Scott Galloway on What the Numbers Say About Key Economic Topics

THRIVE Podcast – Transcript

Season 4

Scott Galloway |

 

Speaker 1

Welcome to Paychex THRIVE, a Business Podcast, where you'll hear timely insights to help you navigate marketplace dynamics and propel your business forward. Here's your host, Gene Marks.

 

Gene Marks

Hey, everybody. This is Gene Marks, and welcome back to another episode of the Paychex THRIVE Podcast. Very, very happy that you are here to join us. I have somebody here with me today who I've been a longtime fan of, who I've followed online, who I respect greatly as an economist and a thought leader, Scott Galloway, who has written really just a wonderful book called Adrift: America in 100 Charts. Scott, first of all, when was this book published? It's pretty recent. 2022, right?

 

Scott Galloway

Yeah, about six months ago.

 

Gene Marks

Yeah, about six months ago. So, guys, if you haven't picked this book up, I highly recommend reading it, mainly because it's not, I don't know, a typical non-fiction academic read. It's literally 100 charts with Scott's thoughts on each of those charts. And then, the book is pulled together with Scott's overall thoughts on some of the big matters that impacts us all. And I know that we're all people running businesses, but it has business impact and life impact as well. Scott, what made you write this book?

 

Scott Galloway

It's funny. It's the easiest questions that are the most difficult to answer. Yeah, I think a lot about what ails us, so to speak. And I spent a lot of time writing. I have a newsletter that goes out to about 350,000 people every Friday called No Mercy / No Malice. And I'm fascinated with visuals. And one of the things I think I recognized early is that if you want to help people understand something or get them to really grasp it, it's much more impactful to try and distill it down to an image. We process imagery six to 60 times faster than words. If I said, "Gene, there's a lion in your studio, get out," you would read it, or if I sent it to you in email, you'd read it, process it, look around. If you saw a lion in your studio, you would know exactly what to do. You would just start running instinctively.

 

Scott Galloway

And so, I thought, "How can I take the best charts that we've produced over the last several years that distill what I think are the biggest issues facing the US and then provide some commentary?" It's how I like to read. I really enjoy visuals. So that was trying to distill down to a finite number of kind of graspable concepts. What are the biggest issues facing us? And two, to communicate it using visuals.

 

Gene Marks

You and your organization put together a bunch of charts over the years. Here, you limited yourself to just 100. And I'm curious what criteria you use to select these 100 charts as you were going through all the stuff that you've done before.

Scott Galloway

So, the hard part is not picking the charts or writing up any chart. The hard part is chunking it and creating an arc in a narrative. So, the first chapter is The World We Built. America has just a tremendous amount of accomplishments and things that we need to stop, take pause, and recognize our collective achievement, and hopefully use that as a means of feeling a little bit more comradery from one another, and then going on to the war against young people.

 

Scott Galloway

So, trying to chunk it. And so, what I said is, "All right, these are the four or five major themes." And then, you try and create a narrative through these charts, and then, you end up with 120 or 80, and you dial down the number of charts so you can have a title that fits fits. But that's the hard part. That's the hardest part about writing, Gene. I don't know. Gene, do you write?

 

Gene Marks

Yeah, I do.

 

Scott Galloway

Yeah. Writing is difficult. What's really hard is creating-

 

Gene Marks

Is editing.

 

Scott Galloway

Yeah. It's creating a narrative, like, "Okay, where is this going? What's the point? How do I land this thing? How does the first paragraph relate to the third? And should the third paragraph have gone first?" So that's the hard part, was the picking 100 and then creating an arc in a narrative.

 

Gene Marks

The other issue that you have with a book like this is that the day after you publish it, it's technically out of date.

 

Scott Galloway

Absolutely. Yeah.

 

Gene Marks

I mean, you're dealing with rolling data. So, how do you deal with that, and what is your plan? Is this the kind of book you think you'll be updating every few years?

 

Scott Galloway

It's an interesting idea. I immediately got called by someone who's much more qualified, like, the top geopolitical guy in the world. He said, "Let's do the world in 100 charts. Let's do the UK in 100 charts. In a 100, could do a bunch of stuff."

