Pivot - Billionaires and the tax code, Facebook smartwatch and a listener mail question on children's screen time

Episode Date: June 11, 2021

Kara and Scott talk about the ProPublica report that America's wealthiest people paid basically nothing in taxes and what the country should do about it. They also discuss Facebook's upcoming smartwatch and the wearables industry. Learn more about your ad choices. Visit podcastchoices.com/adchoices

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a lot of AI systems feel like they're designed for specific tasks performed by a select few. Well, Claude, by Anthropic, is AI for everyone. The latest model, Claude 3.5 Sonnet, offers groundbreaking intelligence at an everyday price. Claude Sonnet can generate code, help with writing, and reason through hard problems better than any model before. Hi, everyone. This is Pivot from the Vox Media Podcast Network. I'm Kara Swisher. And I'm here to announce I'm going into space tomorrow. I have purchased something called the Rocket Trampoline. My adventures in space are only going to cost about $1,450. You bought a trampoline. There's several kids in the neighborhood that I'll say are, you know, enjoy eating. I'll just put it that way.

And you know how when someone bounces right before you, you go really high? Yeah. I'm going to, my technology is I'm getting 70 of these kids. Yeah. And they're going to, you know, bounce right before I bounce. And then I think I can get into near space. And grab onto Jeff Bezos. You're still chasing Jeff Bezos, aren't you? I am chasing that hunk of steroid love.

People liked our show that one day. That hunk of steroid love. People loved it show that day. That hunk of steroid love. People loved it. Even my mother liked it, and she doesn't like anything I do. Oh, gosh. Lucky. That's what we need. Get her off the roads.

Isn't he gay? Actually, you know what? Better yet, I'm going to bid $2.8 million for that seat and put Lucky on that ship. I will help you do that. So Lucky can turn to Bezos and go, go wait aren't you gay and on steroids the whole trip to inner space oh man he couldn't take her he couldn't take her he couldn't take her anyway there's lots more news than jeff bezos and his love affair with scott galloway um so president biden is revoking uh former president trump's executive orders uh targeting TikTok and WeChat, but he's replacing them with orders with apps linked to study these apps linked to foreign adversaries, which might be worse, Casey Newton wrote, for TikTok and stuff.

So they're sort of out of the woods of crazy town, but now they're entering a reasonable town where we actually study these things and do things about it. What do you think of this situation? You summarized it perfectly, and you've written about it, that any solution has to be systemic. Otherwise, it creates a distraction. It's usually not legal. Nobody takes it seriously. Everyone just nods and then does nothing because they realize it's probably not enforceable. It's similar to when senators or regulators, you know, posture in Peacock or your word, swan. Like the social media laws in Florida.

Exactly. Going after specific companies. You're not allowed to do that. You have to make, you have to have systemic change. It's just, you know, it's just so alien. I don't know about you. It's so alien for me to wake up and read about the White House's actions and go, oh, that makes sense. It feels alien. You know what was interesting about president trump he was directionally correct and executionally incompetent you know this was like we need around china very much so around china but so but same thing i mean it's just it's a really interesting thing but i do think that tiktok you know they announced these face prints and

stuff which i thought was not a great idea for them to do this week and so they're going to be scrutinized and they're not out of the woods by any stretch, nor should they be. This is not, at the same time, this is, you know, we'll see what happens if the Biden administration actually follows through on really studying this stuff rather than making it into a political football that it was. And that was a missed opportunity. It really was. And it felt like it was at the behest of Facebook and others in this country. It felt not well thought out. And it felt illegal, like the way they were doing it. And at the same time, it's hard to support things that are done in such a crazy town way.

