1244: Investigating Big Tech Companies & Andrew Yang, Presidential Candidate on Universal Basic Income, Smart People Should Build Things & War on Normal People

2012 is when we did our first purchase. I think 2011 is when we started, you know, attending meetings. Probably 2010 is when I started listening to podcasts. My husband was a little ahead of me, so he was probably, you know.

Late 2009, early 2010, and, you know.

We just obsessively listened to. I think you were on episode 300 at that time, though.

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Welcome to episode 1244. 1244. And today our guest will be yet another of many presidential candidates. And when I say presidential candidate, I don't just mean any presidential candidate. I mean serious, very legitimate presidential candidates. Of course, we've had Ben Carson on the show, Pat Buchanan, Ron Paul, and today we have Andrew Yang. We've had some other presidential candidates as well on the show. Forgive me for not mentioning them all. And I'm sure eventually one of these will be president. So we'll see. Anyway, we'll get to Andrew Yang in just a moment. But first, I wanted to celebrate with you. Yes, let's celebrate. We have something to celebrate. Yay. What are we celebrating? We are celebrating that another of my wishes. I don't know, maybe this is a prediction. It's probably a prediction, but it's certainly been a dream of mine has come true. And that is what you heard about in the news just yesterday. The Department of Justice is now investigating the big tech companies for the absolute, disgusting, abusive, oppressive, anti competitive tactics they have been using to censor people, to keep competitors out of the marketplace and to do all the stuff that they've been doing, all the abuses that they have been committing, really just terrible behavior on the part of these big companies. Now listen, we're all customers of these big companies. We have listeners that work for these big companies. I love their innovation. Don't get me wrong, I am a big fan of these companies. In many ways. However, as who was it Voltaire said, Power corrupts and absolute power corrupts absolutely. I may be misattributing that, but. But I think I have the quote right. And that's what's happened. These companies have become bullies and it is time of the things that I have recommended for many years. You've heard me talking about this for years. Happens. They need to be either busted up under antitrust laws, they need to be regulated like utilities as common carriers so that they cannot censor people anymore, or they need to make their algorithms public so people can see what they're doing behind the scenes. So we have a step in that direction, a serious step in that direction in the news. So I think that's great news. And do not misunderstand me if you are new to the show. I am an ardent capitalist. Okay. In fact, I'm not a fan of what our guest is about to talk about today, which is universal basic income. So we'll get into that. But hey, I put lots of opposing viewpoints on the show. As you know, if you're a regular listener, you've heard that for many, many years. So celebrate with me on the Department of Justice. The government doing their job for a change. It's about this is long overdue and hopefully we'll see a more competitive marketplace and a different world in the next few years here. We shall see how it turns out. But let's hope for the best. Okay, without further ado, let's get to our guest presidential candidate, Andrew Yang. It's my pleasure to welcome Andrew Yang. Andrew is a Democratic candidate for President in 2020. He is founder of Venture for America and former CEO of Manhattan Prep, President Ambassador for Global Entrepreneurship under Obama's administration. He's author of the best selling book Smart People Should Build Things and the new book the War on Normal People. The Truth About America's Disappearing Jobs and why Universal Basic Income, otherwise known as ubi, is our future. Andrew, welcome. How are you?

Oh, thanks for having me. It's great to be here.

Yeah, it's really good to have you on. You are a Democratic candidate and it's kind of interesting just by the titles of your books and so forth, but I'm anxious to dig in this universal basic income concept. I am actually quite surprised about it. I don't think I understand it very well because some of my most staunch libertarian friends are actually in favor of it and just my general maybe old fashioned thinking. So please help me figure it out is kind of like I can't believe they're in favor of that kind of thing. That just feels like the welfare state to me. But it is different, isn't it? Tell us more.

Well, it's not surprising to me at all because there's actually a very rich libertarian heritage behind universal basic income. Milton Friedman was a huge proponent of it. So was Hayek, who's another prominent economist.

Yeah, you get, you get F.A. hayek and Milton Friedman. I'm amazed. Why would they be in favor of it? But. Okay, go ahead.

If you think about the substance of it, libertarianism is often about individual autonomy and freedom. And there's no better way to have people experience autonomy and freedom than to have a certain amount of money imbued into the fabric of citizenship. So if libertarians, I believe, often dislike bureaucracies and programs and paternalistic allocations of resources where they say, hey, we'll give you money, but only for this, and you have to do this and you have to do that. Whereas universal basic income is money, no strings attached. And so it's not a surprise to me that your libertarian friends like it. It actually passed the House of Representatives under President Richard Nixon and has been in effect in Alaska for 36 years, which is a very deep red state, conservative state, and it was passed under a conservative governor as the petroleum dividend.