 

Gene Marks

Yeah.

 

Scott Galloway

So, I don't know if I'll update it. All of my books have been somewhat perishable. My bestselling book, I think, to date was my first one, the four where I talked about, I published it in 2017. And at that point, the only thing we were arguing in big tech was who was going to be president, Jeff Bezos or Sheryl Sandberg. It started out as a love letter. I really do like these companies and made a lot of money from them. They hire most of my students.

 

Scott Galloway

And by the time I was done with the book and spending 18 months just marinating and everything big tech, the book ended up being a cautionary tale. And it ended up, the world came to me. My publisher first said, "Can you really say this? Do you really think Sheryl Sandberg is not doing good for the world?"

 

Scott Galloway

And I'm like, "No. This is really dangerous stuff." Anyways, that book sold the best. They've mostly been perishable because they're about economics, but they still sell. The thing that sold the least well its first year but has sold the same amount every year is my book on happiness, because those themes are much more evergreen. But if you really want something hard hitting, you either have to be incredibly spiritual and write something that extends the test of time.

 

Scott Galloway

So far, I haven't demonstrated those skills. What I do is find something interesting that's going on right now and say, "In this unfiltered voice as possible, this is what I think is actually going on, and what's going to happen."

 

Scott Galloway

And I get a lot wrong, but people are still generous with you because they think, "Well, it makes me think." Well, okay, that's half the battle." But I love writing about current events and then trying to project what I think is going to happen.

 

Scott Galloway

The hard part is that the book industry is from pencil downs to when it's actually on the shelves is nine to 18 months, which I can't figure out why. And I've still never gotten a good explanation. But, yeah, the moment it's on the shelf, it starts becoming perishable. What's interesting is to go back though, because sometimes the stuff, obviously, history repeats itself.

 

Gene Marks

Yeah. I can see this is a book that, okay, maybe it's not an annual revisit, but I can see 10 years from now you coming back to it and saying, "Let's see how we did."

 

Scott Galloway

Let us update the charts. Yeah, 100%. Yeah.

 

Gene Marks

Yeah, which is updating it and also maybe even updating your point of view. I mean-

 

Scott Galloway

Yeah. There you go.

 

Gene Marks

... wherever you're right, you're right. And wrong, you're wrong. Okay. So as I told you before we started recording, the people that listen to this podcast and watch us are primarily business owners, managers. These are employers who own businesses. That's our audience here.

 

Scott Galloway

So, yeah, not an easy task, but I picked out a few charts from the book that have an impact on businesses, and I just thought maybe you can offer some background and insight into them. So, the first one is a chart that said, "An overwhelmed IRS."

 

Scott Galloway

Tell us a little bit about that chart. It basically shows what the IRS, how many people they were actually auditing back in the day compared to now. And you feel that the IRS needs a significant revamping as well. So, tell us a little bit about the background to that chart.

 

Scott Galloway

Yeah. So, it's just pretty basic. There's an algebra of deterrence. The best cop on the beat is the deterrent effect. And that is if I rob a bank or if I assault somebody, there's a decent chance. What you need is the algebra of deterrence is very basic. It's the likelihood you'll get caught times. The time to expected punishment needs to be greater than the expected upside.

 

Scott Galloway

And the algebra of deterrence is totally out of whack now. The smart thing to do in the US is to cheat on your taxes. And when I say cheat, the exceptionally aggressive lie, because the chances of you being audited, especially if you are a large taxpayer, have gone down because the tax code has gone from 40 pages to 400.

 

Scott Galloway

And it's so complicated that if they audit a wealthy person, it takes a staff of two, three, six people, one, three, six months. And the Republican Party also with the help of the Democratic Party because they have a lot of wealthy donors has said, "Has positioned the IRS, not as the people who pay for the Navy, not as the people who pay for food stamps, not as the people who loan Elon Musk's nascent company money, but as bad people who are here to harass our citizens and has either kept their funding flat or actually in some years reduced it."

