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Today's number 7 billion. That's how much us airlines collected and baggage fees last year. Trusually, last week I was arrested at an airport. I guess you're not supposed to yell shotgun before getting on a plane.
That was the best I could come up with. That's the best. You know, I have not true story. I have not checked in luggage in I think 30 years. I'm all care. I will go around the world for a month and now this is because this is because you fly private. That's very different as a distinction here. No, even before private. Now that I fly private, I have like,
Sherpas, I'm literally like the queen of fucking England blowing up to the plane with cases of shit. But if I'm flying commercial, daddy doesn't check luggage. That's impressive. And I'm an outstanding packer. I'm literally like, I have my remote thing, a little carry on and I got my podcast case. That's one of my few competences. This is on the very side.
Where do you put the podcast on? I've been struggling with that recently. I know that I'm a famous podcast. Well Drew or tech guy is a genius. He gave me this little bag or this little text. I really cute little green or gray case. And it's got everything in there and it goes in my, my little duffel. It's outstanding. You're bringing it to Greece next week, right?
I am and I'm going to be on a boat and I keep emailing our travel agents saying, do we have Starlink, which is kind of a business story? I think that's going to be the technology of 2025. Which we'll discuss in this episode. That's right. We will. But I take my pod stuff literally everywhere. Where in Greece? We take off from Bojram and then we go to all these different islands.
Bojram. Yeah, Bojram and Turkey. Are you going to hit the new Scorpios, though? There's a Scorpios and Bojram. They just open one up. I didn't know that. Yep. As of this year. Yeah, no. I'm likely. That's that plays a little too young for me. It's one year too young. Well, yeah. Now I like to go with this old man and young Russian prostitute. I mean, the one there's people my age. People my jet.
Okay. Anyways, do you know how to tell if a woman's a prostitute, right? How's that? She returns my eye contact. Boom. That means there's money involved. That means that if they don't like look away and fear like, oh my god, he's looking at me. That means pro. That means pro. Or at some point that person worked for me and it's like, oh, maybe I should be nice to him because I need another job.
prostitute. Yeah, a lot of those people out there. One in the same. Anyways, what's going on today? Oh wait, today we're discussing Rivians partnership with Volkswagen. People's car in German. And JP Morgan's tax strategy business. Here at the news is Proffji analyst Ed Ellison. Ed, what is the good word?
Just want to remind everyone to follow Proffji markets wherever you get your podcasts. If you're still listening to us on the Proffji pod feed, you're missing out on an additional episode every week last week. We spoke with Ryan holiday about how stoses and makes better investors. The week before we spoke with Ray Dalio. And we've got some awesome guests on the slate. We've got us with the murder and coming up. And also Anthony Scaramucci the mooch. So don't miss it. Go subscribe to Proffji markets. Let's start with a monthly review of market vitals.
The S&P 500 rose nearly 4%. The dollar gained steadily. Bitcoin fell about 8%. And the yield on tenure treasuries dropped as inflation cooled. Shifting to the headlines. YouTube is working on licensing deals with record labels to train an AI song generator on their artists content. YouTube reportedly offered lump sums of cash to Warner, Universal and Sony to encourage artists to consent to the deals after only 10 artists agreed to participate in the test phase for its previous gen AI tool.
The production studio A24 has closed a new funding round led by Thrive Capital that values the company at around $3.5 billion. The investment from Josh Kushner's firm gives A24 evaluation that is 40% higher than its previous funding round, which was two years ago.
And finally, SpaceX is rolling out a mini version of its stalling device for $599. Service for the compact gets will cost consumers an additional $150 a month. SpaceX says it is looking to reduce the price of stalling to make it more accessible to people without an internet connection. Scott your thoughts. YouTube on I think it's really good idea what we're seeing is a lot of content creators are saying Sam Altman distinctive your hush tones and folk concern about the world.
When it's clear LLM's are returning or chat GPT is returning. When you say give me an overview of today's business news and it verbatim lifts two senses from a story in Forbes. There's a problem and Forbes should be compensated. And I think that the kind of worms turned against these guys. And what they're doing here. I think YouTube is doing here as they say. Okay, we have talked a lot about this. AI might offer a great new age of music production.
But if it starts sounding a lot like Michael style and you're not losing your religion, but you're losing your region according to the LLM. They're going to get upset. And so I think them trying to license full libraries of content such that they know anything it spits bag is legit.
I think this just makes a ton of sense and I think it's the right way to build these models because from the get go. These content creators are getting compensated or they sign their rights away to someone who's getting compensated. And it's legal and just some additional context.
