needs. In recent decades, a lot of that
1:24:24money has been flowing through a
1:24:26middleman, private corporations who are
1:24:28supposed to be more efficient in
1:24:30administering this money. [music]
1:24:32>> So welfare is big business. And of
1:24:34course, that's the irony of this whole
1:24:35thing that there's so much money to be
1:24:37made from poverty. [music]
1:24:46[music]
1:24:49Now, this is not easy stuff to
1:24:51understand. We're talking about
1:24:52government welfare programs and
1:24:54bureaucracy. Sometimes they're
1:24:55intentionally hard to understand. And
1:24:57these corporations don't really want to
1:24:59be known by anyone. But if you start to
1:25:02dig, which we've been doing, and you
1:25:06look deep enough into this, you start to
1:25:08see what all of this actually looks
1:25:09like. Who's actually getting rich, what
1:25:11the incentives are within this system,
1:25:13where the loopholes are, and whether or
1:25:15not this is actually benefiting the
1:25:17people that it's designed to benefit.
1:25:19So, in this video, I'm going to show you
1:25:20who gets rich off the poor. And I'm just
1:25:23going to do a few case studies that
1:25:24demonstrate how this works. I'll be
1:25:26making a list of examples here going
1:25:28from what I see as the least egregious
1:25:30abuse of this system to the most. I am
1:25:33bracing myself to get [music] sued or
1:25:36intimidated by the companies that I'm
1:25:39calling out in this video because that's
1:25:41[music] how a lot of these powerful
1:25:42shadowy companies work. So, as always,
1:25:44every assertion in this video is
1:25:45rigorously [music] fact checked and in
1:25:47my sources. lawyers, go check that first
1:25:50before you send me your cease and desist
1:25:51order. Thank you. And with that, let's
1:25:54look at who gets rich off the poor.
1:25:56Let's go back to this graph one last
1:25:58time and just zoom back to the 1950s
1:26:00where you can see that the poverty rate
1:26:02was double what it is today. It's like
1:26:0522%. This was really bad and it led to
1:26:08the president at the time declaring war.
1:26:11And this administration today, here and
1:26:14now declares unconditional war on
1:26:18poverty in America.
1:26:21>> We shall not rest until that war is won.
1:26:25>> So a war on poverty by Lynden B. Johnson
1:26:29in 1964.
1:26:31This is what that war looked like. This
1:26:34big line, this is uh social spending as
1:26:37a share of GDP. You can see this is
1:26:38where he gives this speech right here.
1:26:40this flatline, social spending just
1:26:42skyrockets right after the government
1:26:44spends tons of money for this war on
1:26:46poverty. That money goes towards
1:26:48programs like Medicare and Medicaid,
1:26:49[music]
1:26:50food stamps, public education, which is
1:26:53why you see this big dip from 22% all
1:26:56the way down to 12, 13%. And for a time,
1:26:59all this spending worked. Poverty
1:27:01declined 30% in 5 years. But eventually,
1:27:04progress slowed and the government kept
1:27:06spending and people got tired of it. The
1:27:09economy wasn't doing well and people
1:27:11were tired of subsidizing these welfare
1:27:13programs. And that's where this guy
1:27:15comes in.
1:27:16>> My friends, some years ago, the federal
1:27:19government declared war on poverty and
1:27:22poverty one.
1:27:23>> This is where things start to get a
1:27:24little bit murky. So, we needed help. We
1:27:27got it from Anne Kim who is an expert
1:27:30who literally wrote the book on this
1:27:32history and the modern-day poverty
1:27:34economy and uh sat down with us to talk
1:27:37through this history and how it works
1:27:39today.
1:27:40>> Remember during the 1980s we had this
1:27:42well no you don't remember the 1980s.
1:27:44[laughter]
1:27:46Well during the 1980s there was really
1:27:49this mythologization if that's [music] a
1:27:51word of the CEO. At the same time, the
1:27:54government spending was ballooning.
1:27:56Economic times were not that great. So,
1:27:59Americans were not feeling particularly
1:28:01generous about funding [music] social
1:28:03services programs. And so, the CEOs were
1:28:06really kind of held up on a pedestal as
1:28:07the ones who are going [music] to make
1:28:09government just as efficient as they
1:28:11made their own companies.
1:28:12>> So, it's the 1980s. Reagan wants to rein
1:28:14in all of this spending. [music]
1:28:16He's also afraid that Americans are
1:28:18becoming too reliant on the welfare
1:28:20system. So he kicks off a bunch of
1:28:21changes that over time would lead to a
1:28:24fundamental shift in delivering income
1:28:27support to low-income populations.
1:28:30>> They wanted to privatize Medicaid,
1:28:31Medicare, prisons, [music]
1:28:33air traffic control.
1:28:34>> This privatization of government
1:28:36spending started under Reagan, but it
1:28:38continued into the future
1:28:40administrations, especially under Bill
1:28:42Clinton, who helped expand it. And the
1:28:44fundamental shift looks like this. We're
1:28:46going to be using a [music] graphic like
1:28:48this not only for right now but for the
1:28:51future cases of how this works today.
1:28:53Taxpayers give money to the government.
1:28:54The government used to give money to
1:28:56citizens in need directly. But after
1:28:59these reforms, the money would start to
1:29:00be distributed to the states. The states
1:29:03would then hire [music]
1:29:04for-profit companies to do the
1:29:07complicated work of distributing this
1:29:08money to eligible people in need. They
1:29:11would be responsible for making sure
1:29:12that no one's abusing the system,
1:29:14determining who's eligible and who's
1:29:16not. And the thinking here was that the
1:29:18government is much less efficient than
1:29:20private companies. And that is true in
1:29:23most cases. And that if we apply
1:29:25business and the free market and profit
1:29:28motives to welfare, that the for-profit
1:29:30companies would make this more
1:29:31efficient, less government spending,
1:29:33less waste, and [music] less over
1:29:35reliance on the welfare system. And the
1:29:37big part of all of this is that there
1:29:39would be more requirement for people to
1:29:41be looking for a job or be working in
1:29:43order to qualify for benefits. And who
1:29:45would verify that applicants are
1:29:46actually working? These for-profit
1:29:48companies. And so this is how our
1:29:50welfare system works today in a very
1:29:52kind of American way. It is administered
1:29:55by private companies that you've never
1:29:57heard about who are given lots of money
1:29:58from the government to dole [music] it
1:30:00out to people in need. So Reagan started
1:30:02this privatization train and it was
1:30:04really President Bill Clinton who not
1:30:07only hopped on board that train but got
1:30:09it accelerating to its destination which
1:30:11was total privatization of a lot of
1:30:13social services in [music] America.
1:30:17>> Okay, so that's the context here. Um
1:30:19it's been 45 years since this big
1:30:22experiment began of privatizing our
1:30:25welfare system. I've always wondered
1:30:26like did this work? So that's sort of
1:30:28been the curiosity at the heart of this
1:30:30story. Is government more efficient? Are
1:30:33we saving money? Is this helping
1:30:35vulnerable populations in a more
1:30:37efficient way? The answer is in some
1:30:39cases yes. Like there have been positive
1:30:42outcomes of [music] outsourcing to
1:30:44contractors within the welfare system
1:30:46and public spending. A good example of
1:30:48that is food stamps that used to come in
1:30:50these paper coupons but now are
1:30:53delivered electronically on a debit
1:30:55card. This is more secure. It's more
1:30:57efficient. It ensures that people use
1:30:59these for food. There are a lot of
1:31:01instances where private [music]
1:31:02companies have made government spending
1:31:03more efficient, but the purpose of this
1:31:05video is to shine a light on the many
1:31:07instances where private companies have
1:31:09gotten really rich off of this system
1:31:11[music] in a way that has not benefited
1:31:13the most vulnerable and needy people in
1:31:15our country, the poor, [music]
1:31:17the elderly, children in need, the
1:31:19disabled. So, finally, the reason you
1:31:21clicked on this video, let's draw up
1:31:23this list of who gets rich off the poor.
1:31:26And for that, I'm going to need to look
1:31:29at all these papers. So, we need more
1:31:30space. Let's go to the big table. Okay,
1:31:38one last time. Thanks to Ground News for
1:31:40sponsoring today's compilation. Ground
1:31:41news is where I go first when I'm
1:31:43researching a story because it's where I
1:31:45can compare narratives and framings and
1:31:48understand the bias of different stories
1:31:50before I start making up my mind on the
1:31:53story I'm going to tell. Go to
1:31:54ground.news/jny Harris. Get the vantage
1:31:57plan for yourself. And yes, I am in Mark
1:31:59Robber's Crunch Labs headquarters right
1:32:02now filming this because I'm visiting
1:32:04him. All right, thanks for watching.
1:32:06Okay, so the first one on our list is
1:32:09slightly adjacent to the privatization
1:32:12of welfare, but it follows the same
1:32:14incentives and dynamics, and it has to
1:32:16do with taxes. One of the ways that the
1:32:18government subsidizes the lives of
1:32:19lower-income people is through a tax
1:32:21credit. So, when you file your taxes,
1:32:23you show that you've been working,
1:32:24you've made money, but you didn't make
1:32:26that much money, and therefore, you
1:32:28qualify for an earned income tax credit.
1:32:30If you have kids, it goes up and it kind
1:32:32of maxes out at around $7,000. This is a
1:32:35very simple thing. In a lot of
1:32:36countries, you like check a box and you
1:32:38get this refund or this subsidy to your
1:32:40life. But in the United States, it looks
1:32:42like this.
1:32:46This is a 45page
1:32:49instruction manual about all the
1:32:51specifics on the earned income credit.
1:32:54Something that should be so simple and
1:32:56that is a key way of helping lower
1:32:58income people live their lives. The tax
1:33:00code here in the United States is
1:33:01deathly complicated. intentionally
1:33:03[music] designed to be so to make
1:33:05certain companies rich. And this is one
1:33:08way that works. I have a lot of feelings
1:33:09about this. I made a whole video on the
1:33:10New York Times about this very thing,
1:33:13but I didn't focus on this aspect of it.
1:33:16Because it's so complicated, low-income
1:33:18people who qualify for this credit don't
1:33:20want to fill it out themselves. And so,
1:33:21they go to a tax preparer. Enter this
1:33:25guy. Well, not this guy specifically,
1:33:27but a guy like this representing a
1:33:30company like this. Liberty Tax is one of
1:33:32many tax preparation companies that
1:33:34advertise to low-income people to come
1:33:36in so that they can prepare their taxes
1:33:38and get them in on the earned income tax
1:33:40credit. But we now know they do so using
1:33:43some pretty shady means. There's a
1:33:45lawsuit lawsuit lawsuit lawsuit.
1:33:49District of Columbia versus Liberty Tax
1:33:52Service. Liberty Tax was recently sued
1:33:55for luring lowincome people by saying
1:33:58that they will prepare their taxes for
1:34:00them, only to deceive these customers by
1:34:02secretly skimming extra money off the
1:34:04top of their tax refund, which remember
1:34:07includes the earned income tax credit
1:34:09that is meant to subsidize [music] their
1:34:11lives. Liberty Tax also gives out loans
1:34:14to people saying that they can pay them
1:34:16back once they get their tax refund.
1:34:18But what that really has done is create
1:34:21a market for highinterest bash cash
1:34:23products like refund anticipation
1:34:25[music]
1:34:25loans or refund anticipation checks
1:34:27which are basically just payday loans
1:34:29that are secured by the refund. [music]
1:34:31And so this predatory industry has grown
1:34:33to take advantage of the complexity of
1:34:35an incredibly important benefit that a
1:34:37lot of poor people count on every year.
1:34:39>> These loans would often come with high
1:34:41interest rates and unexpected fees. In
1:34:43fact, the pricing in all of this has
1:34:46been kind of a black box allowing
1:34:48Liberty Tax to take advantage of
1:34:49low-income Americans trying to get in on
1:34:51the benefit that they are entitled to
1:34:53because of this tax credit. Okay, and
1:34:55this is where I have to come clean. I
1:34:57worked for this company, not for very
1:34:59long and not in any high position. I was
1:35:03one of these Statue of Liberty guys. One
1:35:05winter, I was home from university
1:35:07waiting for a security clearance for an
1:35:09internship at NATO. [music] and I needed
1:35:11money. And so I found this job being the
1:35:14Statue of Liberty holding this sign. I
1:35:17didn't know what the sign said, okay?
1:35:19But it probably said something like,
1:35:21"Need money today? Apply for a $500 to
1:35:24$6,250
1:35:26easy advance."
1:35:28In other words, I was probably a part of
1:35:30luring desperate people in to get a bad
1:35:34loan or to have their tax refund skimmed
1:35:37by this corporation. I had no idea and
1:35:39I'm sorry. Liberty is just one of many
1:35:42corporations who has gotten in on these
1:35:44schemes targeting low-income people to
1:35:46try to get in on their tax credits. And
1:35:48to me, this is actually a failure of our
1:35:51[music] tax system. For this segment of
1:35:53the population, this should be a very
1:35:55easy thing like it is in every other
1:35:56country, a box on a free government
1:35:58website that you can fill out in 5
1:36:00minutes. But instead, we've got a
1:36:02privatized corporate middleman who is
1:36:04making all of this money off the poor.
1:36:07Okay. Number two, housing.