But at the same time, and speaking of China, a series of stories have come out, and they have been over the past couple of weeks, about the disappearance of Chinese innovator Jack Ma, who's the most famous person in that country. If you go there, it's very clear. He runs Alibaba, created all kinds of ant, all kinds of stuff there. Just essentially, for people to understand, Jack Ma is like, if you took Elon Musk and mashed him together with Mark Zuckerberg and Bill Gates and all of them, really, and Elon Musk, throw in a little Elon Musk. That's who he is. He's really famous. Well, they've cut his power rather significantly through antitrust actions, cut his fortune in half, giving away pieces of his empire.

And he disappeared for a couple of weeks, right? He has disappeared. I know him very well. He is such an interesting and energetic innovator and was sort of leading the way to this new China of entrepreneurship. So it's a real, I really would love to under, I'd love to talk to him and find out what's going on. But at the same time, it's really chilling what China is doing here. And at the same time, you know, we all support antitrust actions, but the difference between a country of law and moving it, as much as we complain about the slowness and the inaction, this is just the polar opposite.

Well, yeah. So, China is doing a lot worse than sequestering and stripping a billionaire of its rights. But there is – when you think about how fortunate we are in the U.S., in China, you have to – I don't think it's, it's not great to be poor in China, right, for a lot of reasons, or to be an ethnic minority or whatever it is. It's not a great place to live. And it's also, quite frankly, not a great place to be super wealthy.

A third of millionaires, somewhere between a third and two thirds of all millionaires in China have either left or wanna leave because they're worried about unilateral action, private property laws, the fact that you get a robust defense in the U.S. Quite frankly, if you're rich, you can probably overrun the law. We'll be talking about it in a minute, but go ahead. Yeah. And so it's awesome. It is absolutely awesome to be a billionaire in the United States. In China, I think you want to be kind of billionaire-ish. And also, it's similar to Russia.

You have to sign up for being an agent of the government, or they'll take your shit away. They'll be like, great, yeah, no, you have rights. Meet these guys. They're putting you in jail, or they're commandeering a flight over another nation, or we're going to disappear you. He was more well-known and I think beloved than she. And so I think this plays into it. You know, this sort of cult of personality thing is frowned upon unless it's the government.

And so it was really interesting for them to do this. I wonder if he tried to get out or tried to move or, you know, he's such a, if you ever interview me, he's the most energetic person. He's like, you have to sort of strap him in his seat kind of thing. And of course he was behind so many, you know, this was an investment that saved Yahoo. Jerry Yang is someone who met him and invested in Jack Ma early on. Some of his innovations are really fascinating. He had many more women on staff than anyone else. He's, you know,

there's not everything that's perfect about Alibaba, but boy, was it a really interesting way to create a company in a country that needed entrepreneurship like this. So that story in Forbes, you should read it. It's really, there's been many, but that one's particularly clear about what's happening. Well, Neil Ferguson said something very interesting.

He said China's a lot more fragile and vulnerable than people realize because when you have a one-party state, here we bounce a party out of power for four years and they regroup and rethink things and the country gets sick of the party in power and votes back in the other party. Any change in the party system there is revolution. And so the party in power, you know, they come to play. They're like anyone who threatens us, any perceived threat, they take real action against. And also people don't have the same laws and freedoms and protections we enjoy here. And also people don't realize all the shit we have that protects all our property and slows down the system from wrongful persecution, although there still is a lot of wrongful persecution, especially among people of color. I was reading about the Innocence Project the other day. It costs money, which is sort of a bridge to the other story we're going to talk about.

But there's just so many reasons, I think, to be grateful that you don't live in China, whereas innovators obsess with it because they make great payment apps. You don't want to be, I just, you would much rather be a modestly successful entrepreneur in America than a wildly successful entrepreneur in China. Or you'd rather be Mark Zuckerberg here because he's going to slow. Are you kidding? In China?

The role is going to be slow for Mark Zuckerberg. Before we get to that next story, Amazon, this new speaking of overreach, and Amazon is enabling its new sidewalk feature that automatically connects all of its smart home devices like Ring and Echo. You can choose to opt out of the feature. You didn't get to

choose in. They just turned it on. But again, it brings up renewed privacy concerns. The New York Times had a really good piece explaining this. There may not be that many privacy issues or security issues, really. But, boy, honestly, I did a post where I was like, can they just let you opt in? Like, even a little like, hey, we're doing this. This is what it does.