 

Scott Galloway

The result is as the tax code has become more complex, the justification for allocating the types of finite resources you need to audit a wealthy person, the violations have to be so brazen that every year, more and more the percentage of wealthy people that can be audited goes down.

 

Scott Galloway

And where the automation is kicked in is that automation is slowly but surely creeping up through simple tax filers or lower middle income who just have a W2 put down a number. So you're seeing audit rates increase across lower middle income households, and you're seeing them decline across large income households. And I think what I will say is across my cohort, I'm lucky, I'm at a point in my life where I've made some money is the general viewpoint, the advice you get from your advisors on taxes when you're wealthy is be super aggressive because they just don't quite frankly have the resources to come after everybody.

 

Scott Galloway

And I'm not saying that this deterrence is still... Jail is still a fairly significant deterrence. So I wouldn't say people are encouraged to lie, but they're encouraged to be as aggressive as possible. And the tax code has just become so filled with goodies for rich people. I'll use myself as an example.

 

Scott Galloway

I sold my last company for $160 million. The first 10 million to me was tax-free, qualified small business, 1202. I think that's ridiculous. I don't understand the rationale. And when I say that, people will say, "Well, Scott, innovators are important, and we need to encourage them to take risks and allocate their own capital to these small businesses."

 

Scott Galloway

And that sounds great, but no entrepreneur knows the tax code when they start a company. They don't start companies thinking, "Well, I'm going to qualify for qualified small business." That's not why they start companies. The effective tax rate for billionaires is now, depending on how you look at it, a high of 17% and a low of seven.

 

Scott Galloway

So, every year, there's new stuff layered into the... five of the Fortune 100 companies in the US didn't pay any taxes last year.

 

Gene Marks

Right.

 

Scott Galloway

So, if you have GPS, you want to run a boat race at night, and wealthy people in corporations have GPS. So they create obstacles. You make it more and more complex when you have night vision. That plays to your advantage. Now, the myth as I sound like Bernie Sanders meets Elizabeth Warren [inaudible 00:11:32], the myth that the left has tried to foment is that lower and middle income people have really gotten screwed.

 

Scott Galloway

And there's some truth to that regarding the fact that they haven't shared in the prosperity we've recognized over the last 40 years, our GDP growth has been staggering. We have consistently grown unbelievable prosperity, not a lot of progress in lower, middle income, but the people who really get screwed from a taxation standpoint are what I call the workhorses.

 

Scott Galloway

A partner at a law firm and her husband is a chiropractor. They've got the right skills, the right degrees, they make combined incomes of 1.2 million a year. They're killing it, but they just have their income. And if they live in a large urban metro where you can make that kind of money where most big law firms are headquartered or there's people who can spend the kind of money you need to go get adjusted or what have you, they're probably-

 

Gene Marks

They're spending a lot of it.

 

Scott Galloway

They're probably not only spending a lot of it, but they're probably paying an effective tax rate of 45 or 50%.

 

Gene Marks

Yeah.

 

Scott Galloway

Once you make the jump to light speed and the chiropractor can have 12 practices and has enough capital to start opening small businesses and putting them in LLCs and he can start throwing all sorts of expenses at it, he can maybe build something big enough that a PE shop comes and rolls up. And if he's held the stock in that company that owns 12 chiropractic clinics longer than five years, he qualifies for QSB, he pays 22.8% instead of 37% on and on and on.

 

Scott Galloway

If you make the jump to light speed, that is your own small business or you make the majority of your business from investing in other businesses because you've been disciplined enough to save money and have had the money, your tax rate plummets.

 

Scott Galloway

So, the people who get kind of, I would say, most screwed in our society from a tax point are the kind of 90 to 99th percentile, the workhorses. And people don't feel sorry for them because crime me a river, you're making 500 grand a year. But if you want to talk about who's paying the majority of our taxes and who's paying a 50... If you're a partner at Goldman Sachs and everyone likes to demonize them and you live in New York, and you live in Short Hills, New Jersey, you're probably paying literally a tax rate of 50%.