1:36:11So, here in the US, instead of building
1:36:13big public housing complexes like they
1:36:15do in some countries and like we used to
1:36:17do, the privatized version of the
1:36:19American government gives vouchers to
1:36:21low-inccome people and allows them to go
1:36:22choose a house and the government will
1:36:25basically pay for a portion of their
1:36:27rent. This is called section 8 housing.
1:36:29And there are landlords that specialize
1:36:32in renting to section 8 tenants, getting
1:36:35this government subsidy voucher that
1:36:37goes to pay for the rent. But what you
1:36:40find is that some of these landlords
1:36:42jack up their prices because they know
1:36:43the government will pay for it. Like
1:36:45here in DC, an apartment that should
1:36:47cost $1,600 a month, the landlord might
1:36:50charge almost $1,000 more, like $2,500 a
1:36:53month, well above the market price,
1:36:55knowing that the government, who has
1:36:57poor oversight over this program, won't
1:36:59pick up on this and will subsidize that
1:37:02inflated price. Now, I'm not just making
1:37:04this up. Those are real numbers from an
1:37:06investigation here in DC by the
1:37:08Washington Post who found that the DC
1:37:11government is overpaying thousands of
1:37:14apartments to the tune of a million
1:37:15dollars every month here in little DC.
1:37:18But this is happening all over the
1:37:20country, enriching landlords while
1:37:22depleting the assisted housing fund, all
1:37:25while distorting the market. Like this
1:37:27is not free market. This is a totally
1:37:29distorted thing.
1:37:32Number three on our list is corporate
1:37:34middlemen, which is kind of a big
1:37:36section. I'll try to work through it
1:37:38fairly concisely, but it's kind of the
1:37:40biggest [music] one here. This is where
1:37:41a lot of people get really rich off the
1:37:43poor. Remember from our history section
1:37:46just a few moments ago that Ronald
1:37:48Reagan shook up the welfare system by
1:37:50instead of giving money directly to
1:37:52people in need, instead giving it to the
1:37:54states who would then give it to a
1:37:56corporate middleman who would then
1:37:57distribute it. And that corporate
1:37:59middleman also had to kind of determine
1:38:00the eligibility of people, making sure
1:38:03they're working or they're looking for a
1:38:04job. And all of that is a lot of work.
1:38:06And [clears throat] these corporations
1:38:07were the [music] ones to be doing it.
1:38:09>> So these are the folks who are getting
1:38:11government contracts [music] to act as
1:38:14government in running welfare programs.
1:38:16They're basically agents of the
1:38:17government. They're mercenaries for
1:38:19[music] the public sector. They're
1:38:21making huge decisions that benefit the
1:38:23everyday lives of low-income people. One
1:38:25of these companies, for instance, was a
1:38:27company [music] called Maximus, which is
1:38:28one of the largest welfare services
1:38:30providers today. They had revenues of
1:38:33about 88 [music] million in 1995, and
1:38:36just a few years later, their revenues
1:38:37are already up to $500 million. And
1:38:39today, they're a $4.9 billion [music]
1:38:41business.
1:38:42>> Now, this was exactly the point for
1:38:45Reagan and his reformers. [music]
1:38:47These corporate middlemen were supposed
1:38:48to be much more efficient in
1:38:50administering this government money. And
1:38:53indeed, they are for-profit companies.
1:38:55and they operate much more efficiently
1:38:57than [music] the government itself.
1:38:59Cutting costs and looking for ways to do
1:39:02things more efficiently. But let's
1:39:04remember this is not like a normal
1:39:06corporation like McDonald's that is
1:39:08selling a product to a customer that can
1:39:11go somewhere else. Let's see what
1:39:12happens.
1:39:16Few years ago, Maximus took over
1:39:18Tennessee's health insurance program,
1:39:20state-run health insurance program. It's
1:39:22called Medicaid. And what you saw is
1:39:23that many children and elderly people
1:39:26very quickly were booted out of the
1:39:29program. They were found ineligible.
1:39:31There was a 23% increase in the number
1:39:34of uninsured children in the state.
1:39:35That's more than any other state at the
1:39:37time, 2018.
1:39:40It took me a while to get my head around
1:39:41this. Like why would a for-profit
1:39:43company want to kick children and old
1:39:45people off of the state health insurance
1:39:48program? I'll explain in just a sec, but
1:39:49let's look at one more example. In 2016,
1:39:53Maximus took over the Medicaid program
1:39:56in Kansas. And soon thereafter,
1:39:58applicants started to see huge delays in
1:40:00their applications. Backlog started to
1:40:03build up, which remember what we're
1:40:04talking about here. This is an abstract.
1:40:06This is vulnerable people, in this case
1:40:08mostly elderly people, not being able to
1:40:11access their basic health needs for
1:40:14weeks and sometimes months because their
1:40:16application was pending for a very long
1:40:18time. meaning Maximus was working on it,
1:40:21but presumably very slowly. And that's
1:40:24because children and low-income people
1:40:26and elderly people are not Maximus's
1:40:29customer. They do not have an incentive
1:40:31to serve those people. Partly because
1:40:33those people can't go anywhere else.
1:40:35Those people think that they're
1:40:36interacting with the government. They
1:40:38don't know who Maximus is. And mostly
1:40:40because their main job is to get more
1:40:42government contracts and then to cut
1:40:44costs so that they can capture as much
1:40:46of that government contract as profit.
1:40:49So, in this case, what that means is
1:40:51cutting staff, making it as cheap as
1:40:53possible to process these applications.
1:40:56This answers my question about why a
1:40:59company like Maximus would want to
1:41:00[music]
1:41:01get people off the roles to deem them
1:41:03ineligible for these benefits because
1:41:06it's cheaper for them. They are
1:41:08motivated to find people who do not
1:41:10qualify and to [music] pair down their
1:41:13list so they have fewer people to work
1:41:14on, which is less cost for them. So yes,
1:41:17there is cost cutting and efficiency
1:41:19that's happening here, but it happens to
1:41:21be at the expense of vulnerable, needy
1:41:24people who the government is trying to
1:41:26give money to. Now, actually, I don't
1:41:28blame Maximus very much for this. I
1:41:31don't think they're bad people. I think
1:41:32they provide a very useful service in
1:41:34most cases. We should expect a
1:41:37corporation to behave like this. The
1:41:38definition of a for-profit corporation
1:41:40is someone who does everything in their
1:41:42power to make money for their company.
1:41:45That is their job. So without proper
1:41:47oversight and competition and regulation
1:41:50and performance review, these
1:41:52corporations should be expected to
1:41:54minimize the resources they have to put
1:41:56into processing applications and
1:41:58administering benefits. And another
1:41:59point of fairness here, if you look at
1:42:01the financials of Maximus, they're not
1:42:04some crazy profitable company. Yes, they
1:42:06bring in billions of dollars. They've
1:42:08captured a huge amount of this
1:42:09government services market. Their gross
1:42:11profit margin is 20%, which seems like a
1:42:14lot, but if you actually look at their
1:42:15net profit margin, which is kind of
1:42:16their more typical profit margin, it's
1:42:18like 3%. [music]
1:42:20That's a pretty poor performance for a
1:42:22company. They're not insanely
1:42:23profitable. The CEO did make $7.3
1:42:26million last year in full compensation.
1:42:28And they did spend over a million
1:42:29dollars in lobbying and funding
1:42:31elections. My point here is corporate
1:42:34middlemen who administer welfare are not
1:42:36robber barons and they're not running
1:42:38some corrupt scheme, but they are
1:42:40for-profit [music] corporations who will
1:42:42cut costs where they can. And if they're
1:42:44not held accountable for doing that, the
1:42:46[music] people who suffer are the people
1:42:48who are already vulnerable and needy in
1:42:50our country, which is what all these
1:42:52programs are [music] meant to help.
1:42:54>> Because they're one of only a handful of
1:42:55companies that are in this business. you
1:42:58can get away with a lot of um behaviors
1:43:00that may not fly in a more competitive
1:43:03marketplace. [music]
1:43:04>> I remember interacting with these
1:43:06companies. I didn't know I was
1:43:07interacting with them until I started
1:43:09reporting the story. But when my son was
1:43:12like one and a half, he was diagnosed
1:43:14with autism. And we started to look
1:43:17around for services, realized our
1:43:19insurance didn't cover anything. So, we
1:43:21went to [music] Medicaid and we
1:43:23qualified. And my wife is spent hours
1:43:27[music] and hours on the phone with what
1:43:30I now know was a corporate middleman
1:43:32trying to work through these
1:43:34applications and processes. And it was
1:43:37mind-numbingly complicated and difficult
1:43:39[music] and the wait times were so long
1:43:42and the paperwork and the hoops that we
1:43:44had to jump through. And I remember
1:43:46feeling a lot of anger [music] at the
1:43:48inefficiency of the government. that the
1:43:50government has no incentive to perform
1:43:52because [music] we're not their
1:43:53customer. What I realize now is that I
1:43:55was dealing with a corporation. I was
1:43:57not the customer is was not the
1:43:59customer. My son Henry who needed
1:44:01services [music]
1:44:02was not the customer. And in fact,
1:44:04complicated forms and more weight times
1:44:06and process is actually more business
1:44:09for these corporate middlemen. They have
1:44:10an incentive to sell more paperwork
1:44:13[music] to all of us. To me, that is a
1:44:15distortion of what Ronald Reagan dreamt
1:44:18[music] about, of corporations swooping
1:44:20in and making our government more
1:44:22efficient. Okay, that's corporate
1:44:24middlemen. Let's move on to number four,
1:44:27Medicaid dentists. Now, I've had some
1:44:29positive experiences with Medicaid. When
1:44:31I was a freshly married in my young 20s
1:44:33university student with no insurance and
1:44:36we had our first baby, I got hit with a
1:44:39$10,000 bill from [music] the hospital
1:44:41and freaked out and went to the billing
1:44:43department at the hospital and they told
1:44:46me about this magical thing called
1:44:47Medicaid for someone like me who was
1:44:49very low income at the time. And lucky
1:44:50for me, whoever the benefits contractor
1:44:52in Utah was handled it very well and it
1:44:55really saved my bacon. But if you look
1:44:56at all sides of Medicaid, you start to
1:44:59see entire industries that [music] exist
1:45:02to take advantage of the Medicaid
1:45:04system. A good example of this is
1:45:06dentistry.
1:45:07>> It's created an enormous business
1:45:08opportunity for some dentists who see
1:45:11that they can make a living treating
1:45:13exclusively Medicaid patients.
1:45:15>> Unlike regular private insurance,
1:45:16Medicaid doesn't reimburse very [music]
1:45:19much for dental procedures. So because
1:45:21of that, a lot of dentists don't take
1:45:22Medicaid as an insurance. And on the
1:45:24other side, there are some dentists that
1:45:27only take Medicaid. They specialize in
1:45:29appealing to patients who qualify for
1:45:31Medicaid, getting them in, and [music]
1:45:33doing as many procedures as possible to
1:45:36get in on those Medicaid benefits. And
1:45:38once again, if we're talking rational
1:45:40corporate behavior and incentives, these
1:45:42offices will often target lower income
1:45:45or disabled or elderly patients who are
1:45:49less likely to advocate [music]
1:45:51for themselves and against medically
1:45:53unnecessary procedures. So inevitably
1:45:55what's happened over time is that this
1:45:58market has turned into a very
1:46:00exploitative one where dentists have
1:46:02been prosecuted for charging for
1:46:04procedures that didn't exist or
1:46:06procedures that were completely
1:46:07unnecessary. For instance, there was a
1:46:09dentist in North Carolina who was
1:46:11prosecuted for having performed 17 root
1:46:14canals on a 3-year-old toddler. [music]
1:46:17>> And it's not just one bad apple in North
1:46:19Carolina. This is a lawsuit where the US
1:46:22government settled with a company called
1:46:24Cool Smiles and they are a Medicaid
1:46:27specific dental franchise who had to pay
1:46:30close to $24 million because an
1:46:32investigation found that they [music]
1:46:34were performing dental operations that
1:46:36were not medically necessary. They were
1:46:37taking advantage of poor patients in
1:46:39order to get more money from Medicaid.
1:46:42According to the lawsuit, they performed
1:46:44tooth extractions, gave out stainless
1:46:45steel crowns, did root canals on babies
1:46:49that did not need them. Like, there are
1:46:52multiple things really wrong with this.
1:46:55Obviously exploiting a government system
1:46:58to deplete the Medicaid fund is one
1:47:02aspect, but performing like dental
1:47:06surgeries on people, root canals on
1:47:08babies for money is a level of greed and
1:47:13corporate exploitation that I cannot
1:47:15really get my head around. But again, in
1:47:18a world where companies will maximize
1:47:20profits, this is to be expected if the
1:47:23incentive structure is set up that way.
1:47:25Let's get to number five, which is
1:47:27[music] similar to the dental clinics,
1:47:29but it has to do with kidneys. Here in
1:47:31the US, lower-income people are
1:47:33disproportionately [music]
1:47:34plagued with kidney failure. A disease
1:47:37where your kidneys fail and your blood
1:47:39can't be cleaned by your kidneys. So,
1:47:40you need a machine called a dialysis
1:47:42machine to clean your blood for you.