Last week Universal Warner and Sony all filed a lawsuit against these two AI companies, this company, UDO and this company, Suno, for using their music to create this AI generator and they're seeking $150,000 per work in French. So when you consider the number of songs that these companies have probably crawled if they win this suit, it could just flat out put these companies out of business.
And these are legit companies. They've raised millions of millions of dollars. So I feel like what we're beginning to see here, you know, that lawsuit in conjunction with YouTube beginning to make a licensing deal. It does feel like the precedent is being set. And that is if you're an AI company and you want to build a generative model, there's basically no question now you're going to have to pay for it.
You can't just build these things for free. And we should remember that at one point that there was debate over that question. Like, you know, the argument from a lot of these AI guys was, oh, well, we're just we're crawling the internet as the same way that anyone else would, you know, we don't have to pay to use your content. But I think what we're beginning to see as you talk about a lot, I feel like the algebra of deterrence here is taking effect.
It seems as if these companies don't want to gamble with these copyright lawsuits. They'd rather just comply. And I think that that's a win for publishers. It's a win for creators. It's a win for journalists. All these different creators. And if they can negotiate some good deals here, this could be this could be good for them. Let's talk about 824. This is Lauren Sanchez and a thong. And instead of Bezos, this is another guy having a midlife crisis.
And instead of Lauren Sanchez, this is a movie and film production company. And the best way to become a millionaire is to get into media when you don't know what you're doing as a billionaire. And I think I knew a guy who ran a huge credit fund and his partner bought a big film studio and he's like, why is he doing this? He's like, he wants to go to the Academy Awards.
I'm like, well, at least that's honest. This generally 824 is an amazing company. They're the they're the best of a sorry lot. This is a shitty business and a guy in venture capital shouldn't be investing in this business in my view. And I think he's made he's probably I met him once I did a meeting with him. He's such an impressive young man Josh Kushner you're talking about. Who's the founder of Thrive capital?
Yeah, Josh. He's an incredibly impressive young man. And my guess is he's made a shit ton of money and he wants to have a good time and he's convinced his limited. So I know what I'm doing. We're going to make money and I'm going to go. You know, to the Academy Awards. I'm going to hang out. I'm going to go to you watch within about six months. He's going to be the can film festival.
And so I just see this again almost every non economic or irrational decision made in corporate America can be reverse engineered to a dude either going through or about to go through a midlife crisis. This is the first evidence of the midlife crisis of this Kushner kid, but he he should not be in this business. This makes no fucking sense. His let me get this is limited partners.
And they think he should invest in software companies or tech companies that have scale instead he's investing in a really cool hot film production company that he's overpaying for would be my guess. And I just this smells to me like okay. Doc increase my testosterone and my Seattle prescription. What do you think?
The thing you have to remember about Josh Kushner ever on says that he's this very low key guy. He lays pretty low. He doesn't he doesn't really like the spotlight. He doesn't like the fame. At the same time he's also married to a victorious secret model. His wife is calling class. So maybe he doesn't like doing interviews. But I can guarantee you he likes actresses models and celebrities. So yeah, I'm with you.
I don't think this was a normal investment. I don't think they care about the returns. This to me is his way of leveling up the friend group from hang out with his brother Jared and kind of all of the lame unfashionable Trumpi people to yeah, the auto caprio. To be quiet now he gets to go hang out in California and I will say he deserves it. I mean he's been incredibly successful investor they've gone from zero to 14 billion dollars in a.
I think around a decade if there's one thing. A good investor deserves it's an invite to after parties for the Oscar so good on him. I agree with his this notion that you said he doesn't like the limelight I'll come up. Marry someone or fall in love with someone doesn't necessarily mean. You like the limelighter you don't like the limelight he stayed out of the way he didn't want to get involved with the Trump administration because you probably said it won't.
The brand of like fascist clown isn't going to age well and so I'm going to create some distance you smart enough to go I'm going to create some distance between me. And the insurrection just that's probably that that brand is probably not going to age well. But I mean at the end of the day you know what kind of person likes models and actresses that school guy man like models and actresses add.
Good for him enjoy it but just be clear the LPs in that fund you may want to skip that fun until they get back to the boring should make him money. Scott there needs to be an academy awards for SAS companies like the adorable bulls or something there needs to be I think it's called can lions actually essentially say that I'm on the board and investor in open web and they hosted a dinner.