 

Gene Marks

And by the way, I'm a CPA. But I just wrote about this recently that my clients, they complained because they get taxed on their paper profits in their business, but that doesn't necessarily mean to what their cash flow is. They might have showed a million dollars in profits during the year, but they reinvested a lot of it in inventory and capital equipment and maybe they were fluctuations and receivables not showing the cash, but they still got to pay the tax.

 

Gene Marks

And in agreement with what you're saying, I try to explain to them that you're getting killed on your income. I'm not going to argue with you on that. But you're building value. You have the benefit of being an owner of a company. You're taking your risks, but you're building this value that hopefully someday when it comes time to exit, that's when you're going to reap your rewards and hopefully the estate tax exclusions remain at a certain level that they are now.

 

Gene Marks

But it's just a long-term investment that you're making. Scott, let me keep going because there's too many other things. You have another chart about privatized research and development equals privatized progress, you say. And the conclusion is that there's been so much more done on the private sector versus the public sector, and that comes with risks to the economy and society.

 

Gene Marks

And I wanted to hear your thoughts on what you mean by that. And why has the private sector been dominating so much of the research that's out there? And even to add to this, there's a whole debate going on with this research and development deduction for expenses that businesses can no longer take this year unless there's a change to the tax code and whether or not that's going to have an impact on research development. Give me your thoughts on privatized R&Dd.

 

Scott Galloway

So, if you set out to build a trillion-dollar market cap company, that's your goal. I want to grow up to be the founder of a company that someday might be worth a trillion dollars. The thing they all have in common is all of these companies build a thick layer of innovation on top of other people's investment.

 

Scott Galloway

And when I say other people's investment, I mean middle class taxpayers who have funded GPS, who have funded vaccine research, who have funded microchip research, who have funded space technology. If you look at Apple, Google, whether it's DARPA, whether it's GPS, whatever it is, whether it's charging stations being funded by the Infrastructure Act, the best way to make a lot of money is to create a way to repackage and make a more consumable product of other people's investments.

 

Scott Galloway

And so, the spillover from these huge staggering investments required from technology and kind of exploratory sectors, only the government is willing to make those businesses, and then a lot of that innovation is privatized, and they can recognize enormous upside.

 

Scott Galloway

I don't think there is a company that's gotten over, say, a few hundred billion that has not really free-ridden or been a remora fish on the back of massive government investment, whether it's Amazon and the US Postal Service, all of them. You can point to crazy tax credits and infrastructure.

 

Scott Galloway

The question is whether or not we have, if the government continue to make those has the capital to make those sort of forward leading investments or we just become totally dependent upon private companies. And what you're seeing with private companies is this is how private company works. Does it do what's right for society? No. They'll talk a lot about that's way down the list.

 

Scott Galloway

They're not bad people, but the incentives in a capitalist society to fly first class and have a broader selection set of mates because your rich is so great that you will rationalize asocial or at least amoral behavior, right?

 

Scott Galloway

Do they do what grows revenues? No. Do they do what grows the strategic advantage of the business? No. The majority of decisions of private companies are driven by the following thing. What will get the stock up in the next 12 to 48 months because that's how the people making the decisions get compensated.

 

Scott Galloway

And so, the temptation to take your R&D from... Apple spends less on R&D than IBM ever did. Get this, Apple has spent, I think, a half a trillion dollars on share buybacks over the last 20 years. So Apple has spent more buying back their own stock than the value they could have bought almost every... If they'd just taken that cash, not bought back stock, but bought another company, they probably could have bought any company in the world except the six most valuable.

 

Scott Galloway

They could have just enormous investment. And so, the temptation to slowly but surely cut private R&D because you want to save capital for other things is pretty extraordinary. Now, having said that small company spend a lot of money on R&D, it's a dance. But in general I find that government is sort of underfunded. We demonize it, which leads to the self-fulfilling prophecy where we cut the funding and you go to the DMV.