1:47:44Luckily, since the 70s, the United
1:47:46States now heavily subsidizes [music]
1:47:48people who need dialysis for their
1:47:50kidneys. And dialysis is meant to be a
1:47:52temporary intervention while you wait
1:47:54for a kidney [music] transplant. There's
1:47:56always a long waiting list for a kidney
1:47:57transplant. So, you're on dialysis until
1:47:59you can get a transplant, which
1:48:00increases your chances of living. It is
1:48:02a wonderful [music] thing that the
1:48:04government subsidizes this because it
1:48:06saves a lot of lives. But inevitably,
1:48:09here comes the exploitation. overnight.
1:48:11It instantly created an industry
1:48:13opportunity to offer dialysis because
1:48:15now the government was going to pay for
1:48:17it.
1:48:17>> One of these companies is called Dvita.
1:48:19I think they're the largest dialysis
1:48:21center company in the United States. And
1:48:23because of this set of incentives, we
1:48:25can start to piece together how they
1:48:28would behave.
1:48:29>> And the thing again about dialysis is
1:48:31like Medicaid dentistry, it's a volume
1:48:34business. The government pays diialysis
1:48:36centers per treatment. And last year it
1:48:38was about $380 per treatment. So it it
1:48:41is unfortunately in the interest of
1:48:43dialysis companies that run dialysis
1:48:45centers to keep those machines occupied
1:48:48as many hours of the day as they can to
1:48:50cycle through as many patients as they
1:48:52can because an empty diialysis machine
1:48:55is $380 that they're not making.
1:48:58>> Okay. So a company making sure that
1:49:00their machines are being used at full
1:49:02capacity is actually there's nothing
1:49:04inherently wrong with that. That is a
1:49:06company just using its resources
1:49:09efficiently, administering a lifesaving
1:49:11treatment. But that's kind of just the
1:49:13beginning. What you see in these
1:49:14for-profit diialysis centers is less
1:49:17staff to help with the treatment. And
1:49:19you see higher death rates. And this is
1:49:21where it becomes so clear where the
1:49:22failure is. You see 17% fewer referrals
1:49:27for kidney transplant. Meaning these
1:49:29people who are on a temporary dialysis
1:49:31intervention who are supposed to be
1:49:33waiting for a kidney transplant are kept
1:49:36on the machines longer because a
1:49:38for-profit company makes money the
1:49:40longer they are in the chair. So why
1:49:42would they refer them to get a kidney
1:49:44transplant when they make more money
1:49:46keeping them on the diialysis treatment?
1:49:48If someone gets a transplant, that is a
1:49:50lost customer. Unfortunately, it's an
1:49:52option that's being denied a lot of
1:49:53people because it's in the financial
1:49:55interest of dialysis centers to keep
1:49:57someone in dialysis rather than quote
1:49:59losing them to transplant. Now, Dvita
1:50:01has paid like a billion dollars in
1:50:04settlements and for some of this
1:50:06behavior, including $350 million they
1:50:10had to pay after being [clears throat]
1:50:11sued by the US government for paying
1:50:13doctors to go out to recruit people to
1:50:16come to their dialysis centers so that
1:50:18they could corner the market in certain
1:50:20areas. They had to pay another $450
1:50:22million because they were found billing
1:50:25the government for medicine that they
1:50:28had received and just thrown out and
1:50:30charged the government anyway so that
1:50:32they could get reimbursed. All of this
1:50:35once again further draining the money
1:50:37that is allocated by our government to
1:50:40help people in need. And finally, number
1:50:44six, the last on our list, the one I'm
1:50:46deeming the most egregious because it
1:50:48has to do with children. And not just
1:50:50any children, the most vulnerable
1:50:53children in our society. Specifically,
1:50:54children who have been removed from
1:50:56their family because of abuse,
1:50:59abandonment, or death. Foster children.
1:51:02If a foster child loses a parent or
1:51:04[music] is physically or mentally
1:51:06disabled, the federal government
1:51:08entitles them to around $700 a month to
1:51:12subsidize their lives. This is one that
1:51:14goes straight from the federal
1:51:15government from the Social Security Fund
1:51:17straight to these children, or at least
1:51:19it should. But here comes the corporate
1:51:22middleman once again. States will often
1:51:25hire corporate middlemen like Maximus,
1:51:27who is in fact a part of this, [music]
1:51:29to look through the databases of foster
1:51:32children to identify which of those
1:51:34children qualify for this benefit.
1:51:36Meaning, which of these children have a
1:51:38dead [music] parent or are physically or
1:51:39mentally disabled and then to go through
1:51:42the process of diverting that money away
1:51:45from the children [music] and into state
1:51:48coffers. The state says they're doing
1:51:49this to help supplement the foster care
1:51:52program in their state to help boost
1:51:54their budget. But what feels very icky
1:51:56about this to me is that it creates once
1:51:58again a business [music] opportunity for
1:52:00a for-profit company who is incentivized
1:52:02to scour these databases looking for
1:52:05children who qualify for this benefit to
1:52:08divert the money away from them and
1:52:10towards the state. And Maximus gets paid
1:52:13a fee to do this. They're incentivized
1:52:15to do this as a service for the state to
1:52:17look through these databases and look
1:52:18for children who qualify. There's one
1:52:20NPR report from a while back that
1:52:23reports that the corporate middleman
1:52:25Maximus, who we've talked about at
1:52:26length here and who I will probably get
1:52:28sued by, would get $1,600
1:52:31per child that they found who qualified
1:52:34for this benefit. Remember, a child who
1:52:37parents are dead or who has a physical
1:52:39or mental disability who's entitled to
1:52:41around $700 a month to supplement their
1:52:44very difficult life. If Maximus finds
1:52:46that child and diverts that money into
1:52:48state coffers, Maximus gets paid $1,600.
1:52:51That was in Alaska. Oh, but it's still
1:52:53going on. In 2018, Washington State
1:52:56worked with Maximus to get $6.89 million
1:53:00of foster children's money. Wisconsin
1:53:02got $4.13 million from their foster
1:53:04children. Thanks again to the services
1:53:06of Maximus. Illinois, $18.7 million from
1:53:11foster children. Illinois didn't work
1:53:12with Maximus in this case, but another
1:53:15similar corporate middleman called
1:53:16Diversified Services Network [music]
1:53:18to do the same thing. None of these
1:53:20companies want to be known or spoken out
1:53:23loud. They just sort of operate as like
1:53:25a proxy for the government. They just
1:53:28this is what they do. This money is
1:53:30being diverted from going directly to
1:53:32the foster children to going into the
1:53:35statewide foster care program. So, it
1:53:37still is benefiting those children
1:53:39indirectly. But it feels wrong to me
1:53:41because this money was intended to
1:53:44benefit them directly. [music]
1:53:45These are the most vulnerable children
1:53:47in our society. This money is entitled
1:53:50to go to them.
1:53:54Okay, so that was kind of awful.
1:53:56[snorts] I learned a lot about how the
1:53:58welfare system works and what
1:54:01privatization means. I also learned that
1:54:04there are situations where this makes a
1:54:07lot of sense. I didn't go into the full
1:54:10evaluation of privatization versus not.
1:54:13I don't think that was the scope of this
1:54:14video. What I've been trying to do here
1:54:16is look at places where in our vast
1:54:19welfare system, profit-seeking
1:54:21corporations have found ways to exploit
1:54:24that system to make money at the expense
1:54:27of vulnerable populations that are
1:54:30entitled to that money who we the
1:54:32taxpayer pay to help supplement their
1:54:34life so that they can have a better
1:54:37life. Now, what can we do about this? Is
1:54:40this just totally hopeless? The answer
1:54:42is no. How do we fix the situation?
1:54:44Well, you know, there's an old saying
1:54:46that the first rule of holes is to stop
1:54:48[music] digging. And in this case, the
1:54:50first rule will be to stop
1:54:52privatization. The industry has kind of
1:54:54grown under the radar, unchecked,
1:54:56unmonitored for decades now. And we
1:54:59don't know how big the problem is. And
1:55:01we can't tackle it unless we get some
1:55:03sense [music] of how much money is going
1:55:04to this, the amount of drag that the
1:55:07government is experiencing from the
1:55:08poverty sector. And I [music] think
1:55:09that's the first step, one of the first
1:55:11steps to take.
1:55:12>> I believe that there's a version of
1:55:14privatized contractors administering
1:55:17public services and welfare that is
1:55:19responsible and actually works [music]
1:55:21for serving the vulnerable populations.
1:55:23It's intended to to do that. It will
1:55:25require much more oversight and
1:55:28regulation that takes into account all
1:55:30of these incentives [music] that treats
1:55:32corporations like adults who are going
1:55:34to find whatever loophole they can in
1:55:36whatever system to make money. and
1:55:39closes those loopholes. Also, if we're
1:55:41going to call this privatization, we
1:55:43need [music] competition, real
1:55:45competition, not these near monopoly
1:55:47massive companies [music] that kind of
1:55:49own entire sectors of public spending.
1:55:52And in all of this, I think we should
1:55:53re-evaluate how much profit should play
1:55:56a role [music] in these companies
1:55:58incentives. California is also working
1:56:00on a profit cap specifically for the
1:56:02dialysis centers, making it so that they
1:56:04don't even have the ability to profit as
1:56:07much as they do. Now, unsurprisingly,
1:56:08this was fought tooth and nail with with
1:56:10over hundred million dollars from
1:56:12diialysis centers, and the Proposition 8
1:56:14was shot down, but it's a great policy
1:56:17recommendation, and it begs the
1:56:19question, how much profit should a
1:56:21corporation that [music] is
1:56:23administering public welfare be entitled
1:56:26to? But ultimately, none of this will
1:56:28change unless the customer demands more.
1:56:31And the customer in this case is the
1:56:33government. If the government does not
1:56:35measure and demand better performance,
1:56:37these companies will [music] not do
1:56:39better. The government seems to not be
1:56:41demanding a lot of change on the whole.
1:56:44There's a trend towards more and more
1:56:46privatization in things like [music]
1:56:48Medicaid and other benefits. Our belief
1:56:51in the market has allowed us to be blind
1:56:54to some of these failures.
1:56:57>> [music]
1:56:57>> And my worry is as we continue to
1:56:58privatize without plugging some of these
1:57:00gaps, without fixing some of these
1:57:02loopholes, we are enabling these
1:57:04companies to exploit those loopholes.
1:57:07And as we've seen, they will do it. They
1:57:09will find ways to continue to get rich
1:57:11off the poor.
1:57:14Hey, if you're still watching, you are
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1:57:47description. And [music] I'll see you
1:57:49over there.
1:57:56eggs, milk, bread, ground beef, butter.
1:57:59Prices at the grocery store are going
1:58:01up, especially for people who spend a
1:58:03large amount of their income on food.
1:58:06So, a little price shock can have huge
1:58:07effects. Grocery prices that usually go
1:58:09up 1 or 2% a year have started jumping
1:58:12to more like 13% a year.
1:58:14>> Prices are going up yet [music] again.
1:58:16>> Sticker shock on store shelves.
1:58:18>> You probably don't need to be reminded.
1:58:19And now, of course, everyone's blaming
1:58:21COVID and broader inflation. And while
1:58:23those are a part of the explanation,
1:58:25there's actually something bigger going
1:58:27on here. I mean, check this out. Food
1:58:29companies are bringing in record
1:58:30profits. CEOs of those companies are
1:58:31making way more just in the last few
1:58:33years, and shareholders are getting huge
1:58:35payouts. So, what is going on here? That
1:58:38is a question I have had for a long
1:58:40time. And we're sitting here in the
1:58:41kitchen, which is also our studio. And I
1:58:44thought, you know, got to use it
1:58:46sometime. So, why not on the video about
1:58:48food? Today we're going to understand
1:58:49our food system, the vast, complicated,
1:58:51kind of magical food system that
1:58:53provides a lot of us with our
1:58:54nourishment, bringing food from all
1:58:56around the world to our grocery store
1:58:58shelves. And then we're going to look at
1:58:59the corporations behind this system. I
1:59:01want to understand what their incentives
1:59:03are, what their power is, and what they
1:59:05have to do, if anything, with the rising
1:59:07prices. I also want to understand why
1:59:08they're making so much money right now.
1:59:10And ultimately, I want to answer what
1:59:12and who is behind this massive increase
1:59:15in grocery store prices. About 8,000
1:59:18[music]
1:59:19years ago in what today is Syria and
1:59:22Iraq, you could find humans doing
1:59:24something that was pretty unique for the
1:59:26time. They're growing food and in fact
1:59:28more food than they actually needed and
1:59:29then started trading it with other
1:59:31people who had more than they needed.
1:59:33Now this was new. If there was one group
1:59:35who lived near a salt mine and another
1:59:37group who grew wheat, they would both
1:59:38make a surplus. They would swap their
1:59:40goods and both would be better off. A
1:59:42super basic idea that changed
1:59:44everything. Humans started doing this at
1:59:46a more and more massive scale. Crossing
1:59:48seas and deserts, building empires to
1:59:51move goods, to share tools, to spread
1:59:53ideas. And the collective human focus
1:59:55became, how do we do this better,
1:59:57bigger? We invented technology to
1:59:59improve it. We fought wars over it. We
2:00:01created money and companies and laws,
2:00:03entire systems just to trade more stuff
2:00:05with more people. Trade was changing the
2:00:08world. [music] And a lot of the history
2:00:09of our world is the history of trade.
2:00:11It's what spread ideas and technology
2:00:14[music] and flavors around the globe.