It will make your life easier, and here's why. It's amazing how they do this. I just am like like I don't know it's creating mesh that's actually really interesting whereas you know Apple has said

you have to opt in for the tracking across different sites for ad targeting so the difference

between opt in and out although Apple has enabled mesh networks without your permission they all do it they all do this without your permission opt in versus opt out

is about an 80% share difference. If you ask people to opt-in, you'll get 10%. If you ask them to opt-out, you get 90%. Because people are lazy. And it doesn't work

without all the people opting in these mesh networks. It's just... I will say, I'll probably do this. I think that people talk a big game

about privacy. I think Amazon actually has a decent amount of credibility. This is what the Time story talked about, yeah. Their systems haven't been hacked to the same extent that some other systems and people, while people talk a big game about privacy every day in terms of their actions, they opt for a lack of privacy as long as there's utility and exchange. And Amazon has

a habit of doing that. So, I mean, just personally, I won't opt out. I get it. They just should say, here's why we want to do it. Agreed. Or at least explain it as they're turning it on much better. I just don't. I don't have echoes and I don't have rings. I just, you know, I just, I don't. It's more irritation than anything else. I'm not necessarily as nervous about it. We love it.

That's how we speak to each other in the house. We do. Nolan, come finish. You know, Alexa announced, dun, dun, Nolan, come finish your dinner. Really? And then, you know, dun, dun. What?, Nolan, come finish your dinner. Really? What? No, Dad. Leave me alone.

I hate you. That sounds familiar. We have Alexa. Wow. We have Alexa throughout the house. Really? Oh, yeah. I just yell up the stairs.

I'm a yeller up the stairs. I love that. That kind of thing. We love it. But you have such a vast house compared to mine that you can yell up the stairs. That's just a preface to the yelling. It soon evolves to the yelling and someone going upstairs and then the dog following me and peeing on the carpet.

Are you listening to me? Oh, my God. I know. We live the same life. You just have a nicer house. So, let me move on. Speaking of overreach. Which is going into space.

I'm here to announce now. Can I have your house when you go into space? All right, Carrie, you're welcome anytime. No, but can I have it? You guys love it. Just bring the golden child. I'd like to own it. Just bring the golden child.

I have relatives that believe in the, you know, when everyone goes up, the rapture. I have relatives who believe in the rapture. And so my brother made bumper stickers one year that said, when the rapture comes, can I have your stuff? Which I thought was very funny. But so can I have your stuff when you go into space and eventually, you know, marry and live with Jeff Bezos on Mars? You know, if it happens, I just want to be super fucking high because I think it'll burn a little bit brighter. I mean, the rapture on its own would be pretty cool, but it'd be awesome high. Oh, to be up with Jeff Bezos.

It'd be awesome high, yeah. There you go. Yeah. By the way, 70% of Republicans now believe and think gay marriage is just fine. So. Where did that come from? It just did.

I was just saying, I was just saying, you're marrying Jeff Bezos. Now the Republicans are on your side. Anyway, we're going to move on to big stories. A ProPublica analysis found the world's richest people paid close to nothing in federal income taxes between 2014 and 2018. The report released this week showed that the 25 richest Americans, including Jeff Bezos, Elon Musk, Warren Buffett, paid almost nothing in federal income taxes. It's a little tricky because they don't pay themselves. They make money in other ways by taking loans against their stock,

their stock appreciation. This is against a backdrop of huge appreciation in their stock. I think it's $401 billion. According to research, because of the complex tax code in the U.S., it favors wealth versus labor income. It was easy for wealthy Americans to find massive loopholes, but