 

Scott Galloway

A lot of people's only interaction with the government is the DMV, and they're like, "The government's awful. So I will vote for anyone who will lower my taxes and cut funding because they're idiots." And you end up with a government that's just not as efficient, doesn't do as much work, we become more reliant on private companies. So it's a balance.

 

Scott Galloway

I don't know if there's a sweet spot, but I'm not comfortable with... The same argument can be made for wealthy people that wealthy people in America are very generous because they make a ton of money. They get midlife crises, so they start giving a lot of it away at nonprofit.

 

Scott Galloway

That is very good, but what a non-[inaudible 00:19:35] would say is, "Should rich people really be shaping what public policy is, or should we be paying more taxes?" And then elected representatives... Rich people generally aren't going to donate money for prison reform or opium or opiate rehab. They invest in the new Paulson School of Engineering at Harvard, right?

 

Gene Marks

Right.

 

Scott Galloway

So very wealthy people have their own gigs, their own pet projects. So I don't know if I still like the government as the premier. If you think about the most successful venture capitalists in history, it's been the US government, and that is the investments. If you look, like I said, any trillion dollar plus company, it's from these remarkable forward-leaning visionary investments the government made in space, location, technology, whatever it might be. So, I like the idea of a better funded government that is still making these really forward-leaning investments.

 

Gene Marks

Okay. You have another chart in this book that addresses minimum wage, and it shows that based on total economic productivity, which I'm going to ask you to define in a minute, our minimum wage at a federal level, which right now is at 7.25 an hour should really be $22 and 18 cents an hour if it kept up with our total economic productivity.

 

Gene Marks

So, first of all, if I can ask you to define what you mean by total economic productivity and then also to talk to me about your thoughts on minimum wage. Are you saying, by this chart, that you support an increase in the federal minimum wage to as high as $22 and 18 cents an hour or is this just what the data is telling you it should be?

 

Scott Galloway

And now, I think I'm going to fail this jeopardy question. I don't know if it was on an inflation adjusted basis or if it was just how much our GDP has increased per capita. In other words, at $7 and 25 cents, I think if minimum wage had just kept pace with our increase in gross domestic product, it'd be at about 22 bucks a share... Or I'm sorry, 22 bucks an hour.

Gene Marks

An hour, right.

 

Scott Galloway

And my feeling is, and conservatives will hate this, I think we should have $25 an hour federally mandated minimum wage. And I think there should be certain exceptions. If you live in Alabama, your minimum wage should be maybe some sort of algorithm of if you're going to expect someone to work 40 or 50 hours a week, they can't live in poverty. And in this region to be above the poverty line, you need to make $19 an hour.

 

Scott Galloway

In New York, it would be at least 23 or 25. And you would see Walmart stock get cut in half, McDonald's stock get cut in half, and it would be worth it. I think that America's brand or our culture is about a few things. I think we're generous people. I think we're courageous. I think we're willing to deliver violence anywhere in the world to protect our interests.

 

Scott Galloway

We're creative. But at the end of the day, or one of the courses, I think we work. At the same time, I think you have to always ensure there's a certain level of dignity in that. And I think unions have failed.

 

Scott Galloway

I think they're a failed construct. And 39 of the 40 western nations that have union unions, they've lost. They've shed massive membership. It's been cut in half union membership in the US, and they've been the perfect enemy for corporations because they're generally lame, corrupt, disorganized, inefficient.

 

Scott Galloway

And the media will get all hopped up because one Starbucks in Wausau, Wisconsin gets unionized. But I can almost guarantee you over any extended period of time, they lose membership. I like the idea, dignity of work, a unified body to negotiate with management who is more sophisticated, has more money to hire advisors PR campaigns, I think there should be one union. I think it should be the federal government.

 

Scott Galloway

And I think if you look at what would happen if we took minimum wage to where productivity would've taken it from the '70s, if people at low skilled or medium skilled had been able to just kept pace with the growth of the economy, I look at what would that do for obesity? What would that do for divorce rates?