2:00:16Arabic math and Chinese inventions.
2:00:18Tomatoes arriving to Italy. Chilis
2:00:20arriving to Asia. Corn to Africa. Coffee
2:00:23arrives to Europe in like the 1500s and
2:00:26[music] blows everyone's minds.
2:00:28Contributes to a whole revolution in
2:00:30thinking.
2:00:34It's good coffee, guys. But despite all
2:00:36of this global trade and improvement and
2:00:38connecting the world and bringing
2:00:39flavors everywhere, food still remained
2:00:41quite expensive. You still had to work
2:00:43really hard just to feed yourself and
2:00:45your family. Agriculture and food
2:00:47preparation required immense physical
2:00:49labor involving entire households in the
2:00:51effort to produce sufficient calories to
2:00:53survive. Like we have data from the late
2:00:551700s that shows that people in Britain
2:00:57spent 75% of their income just feeding
2:01:01themselves. Around the same time in
2:01:02France, they were spending about 70% of
2:01:05their income on bread alone.
2:01:08Have a bite of this. Oh my god. Is there
2:01:11anything better than just white bread?
2:01:13Okay, but soon that started changing and
2:01:15fast. Let's graph it. Look what happens
2:01:18by the year 1900. A household is
2:01:20spending more like 42% of their income
2:01:22on food. Then in the 30s it goes down to
2:01:2334%. Just keeps falling. After World War
2:01:26II, something really dramatic changes in
2:01:29the global economy.
2:01:32The US and its allies built a global
2:01:35economic system meant to connect the
2:01:36globe. Maybe if everyone's economy was
2:01:38connected, it would all be benefiting
2:01:40too much to fight each other was kind of
2:01:42the thinking. And America wanted to set
2:01:44the rules for everyone, and they
2:01:45successfully did. And with this new
2:01:47system comes a whole new level of
2:01:49efficiency and connection. Like these
2:01:51magical boxes that can go seamlessly
2:01:53from ships [music] to trains to trucks,
2:01:56drastically cutting costs and loading
2:01:58time. the world standardized around
2:02:00everything from railroad sizes, pallet
2:02:02sizes, paper sizes, barcodes, shoe
2:02:04sizes, screw sizes. It's invisible
2:02:06stuff. This isn't sexy, but it's
2:02:08important. It's transformative. The
2:02:09whole idea being that if everyone's
2:02:11using the same system, everything
2:02:13becomes more efficient. Trade gets
2:02:15better. Now, a tractor part made in
2:02:16South Korea snaps in nicely to a tractor
2:02:19in Kansas. And then there was the US
2:02:21dollar that everyone could use as the
2:02:22global currency along with international
2:02:24agreements that laid the rules for
2:02:26modern [music] trade. Suddenly, it's
2:02:28like the 1950s and the whole world is
2:02:30being stitched together in ways our
2:02:32ancient grain trading ancestors could
2:02:34have never imagined. This is why today
2:02:36almost everything you touch has gone to
2:02:39more countries than you have because it
2:02:41traverses a huge network of the global
2:02:44economy. We call it the supply chain.
2:02:47Like look at an iPhone, albeit kind of
2:02:50cracked. This iPhone traveled to 43
2:02:52countries before it ended up in my
2:02:54hands. Okay, but food isn't an iPhone.
2:02:56Food is squishy and perishable and needs
2:03:00to kind of be refrigerated. It doesn't
2:03:02go through the same like advanced global
2:03:04supply chain that other stuff does,
2:03:06right? Wrong. Actually, [music]
2:03:09this is a beautiful tomato that was
2:03:11grown here in my local area that I
2:03:14bought at a farmers market. Full
2:03:16disclosure, did not buy this. My
2:03:17producer bought it and I am holding it
2:03:19now and I will probably eat it with this
2:03:21bread and this coffee after I'm done
2:03:23shooting this video. Anyway, this costs
2:03:25six bucks. Okay, this is a $6 tomato.
2:03:27Take it in. That beautiful tomato. Wow.
2:03:30Shoots really nicely. 5 miles from my
2:03:32house. Okay, then we've got these
2:03:33tomatoes. They don't look that much
2:03:35different. A little more uniform. These
2:03:36are tomatoes that came from the global
2:03:39economy. They're all basically the exact
2:03:41same size. These have come to me from
2:03:43very far away. Not in this country. We
2:03:45actually do grow a lot of tomatoes here
2:03:46in the United States over in California,
2:03:48but most of our tomatoes are grown in
2:03:50Mexico. 4 billion pounds a year come
2:03:52into the US. So, here we are in northern
2:03:54Mexico here in these endless fertile
2:03:56fields. I've actually spent a lot of
2:03:58time in this region, not as a
2:04:00journalist, but as a Mormon missionary,
2:04:02riding in pickup trucks through fields
2:04:04that grow food destined for US grocery
2:04:06stores.
2:04:10>> Anyway, let's not look at my bad
2:04:11Spanish. Let's talk about the journey of
2:04:13a tomato. They're often picked while
2:04:14they are still green. They're not ripe
2:04:16yet. Often picked by hand and then
2:04:18loaded into trucks. A tomato like this
2:04:20will often go into a sealed room where
2:04:21they are gassed with ethylene to ripen
2:04:24them. Ethylene is just a naturally
2:04:26occurring hormone that helps ripen these
2:04:28guys. And they want them to all ripen at
2:04:29the same time right as they get to the
2:04:31grocery store. But we have a long way to
2:04:32go before we get to the grocery store.
2:04:34So they're pumped with this gas and then
2:04:35if they're going into cans, which a lot
2:04:37of tomatoes do, they go through this
2:04:38industrial factory wizardry. But for the
2:04:41ones that are going to end up like this
2:04:43fresh, they are on a truck headed north.
2:04:46They end up in a nearby city, probably
2:04:48the capital, Kulakan, in this big
2:04:50facility where they are sorted, chilled,
2:04:52and then put on big pallets. They get
2:04:54back onto a truck, which by the way, all
2:04:56of these trucks are refrigerated. That's
2:04:58a big logistical challenge to make sure
2:05:00these things don't get too hot or cold.
2:05:01And now the truck is heading north. It
2:05:03gets to the US Mexico border. Look, this
2:05:05is where people go back and forth
2:05:07between the two countries. But over here
2:05:08is a special border crossing just for
2:05:10trucks. Our tomatoes are in one of
2:05:11these. It clears customs and then it
2:05:13probably ends up at one of these
2:05:14transfer stations where the trailer
2:05:16might be transferred on to another truck
2:05:18to an American driver who will take it
2:05:20from there. The tomatoes are now in the
2:05:21United States. Once in the US, they
2:05:23might be re-ripened and repackaged and
2:05:25they eventually take a longhaul trip on
2:05:27America's freeways, ending up at a
2:05:29distribution center like this one in
2:05:32Illinois. Here, tucked into the endless
2:05:33expanse of farmland is this massive
2:05:35building surrounded by cargo trucks. The
2:05:38tomatoes are unloaded. They're scanned
2:05:40for inventory. They're repackaged and
2:05:42then they're back on the road headed
2:05:43towards the grocery store. And I promise
2:05:45I'm getting close here. Okay, we've
2:05:46arrived at the grocery store. This whole
2:05:47journey was 9 days, about 1,000 km or
2:05:51620 mi. And the tomatoes are finally
2:05:53stacked in the vegetable aisle ready for
2:05:55you to buy a pound for $2. Bring them
2:05:57home, chop them up, and throw them into
2:05:59a sauce. Bonap petit.
2:06:02That was crazy, right? like that whole
2:06:03journey like your tomatoes came all the
2:06:05way from a farm in Mexico and they
2:06:07somehow made it to the grocery store
2:06:09without being smashed or like going bad
2:06:11and are somehow significantly cheaper
2:06:13than this. How does that work? Like how
2:06:15does that make any sense? And it's not
2:06:17just tomatoes.
2:06:19[music]
2:06:21Avocados are picked by hand in southern
2:06:24Mexico, sorted, chilled, trucked, and
2:06:26displayed in the northeast of the United
2:06:28States in the dead of winter for like
2:06:30three bucks. Most of our vegetables in
2:06:33the United States come from other
2:06:35countries like 60%. Then of course you
2:06:37can imagine that it gets more
2:06:38complicated with animal products, eggs,
2:06:40milk, meat. But this is your food
2:06:42system, our food system. The majority of
2:06:44us participate in this food system.
2:06:48[music]
2:06:50So why is food suddenly way more
2:06:53expensive? Well, there are two answers
2:06:55to that question that we are about to
2:06:56get to. The first one will make a lot of
2:06:58intuitive sense because we just traced
2:07:00the journey of a tomato. The second one
2:07:02will boil your blood. Answer number one,
2:07:05something happens along the way. Like
2:07:08let's go back to this map. And you see
2:07:09that in this journey, your tomatoes
2:07:11passed through farmers and packagers and
2:07:14cold storage and drivers and customs
2:07:16brokers, international trade treaties,
2:07:18warehouses, wholesalers, grocery stores.
2:07:21If any part of this system breaks or
2:07:25becomes more expensive or if there's a
2:07:27power outage or a storm or a frost or a
2:07:30drought or gas prices spike, workers go
2:07:33on strike, there's a new tariff that can
2:07:34make any one of these steps more
2:07:36expensive. And it is you, the final
2:07:38customer, who will pay that price. We
2:07:40call this a supply chain shock or
2:07:42shortage. And it's kind of ironic that
2:07:44the system that makes food more
2:07:47accessible and cheaper is also the same
2:07:49system that makes our prices fragile. So
2:07:51yeah, that's answer number one. Supply
2:07:53chain shocks. And over the last four
2:07:54years, I mean, you know, there's kind of
2:07:57been a lot. There's obviously CO, but
2:08:00that was just the beginning of a domino
2:08:02effect. There was a drought in the
2:08:03Mediterranean, so olive oil prices went
2:08:04up.
2:08:05>> Climate related issues have screwed up
2:08:06fresh produce at large. There are both
2:08:09climate stuff that affects how much you
2:08:11can grow, but also sometimes climate
2:08:13then interacts with like disease
2:08:15outbreaks.
2:08:16>> A freeze in Texas wiped out a bunch of
2:08:17citrus.
2:08:18>> These farmers are experiencing some of
2:08:20the worst conditions ever because of the
2:08:22drought. The ground is just not fit for
2:08:24grazing. And like many others, the
2:08:25rancher here has had to callull his herd
2:08:27because it's more economical than
2:08:28feeding them.
2:08:28>> Russia's invasion of Ukraine messed with
2:08:30a lot of industries.
2:08:31>> The war in Ukraine spiked wheat prices
2:08:34there for a little bit and also spiked
2:08:36fertilizer prices. And the issue is
2:08:38Russia controls one type of fertilizer
2:08:40but not two others. And so it meant
2:08:42farmers had to like retool all of their
2:08:44systems to switch to the other
2:08:45fertilizer. And then there was a run on
2:08:47those two fertilizers. Oh, palm oil got
2:08:50really screwed up there for a while
2:08:52because Indonesia decided to temporarily
2:08:54ban exports because prices were
2:08:56increasing so much. So they wanted to
2:08:57make sure they had enough supply. This
2:08:58was also kind of in the wake of Ukraine
2:09:00and so vegetable oil prices were up.
2:09:02>> A hurricane in Florida messes with
2:09:04orange groves. The Houthi rebels in
2:09:06Yemen are firing rockets at these
2:09:08merchant ships that are the lifeblood of
2:09:10the global economy.
2:09:11>> Canada, the largest producer of canola
2:09:13oil, had a big drought and so that
2:09:15dropped. Meat processing during the
2:09:16pandemic, there were massive COVID
2:09:18outbreaks in meat packing and so they
2:09:21had slowed down a lot of line speeds
2:09:23because there were fewer workers and so
2:09:25just like less meat was getting
2:09:26slaughtered and packaged. And then of
2:09:28course there were shortages in random
2:09:30things like packaging and trucking and
2:09:32cold storage and shipping containers.
2:09:34>> During COVID, production of aluminum
2:09:36cans was lower because factories were
2:09:38closed. But then trade wars over
2:09:40aluminum has affected cans. And so for a
2:09:42while soda was being affected and beer
2:09:44were being affected.
2:09:45>> Each shock to the system triggers a
2:09:48reverberation through the rest of the
2:09:50system which makes things more expensive
2:09:52and unpredictable. the price goes up and
2:09:54eventually the price of your final
2:09:56product, the thing you see on the
2:09:58grocery aisle has gone up. Okay, so no
2:10:00one's disputing that supply chain shocks
2:10:03are a major reason why prices have gone
2:10:05up. But this isn't actually the full
2:10:07explanation. There's something bigger
2:10:09going on here, and that gets to my
2:10:10second answer to the question of why
2:10:12grocery prices are more expensive. I'll
2:10:14just say it up front here, uh, which is
2:10:16we've all been kind of tricked. [music]
2:10:18And there are people making a lot of
2:10:20money off of us being tricked about
2:10:22prices.
2:10:23>> Basically in CO, I think there was kind
2:10:24of a reckoning of customers were pretty
2:10:27understanding when companies said, "Hey,
2:10:30you're going through hard times and so
2:10:31are we. Like our costs are going up."