they weren't really loopholes. It's just the way it is. Now federal authorities are investigating the disclosure of this private tax information, which could be prosecuted as a criminal offense. Scott, explain what this was essentially saying, which is something that is a shock, but no surprise. Yeah, first off, it's kind of interesting that the person who would probably get in the most trouble is the person who leaked this information. But look, here's what it comes right down to, and that is one, and I'll start where I'll finish. Do we want a progressive tax system in our society? First off, we have to make

that decision because ever since Reagan, it's slowly but surely become regressive where billionaires now pay the lowest tax rate. Do we want that? On average, these individuals paid in terms of an increase of their wealth, about 4.5% to the governments. There's a less than that? Yeah, three. So they basically- And some people like Warren Buffett under 1%, but go ahead. But to solve it, to come up with a thoughtful solution. So let's assume we think, okay, the wealthiest people in the world shouldn't pay the least amount of tax because that only means people who are less wealthy have to pay more tax and we believe in a progressive tax structure.

This is the mechanics of it. We have printed probably tens of thousands of people, and I'm not talking even like the top guy or gal at Clover or Square or Lemonade or Airbnb, but these companies have printed thousands, if not tens of thousands of people, say, worth $50 to $100 million. So, let's be ambitious. Let's say we're worth $100 million, right? What we do is say we need two million dollars a year or three million dollars a year to run our fat lifestyle. A quarter of a million dollars a month is what we spend. Instead of selling the stock, which triggers a capital gain, you borrow three million dollars against your holding, right? And

that's, you get to borrow at 1% interest because interest rates are so low and all these investment banks want to manage the wealth of high net worth people. So, you borrow $3 million. So, now you only technically have $97 million in wealth. But if your stocks go up more than 3% a year, you have more net worth and you pay 1%, but you don't pay any taxes. And you get a tax break on the loan. That's right. And you get a tax lien on the interest on the loan. Or better yet, say you have a private company. It's not a liquid stock. Michael Bloomberg was in this group.

And you pay yourself a million dollars in salary. Well, I know. I'm going to take 10% of the company and put it in a charitable trust. I don't even have to give the money away. I just put it in a charitable trust. And I get a $10 million tax deduction, meaning any money I pay myself is tax-free. So in sum, in sum. Yeah, the charitable away. I just put it into charitable trust. And I got a $10 million tax deduction, meaning any money I pay myself is tax-free. So, in sum, in sum.

Yeah, the charitable deduction. And also, you can determine all these CEOs that give a dollar to themselves. That is not a good thing. They are just deciding on their income, essentially, is what you're saying. Well, what I'm essentially saying is that, one, if you're worth more than $50 million, you don't have to be evil. You don't have to than $50 million, you don't have to be evil, you don't have to be nefarious, you don't have to be really cunning. There's no reason you should ever pay tax. So, first off, are we comfortable with that? Are we comfortable with the notion that once you hit $50 million in wealth, you effectively leave the tax system and are no

longer contributing to our Navy, our parks and services, or to Social Security? That is a fact, that if you have over $50 million, relatively smart people can figure out a way for you to not pay tax. So the question is, how do we figure out a way where tax isn't dependent upon income triggering events? That's right. It becomes somewhat like there's an AMT related to your increase in wealth or something like, because the bottom line is the really wealthy people can avoid income triggering events. And Carl Icahn summarized it. He said, they said you paid no income tax. And he rightfully said, well, I had no income. Right. Because I was able to, he's able to offset it with expenses and charitable giving such that

he can report zero income year after year. The whole idea behind this is you don't, you can pick your income. That's what it is. That's right. I want to pick my income and what works best for me. I can say I'm making a dollar and then give me kudos for only taking a dollar. That was always such bullshit when tech companies do that. The CEO's only making, not only making a dollar.

Secondly, the borrowing situation that people don't realize. But what's really interesting is the Biden administration is trying to raise taxes on the wealthiest by a few percentage points from 37, I think, to 39.6. But that does hit people who can't do this, who make income, who make big salaries. Like a lawyer makes a big salary, doesn't get stock. And so they're like, look, I pay 37% right now and I can't borrow against, you know, go sock essentially. And so I'll pay that difference.