And granted they their clients are media companies but I thought it can is I can used to be where they give up awards for you know the best co commercial and now software companies are hosting. Dinner's and Yahoo news core and the telegraph are all showing up for these dinners I thought anyways it's all it's all changed. Anyways what else is next stalling 599 dollars for a mini stalling you can put in your backpack every year we do a prediction stack me a pulse together a deck.
And I roam the planet talking about predictions for 2020 you know name it and some we get rights and we get wrong and every year we predict a technology for the following year that'll be in that news a lot of share of the value I think in 2021 was voice then we said.
Technology for 23 that we're pretty good 22 is a item in 23 we're protected 24 be the year g op 1 it's shaping up and I don't want to commit to this but it's shaping up that I believe the technology 2025 is going to be space access starlink. And I told you I'm going on a boat next week and when something is a big purchase going with the family of the solicit on money and I didn't ask anything about the boat but I called the broker and I had one question does it have starlink.
And that that moment I thought wow I am now making huge purchase considerations based on the technology and I thought okay that means mean so quick lesson right and this is the kind of first construct my brand strategy class all strategy comes down to clearing three hurdles I call the hurdle test the first is is a truly differentiated I guess your product really different is it really.
And that's hard brand is synonymous or shorthand for differentiated the second is okay that differentiation is a relevance or one point the hospital of business was considering calling itself the internet business school that would be highly differentiated yes it would be relevant right does anyone care and differentiation relevance are in constant combat with each other because whereas Ferrari is highly differentiated it's not that relevant very few of us are in the market for a $550,000 electric car
whereas Kleenex is highly relevant we all need it but it's hard to maintain that differentiation so these two things are in combat with each other but say you find something that is truly differentiated and is relevant well Tesla seems to be differentiated and it's relevant people are interested in EV's okay the third hurdle is it sustainable can we own it so back to starlink it's differentiated I mean you get a call on a plane on FaceTime video it's crystal clear is irrelevant
is a relevant oh yeah I mean we're going to try to do these pods next week I need serious broadband highly relevant and then is it differentiated this is why I think this thing is going to be the technology the air 60% of all currently orbiting satellites belong to SpaceX 60 almost two thirds of us it's just crazy
so even if someone says this is an amazing business we got to get into it we're Boeing whoever it is we're Amazon we have deep pockets to figure out a way to get the Falcon X heavy rocket or whatever it is to the launch capacity to get these satellites in the space that is a moat the size of the Amazon anyways this latest version 599 this is a 10x better product at substantially lower price this is just I'm I'm going to do this
I'm intoxicated just thinking about it but I really wish it was you that had come up with this not this fucking weirdo that has 78 children now anyways what did the what did the yacht I tell you he said we have outstanding knows the uproar
that we have outstanding internet I'm like okay what does that mean boss to me that sounds like you won't have it is he's unwilling to tell you is dodging me yeah he's not telling you the world's stolen I mean ghosted he's treating me like every woman I've dated my 20s and 30s no I'd really love to get together but I'm busy
exactly what's happening I'm super busy but I'd love to get together by the way I just want to credit stalling for giving us the story of the year and that is stalling was gifted lost year it was delivered to this Amazonian tribe in Brazil who had never had an in-snack action before one of the last great remaining civilizations without internet within nine months all the girls predicted social media
I quote from signama rubos 73 years old she told the New York Times quote when it arrived everyone was happy but now things have gotten worse young people have gotten lazy because of the internet they're learning the ways of the white people the last great community and we just had to come in there and fuck it all up with a stalling it's it's the story of the year in my view yeah but they're can we're they're connecting the world
yeah we'll be right back off to the break with a look at rivians partnership with Volkswagen support for the show comes from betterment even the most hardcore of us need to kick back and chill every now and then but if you're an investor chill is the last thing you want your money to be doing you want it to be pumping iron and running marathons for you if you want your money performing
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we're back with prof. markets Volkswagen is investing up to $5 billion in EV manufacturer Rivian it's poised to be a mutually beneficial partnership Rivian lost $39,000 per car in the first quarter and could use the cash
it will also be able to leverage the manufacturing might of the second largest car maker in the world I mean while Volkswagen will gain access to Rivian's EV software to help it tap into the electric market shares of Rivian sword more than 50% in authorized trading on news of the partnership
while Volkswagen shares slipped about 3% Scott what are your initial thoughts on this partnership I think this is so interesting the first is it's I think it's a great idea they both bring something to the partnership so the Rivian is a really cool brand it's a really beautifully designed car I imagine us some software and battery technology so they bring some IP call it and some brand equity to Volkswagen who's probably looking to get from letter E to letter H is quickly as possible in EVs