2:10:33There was kind of this reset. The
2:10:34American consumer has gotten so used to
2:10:36having a really cheap thing delivered to
2:10:39their door in like 2 hours, right? Like
2:10:42in Econ 101, they teach you about a
2:10:43supply and a demand curve, right? And as
2:10:45you increase prices, the number of units
2:10:48you sell goes down. And what you're
2:10:49trying to do is like maximize [music]
2:10:51those two things of like I can sell as
2:10:54many products as I can make for as much
2:10:55as this. And like that's you know the
2:10:57price invisible hint. Yeah.
2:10:58>> Right. Yes. And so if if you increase
2:11:01prices you expect intuitively to sell a
2:11:04little bit less. Now you can like
2:11:06it enough that like the total is a
2:11:08little bit higher. But what companies
2:11:09realized is they could inch prices up
2:11:12and see no or very little reduction in
2:11:14consumer demand and so they kept doing
2:11:16it.
2:11:17>> This will be clear very soon because
2:11:18there's a lot of examples of this, but
2:11:19the best one that is on my mind is eggs.
2:11:22>> The egg price is out of control.
2:11:25>> Eggs are insanely expensive right now.
2:11:28Maybe by the time you're watching this
2:11:29they will have gone down a little bit,
2:11:30but over the last like 3 4 years egg
2:11:32prices have gone crazy. And what's the
2:11:34explanation that we're all hearing? Yes,
2:11:36the bird flu calling millions of hens.
2:11:40Bird flu.
2:11:40>> Bird flu. Bird flu. Already more than 90
2:11:43million birds have been killed since the
2:11:44outbreak started.
2:11:45>> I mean, if you are an egg producer and
2:11:48suddenly there is an outbreak of bird
2:11:50flu in all of your farms. Like that's a
2:11:53huge deal. That'd be like really
2:11:55terrible, right, for your business.
2:11:56You're like, man, our product is being
2:11:58killed by a flu. And wait a minute.
2:12:02US's biggest egg producers profits
2:12:05triple as prices sore. Wait, triple
2:12:09profits for the biggest egg producer.
2:12:12Oh, and if you look at the biggest egg
2:12:14producers stock price, do you see this?
2:12:17Right around the time when the aven flu
2:12:19is happening, their stock price is going
2:12:21nuts. Time to get out their annual
2:12:23report.
2:12:25Annual report for Calain Foods, Inc.
2:12:28They're a privately traded company. They
2:12:30must disclose all of their financials,
2:12:31which means we can get a little more
2:12:33insight as to how they fared during this
2:12:35time when there is a crisis in our egg
2:12:39economy. And all of us are paying like
2:12:42more than double the price for a dozen
2:12:44of eggs. This is 2023
2:12:46and it looks like its shareholders got
2:12:49paid $250 million in profits. Okay, it's
2:12:54right in the middle of the bird flu
2:12:56crisis. You wouldn't think that they
2:12:57would be profiting that much, but is
2:12:58that a lot? about $250 million. Maybe
2:13:00that's not that much. Let's graph the
2:13:02dividends, the profits paid out to
2:13:04shareholders.
2:13:07Wo. Okay. Well, 2023 uh was a great year
2:13:11for the uh largest meat producer in the
2:13:14United States despite like all of this
2:13:16aven flu. So, in 2023, they paid $250
2:13:20million. The year before they paid $6
2:13:22million. So, they had a 40 times
2:13:24increase in the profits they paid out to
2:13:26their shareholders. right in the heart
2:13:27of when all of us were going to
2:13:29restaurants and seeing these signs.
2:13:31We're raising prices on eggs because
2:13:32there's a bird flu, so we have to pay
2:13:34more. But the company making the eggs is
2:13:35profiting a lot more money. It's not
2:13:37just revenue. It's not like they're
2:13:38making more money and their costs have
2:13:40increased a bunch. So, they're not they
2:13:41are profiting. They are making way more
2:13:44money after all of their costs. And
2:13:46we're [music] all paying more. Oh, and
2:13:48this year 2025, their profits are up
2:13:51342%
2:13:52in Q2 of this year. I mean, just to mic
2:13:55drop like drive this home, let's put
2:13:57these two graphs next to each other.
2:13:59This one is the price for a dozen eggs.
2:14:01It's gone up a ton because of bird flu.
2:14:03And this one is profits for shareholder
2:14:05of Calain Foods going up at the same
2:14:07time. So, these graphs tell a story of a
2:14:09company was able to raise prices more
2:14:11than what they needed to to cover their
2:14:12costs and they were somehow able to do
2:14:14that. Can we just look at the supply of
2:14:17eggs in the United States just real
2:14:19quick?
2:14:20This graph, there's the price. price
2:14:22goes up here. Right now, let's draw on
2:14:24the number of eggs produced in the
2:14:26United States during this time. Here's
2:14:28the outbreak of the aven flu, early
2:14:302023. Now, I'm going to draw on the
2:14:33number of eggs produced in the United
2:14:35States. If I were guessing, I hadn't
2:14:36seen this chart before, I would imagine
2:14:38it would look something like this, like
2:14:39eggs, eggs, eggs, flu happens,
2:14:41production of eggs plummets. When
2:14:43there's less supply, prices have to go
2:14:45up. And that's why prices went up. Now,
2:14:47let's draw in the real shape. Again,
2:14:48number of eggs produced in the United
2:14:50States. Boom. kind of barely dips. Yes,
2:14:52aven flu was a real thing. I'm not like
2:14:54drawing some like conspiracy theory here
2:14:55that like this this is not real, but
2:14:57like this crisis was as much about
2:14:59storytelling as it was about supply and
2:15:01demand. We all accepted way higher
2:15:04prices because of these signs, because
2:15:07of all of this news. And in fact, thanks
2:15:09to CO, we were kind of used to hearing
2:15:10about supply chains and paying higher
2:15:12prices and waiting longer because of
2:15:15something that's out of our control.
2:15:16This is the driver of inflation, right?
2:15:18But what this story tells is that
2:15:20there's a company that by the way
2:15:22controls 25% of the market. They are a
2:15:25huge player, the largest player by far
2:15:27in the egg economy that has the ability
2:15:29to raise prices even when they don't
2:15:31need to increase costs. And that
2:15:33company, by the way, if you chart how
2:15:35many eggs they were making during the
2:15:37crisis, they were actually making more
2:15:39eggs and just selling them at a way
2:15:41higher price. So, of course, their
2:15:43profits tripled. Of course, their
2:15:44shareholders made off with huge
2:15:46dividends. You can read a lot more about
2:15:48this in a couple really good reports
2:15:50that were very helpful for our
2:15:51reporting. One of which concludes that
2:15:54corporations have used this outbreak,
2:15:56the aven flu, as a smoke screen for
2:15:58raising prices beyond what was necessary
2:16:01to cover any rising costs. This is the
2:16:03kind of stuff that happens when one
2:16:05company owns a huge portion of an
2:16:08industry. They just have a ton of
2:16:10control and they're able to manipulate
2:16:12the market that is supposed to be a
2:16:14competitive space where all the firms
2:16:15compete for customers by lowering their
2:16:17prices as much as they possibly can. But
2:16:19our modern food system has become more
2:16:21and more consolidated. Four firms handle
2:16:2485% of all beef processing in the US.
2:16:26Three companies control 78% of all
2:16:29pasta. Two firms own 70% of the canned
2:16:32tuna industry. One company dominates
2:16:34seed genetics. 70% of all grocery stores
2:16:38flow through just four chains. This
2:16:40level of consolidation means that
2:16:42companies don't compete on prices. They
2:16:45match prices. And when there is a
2:16:47crisis, they're able to take advantage
2:16:49of that to help spread the narrative and
2:16:51signal to the rest of us that prices
2:16:53have gone up because of this crisis. And
2:16:54really, they're just patting their
2:16:55bottom line. There's a bunch of lawsuits
2:16:56happening right now because of this.
2:16:58McDonald's is suing meat companies for
2:17:00colluding to keep prices high. frozen
2:17:02potatoes for your French fries. Also
2:17:05very consolidated. Also some like price
2:17:07manipulation allegations there. A big
2:17:09turkey producer is in the middle of a
2:17:11price fixing scandal. They've had to pay
2:17:13out settlements. $32 million here, $4
2:17:15million there. I mean, this is kind of a
2:17:18cost of doing business when you are a
2:17:19big industrial food producer and you use
2:17:22your power to cash in. So, we've been
2:17:23told a story that these crises, COVID
2:17:26and supply chain shocks are at the root
2:17:29of inflation, of prices going up. But
2:17:31there's now pretty compelling evidence
2:17:32that corporate profits, their ability to
2:17:35take advantage of these prices to raise
2:17:37prices above where they need to be, is a
2:17:38major driver of inflation, meaning we're
2:17:40paying more money and we're making these
2:17:42companies way richer. Corporate profits
2:17:44are at an all-time high despite some
2:17:47volatility in the economy. Last year,
2:17:49margins reached over 16%, which is the
2:17:52highest on record since 1950. And it's
2:17:54not just in food, it's across all
2:17:56sectors. The CFO of Hershey in 2023 said
2:18:00on an earnings call to the company
2:18:02shareholders, quote, "Pricing and
2:18:03productivity gains more than offset
2:18:06inflation [music]
2:18:07and higher manufacturing and overhead
2:18:09costs." In non Wall Street speak that
2:18:11says, "We increased our prices well
2:18:14above what our increased [music] costs
2:18:16were." Like our costs for sugar, cocoa,
2:18:19etc. have gone up. But we have been able
2:18:21to not only pass all of those costs on
2:18:23to consumers, but then some, increasing
2:18:25our profit margins. Hershey's wasn't the
2:18:27only company to say this. Virtually like
2:18:29the vast majority of S&P 500 companies
2:18:32said this. Fredo and PepsiCo, for
2:18:34example, did the same thing where they
2:18:36said, "We've been able to rapidly
2:18:38increase kind of our pricing actions is
2:18:41what they call them, which just means
2:18:42increasing prices." So profits are
2:18:44soaring while a family of four who's
2:18:46surviving on a thrifty food plan is
2:18:49seeing their costs for food increase by
2:18:5230% or more over the last few years.
2:18:54More and more are turning to government
2:18:56programs. And so now our taxpayer
2:18:58dollars are going to help inflated
2:19:01prices to make shareholders rich. It's
2:19:04not a good setup. It's not a good set of
2:19:06incentives. It's not a free market. This
2:19:08isn't good. And yet luckily there is
2:19:10some hope here. The Department of
2:19:11Justice is already investigating this
2:19:14egg price fixing allegation. Calmain has
2:19:17already been accused of doing this in
2:19:19previous disease outbreaks.
2:19:21>> Now, the largest supplier of eggs in the
2:19:24US now under federal investigation
2:19:26related to sky-high prices that
2:19:27consumers saw for several months.
2:19:29>> But what really needs to happen is a
2:19:31breaking up of these food companies that
2:19:33have so much power in the market. Food
2:19:35isn't like other things. It's not like
2:19:38vacations and cars and things that are
2:19:40discretionary. It is our basic survival.
2:19:42We have antitrust laws. We have other
2:19:45laws that protect small businesses. And
2:19:47this current crisis is rejuvenating a
2:19:49discourse around seeing what the
2:19:51government can do to actually make
2:19:53prices more affordable to everyday
2:19:55Americans. There's also a necessary
2:19:57reckoning with how reliant we are on
2:19:59these far-flung supply chains. Co really
2:20:02started this and you're starting to see
2:20:03more and more stuff come regional and
2:20:06local. Mexico is experimenting with the
2:20:08government coming in [music] and putting
2:20:10a price control for a basic basket of
2:20:12food, using their power to negotiate
2:20:14with food corporations [snorts]
2:20:16to keep prices affordable for the
2:20:18basics.
2:20:18>> One place that grocery prices really
2:20:20didn't increase all that much was Mexico
2:20:22and that's because Claudia Shinebomb's
2:20:24administration did this thing called in
2:20:25Spanish it translates to basic basket.
2:20:28And so for the equivalent of like $40,
2:20:30you can get enough food to feed your
2:20:32family of like rice, beef, a couple
2:20:34vegetables, a gallon of milk, these
2:20:36basics. And in fact, that price has come
2:20:38down by like 12% over the past year. And
2:20:40she did this, it's effectively a price
2:20:42control, but it's voluntary. So in fact,
2:20:44Walmart of Mexico participates [music]
2:20:46in this program, but she got a bunch of
2:20:49farmers and suppliers and retailers to
2:20:51all buy into this program. She
2:20:53negotiated this big deal and they all
2:20:55offer like a basic basket of goods for a
2:20:57low price for Mexican families. She just
2:21:00used kind of the weight of the
2:21:01government to say, "Hey, I think
2:21:03groceries should be cheaper for Mexicans
2:21:04and how can we work together to do it?"
2:21:15So there is some movement happening
2:21:17here. The reality is our food system is
2:21:19amazing. It has made food much cheaper
2:21:22than it was. But it has some real
2:21:24weaknesses. Weaknesses that are being
2:21:26exposed in the last few years and that a
2:21:29lot of people are feeling when they go
2:21:30to the grocery store. Those are market
2:21:32failures. And that is where the
2:21:33government steps in to ensure that our
2:21:35food system works for the consumers, the
2:21:37people who need to be able to rely on
2:21:39affordable food and not for the
2:21:40corporations that provide it.
2:21:47This is what a $100 million looks like.