Right, but the petroleum dividend is kind of a different thing. Isn't that more of almost an incentive to get people to move to Alaska because it's oil rich or.

No, no. If you look at the history behind it, the underpinnings are exactly the same. Where Governor Hammond said, let's keep money out of the hands of government, where they're just going to build a giant program out of it, let's instead give the money directly back to the Alaskan citizens.

I like that.

Every Alaskan gets between one and two thousand dollars a year, no questions asked, free and clear to do whatever they want with it.

Right, right. Okay. So what did you mean about Nixon, though? I mean, we didn't have UBI under Nixon, did we?

We didn't because it stalled in the Senate. But Richard Nixon was hugely for it at the time. It was mainstream economic and political wisdom where 1,000 economists signed a letter saying that universal basic income or an income floor would be great for the economy and for society. So again, there's a very deep conservative and libertarian heritage around universal basic income.

Okay, well, where does the money come from? Taxes?

It comes from different places depending upon how you plan to fund it. The way I plan to fund it as I detail in my book the war on Normal People is by implementing a value added tax or a consumption tax. Because right now we in America are in a bit of a trap where we have an income tax regime, but more and more work is going to be done by software, AI machines, and our current income tax setup does not harvest that revenue at all. Because the main beneficiaries of automation are global technology companies that are expert at not paying a whole lot of tax. So what we need to do is we need to move to and implement a value added tax the same way as every other industrialized country has it, so that a company like Amazon that can say, hey, we don't have maybe profits in particular quarters, we don't pay any income tax. Under a value added tax, there'd be no avoiding society receiving some of the gains from all the work that they do. So the way I pay for it would be by implementing a value added tax at half the European level. And because our economy is so large and robust, that would be enough to pay for the majority of universal basic income.

So would income tax go away if we had a VAT tax, then?

Well, I think over time that is the way to go because it really doesn't make any sense to tax labor over time. You know, you don't want to tax something that you're trying to encourage necessarily. So I think in an ideal world.

Well, that's. It's refreshing to hear that from a. Well, from a Democrat. No offense, but I love it. That's good. You don't want to tax something you want to encourage. I like that. Very good. Okay.

Common sense, but thank you for saying.

I couldn't agree more, more. But it doesn't work out that way in the political landscape too much, maybe. Can you dive in? Just take a little dive. Just really quick and explain the VAT tax concept and why it's better. I mean, I know you alluded to that, but I just want to give you a chance to. You know, Americans aren't used to thinking that Europeans totally think that way, but tell us more.

Sure. So a value added tax is a consumption tax that gets paid by companies at every stage of production. So that every time that the simplest way to think about it is, let's say like I build a car, every time I get a part, I'm adding value to this car. And then like I pay a VAT on each component, and then when I sell it to the end consumer, the consumer typically pays the same percentage. So the great thing about a VAT is that you can control it because you can control your consumption. So if you consume more than you pay more in taxes, and that's the way it ought to be in the sense that the people who consume the most and benefiting the most from society's infrastructure. And so instead of taxing people based upon wealth and income, it makes sense to tax on consumption. And also it's impossible for very large companies to game it in the same way that they currently game income taxes by offshoring it to Ireland or what have you.

Right, right. Yeah. Well, that whole double Irish twist is a complete scam. Americans are getting totally ripped off by these multination corporations. That's just pathetic. But you know, that's another discussion probably. And maybe you can come back and talk to us about that because I just. That's super annoying.

It is like, I agree with you. They're like they're trying to maximize shareholder value, which is their mission. But it's not very helpful.

No, it's, it's not. It's, it's really a scam. It's a benefits the wealthy and everybody else, you know, doesn't get to participate. It's, it's a scam. Okay, so let's do VAT versus sales tax. There is a difference. Okay. Because the VAT is charged a along the way. The sales tax is only charged by the end consumer. Right. So would it be fair to say that a VAT is a sales tax all along the way? Like multiple sales taxes?

Yeah, I mean, that's a simpler way to think about it. Sure. In essence, that is the way it shakes out in most situations.

Okay, so how do you decide though who gets hit with the vat? I mean, wouldn't it encourage, I mean, the national sales tax idea? I thought, well, that's a good idea, I guess. But then I think, well, isn't it going to just encourage hoarding and people won't consume? And when you've got an economy built on 72% of the economy is consumption. Right. Won't it just encourage people to just hoard money and save it? God forbid? I mean, savings isn't bad, but.