 

Scott Galloway

Divorce rates are directly correlated to economic strain in a household. What would that do for opioid addiction? And there's no free lunch. A lot of taco trucks would go out of business. A lot of businesses are dependent upon $9 an hour wages. But I think if you look at food insecurity and homes, just think the benefits of immediately leveling up people who don't have a lot of skills or live in areas where there aren't high paying jobs, I think you pay a cost for it.

 

Scott Galloway

I think a lot of small businesses would go out of business, but what we've seen is in the states that have increased minimum wage, the economy unemployment's actually grown because the wonderful thing about lower and middle income people is you give them another thousand bucks, they spend it all. They recirculated it back into the economy.

 

Scott Galloway

So, there's a limit. I'm not saying 50 bucks an hour. There's a limit. At some point, you would wipe out too many small businesses, but we have gotten so far out of whack that I do think somewhere between 20 and 25 bucks an hour probably makes sense.

Gene Marks

Do you think it's a national decision or a more localized decision? Do you think that the small business in Kentucky should be paying the same minimum wage as their counterparts, say, in Los Angeles?

 

Scott Galloway

Well, ideally, it's a local decision, but it just doesn't happen that way. What I would suggest is, so the answer is it local or federal? I think the answer is yes. And that is, I think, the minimum wage, it says, "The minimum wage in any district is an algorithm that says if you work 40 hours a week, you're not going to live in poverty."

 

Gene Marks

Right.

 

Scott Galloway

And that might be 26 bucks an hour in Brooklyn, and it might be 16 in Tuscaloosa. So I think you do have to adjust for the economic realities. There are some places where there's an Amazon factory warehouse where if you make 18 bucks an hour and your husband works there and he makes 18 bucks an hour, you can string together a decent lifestyle on that.

 

Scott Galloway

So, I'm not saying go in and force it to go to 25 bucks and then Amazon thinks, "Well, why the hell are we in Alabama? Let's get out of here." But I do think that dignity and work is really important in the United States. And I think that that poverty, the working poor, I think, that correlation with diabetes, bad health outcomes, ultimately things that end up costing taxpayers in the form of incarceration.

 

Scott Galloway

Divorce is economically expensive for Americans because you end up with single family households, and kids just don't do nearly as well in single parent households. Dan Quayle was right. You do need two parents where he was wrong as it doesn't matter if it's two men or two women.

 

Scott Galloway

What's interesting, and I'm going a little bit off script here, is that girls in single parent homes actually have similar outcomes, it's boys.

 

Gene Marks

Interesting.

 

Scott Galloway

They come off the rails. It ends up the young men or boys are physically stronger and emotionally and mentally weaker than their female counterparts. So I think that the massive number of unions are a total failure.

 

Scott Galloway

I've been on a lot of corporate boards. The union people come in, and these are really liberal companies. And we tear them limb from limb, slowly but surely methodically. And we all hope that... They have failed the middle class. They worked really well. World War II to the '80s, they no longer work.

 

Scott Galloway

I'd like to see the federal government step in because for two people to be working their asses off 40 or 50 hours a week and be living in poverty, that's just inexcusable for me, in the wealthiest nation in the world, and we can absolutely afford it.

Gene Marks

Scott, we only have a few minutes left. Obviously, just scratch the surface of what's in this book, and your responses are fascinating. So for all of you guys who will be buying this book, Scott wraps things up with things that we must do. And this is Scott's thoughts on policy changes that need to be enacted to make a better America, if I'm defining that right or describing that right, Scott.

 

Gene Marks

So, let me just pick up one of those things because, to me, it's so controversial. And you just pissed off the left before with your comments on unionization and females learning better at home than males.

 

Gene Marks

But on the right-hand side, I'll give you a chance to piss off the right of center people. One of the things that you say we must do would be to enact a one-time wealth tax. So hugely controversial issue. And let me just ask you, what do you mean by that? Why do you think that that's important to do? How would you implement something like that?

 

Scott Galloway

I'm not sure it works since I wrote it. I've done more research on it. And the one time the place they tried to do it in France, the wealthiest man in Europe, moved to Belgium, because the top 1% are the most mobile people in the world.