2:21:50100 million $1 bills. Look at this.
2:21:53Okay, but watch this. This is what $100
2:21:56billion looks like. Wo! That's hundred
2:22:00billion. [music]
2:22:01It's like 19 people on Earth that have
2:22:02this much money. Oh, and by the way, one
2:22:04of these guys just bought a house right
2:22:06up the road here in Washington DC.
2:22:08Remember when we did the piles of cash?
2:22:10This is what $100,000 looked like when
2:22:12we did that visualization. So yeah,
2:22:14we're in a whole different echelon now.
2:22:16I want to show you the lifestyles of
2:22:18people who are worth this much money
2:22:20versus this much money. So we've been
2:22:22talking to experts, interviewing people
2:22:24who work with the ultra wealthy to
2:22:26construct realworld scenarios of what
2:22:29these people's lives look like, what
2:22:30kind of influence they have in society
2:22:32to understand what and who they can buy.
2:22:37So first up, let's start with $100
2:22:39million.
2:22:43>> [music]
2:22:45>> My name is Scott. I started a candy
2:22:47company and I grew it over many years
2:22:49and I eventually sold it to a big giant
2:22:52candy corporation. And because I started
2:22:55the company, I own most of it. And so I
2:22:56got a huge payout from this sale.
2:22:58Between that and a bunch of other
2:22:59investments over the years, I now have a
2:23:02net worth [music] of $100 million.
2:23:05Wow, that's a big number.
2:23:08My primary residence is New York City
2:23:10where 818 other centillionaires live.
2:23:13Centaillionaires, it's like 100
2:23:15millionaires. I'll show you my New York
2:23:17City house in just a second. But first,
2:23:19let's talk about my fortune and how I
2:23:22can spend it. Now, I can't actually
2:23:23spend my fortune right now because all
2:23:25of it is in the stock market. The upside
2:23:27to that is that it grows and grows. My
2:23:30portfolio grows at 10% every year. So,
2:23:33what if I just sell this $10 million
2:23:36return I got this year? This could fund
2:23:38some of my lifestyle. But look at all
2:23:40these taxes. All in all, it's like 37%
2:23:42of that $10 million. I guess it still
2:23:44leaves me with 6.3 million bucks to
2:23:46spend. And look, I didn't even have to
2:23:48touch my portfolio. I'm still worth $100
2:23:50million. Wait, is this video just tax
2:23:52calculations? No. Let's go find a house.
2:24:01My budget for a house is anywhere
2:24:04between $8 and $15 million, which
2:24:07sources told us is common at this level.
2:24:10And even though I live in one of the
2:24:12most expensive and crowded cities on
2:24:14Earth, with my budget, I can find a
2:24:16pretty sick house, I think. Okay, let's
2:24:17look around. Boy, there's some nice
2:24:20options here. How about this one? $8.5
2:24:23million. This nice apartment in Midtown
2:24:26Manhattan. The listing tells me that
2:24:28this is the epitome of refined living. A
2:24:31superior pre-war white glove
2:24:34cooperative.
2:24:35What does that mean? Four bedrooms, four
2:24:38bath. This sun-kissed airy air.
2:24:44This sun-kissed
2:24:46is one of the crown jewels of the Tony
2:24:48Enclave. What is it? Am I reading like a
2:24:51different language? What is the Tony
2:24:52Enclave? I don't know what any of those
2:24:54words mean. Sorry. [laughter]
2:24:55But I do know that it has a semi-private
2:24:58elevator and is the perfect setting for
2:25:01alfresco entertaining. And me 100
2:25:03millionaire, I am super into alfresco
2:25:06entertaining. I mean, this is looking
2:25:08like a pretty great house. It's got this
2:25:09super romantic painting above the
2:25:11mantle. And in addition to my real
2:25:13library, I also get a bathroom that kind
2:25:15of looks like one. By the way, this is
2:25:17only my primary residence. It's not my
2:25:19only home. I've got a couple vacation
2:25:21homes around the country and the world.
2:25:24This one in Miami, which is a
2:25:26increasingly a playground for the ultra
2:25:27rich, and this one in the south of
2:25:30France. And both of these have full-time
2:25:32housekeepers. Let's talk about my
2:25:34vacations. I visit these houses a couple
2:25:36times a year, but for my other
2:25:38vacations, I'll maybe go to the Hamptons
2:25:40because I love to watch polo. There's
2:25:43this great polo match in July and I buy
2:25:46a VIP ticket that will cost me only
2:25:48$3,500.
2:25:50Or lately I've been getting into F1 and
2:25:53so maybe I'll go to the race in Monaco.
2:25:55I'll stay at this hotel Heritage or no
2:25:58Hermitage. I'll stay at the Hotel
2:26:00Hermitage Monte Carlo for just €22,000 a
2:26:04night which is like $25,000 per night.
2:26:07Okay, let's get to the F1 race.
2:26:08>> And the Monaco Grand Prix is underway.
2:26:12>> Jeez, no one told me I needed to bring
2:26:14my swimsuit to the F1 race. I'm feeling
2:26:16a little overdressed.
2:26:19Food's great, chef.
2:26:22Great view. Let's get to the race. I'm
2:26:25planning on watching the F1 race from a
2:26:28private yacht. The ticket was $16,000.
2:26:30[music] And look at the benefits here. I
2:26:32get to walk around in the pit. I get to
2:26:34meet the drivers. And I even get
2:26:38VIP tenders.
2:26:43Oh,
2:26:45not that kind of tender. Just a fancy
2:26:47boat that brings me out to the yacht.
2:26:50Anyway, something's bothering me.
2:26:52Remember when I showed you I could sell
2:26:54off the returns that I made this year
2:26:56from my stocks and still come out with
2:26:58millions of dollars of cash to spend?
2:27:00Well, I didn't really like having to
2:27:01sell off all those returns and then have
2:27:04to pay like over 30% in taxes. Me and
2:27:07everyone else you'll see in this video
2:27:09don't like to sell our portfolio, our
2:27:12assets to get cash because that triggers
2:27:15all of these taxes. It gives us less
2:27:17power in the companies we own. Instead,
2:27:20we like to get cash through a bunch of
2:27:22other ways using our [music] vast
2:27:24fortune. My favorite trick is to go to
2:27:26the bank and to ask for a loan. Wait,
2:27:29what? I'm a super rich guy. Why do I
2:27:31need a loan? Well, let me show you. The
2:27:33bank will loan me a lot of money if I
2:27:36put my huge investment portfolio up for
2:27:39collateral, meaning they can come after
2:27:41it if I don't pay the loan back or if I
2:27:42default or something. Okay. Okay. How
2:27:45much can I get in a loan? Well,
2:27:47according to the bank UBS, I could
2:27:49borrow up to 85% of the value of my
2:27:53investment portfolio, which remember is
2:27:54$100 million. So, I could potentially
2:27:57get a loan for $85 million. Another
2:28:00bank, Meil Lynch, says that they will
2:28:02give at least 50% of the value of your
2:28:05portfolio. But regardless, we're talking
2:28:07tens of millions of dollars that I can
2:28:09borrow and spend. And guess what? I pay
2:28:12zero taxes on this money cuz it's not
2:28:15income. It's technically debt. Okay,
2:28:17wait. But it's a loan. So, I'm acrewing
2:28:20interest, right? This isn't free money.
2:28:22I'm going to have to pay it back someday
2:28:24and likely have to pay it back with post
2:28:26tax money. So, it's not free money.
2:28:28What's the deal here? Why am I doing
2:28:30this? Well, according to a lot of good
2:28:32reporting from the Wall Street Journal,
2:28:33people making $100 million or more can
2:28:36get quoted on an interest rate as low as
2:28:3987%.
2:28:41Super low. In reality, today under these
2:28:43conditions and with my net worth, let's
2:28:45just be really real and conservative and
2:28:46say that my interest rate on the loan is
2:28:48more like 5.9%. It's a lot higher than
2:28:511%. But watch what happens. This allows
2:28:54me to not have to touch my investment
2:28:56portfolio. I don't have to take out that
2:28:58$10 million of stocks and pay a bunch of
2:29:01taxes. And that is growing at 10% a
2:29:04year, way more than the interest on this
2:29:06loan. Now, watch what happens over time.
2:29:09This is the value of that $10 million
2:29:11left in my portfolio. And this is how
2:29:14much I owe on the loan I took out.
2:29:16That's a nice looking graph. My wealth
2:29:19is growing way faster than the interest
2:29:21on my loan is acrewing. So, this
2:29:22tax-free debt thing is awesome, and it's
2:29:25one way that I will turn my net worth
2:29:27into spendable cash without having to
2:29:29sell off any of my stocks in my
2:29:31portfolio.
2:29:33Okay, no more tax math for now. I want
2:29:36to go buy some more stuff. It's time to
2:29:37talk about private jets and yachts.
2:29:39Sadly, I can't afford the private jet
2:29:41that I want. Wamp wamp. But this doesn't
2:29:44mean I don't fly private. These days, I
2:29:46can easily just book a jet like this
2:29:48one. It can take me from New York to
2:29:50Miami and it only costs me $15,000. I
2:29:54can get from LA to Australia for
2:29:56$200,000 on this private jet.
2:30:01$200,000 seems like a lot, but let's
2:30:04compare it to the median net worth of a
2:30:07US household, which is $192,000. The
2:30:09median net worth of a household, not a
2:30:11person in a household. Spending $200,000
2:30:13on this flight to Australia feels the
2:30:15same for me as a median household
2:30:18[music] spending $384.
2:30:21$384 for this ticket. Pretty doable for
2:30:23a flight to Australia. Now, I can get a
2:30:25better deal on these private flights if
2:30:27I pre purchase a jet card like this. I
2:30:30fill it up with prepaid private jet
2:30:32hours. Prices range from $5 to $7,000
2:30:35per hour for a small private jet and up
2:30:38to $20,000 an hour for a bigger, longer
2:30:40range jet. Maybe someday I'll own my own
2:30:42private jet, but my budget of $10
2:30:44million [music]
2:30:45doesn't really get me the fancy one that
2:30:47I want. I'll opt to charter for now.
2:30:49What I can afford is a fairly large
2:30:52staff to run my life. I have 18
2:30:54full-time staff members, and that's a
2:30:57real number of staff for people of this
2:30:59net worth. from a Morgan Stanley report.
2:31:01I've got a personal driver. I've got a
2:31:03shopper. I've got a butler, a chef, a
2:31:05laundry person. I'm super into security.
2:31:07So, I've got a head of security and a
2:31:09bunch of security guards. I have a
2:31:11personal handler who sets up all the
2:31:13logistics of stuff I want to do. Like, I
2:31:15want to go yacht shopping this weekend.
2:31:17They're handling all of it. Oh, that's
2:31:19him now. Hey, Brad. Yeah. For the yacht
2:31:22show this weekend, can you make sure I
2:31:23get some VIP tenders? No, the Yeah, no,
2:31:26the real the the the chicken ones. Oh,
2:31:29and I almost forgot. My most important
2:31:31staff members are the financial and
2:31:33legal experts who find the most clever
2:31:35ways to reduce how much taxes I have to
2:31:38pay. Which my wealth manager Jeff keeps
2:31:41selling off all my stocks at a loss. And
2:31:43we're like losing money. Jeff, what are
2:31:45you doing back there?
2:31:47>> Don't worry, Scott. This is called a
2:31:49wash sale and I know what I'm doing. You
2:31:51get back to yacht shopping.
2:31:54>> Loss harvesting. Wash sale. I don't
2:31:56understand it all. Jeff does though.
2:31:58Anyway, back to yacht shopping. Wow,
2:32:00look at these yachts.
2:32:03I'm actually sad to discover that I'm on
2:32:06the lower end of ultra ultra wealth.
2:32:08>> So, my yacht is actually not that fancy.
2:32:11It It's not a super yacht, that's for
2:32:12sure. It looks more like this. Costs a
2:32:15little over a million bucks. I might
2:32:16splurge and get this guy. Costs more
2:32:19like 6 million bucks, but this is still
2:32:21pretty entry level because at this
2:32:23point, yes, I've got loads of money. I
2:32:25can buy and travel and live how I want.
2:32:28But what separates me from the big dogs
2:32:30who we're about to [music] see is yachts
2:32:33and private jets, but also influence in
2:32:35society. I do some donating. I donate a
2:32:38bunch of money to politics. I gave
2:32:41$900,000 to a pack [music] that supports
2:32:43the candidates that I hope will win. I
2:32:45also belong to the invite only Aman
2:32:47club, which I had to pay a $200,000
2:32:49initiation fee for. My membership fee is
2:32:51$15,000 a year [music] and I get to rub
2:32:53shoulders with people way richer than me
2:32:56like Bill Gates and even the Kardashians
2:32:58show up every once in a while. But this
2:32:59isn't real influence. I'm kind of paying
2:33:02for access. It's nothing like we're
2:33:04going to see once we cross the billion
2:33:06dollar mark.
2:33:08All right, now let's 10x this and get to
2:33:13$1 billion. Forbes says that there's
2:33:16about 3,000 people on Earth with this
2:33:18kind of money. Hi, my name is Javier. I
2:33:20was a moderately wealthy guy for a
2:33:22while, but I randomly wrote a $200,000
2:33:24check to a couple of young guys in
2:33:26Silicon Valley who had a startup idea.