Well, the thing you have to remember is that we're taking every dollar of the vent and putting it in the hands of American consumers in the form of a universal basic income where every American adult is getting a cash grant of $1,000 per month. And so the Roosevelt Institute did a study as to how this would impact the economy. And not rather than consume less, people would consume a lot more. Because most Americans Right now are quite scrapped.

Right? They might have more.

Yeah, yeah. 59% of Americans can't pay an unexpected $500 bill right now. So you can imagine if you put cash in their hands, how much of it's going to be spent. It's going to be spent locally in Main street businesses throughout the economy. According to the Roosevelt Institute, this would create 4.6 million new jobs and grow the economy by two and a half trillion. So even if you have slightly higher prices and you're putting buying power into the hands of the American consumer in a way, that's going to much more than counterbalance that.

All right, so let's take. So people can kind of understand where this is coming from. This is part of your platform, and that's great. But what would. Let's take three people that we all know and love or hate in the political sphere, and let me ask you, what do you think? And maybe you have to speculate a little bit. What do you think they would think of your VAT program? What would Hillary Clinton think? What would Bernie Sanders think? What would Donald Trump think?

I hesitate to guess what each of them would think, but I do want to suggest that we are going through an enormous economic and technological transition right now. And the reason why I'm so passionate about both the freedom dividend, which is what I call universal basic income, and movement to VAT is that we are in the process of automating away the biggest labor categories in the United States right now.

I was definitely going to get to that. I think that is potentially, in my eyes, the biggest and best argument for a UBI Universal basic income. And that was the angle from which I thought a lot of the libertarians were coming, is that, look, we're not going to have a choice because automation is going to take away the transportation jobs, which is arguably the biggest job category worldwide. So that's going to be automated away in the not too distant future. A lot of other things will be. And you know, Andrew, I really struggle with this automation question because the human mind is limitless. The human desire for more stuff and more services is also limitless. It's just you can't placate it ever. Right. Because think of us back 200 years ago and the minor insignificant wants and needs we had then versus what we consider a need or certainly a want today. Right. Our expectations have just risen dramatically, of course. So there's just no end to it. And when you look at automation, it's always ultimately worked out. It's never been this horrific Job killer that everybody was worried about at the time. You know, when Elias Howe invented the sewing machine, women were asking, what are they going to do with all their free time? What am I going to do with all my free time? Right. I mean, think how ridiculous that sounds today. Right? But they said that back then.

What I would suggest is that we have to get out of the realm of abstraction and into the realm of concrete and direct.

Go for it.

So to your earlier comment, there are three and a half million truck drivers in the United States. 94% male, average age 49, average education, high school or one year of college. The financial incentives to automate truck driving are $168 billion per year in savings, not just from labor, but equipment utilization, fuel efficiencies, fewer accidents, etc. So the smartest people in the country are working on it right now. They're making progress every day. And so you can say, hey, no limit to human ingenuity, etc. But if you're standing in front of like half a million truck drivers who've been newly displaced, who are 50 years old and are accustomed to making between 40 and $50,000, and now who knows what their next job is going to look like because it's not even going to be possible to go work in retail because the retail sector is shrinking where 30% of malls are going to close in the next four years. So if you were to say abstractions to these newly displaced truck drivers, they'd look at you like you were an alien, which is going to be the reality in many communities. The thing that tipped me over the edge is when I did research for my book the War on Normal People. The simple fact is, just look at what happened to the manufacturing workers in the Midwest after 5 million of them lost their jobs over the last 15 years. They did not relocate. They did not magically find new jobs. They did not get retrained. 40% of them left the workforce entirely and went on disability. Suicide rates spiked, many of them.

Pretty scary stuff.

Yeah, yeah. Like really just epic social dysfunction and despair where our life expectancy is declining as a society for the last two years because of just an increase in deaths of despair. So when you start looking at the data, which is what in my mind, any rational person should do, then you see very clearly the pattern that's going to play out for truck drivers, retail workers, cashiers, fast food workers, call center workers. We're talking about the biggest labor categories in the US and people are not moving for new opportunities. They're staying where they are. And disintegrating.

Yeah, no, I mean, I see it. It scares me. Okay, so give all of these people $1,000 a month or do you give it to just everybody, even the millionaires and billionaires? Does Everybody just get 1,000amonth?

Yeah, everybody gets it. Okay.

And it comes from the VAT tax and the income tax ultimately goes away. Is the dream, right?

Yes, that would be the dream. It's going to take a long time to get there because obviously we have a very built up system.