 

Scott Galloway

So, I want to be clear. I get it wrong all the time. A one-time wealth tax, the more I learn about it, I'm not sure it works. What I do think is that you should eliminate capital gains. I'm a fan of Reagan. I think we should have one form of income.

 

Gene Marks

Income.

 

Scott Galloway

Yeah. I don't understand why the income someone earns from their sweat is not as noble as the income that money earns.

 

Gene Marks

Right.

 

Scott Galloway

I don't think there's any excuse for it. You have income from your investments. You have income... I mean, I understand it effectively. This is what has gone on. Old people vote. Old people have money. People who vote and people have money have literally overrun Washington. The Demo and democracy is working too well, if you think of money as voting power. And old people, they vote.

 

Scott Galloway

The result is the following. We have taken our economy, and we have totally tilted it towards reallocating trillions of dollars from people under the age of 40 to people over the age of 40. Well, a 70-year-old now on average is 72% wealthier than he was 40 years ago.

 

Scott Galloway

A person under the age of 40 is on average, 24% less wealthy than she was 40 years ago. And just a couple examples of how that's happened is the two biggest tax deductions are capital gains. Why when I sell a stock... I get most of my money from investments now because I'm old and I'm wealthy. I pay 22.8. Young people get the majority of their income from current income, which is 37 or 38% at the highest level.

 

Scott Galloway

Old people own stocks. Young people own their time and work. The second biggest stocks deduction, mortgage interest. Who owns homes? Old wealthy people like me. Who rents? Young people trying to get ahead in those. So, we re-allocate a trillion and a half dollars in wealth from people who are young and working age to people in Social Security. The wealthiest generation in the history of the planet is getting a trillion and a half dollars reallocated from young people to them. It just makes no sense. If you look at our tax code, almost everything says, "How do we take money out of younger pockets and put it into older pockets?"

 

Scott Galloway

So, the one-time wealth tax, I'm a big fan of billionaires. I think we need them. I aspire to be one. I think capitalism taps into people's self-interest. I think we need billionaires. Should three people in America have the aggregate wealth of the bottom half of America? Should my tax rate plummet to 16 or 17% once I get above a certain income level?

 

Scott Galloway

It just feels as if our tax policy has become regressive. And the top 10%... or excuse me, really the top 1% are not, for lack of a better term, paying their fair share. So probably rather than a wealth tax and one-time wealth tax, we should just eliminate certain tax deductions. I mean, I could go on. I'm doing opportunity zones this year. That's just a giveaway to the rich.

Gene Marks

It is.

Scott Galloway

It's just a giveaway. The bottom line, thanks very much, I'll take it. And I take advantage of all these things because I'm not going to disarm unilaterally. And whenever I get on a show and some kind of tax guy says to me, "Well Scott, just send a check to the government." Come on, boss. Come on. I'm going to take advantage of it. Just like every prisoners of war's obligation is to try and escape. Every person's obligation is to legally pay as little taxes as possible.

 

Scott Galloway

Why on earth is my Social Security tax capped at 150 or $160,000? What's the logic there? Poor middle class earners pay 6%. I pay 0.6%. Oh, give me the logic. I shouldn't have to support seniors. I don't need to live in a society where there's no senior poverty. So if you really look at the major tax shifts over the last 50 years when... I'm really on a rant now, Gene, but I think the greatest innovation in history, I think, is the American middle class.

 

Scott Galloway

They pay the majority of taxes. Show me a Nobel Prize winner, someone who wins the Pulitzer, someone who is a general in the army, someone who starts a great nonprofit, someone who starts an amazing company, 80, 90% of the time they come out of the middle class of America.

 

Scott Galloway

The middle class of America has produced more righteousness, more economic opportunity than any... The ultimate innovation isn't the iPhone. It's not the microchip. It's the American middle class. And we like to think that it just happened on its own. It didn't. It happened when a bunch of men came back from World War II, and we made a staggering investment in them in the form of subsidized housing and free education. And we leveled them up. And amongst other things, we made them really attractive to women so they could form households and have a shit ton of kids.