at the same time there's just no getting around it the reason why I still believe Tesla is going to go down 50 70 80% automobile manufacturing is a shitty low margin business of scale emphasis on scale basically what automobile companies do is they come up with one kind of platform and they figure out the tooling and the manufacturing and the assembly line in the factory and it's really expensive it's like a billion plus dollars to create this platform
and then it's about how many cars can you can you push up through that platform so the SUV platform at Volkswagen produces the TORIC which is a Volkswagen branded the Q7 which is Audi branded and the Cyan which is Porsche branded and the reason why Volkswagen works is it can shove through all of this production different brands different finishes different positioning through one SUV platform
and those are the only guys that survived they can really push volume and scale to the platform the beginning of the 20th century there were 100 automobile brands by 1949 basically it was the big three so this is consolidation and I would imagine this is date before we get married if this goes well and they like each other they'll take an increasingly large stake
but the insight and again it goes back to the cushioning thing this is all about a guy in his 50s and the decision she's making right in his 60s I think business is actually older than me which makes me feel pretty good this is an incredibly disciplined operator and business person and I think when Bezos bought the Washington Post I think the newsroom thought we're precious we're doing important work long form journalism someone should fund it just because you know we're so awesome
and I think they were expecting him to fund it indefinitely and just pay for them to play in journalism and I think he said no you guys either figure out a way to make money or we're going to start firing people because he's realized the moment you kind of say to your kids oh you're so cute I'll pay your rent now I'll pay your mortgage now you end up with dependence the rest of your life
and I think he said the same thing at Rivian is like okay what's our path to profitability here and I'm like wow we can just want to make it clear for all listeners so Bezos he doesn't directly own Rivian but Amazon right yeah exactly
so Amazon invested in Rivian back in 2019 and they bought around 20% of the company that they've been diluted down to around 17% but that's the that's the basis for sorry continue usually you find in every border or in an organization there's kind of one or two people making all the decisions I got to think when Bezos has a view around Rivian they're really inclined to do that and because he has so much credibility and obviously controls a huge stake here
I would bet he's just kind of said is the deepest pocket Amazon look we're not going to continue to hemorrhage money like this I think they only had about nine months of capital left so they needed to find a solution and there was probably two solutions one was named Jeff Bezos and the other was you know fill in the blank and end up being Volkswagen
and I think the same thing that's happening in Washington Post was like sorry folks you're either a company that works here or makes me much sexier to the world you know I think it was considering you buying the Washington commanders at some point where he has now the third biggest three massed you out in the world and the Washington Post doesn't make me any sex here Rivian a little bit but it's not worth the money you guys either need to get profitable
show me a path to profitability or we're going to partner with Volkswagen I I actually ordered a Rivian I'm really excited about it I got a thumb green I'm going to be an aspect I'm going to put lay I might great day in the back I'm going to cruise down into town and they will love me they will love me I'm also going to put a bike in the back with that I will never ride but I want people to think I'm outdoorsy I'm just going to make a prediction
you you keep saying you're excited about this Rivian I think you've been saying out for maybe at least two years I want to say I don't think this Rivian is ever going to arrive it's ever going to be delivered no I don't think you're ever going to do whatever paperwork is needed to have it arrived at your house I don't think you care about getting a Rivian
I don't know for some reason it hurts my feelings I'm not sure why I was actually thinking of ordering it and then auction it off for charity water and then I thought I'm not that generous I want I want the option to have the Rivian that's exact I think something like that's going to happen you never actually know in a Rivian but you'll continue to be excited about it that's my plan to wait for the ask answer anyways
the fact that they can't make it that means this is it I mean I think Fiskr just went out of business I believe the Tesla is going to hit a wall but I'm saying that since the stock was at 15 and it's not 160 or something but I would bet that Rivian becomes the next SUV that's shoved through the Volkswagen platform just to give some color to how far this company has fallen it was worth
when IPO it was worth 130 billion dollars Jesus I don't know if you remember but everyone was obsessed with this thing everyone was saying it was like the best new co-accompany it's going to compete with Tesla it's going to solve climate change it was actually more valuable than Volkswagen at one point we said many many times that this was ridiculously overvalued it's now worth around 15 billion dollars it's fallen 90 percent so I feel like we can't have won that prediction
we also talked about the burn rate so let's just go through the numbers here operating cash outflows last quarter were 1.3 billion dollars capex for the quarter was a quarter of a billion dollars so total cash burn of one and a half billion dollars losing roughly $40,000 per vehicle as you mentioned at that burn rate the company would be out of business by the beginning of next year they had nine months of runway left