There's a lot of iron triangles in there. Yeah. A lot of special interests that are going to protect their turf for sure. Yeah, absolutely. Okay, so talk more about the war on normal people, if you would. To look at the title of the book, it almost seems like a cultural title, but it's not, Right? It's just jobs. Middle class jobs, right?

Yes. I mean, to me the cultural stuff in my opinion is a bit of a distraction. The reason why people are angry and upset is that their economic security has disappeared and their paths forward for them and their children have disappeared. And that's where the despair and anger is coming from. And it's completely rational in my opinion. I think all of the indignance is just like doing everyone a disservice. We are in the middle of the greatest technological and economic transition in the history of the world and we're dealing with it by pretending it's not happening. Which is, in my opinion, an incredibly terrible way to deal with a massive problem, which is why I'm running for president, is to wake people up and say, hey, the problem is that we automated away millions of manufacturing jobs. We're about to do the same thing to the retail jobs and the transportation jobs and the rest of it. And if we don't get our acts together by the time we get to inning six or seven, there's going to be no turning back. You can't reconstitute societies and communities and civilization if it disintegrates. I mean, you know, we have to preempt the great trucker riots of 2025 and we do not have that much time.

Right. Well, I was just going to ask you to kind of outline that for us, if you would. Of course, nobody knows for sure, but what is your vision of the timeline? Is it that the truckers and the Uber drivers and the taxi drivers and maybe the postal and the UPS and a lot of these, will they be automated out of a job by so 2025 is that it's seven years away, you think or what's the timeline here?

Well, I was in Silicon Valley and I talked to an official at one of the very large ride sharing companies and he told me that their internal projections are that half of their rides will be given by an autonomous vehicle in 2022. Wow.

It's coming fast, folks. It is coming fast. Wow.

Yes. That's why we need to get our acts together and that's why I'm running for president, so that we can come together and come up with some real solutions. Because we're talking about society level problems and it's something that no municipality or state can address. This needs to be a national level solution.

Yeah. What is the too late part of it? You mentioned reconstituting and so forth. So say we have the great trucker riots of 2025, as you put it. We can't just decide after the fact that hey, look at these people and this is terrible what's happened to them and society's gotta pitch in for the good of everybody, not just them, and do a ubi. Why can't you do it as a reactive thing versus a proactive thing?

The issue is that I always try and think about this on like an individual and family level where if you look at Americans on disability right now, there are more Americans on disability than there are that work in the construction industry right now.

Yeah. Somehow everybody became disabled. I just failed to understand how that happened. But apparently it's a.

Well, it's all tied together. They're all related. So the churn rate from disability or the proportion of people that get off of disability, zero. Because no one's ever going to jeopardize a lifetime of benefits for a tenuous part time job that could disappear. And then after that job disappears, then you don't get your benefits because you've proven yourself to be able bodied. Right. So the point I'm making is that after someone gets to a point where they are not functioning at a high level or not viable, like they become dysfunctional and it's likely that they stay that way. And so then if you show up and say, hey, it's time to become functional, much, much harder, it's much easier to keep people and communities functional than it is to wait for someone to become dysfunctional and then expect them to return to viability, that's just much, much harder.

I agree.

Especially at scale.

Yeah, very, very good point. But what do you say to all the criticism? Would say, you know, isn't this just welfare? Isn't it just another form of welfare I mean, you addressed that earlier, but I don't know, it still kind of reeks of that a little bit, doesn't it? Isn't that a fair statement?

Well, it depends upon your framing. I mean, to me it doesn't, because to me, it's a dividend. We're the owners and shareholders of this society, the richest, most advanced society in the history of the world. I've never seen anyone get upset when shareholders of a company declare a dividend. Everyone's like, oh, that's great. Great management, sure. Like we're in the same place. And we need to let go of this fixation on institutions of the past somehow having various connotations associated with it. We are the owners and shareholders of the stakeholders of the greatest society in the history of the world. We declare ourselves a dividend and we should do what we want with it, which hopefully means starting new businesses, building organizations and institutions in our communities that make our lives better. The issue is really what people surmise, like others will do. But the data is incredibly encouraging where people use cash grants in this sort of situation to improve their lives the vast majority of the time.

Okay, well, I couldn't agree with you more, Andrew. In concept, I absolutely agree. Hey, look, we're the owners. We deserve a dividend. But if you look at the deficit and the debt, there's no money to pay a dividend. Not right now. I mean, we've got, you know, if this were a corporation, it's a mess, isn't it? Or no.