2:33:28They gave me 4% equity in their company,
2:33:31and then their company blew up and is
2:33:32now worth $80 billion. After some
2:33:34dilution, my $200,000 check is now worth
2:33:38$1 billion. That's my net worth. So, how
2:33:41do I get liquid cash to spend from my
2:33:43vast fortune? Well, I don't want to sell
2:33:45any of my stake in the tech company I
2:33:47invested in because I have voting
2:33:49rights. I can control how it is. In
2:33:51fact, like Scott, I don't want to sell
2:33:53any of my portfolio for cash. Instead, I
2:33:56will generate money other ways. I'll go
2:33:57back to the old debt trick that we saw
2:33:59with Scott. Even if I get a loan that's
2:34:012% of my vast portfolio, I'm looking at
2:34:04$20 million of tax-free cash, all
2:34:07without having to touch my portfolio,
2:34:09which continues to grow in the market at
2:34:1210% a year. that $20 million that I
2:34:14didn't have to take out of my portfolio
2:34:16is just in the market is growing nice
2:34:19and fast. And look, after five years, my
2:34:21portfolio has grown way more [music]
2:34:24than the interest on this loan. I can
2:34:26easily pay back the loan right now and
2:34:28still have extra to spare.
2:34:32Okay, so let's talk houses. Where do I
2:34:34live? Of course, New York City, where
2:34:35there's more billionaires than anywhere
2:34:37else in the world. I live up on the
2:34:38Upper East Side. Look at this beautiful
2:34:40home. sixbedroom, 17,000 square ft²
2:34:44Manhattan apartment. It cost me $57.5
2:34:47million. This was actually two huge
2:34:50multi-million dollar houses that they
2:34:52combined into one just cuz it's got a
2:34:55pool with my favorite inspirational
2:34:57quotes on the wall, a basketball court
2:34:59on the roof. But this is not my only
2:35:01home. It is one of seven that I own,
2:35:04including my home in Aspen, in Lake
2:35:06Garta, Dubai, St. Barts and of course
2:35:10downtown Paris.
2:35:12And look, I finally own a private jet.
2:35:15Yes, no more chartering or prepaid
2:35:18flight cards. I've got my own private
2:35:20jet and it is sick. Look at this thing.
2:35:26Cost me $75 million. And I have to pay
2:35:29$3 million a year just to maintain it.
2:35:32Like I have to pay $135,000
2:35:34just to store it in a hanger. I pay
2:35:37$600,000 a year on fuel and $45,000 just
2:35:40on like basic maintenance. Oh, and I
2:35:43have a full-time pilot and crew. I spend
2:35:45over $700,000 just to keep them retained
2:35:48as my full-time flight attendants. And I
2:35:51finally can buy a respectable yacht.
2:35:54Like, look at this one. It's 131 ft
2:35:56long. It's got a pool and a hot tub on
2:35:58the deck. It can carry 11 guests and
2:36:00nine crew members. And like my PJ, I
2:36:03have to pay a full-time crew to run this
2:36:06thing year round, even though I only use
2:36:07it a few times a year.
2:36:10My vacations look pretty similar to
2:36:12Scots. A lot of expensive VIP access,
2:36:15but just a little more elevated. Like, I
2:36:17paid $3 million to watch the Super Bowl
2:36:19in this suite with Taylor Swift and a
2:36:22bunch of other rich people. The
2:36:23difference between me and Scott is I get
2:36:25invited to stuff that I don't even have
2:36:27to pay for because we're kind of all a
2:36:29little bit post money at this point.
2:36:30Like the Monaco Yacht Show, they have an
2:36:32exclusive opening day. Scott was paying
2:36:35$2,200 for a ticket, but I'm one of the
2:36:38200 people that they just invited to the
2:36:40VIP experience. And in fact, where
2:36:42Scott's vacations were about lavish,
2:36:45opulent hotels and experiences, I had
2:36:48kind of a different vibe. I care mostly
2:36:50about privacy and security. In fact, the
2:36:53places I stay look a lot more like this
2:36:56from the street. unassuming, not drawing
2:36:59any attention. But behind these walls,
2:37:01I've got everything I need for my
2:37:03vacation. My security team flew in a few
2:37:05days earlier to secure the property. And
2:37:07then I arrive with my butler, my chef,
2:37:09my even my personal doctor is on site.
2:37:11[music] I've got a dog walker who I pay
2:37:13to just hang out with my dog. And of
2:37:15course, my luxury travel coordinator who
2:37:17just zipped into town to connect with
2:37:19the brands she's been communicating
2:37:20with. They're planning to come to my
2:37:22villa to set up my own personal store in
2:37:26one of the many bedrooms so that I can
2:37:28browse [clears throat] the latest
2:37:29fashion [music] without leaving my
2:37:31villa. By the way, that's a real example
2:37:32from our reporting. A family who did
2:37:35this during one of their vacations and
2:37:36ended up spending $1.5 million on their
2:37:39little inhome designer store during
2:37:42their vacation. In fact, I want to super
2:37:43clarify that all of these examples are
2:37:47based on real reporting, real examples
2:37:49from our interviews with people who work
2:37:51with the ultra rich. Many of them don't
2:37:53want to appear and be quoted in this
2:37:54video, but we're grateful that they let
2:37:57us in on some of these lifestyle details
2:38:00of how people live and travel at this
2:38:02wealth level. Anyway, I'm Javier, and at
2:38:05this point, it's hard to know what to
2:38:07spend my money on that Scott can't. Like
2:38:09we can both buy a $91,000 shirt, which
2:38:13sales tax alone on this puppy is like 8
2:38:15grand. $9 million painting. There's a
2:38:18few things that are out of reach for
2:38:20Scott that I can buy. Maybe like this
2:38:22nearly $3 million bottle of whiskey.
2:38:24What I can do at this level is pay for
2:38:27hyper exclusive experiences like paying
2:38:30my favorite band, the Eagles, to fly in
2:38:33and play me a show. I'll pay millions of
2:38:36dollars for this. And in fact, they've
2:38:37negotiated only playing Hotel California
2:38:40one time, but it was totally worth it.
2:38:42And yes, that $6 million private concert
2:38:44is a real example, too. Anyway, let's go
2:38:46back to security because now that I'm a
2:38:48billionaire, I'm a little more wellknown
2:38:50and my security team has grown. But I'm
2:38:52also starting to get a little more
2:38:53paranoid thinking about how I'm planning
2:38:56for something apocalyptic. We rich
2:39:00people think about this a lot. What if
2:39:02we lose it all? My vast wealth is in the
2:39:06market, in the economy, and if [music]
2:39:09order breaks down, it could be worth
2:39:11nothing. So, I'm gonna invest in some
2:39:15backup plans, a bunch of land in upstate
2:39:18New York. And in fact, I'm even working
2:39:20on a bunker. I love bunkers. This
2:39:22thing's got food storage, a
2:39:24decontamination shower, a high-tech air
2:39:26filtration system, four bedrooms, a hair
2:39:29salon, a shooting range. Listen, I'm not
2:39:32a prepper, but you know, just in case
2:39:34and I've got the money to do it, why
2:39:36wouldn't I? [music]
2:39:40I'm worth a billion dollars. So, at this
2:39:42point, I kind of have an army of tax
2:39:44professionals optimizing my wealth so I
2:39:46can pay as few taxes as possible. And
2:39:49Congress just passed some legislation
2:39:50that's really helping me out on this.
2:39:53[applause]
2:39:54At this level, I start to get weird and
2:39:57creative with my money. Maybe I'll buy a
2:39:58hotel chain. Or maybe I'll invest in
2:40:01Bubbles.
2:40:02No, not those kind of Bubbles. Bubbles
2:40:05is the name of my thoroughbred horse
2:40:06that I bought for $3 million. I paid
2:40:09millions of dollars. And then I had to,
2:40:11of course, build a home and a bunch of
2:40:12stables for Bubbles. And I had to like
2:40:15get a trainer and feed and [music] care
2:40:17and medical attention. It's a lot of
2:40:19money, but it's a business expense. And
2:40:21Bubbles is a depreciating asset on my
2:40:24balance sheet. I'm supposed to try to
2:40:25make a profit off of Bubbles, but really
2:40:28I'm doing it because on race day, I love
2:40:30showing up to watch him race. Get to
2:40:32hang out with my [music] friends, spend
2:40:34some time at the track, throw a big
2:40:36party, and watch Bubbles race. Come on,
2:40:39boy. Come on.
2:40:40>> The Kentucky
2:40:43is a great start.
2:40:45>> Bubbles.
2:40:50>> Oh, he lost again. And yes, I'm losing a
2:40:53lot of money on bubbles, but honestly,
2:40:55I'm not that stressed because this is
2:40:57more of a hobby. And all of these losses
2:40:58I can write off to lower my tax bill.
2:41:00I'm actually doing this same kind of
2:41:01hobby thing on a much bigger scale. I
2:41:04bought an NBA team. I'm able to write
2:41:06these players off as depreciating
2:41:08assets. Even though the team is growing
2:41:10and making money, all of this helps my
2:41:12tax rate be lower than the players who
2:41:15play for me and even lower than the guy
2:41:17serving beer in the stands. ProPublica
2:41:20did a great analysis on that, by the
2:41:22way. But yeah, anyway, all of this is
2:41:23legal. Like, I'm not breaking any rules.
2:41:26And honestly, it's really fun. And
2:41:28[music] look, I have the best seats in
2:41:30the house. Oh, and by the way, I still
2:41:31pay a lot of taxes. My businesses pay
2:41:34corporate taxes and income taxes and
2:41:35payroll taxes and property taxes and
2:41:37sales taxes. I contribute massively in
2:41:39dollar terms. And my businesses generate
2:41:41huge amounts of tax revenue and jobs.
2:41:43And I took a risk in building my wealth.
2:41:45And when I sell or die, the government
2:41:46takes another giant cut. I'm paying
2:41:48plenty. And in fact, I'm paying so much
2:41:51that I'm going to use some of my
2:41:52influence to try to change that.
2:41:57I've got my eye on a Senate candidate.
2:41:59I've contributed $20 million to his
2:42:02campaign to get him reelected and he
2:42:04won. Yes. It's a few months later and
2:42:07Congress is working on a bill. It could
2:42:09have big ramifications for my business
2:42:11and therefore my net worth. And so, I'm
2:42:13going to call in my favor to the senator
2:42:14who I donated so much money to help
2:42:16reelect. I need him to insert eight
2:42:19words into this massive bill to allow my
2:42:22business to qualify for a huge
2:42:24deduction. He does it last second and I
2:42:27just saved hundreds of millions of
2:42:28dollars in taxes. 20 million bucks to
2:42:30get this guy elected in exchange for
2:42:33hundreds of millions of dollars in
2:42:34savings. That sounds like a good
2:42:35investment. Thanks, Congress. My
2:42:37financial adviserss have been telling me
2:42:39that it's time for me to not just be a
2:42:40rich person, but to become a
2:42:42philanthropist, to give away my money,
2:42:44and to save some taxes in the process.
2:42:46How about let's see what can I give
2:42:48away. Well, I've got this really nice
2:42:50art collection. An appraiser said that
2:42:52it was worth $130 million. I'm going to
2:42:55donate this, but I'm not going to donate
2:42:57it to like a public gallery. I'm going
2:42:59to donate it to my own family's private
2:43:02nonprofit foundation. And as long as I
2:43:04make this art accessible to the public,
2:43:07I can write off the $130 million from my
2:43:10taxes over several years. Okay. So, I
2:43:12have to make all this art accessible to
2:43:14get the tax write off. what counts as
2:43:16accessible. Luckily, the IRS isn't super
2:43:18specific. So, I've decided to open up
2:43:21the art room to the public, but just in
2:43:23kind of random two-hour slots that you
2:43:26need a lottery to get an access to.
2:43:28There'll [music] be only guided tours on
2:43:30random Wednesdays, no regular hours, no
2:43:33self-guided tours. That's accessible,
2:43:35right? I'm taking the tax write off.
2:43:38That work, guys.
2:43:39>> Nice approach.
2:43:41>> Yes. And yes, that is a real example of
2:43:44philanthropy really being vanity
2:43:46projects with no public benefit. Thanks
2:43:48again to ProPublica for their great
2:43:49reporting on it. Okay, moving on.
2:43:52Now, there are billionaires who give to
2:43:55real causes that benefit real people who
2:43:58give away a large amount of their
2:44:00fortune to actually change the world for
2:44:03the better. But it's also very common
2:44:05for billionaires to use foundations and
2:44:07philanthropy as tax shelters and vanity
2:44:10projects. And the IRS doesn't really
2:44:12come down on these people very often.
2:44:14Oh, I just got an email saying I'm going
2:44:16to Switzerland because I donated to the
2:44:18presidential campaign. The president is
2:44:20assigning me to be the ambassador to
2:44:22Switzerland. And I know the president
2:44:24said that he wouldn't be appointing his
2:44:26donors to these types of roles, but here
2:44:29I am. Seems like a lot of us donors are
2:44:31getting appointed. This is great. Let's
2:44:33get the jet ready to go to Switzerland.
2:44:35So, you can see that my fortune at this
2:44:37point buys me anything I want, but it's
2:44:40actually starting to be more and more
2:44:41about buying influence [music] in
2:44:43society and politics. But this is just
2:44:45the beginning. Let's see what happens
2:44:47when we 100x this. Okay, things are
2:44:50about to get kind of nuts because we're
2:44:52about to 100x this pile to go from 1
2:44:55billion to $100 billion.