so it was in an extremely dire situation people are saying that this Volkswagen investment was a lifeline I think that's often hyperbole in this case it's completely true if no one had come in if Volkswagen hadn't come in here this company would have died which makes me think why didn't they just buy the company effectively what they've done is they've peed on this thing and no one else is that's it no one else any other dog or a car is going to go to a Volkswagen's here
that's really good so they've what they've bought is essentially an option and that is rather than saying okay for them Volkswagen's market cap is $58 billion this is one of the biggest best run automobile companies in the world the fact that revision was a one point where twice that gives you a sense for just a
batch of crazy it is right now what is Rivians market cap it's 12 billion they would have to come in and offer probably 13 to 14 billion to take the same instead they come in a one billion if the stock goes way up good they've made a bunch of money if it comes down they buy the whole thing
they couldn't give 25% of their outstanding equity to Rivians shareholders to buy something losing money so this is a chance to date get some technology work together and if Rivian you know the stock goes from its at 1458 if it goes from 1458 to 5 they'll step in and they'll take the whole thing
do you think that this is the beginning of a huge run up Rivian like does this renew your excitement for this company or is this just kind of like softens the land it happened Rivians stock I was even looking at this thing Rivians stock popped about 20 or 30% in the last few days
it went up it was trading at 12 it went up to it went up to 16 so what was that it was up 30 or 30 or 35% now it's down to 14 and a half I would be shocked if it wasn't I mean I guess you could say that some of that pricing you know was it was a 10 bucks pretty recently
was it fear about them coming into a cash crunch and now that's sort of been taken off the table or at least they take the can down the road but this thing still has a you know 12 billion dollar market cap for a company that's hemorrhaging money this is just this is how fucked up this this company's worth 12 billion dollars Ford Motors were 12.3 billion and Ford is a profitable company pushing out a ton of cars any long term predictions for the EV market you mentioned Fisker when out of business
so did Lord's Town Motors so did Protera three different EV companies that went bankrupt in the last two years EV sales last quarter in the US also fell 7% is this kind of the beginning of the end for not EVs but EV startups that feels right I mean what is it that that curve or the Gardner curve I don't know who invented it where there's growth excitement, froth, hysteria and then disappointment, realization, valley of death and then consolidation
the weaker players get swept off the deck and then it comes back it feels like we're entering the you know the valley of death and that is companies are either going to go out of business or need more capital I mean there's been a bunch of electric EV kind of truck companies that have
really struggled and I think that as a whole I mean I think the market was only up three the market for EV was was only up 3% year on year but as the Chinese enter the market bring the prices down as it becomes more accepted as the charging station
infrastructures built out supposed to one out of five charging stations are working right now I think that this market it just feels to me like the whole world is headed this way we'll be right back after the break we'll look at tax harvesting we're back with Profty Markets
JP Morgan Chase is on a mission to take share of a growing business tax strategy the bank has attracted more than $15 billion in assets under management in its tax advantage accounts known as SMAs or separately managed accounts unlike a regular account these accounts offer personalized tax management advisory and according to one JP Morgan banker quote it might be the fastest growing piece of asset management over the last 18 plus months
the growth is not just at JP Morgan however it's industry wide assets and separately managed accounts have increased 30% year over year in 2023 and asset managers say 45% of assets are now subject to tax management that's up from 33% in 2022 so Scott tax avoidance is becoming increasingly popular from the numbers here and to be clear this is different from tax evasion which describes illegal tax strategies we're talking about legal tax strategies tax avoidance
so as someone who works quite a lot with tax lawyers could you describe what some of those tax avoidance strategies actually all that wealthy people are using today so first off this is a key component of obtaining and maintaining wealth is tax we call it tax minimization
we have an entire chapter in the algebra of wealth on taxes if you don't it's just it's going to be near impossible for someone to become economically secure much less really wealthy unless they have a pretty strong grasp of taxes to not I mean you're driving you're driving towards economic security
do you want to figure out which toll booth is two bucks versus seven bucks you know you just got a figure this shit out you got to understand how to get through this toll booth is inexpensively and as quickly as possible
this is why I think young people need to talk about money you need to understand taxes if you I mean I just did the math when I was living in New York in 2010 I just had a couple of kids and I was doing the math and I thought okay we make a lot of money and I feel broke and I don't like it and so we decided to move to Florida in addition to the lifestyle arbitrage where the private school we sent our kids to was no joke $14,000