So this is a great way to look at it. If we were a corporation, we would see, it's like how this corporation is doing 19 trillion in revenue, up 4 trillion in the last 10 years alone. We can easily afford this. Now you can look at and say, hey, this corporation's been badly mismanaged for several decades, that's for sure, and has kicked all these cans down the road and generally let a lot of things. And all of that is completely accurate. But past mismanagement does not mean that we do not have the means and we do not have the resources because we 100% do. Again, 19 trillion, up 4 trillion in the last 10 years. We can easily afford $1,000 ahead if we decided that's what we wanted.

Okay, so at first we would just add to the deficit and the debt, probably, right?

No, I believe with a 10% VAT, this thing is neutral. And if you look at the numbers, so the headline number is 2 trillion a year, but we're already spending between 5 and 600 billion in welfare benefits and disability and everything else which this replaces. Because it's not like if you have benefits now, you get another thousand dollars. It's like opt in. So it ends up defraying the cost. 10% VAT gets you between 7 and 800 billion. So now you're at 1.3 to 1.4 trillion. We get 25% back of any economic growth because that's the revenue to GDP ratio. So if the economy grows by 2 trillion, we get another 500 billion. And then we're going to save tens of billions on health care because instead of people showing up to the ER as their primary care, they'll have enough resources so they'll do a little better than that. Incarceration, homelessness services, mental health, like all of these things that we currently spend a trillion dollars on, we're going to spend a bit less.

Right?

So this thing ends up being neutral. Like we can't nickel and dime our way to prosperity on this one.

Right?

We'll see that by spending the money, we'll end up getting it back many times over. By making people, we're going to make the labor markets much more dynamic too. A lot of Americans are stuck in place because they don't have the means to move. They're underwater on mortgages, et cetera, et cetera. With this, they'll be able to move for new opportunities and will make the labor market much more dynamic.

Okay, I get all that and I get what you're saying. However, wouldn't the cost of every product and service increase by at least 10%? I mean, you know, if there's a VAT or that 10% is actually being charged multiple times along the supply chain. Right? So wouldn't it make the cost?

It ends up to a grand total of 10% per final. Good. Okay, but, but if you look at the prices that are driving everyone nuts right now, a lot of things are getting cheaper. Everything that the markets work on and technology work on, so that's clothing, Entertainment, consumer goods, TVs, etc. Much, much better and cheaper. Think about the things that are infuriating us all and just keep on going up and up in price. What are they? Tuition, health care, housing, education, Health care.

Right, sure.

And why is that? It's because we don't have true markets in any of those three realms where education is subsidized by the government, college is just total scam, jacking up their prices. And just like families keep paying more and more health care, you know what.

We should mention, because a Lot of our listeners are real estate investors. And yes, education is subsidized by the government through Sallie Mae. So the worst mistake ever to increase the cost of education was to offer these government insured student loans. That was a mess. And it's still a mess. It's just ruined it for people. Real estate is subsidized through Fannie Mae and Freddie Mac. So that's another government subsidy. The price of real estate would be lower if they went away. But then you could also argue that, hey, you know, there might be less development because a lot of, a lot of that happens on the supply ends, but I think it'd still be lower overall. And so you've got all these government programs in there that are distorting the free market, you know, so you're right. Yes. Yeah.

So that's what's causing inflation, is that we have these non functioning, protected giant marketplaces. Anything where technology and the markets have been allowed to do their work have obviously been getting cheaper over time.

Absolutely. Interesting viewpoint. I'm really glad you came on to talk about this. I got to ask you, what do you think, if anything, about cryptocurrencies and what's going on there? Kind of a crazy world.

It is a crazy world. I mean, it's like a lot of other trends. Where is there a solid new underlying technology? Yes. Has it gotten overblown and probably ahead of itself? Yes. Will there be a retrenchment? Yes. Will, like new things develop after the retrenchment? Yes. One thing I do want to convey to your listeners, if what I've described is of interest to you, please do visit yang2020.com check out more information about my campaign. But we have to get ahead of this and fix the economy before it's too late because we are heading towards impending disaster. And if you look at the numbers, you can see all of the signs are there. So if you agree that we need to take dramatic steps to alter our economy and prepare it for the challenges of 2020, then please do join me at yang2020.com and check out the book the War on Normal People for all the facts and figures because I'm a very rational, evidence based guy.

Yeah, you sure are. And I really appreciate you coming on and sharing some of this stuff, Andrew. So thank you for that. You know, this has been an interesting discussion, so thanks for sharing it.

No problem. My pleasure. Keep up the awesome work. Let's go create some wealth.

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