 

Scott Galloway

And we paid them really well because we had made such an investment in manufacturing technology that they had really, really good jobs. If you don't maintain that innovation, you end up with a society that's not nearly as great. Show me how a middle class is doing, I'll show you how the nation is doing. What do you know? China's brought 500 million people into the middle class the last 40 years. We have shed 10 million people. Relatively speaking, who's done better from where they were 40 years ago? The life expectancy in China's gone from 47 to 77. And the United States' life expectancy has declined four out of the last five years.

 

Scott Galloway

If I were to come up with one lesson, the American middle class, there's nothing like it. It's the greatest source of prosperity and good in history, and it's worth investing in. And the middle class, we made massive investments, a $500-billion transfer or National Highway Infrastructure Act. And also, the top tax rate during Eisenhower was 92%. Should it be 92% now? No. That's too high. I think once you get above 50 and you feel like you're working for the government, that probably disincentivizes you.

 

Scott Galloway

But should it be 17? Should it be nine for billionaires? So it feels like it's really swung way too far away from the middle class and towards really wealthy people in corporations. It strikes me that if we have corporations constantly moving overseas and now 55% of... I think all corporate taxes are taxed offshore.

 

Gene Marks

Right.

 

Scott Galloway

Who's going to pay... I'm not even talking about the liberal program. I'm not even going to talk about whatever you want to... food stamps. Who's going to pay for our Navy? At some point, we got to pay for this stuff, and we can't just keep putting it on our kids and our grandkids' credit card.

 

Scott Galloway

At some point, we got to pay for it. So it's all a long-winded way of saying, "I'm not sure a one-time wealth tax works. I recognize that now." But the song remains the same. And that is, it's America's supposed to have, most Americans agree, we should have a progressive tax structure. It's progressive all the way up until about the 99th percentile, and then it plummets. And more and more of our income is being crowded into that 1% that's paying a lower tax rate, which will make the middle class unsustainable.

 

Scott Galloway

And you see it in weird ways. When I applied to UCLA, the acceptance rate was 76%. Now, it's 9%. And if you're from the top 1% income-earning households, your kid is 77 times more likely to go to an elite university than if you're from the bottom 99. Is that the world we want? We seem to have fallen out of love with the middle class, and we seem to have this idolatry of the top 1%. And I think that America's not that. That's the Hunger Games. We need to go back to where we were and fall back in love with unremarkable middle class kids.

 

Gene Marks

Jesus, Scott, you're on a roll. That's all I can say.

 

Scott Galloway

It's the math. It's the math, Gene.

 

Gene Marks

Hey, great points of view, great insights. The book is called Adrift: America in 100 Charts. I've been speaking to Scott Galloway. Scott, how can we reach you, find out more about you, subscribe to you?

 

Scott Galloway

That's a generous question. I'm @profgalloway on Twitter. I have a newsletter that comes out once a week called No Mercy / No Malice. I have two podcasts, The Prof G Pod and Pivot. I'm everywhere. To resist is futile. I'm like AOL in the '90s. Like you open your cereal box, and you see a disc in there and think, "How the hell did this get in there?"

 

Gene Marks

I'm about to say, if I see a CD in the mail from you-

 

Scott Galloway

Yeah. That's it. That's [inaudible 00:37:12].

 

Gene Marks

... I'll know you certainly are everywhere. Hey, thanks a lot for joining me. It was a great conversation. I'd love to speak again. Again, we've scratched the surface of the type of topics I want to talk about with you, but I do appreciate your insights, and I know our audience will as well.

 

Gene Marks

Do you have a topic or a guest that you would like to hear on THRIVE? Please let us know. Visit payx.me/thrivetopics, and send us your ideas or matters of interest. Also, if your business is looking to simplify your HR, payroll, benefits, or insurance services, see how Paychex can help. Visit the resource hub at paychex.com/worx. That's W-O-R-X. Paychex can help manage those complexities while you focus on all the ways you want your business to thrive. I'm your host, Gene Marks, and thanks for joining us. Till next time, take care.

 

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