you know at that time versus 58 at first Presbyterian and you know everything was cheaper I was going to save the income tax savings was 13% and I did the following and I was very disciplined about this I took the majority not all but the majority of our lifestyle savings and I took that 13% I did the math and said every month I'm going to take 13% of my top line income and I'm going to pay taxes to me and that is I'm going to invest it and it it changed my life economically
so thinking about taxes and how to minimize your taxes I mean it's like the guy Wayne Heizanga who passed away was a founder of blockbuster and I think ended up owning the Miami dolphins for a minute when he was doing ads for Florida I used to say it's not what you make it's what you keep he's right and what people don't focus on enough they focus so much on how much they make they don't focus on what they keep anyways tax minimization is about what you keep so there's some very basic strategies
the first is geographic arbitrage right moving to a low tax state or had establishing residents in a low tax state the second is just being thoughtful about timing of sales and that is you really don't want to be in any asset less than a year because the top tax rate for the short term capital gains that's assets you own for less than 12 months is 37% versus I think it's 22.8% for long term capital gains so anything I buy almost anything investment I make
I assume I'm going to hold longer than 12 months now on the flip side if there's a loss at the end of the year I think about taking those loss I harvest losses could you just describe how how tax loss harvesting actually works
yeah you buy you own Amazon what's the stock that's gone down I'm trying to think of what stock has gone down the most over the last 12 months that would actually be interesting to see what you know so whatever it is stocks gone down 50% you sell it on December 30th you paid $10,000 for it it's worth $6,000 you sell it at the end of the year you get a $4,000 tax deduction you recognize the loss and there's now there's funds they went everything anything's down they sell them right away
and they have to wait a certain amount of time to buy back in but they're constantly harvesting losses which juices the returns so being really thoughtful about tax minimization is just hugely important so there's I mean I'll give you an example Vox is going to owe me a lot of money I did this strategy or did this agreement with Vox who distributes this podcast where they're going to give me a lump sum of money in May of 2025
and because that's current income which I hate 37% all this 37% of it right away I'm going to do something or we're talking about doing something called the installment method now what is that they can pay me over six years which they like which because it saves them cash flow because it's a sizable amount of money we pick an interest rate
I don't know call it 7% and over six or seven years they pay down I'm basically loaning them the money they were owing me say it was $100 I'm loaning them $100 and they pay it off over six or seven years like a mortgage and they pay me 7% on it but here's the fun part because they're paying it off over seven years I'm getting 7% on the pre-tax income so for the first whatever it is three or six months I'm getting 7% on $100
whereas if I sold the dollar I just recognize the gain with a 37% tax rate I'd end up with 63 cents and I would need to get 10 or 12% on investment the biggest tax loophole that has increased my wealth is our tax system really loves real estate and a loves entrepreneurship
so I would start companies small companies and if they had less than 50 million assets which any company I start does you can either invest in or start it in the stock you get if you hold on to that stock for more than five years the first 10 million or or whichever is greater the first 10 million or 10 times the initial investment is tax free
so when I sold L2 the first 10 million was tax free when I made an investment in a small company that went up dramatically I got 10 the first 10 times my initial investment was tax free so that's 1202 also in terms of entrepreneurship creating a company you can run a lot you know if I'm if I'm going to LA and I see my dad in San Diego but I spent four the five days in LA working on an original scripted drama on big tech based on the book the four written most guy Callaway
I can write off all of my expenses you can shove a lot of expenses through a small business because you'll find most of your life at least if you're an entrepreneur is somewhat related to business who really gets fucked is the person working at Goldman or working in a law firm or working for an employer where every year they just get all of this reportable income that's top line and then it's all current income and it gets taxed in a high tax state like you are now at a point Ed
where you're going to start paying 30 35 40% tax rates because there's no hiding there's really no hiding your income so the key to tax minimization is to figure out a way to save enough money as an earner such that you become an owner because then you can get long term capital and sick of yourself as a stock and that is every year the stock of ed else and goes up call it 150 grand in value every year you have to pay 40% tax on that whereas if you manage to save money
and you buy 150 grand worth of Amazon stock over five or 10 years and it doubles it goes up 150 grand unless you sell it it is growing tax deferred so at the end of the day the kind of the ultimate rich persons tax avoid strategy is the following
you have a lot of stock in Amazon and you never sell it you just let it increase in value and then you borrow against it and you never recognize a capital gain and you can even write off the interest on the money you borrow now at some point you got to pay that back so what do you do you pretend you want to spend more time with your father and you moved to Florida and when then when you sell that stock it's taxed at a much lower rate