2:44:59There's less than 20 people who have
2:45:01this much net worth or more. They're
2:45:03almost all Americans who started
2:45:04technology companies. Elon Musk, the
2:45:06world's richest man, has anywhere from
2:45:07four to five times this much, depending
2:45:09on the day. And at this point, there's
2:45:11no way I can convince you how much money
2:45:12this is. Like, you would have to combine
2:45:14the incomes of over 7 12 million
2:45:16Americans toiling away earning the
2:45:18median salary of $63,000 a year. 7 and a
2:45:22half million people earning the amount
2:45:24of money controlled by one guy. Hi, my
2:45:27name is Bradley. I founded a technology
2:45:30company decades ago and it is now one of
2:45:32the most valuable companies on earth. I
2:45:34still run it actively and most of my
2:45:36hundred billion dollar fortune is in the
2:45:39form of a huge amount of stock in this
2:45:41company. How do I even think about where
2:45:43to live?
2:45:46I could go the direction of Indian
2:45:48billionaire Mukesh Amani and build my
2:45:50own personal 27story skyscraper complete
2:45:53with a hanging garden and a sixf flooror
2:45:56garage where I can store 168 cars or I
2:46:00could collect a portfolio of trophy
2:46:03homes all over the world. I'll buy this
2:46:05one in Florida for $173 million. It's
2:46:08got 33 bedrooms and 39 bathrooms. That
2:46:12is a lot of toilets. I'll buy a spot in
2:46:14London, but I'll make sure to buy all
2:46:16the properties around it, so I've got a
2:46:18lot of privacy. That one cost me $22
2:46:20million. I'll grab a bunch of property
2:46:22along this coastline in Malibu. I'll buy
2:46:24this private golf course next to my
2:46:2619,000 ft mansion, [music] even though I
2:46:29don't really play golf. And I'll even
2:46:30pay $86 million for a Zen temple in
2:46:33Japan because I'm super into Japan.
2:46:35Let's add to the list buying this entire
2:46:38island of Lai, Hawaii. All in all, my
2:46:40big portfolio of houses around the world
2:46:42adds up to about $2 billion worth of
2:46:45homes. But if I'm like Larry Ellison,
2:46:47whose homes all of those I just
2:46:49mentioned are, this isn't even 1% of my
2:46:52net worth. But I don't want to just buy
2:46:54homes. Maybe I want to buy a social
2:46:56media company.
2:47:00>> I'm really into influence right now, and
2:47:02influencing the media is a great way to
2:47:04influence society. And this is where I
2:47:06can take the loan thing that we talked
2:47:08about earlier to a whole new level. Yes,
2:47:10I could sell a bunch of my stock to get
2:47:12cash to buy the social media company. Or
2:47:14I can do what Elon Musk did and take out
2:47:16a giant loan, billions of dollars, that
2:47:20I don't have to pay taxes on that is
2:47:22based on my vast fortune. Musk was about
2:47:25to take out a loan of $12.5 billion, but
2:47:28then ended up taking about half that to
2:47:29buy Twitter. And this is what's wild is
2:47:32the loan thing. At this level, I can
2:47:34plan to just do this forever. I never
2:47:36have to pay off these loans. I never
2:47:38have to sell off any of my stock. I
2:47:40could keep paying down the interest so
2:47:42it doesn't compound. But even if I
2:47:44don't, my fortune grows way faster than
2:47:47this debt acrru. And the real benefit of
2:47:50this happens when I get close to the end
2:47:52of my life. It's been decades. I have
2:47:54all these loans. They've grown acured
2:47:56interest. My fortune has grown way
2:47:58faster. And at the end of my life, I
2:48:01could sell a bunch of my portfolio, get
2:48:04a bunch of cash, and pay off all my
2:48:06loans before I die so I don't leave my
2:48:08children saddled with all my loans. But
2:48:09I don't want to do that cuz I would have
2:48:11to pay a huge amount of taxes if I did.
2:48:13And if you haven't noticed, I don't like
2:48:15taxes. My goal now, as I get close to
2:48:17the end of my life, is to set my family
2:48:19up to inherit my vast fortune in the
2:48:22most advantageous way [music] possible.
2:48:24So, I max out the gifting exemption.
2:48:26There's like $14 million I can do there,
2:48:28but that's like a drop in the bucket.
2:48:30I'll set up some trusts that technically
2:48:32remove control of my wealth and pays out
2:48:35a certain amount to the named
2:48:36beneficiaries, like my children and
2:48:38grandchildren, over a period of time,
2:48:40potentially forever. But watch this. My
2:48:43portfolio is a vast fortune that is
2:48:47mostly loaded with unrealized gains.
2:48:50Meaning, this is all money that has
2:48:51grown in the market. I haven't paid
2:48:53taxes on it yet cuz I haven't taken it
2:48:55out. [music] The moment I take it out, I
2:48:57have to pay taxes. But what I can do is
2:48:59when I die, I can give this giant
2:49:02fortune to my daughter, let's say, and
2:49:05the moment I give it to her, boom, the
2:49:08clock resets. She inherits that fortune
2:49:10and suddenly it's as if she has zero
2:49:13gains. [music] Meaning she could sell
2:49:15this entire portfolio on day one and pay
2:49:18no taxes. Those unrealized, untaxed
2:49:20gains disappear, never to be taxed. And
2:49:24yes, there is a big estate tax that I
2:49:25have to pay when I die, but my army of
2:49:28wealth managers have figured out a way
2:49:30to buy an insurance policy that will pay
2:49:32that tax for me. Anyway, I'm not dead
2:49:34yet. Let's talk about yachts. Because at
2:49:36this point, at hund00 billion, I can get
2:49:39the top of the line. [music]
2:49:42Look at this 600 ft long, $600 million
2:49:46yacht. This thing has a crew of 80
2:49:49people. It can cross the Atlantic
2:49:50without refueling. It's got a pool, a
2:49:53helellipad, a movie theater, a golf
2:49:56training room because, you know, I got
2:49:57to practice my swing when I'm out in the
2:49:59Atlantic. I pay my crew super well. Many
2:50:01of my crew stay on board my yacht for
2:50:04years. Oh, and did I mention that it's
2:50:06not just the yacht? I also have this
2:50:08little shadow barge that follows my
2:50:10yacht around when we're out to sea. It
2:50:12carries extra fuel so we can be out on
2:50:14the water longer. It also keeps some of
2:50:16my car collection. Oh, what's that?
2:50:18You're burning to hear about my car
2:50:19collection? I have 2,000 cars. This
2:50:22giant collection is worth around $200
2:50:24million. It's kind of my hobby. Another
2:50:26real example from this billionaire. And
2:50:28just when I thought I had the top of the
2:50:30line, there's something else I got my
2:50:32eye on. This super yacht airship
2:50:35crossover that's straight out of Star
2:50:37Trek. I want this thing. Especially
2:50:39because the article says that quote
2:50:41crossovers can be oodles of fun when
2:50:44done right. I want oodles of fun. My
2:50:47super yacht's starting to look boring
2:50:48because I have to stick to the sea. But
2:50:50with this crossover, I can go anywhere
2:50:52[music] because it literally turns into
2:50:53a blimp and goes onto land and it costs
2:50:56about a billion dollars. And yes, it's
2:50:58got all the bells and whistles. A pool,
2:51:00a sauna, a gym, a helellipad, tenders,
2:51:04and a nice big garage for my cars. And
2:51:06yeah, we got to talk about my private
2:51:08jet. Oh, sorry, private jets. I have
2:51:11three of them, and they're all huge. My
2:51:14favorite one is this one.
2:51:17This is the ACJ 350. It's got a cabin
2:51:19that's 167 ft long, over 3,000 square ft
2:51:23of floor space on this sucker. I bought
2:51:25this thing for $360 million, and I spent
2:51:28another $100 million just to renovate
2:51:30the interior because I wanted a spa on
2:51:32board. I mean, totally worth it, right?
2:51:36Oh, and on a more grave note, I had to
2:51:38make a deal with my pilot that in case
2:51:40of the apocalypse, which I think about a
2:51:42lot, I'll let him and his family come
2:51:43with me to my compound. Like, if if we
2:51:46have to escape, I need to guarantee that
2:51:47I have a pilot to fly me away in case
2:51:49like the mob comes knocking. Where will
2:51:52I fly? Oh, I've got some options. Got
2:51:54bunkers all over the place. Some of them
2:51:57have air strips, so I can just fly right
2:51:58to them. My favorite one is in New
2:52:01Zealand, where a lot of us ultra wealthy
2:52:03are burying bunkers. This thing is
2:52:05buried underground. It's got a pantry, a
2:52:08gun room, a surgery station. This thing
2:52:10only cost me $8 million to build, but
2:52:12that's not including the couple million
2:52:14dollars I had to invest in New Zealand
2:52:16for several years to qualify for an
2:52:18investor visa. So, they'll like let me
2:52:20into their airspace. My other bunkers
2:52:22include huge pieces of land in Hawaii
2:52:25where I have a huge full-time staff,
2:52:27including a person who raises my Wagu
2:52:30cattle, just like my buddy Marz. He's
2:52:32got one, too. We love Wagu and
2:52:34Hydrooils. When I say and hydrooils, cut
2:52:36to him on the hydroofoil out in the
2:52:42We got this, Mark. Okay, but I'm not all
2:52:44doom and gloom apocalyptic. It's just a
2:52:46backup plan. I have hobbies, too, but my
2:52:48hobbies have turned into kind of reality
2:52:50bending projects. Like, I want to go to
2:52:53space.
2:52:54>> I feel super connected to love.
2:52:56>> I want to create my own libertarian
2:52:58nation in the South Pacific. I've got
2:53:00the money to do it. I have like more
2:53:02money than a lot of nations. Or I could
2:53:04throw my money at wild innovative ideas
2:53:06like making human brains talk to
2:53:08computers or finding ways for humans to
2:53:11live forever. My security team is now
2:53:13[music] huge. Dozens and dozens of
2:53:15professionals, many of them former Navy
2:53:17Seals. And it's hitting me that at this
2:53:19level, I have so much money I can
2:53:21actually make a huge impact [music] in
2:53:24the world. I have the ability to give
2:53:26away over $19 billion of my wealth. no
2:53:30strings attached to help change the
2:53:32lives of underrepresented people like
2:53:34Jeff Bezos's ex-wife did. I could put
2:53:36billions of dollars into eradicating
2:53:38infectious diseases [music] and focusing
2:53:40on improving maternal and child health
2:53:42funding like Bill and Meinda Gates have
2:53:44done. It's a lot of power that I have to
2:53:47affect what public health initiatives
2:53:48get done. Or I could pour my
2:53:50philanthropic money into foundations
2:53:52that get me tax benefits and serve my
2:53:55own ventures and are completely
2:53:56controlled by me and my family. I could
2:53:58do either. And my level of influence is
2:54:00not just in the philanthropic causes I
2:54:03can fund. I also rub shoulders with the
2:54:05most influential decision makers in the
2:54:07world. Did I mention that as a part of
2:54:09my real estate portfolio, I've got this
2:54:11huge swath of beach in Florida where
2:54:13I've created an enclave for the rich.
2:54:16It's right next to the president's
2:54:18Florida residence and it's where I make
2:54:20sure that I rub shoulders with the right
2:54:23people. This election cycle, I'm going
2:54:25to spend almost $300 million on getting
2:54:29my favorite candidate elected to be
2:54:31president. That seems like a lot. Is
2:54:32that legal? Actually, yes. Look, I have
2:54:35a front row seat to the inauguration,
2:54:37and the president is giving me the job
2:54:39I've always wanted, which is [music]
2:54:40taking a chainsaw to the federal
2:54:41government.
2:54:42>> This is the chainsaw poor bureaucracy.
2:54:46Chainsaw.
2:54:48>> Wow. Well, that was quite the journey.
2:54:50If there's one thing I've learned on my
2:54:52journey from a hundred million to a
2:54:54hundred billion dollars, it's that
2:54:56wealth begets more wealth. That's why I
2:54:58did all those like tax calculations and
2:55:00debt to show [music] you that when you
2:55:02have wealth and ownership of assets in a
2:55:06capitalistic system. [music] You become
2:55:08impervious, you can build a fortress of
2:55:12wealth that just keeps growing. And then
2:55:14once you have that fortress, [music] it
2:55:16allows you to influence government and
2:55:19policy and media that [music] then
2:55:21serves your interests to get more
2:55:24wealth. All while opportunities, [music]
2:55:27wages, and resources stagnate for the
2:55:30majority. This isn't a broken system.
2:55:33[music] This is a system working exactly
2:55:36how it was designed by policy choices
2:55:38and decisions. And it might strike you
2:55:41as unfair. [music]
2:55:42I think it is. But I also think it's
2:55:44really dangerous. It's exactly the type
2:55:46of concentration that creates [music] a
2:55:48politics of grievance and anger and
2:55:51resentment and hopelessness. All so that
2:55:54a few people can [music] have access to
2:55:56their fancy boats and exclusive parties.
2:56:34Heat. Heat.
2:57:00Heat. Heat.
2:57:31Heat. Heat.
2:58:07Heat. Heat.
2:58:23>> [music]

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