so it really is you want to you really want to learn about taxes and understand tax policy because if I had been paying again that 13% that I was disciplined enough to reinvest every year in stocks that grow tax deferred change my life economically and these strategies are out there and it's important that you know them and again if it sounds like we're fucking the young and people who make all of their money from current income from sweat
who are earners as opposed to people who own or invest or own real estate trust your instincts it's yet another transfer of wealth from the entrance to the incumbents I think that's something that a lot of a lot of people would criticize you for which is you know what we talk a lot about is the fact that the ultra rich generally speaking are not really paying taxes
wealthiest 400 fam is in the US paid an average effective tax rate of 8% in the past decade you talked about the buy borrow die strategy where you have huge asset base and instead of selling and registering you know and having to pay taxes on those on those sales you just borrow against it and you keep on doing that and you can do that and it's an extremely low rate because you're so rich there are all these different strategies which you use
and so I think a lot of people would say that you're being hypocritical because you're arguing against this and talking about how it does screw the young over but at the same time you're also doing it so what would what were your response be to that criticism I understand the criticism the question is is anyone out of my funeral going to say he paid more taxes than he was supposed to what a great guy be clear I am going to vote for people who restore a progressive tax
structure why what if you're if your job in a capitalist society is to make as much money as you can and it's your job to minimize your taxes to protect yourself why would you vote for someone who's going to increase your taxes because I want a healthy America and I want an America that makes the same forward leaning investments in the middle class that were made in the 60s and 70s and 80s that benefited me
and so I want to see the same opportunities provided to people your age that were provided to me having said that I will absolutely I'm not going to disarm unilaterally I will take advantage of every single tax loophole now now that I feel a little bit defensive I'll say the following
I recognize my privilege I got to a certain number and I decided anything above that I was even going to spend or give away and my personal code around this is I look at my spending every year and I give away that or more every year as a self imposed tax over the last four years I think I've given away
approximately some are between 17 and 20 million dollars and I think a virus that affects America is hoarding there is no reason to have more than a hundred million dollars I just can rationalize why any individual would need more than a hundred million dollars do you want to build a dynasty well guess what your kids are probably going to be be fucked up that's not good for your kids I'm not saying it's bad for
make sure they have some money in the house but I have there's no evidence of building dynasties as any any good for anybody once you have the nice house the second house can do amazing things take care of your parents take care of your kids give money away why do you need more money you don't and it's a society telling you that your worth is based on a number that keeps getting bigger and bigger you need to get off that treadmill so spend it I think it's great and give it away
and that's what I do but be clear along the way I'm going to minimize my taxes and try and increase my wealth and above a certain point I'm going to either spend it or give it all away and that's another tax loophole is a donor advisor fund and that is a big deal if I think I'm going to give away ten or twenty million dollars I put it into a daft and immediately immediately or just stock I'm going to give this away it's been designated that I'm going to give it away and immediately I get the tax
deduction without giving it away right away and I can borrow money against it I mean essentially for every dollar that's donated in philanthropy the government loses like 72 or 73 cents so really what we have here is kind of people rich people deciding what are our social priorities and the government not gaining from it not it doesn't replace government spending because they don't get the you know it doesn't help the government but that the
argument doesn't really work in your favor here because that is something that you do I think I am by the way I just want to be clear I'm with you I would be doing the same thing but I just think the critics would say well why you deciding where that money goes why you spending all this time if you believe that you don't need that much more money why not just handed over to the government they need money they need to build infrastructure why you
deciding that it should go to this charity and doing all this work to minimize the taxes such that you don't have to pay to the government I understand the argument but the idea of just sending them a first off that I don't think they'd let you I mean maybe they would I you they're not it just would feel weird to send money to the treasury and what I do as I say OK I'm very my two big
charities are teen depression and right now vocational programming for young men and women and those are two things I'm really passionate about I think those add social good I don't create large organizations or offices I just sign them a check I inspired my McKenzie Scott I don't want my name on shit I give a much money to you see I'm Berkeley for vocational program this said you want to call the gallery thing I'm like no in 20 years they're going to find out I said things that are
upset I don't want my kids to be embarrassed respect I don't just I want it I just want to I don't want my name on anything I think this is I think it's anyways so but yeah if you if the notion is I should just send money to the government that I don't technically know not I don't do that I but I do try to pay it forward and impose a hundred percent consumption tax my big my big
aha moment was my number if you will keep getting bigger and bigger and bigger I thought at one point I thought when I sold out to I thought well I could start a private equity fund a ton of money and maybe in ten or fifteen years I could be a billionaire and I just like the sound of that Scott gallow a billionaire that just felt sexy that just felt right
and then I remember a moment which is personal I won't go into it I remember like why the fuck do I need to be a billionaire I go my trying to impress I need to impress the people who I love and love me and the way I do that is a set of shared experiences and spending more time with them
which is not going to happen if I get on a hamster wheel to try to get to a billion dollars and also you have to take a lot of risk with the money you have to get to a billion so I said I just need to get off this fucking treadmill and it's hard to get off it at when your whole life you're trying to get to a bigger number and you keep getting shot in the face and going to zero and finally you're back and then you go down and you go
up it's just hard to get off that treadmill but be clear no one's going to disarm you know laterly rich people aren't stupid they're not going to start cutting checks to the government what we need to do is elect people and I do this I spend money and I work and I can this for people who are going to restore a
progressive tax structure have an alternative minimum tax on corporations who have the lowest tax rate since 1939 their tax is used to be 1% of GDP excuse me 2.5% of GDP now they're 1% and also have an alternative minimum tax on very very wealthy people such as no matter what
loopholes they manage to invent they pay at least 20 or 30% of their income but tax strategy that tax codes come from 400 pages to 4,000 and those 3,600 pages aren't there to help out the middle class they're there to fuck the middle class not intentionally but to say to have thoughtful
conversations and into things like opportunity zones which by the way I've invested in here's a good one put a million dollars into an opportunity zone fund and they've I designated a bunch of low incumerias and if you invest in an opportunity zone and that is a warehouse in Reno that Amazon
just least out which I invested in I invested I think I invested $5 million $5 million tax deduction in 7 years I'll have to pay that taxes on that but I get to invest with 5 million and pre tax income for 7 years and any gains on it if I hold on to it for 10 years or tax free and they couch it is helping low income neighborhoods or whatever no it's not it's a tax loophole for rich people these are everywhere
these things are everywhere and they're even more present in real estate and among corporations if you own commercial real estate you can depreciate the property 2 or 3% a year if you own Apple and it doubles you can't you can't depreciate it you can actually depreciate commercial real estate if you own I mean if you own an asset in real estate
and it goes up it doubles in value from a million to 2 million a commercial piece commercial real estate you can do a 1031 v exchange and as long as you roll it into a similar asset class you don't trigger a capital gain if you sell Apple at a hundred bucks a share and you've made 50 bucks you get taxed on it so real estate very effective lobby hugely taxed
and what are we doing trump raised the limit on trusts where if I put money into a trust it grows tax free and then my kids inherit it I mean she's probably the thing that needs the most 100% returning into dynastic wealth but yeah but so a lot of people what they do is they go earn money invest it borrow against it die
and you never pay taxes on it it gets your kids get it and trump trump I think increase the per person trust limit from 5 million to 13 million so if you're a couple you can put 26 million dollars in a trust that your kids will get and they'll never have to pay the taxes that you accrue while you're alive
yeah but he's fighting for the working people so yeah so look the tax code has been weaponized by the rich and corporations I want to be clear I will fight hard to change it but no I'm not going to disarm you know laterally and just to cut a check to the government just be clear
about your position you want to get rid of the loopholes but so long as they exist you will use them yeah 100% which I think is a fair position the way I think of it it's like it's a lot easier to pay to pay 20% 30% taxes if so is everyone else but if you look around and these other rich guys are paying 8% or nothing a lot of them are paying nothing it's a lot harder to do that let me just put it this way if teaming when finally calls me up in the finals against
Germany and Berlin because I except for pretty good foot I don't know if you know this about me and and I get fouled in the last minute of the game or someone knocks me over in the penalty box I am I am so falling to the ground and pretending I've torn my ACL and trying to win I am so flopping I am going to try and win it and if that's unethical fine I'm on ethical but I'm going to play by the rules of the game and do my best to win full stop
let's take a look at the week ahead we'll see the unemployment rate for June and the minutes from the Federal Reserve's latest meeting do you have any predictions well that was my prediction was the star link is going to be the technology from SpaceX is going to be the technology of 2025 this episode was produced by Claire Miller and engineer by Benjamin Spencer or
social producer is Alison Weiss or executive producers of Jason Starverson Catherine Dylan me as a very is our research lead and drew boroughs is our technical director thank you for listening to the industry markets and the box media podcast network will be back with a fresh take on markets on Monday.