So what it does hit is it hits wealthy people. People in the middle class, they're paying 14%, 14 to 15% typically. And so everybody pays much, much more than the very wealthy. And so it is progressive up to a point, right? Because you go from 14 to 37%, depending on your wealth, but it's all based on income. So will this renew calls for this wealth tax, which the Biden administration has rejected? Because the increases they're making are people already paying those large amounts of money in taxes. Even if you're rich, and it paying those large amounts of money in taxes. Even if you're rich, and it's easy to sort of soak the rich, but in this case, you're not really

soaking the really rich. You're soaking others. And that may be, maybe we should pay more in taxes as people who are wealthy. But one of the things that's happened is there's not a wealth tax for this increase in value in stock and then what they're able to do with it. What do you, do you think there is, there will be this, I think calling it a wealth tax is the problem because everybody likes wealth. Well, so first off, your point is exactly the right one. And that is, as humans, we like to simplify into a construct such that we can say, immediately look at someone and make a stereotype. And the stereotype around taxes, okay, young people or lower and middle income people pay more in usage and consumption taxes. And then we like to think that it's easy to think, oh, as you get richer, you pay less and less taxes. To your point,

the person that gets really screwed here is the workhorse. The general counsel at a big tech firm that didn't get a lot of stock makes half a million a year, and maybe her husband is a dentist making two or 300,000 a year, and they have to live in a major metro to have those kind of jobs. So, they make $800,000 a year, and you think, wow, that's amazing. If they live in New Jersey, California, or Manhattan, they pay 50% in taxes. And when you talk about take-home pay at $400,000, if you have two kids in those areas, you're not rolling in it. You're not living large. So, the wealthy are actually the ones that I believe are probably paying that have the biggest burden.

And the middle class, 14%. Fair enough. But the super rich, boom. Once the majority of income comes from assets, you can make the jump to light speed and you're on the gold medal platform and they give you three gold medals. Now, the question is, I don't think a wealth tax works for several reasons. And if you did a wealth tax, I think it'd have to be one time. And the first is capital and wealthy people are the most mobile people in capital in the world. They just don't have a problem. They spend a lot of their lives on the road anyways.

They can lubricate it with private jets. And they can say, all right, we're moving to Toronto where our domicile now is in London. And this is what Bernard Arnault did. When France tried to put a wealth tax on people, Bernard Arnault said, congratulations, I now live in Belgium. I now live in Brussels. And the wealthiest man in Europe changed his tax domain, and there's nothing he can do about it. What you could do is a one-time wealth tax, where he said, look, there's been a windfall here, and that would probably not motivate people to move countries, kind of a one-time thing. Yeah, I did a column suggesting this. And then you have to have, probably, get rid of trust exemptions. The other thing is,

the part of this story was, they can then jump it to their kids, so never, or their grandkids, but they still have control of it, this ability to do that. But the wealthiest people in this nation are the most tax advantaged. And there are two groups. The first is entrepreneurs. And by the way, so I'm an entrepreneur. And to your point, I've never taken a salary. I've always poured my money back in because I thought if my equity becomes more, I pay less on that wealth accretion and I can afford not to take a salary. So I've never taken a salary. And if you sell a small business and you were a shareholder in the company before it was worth $50 million and you've held it for five years, the first $10 million is tax-free. So entrepreneurs are some

of the wealthiest people in the nation. The second largest cohort of wealth is also the most to tax advantage, and that's people who own real estate. And inherited wealth. So you have, in real estate, it's the only asset class where if I own a building that's worth $100 million, I get to depreciate it 2% or 3% a year. So I get a tax write-off, even though it's likely going up in value 4% to 6%. And then if I decide to sell it, I have six months to, what is it, 10B1 exchange it into another asset. If you sell stock even, you don't have six months to throw it into another stock and not pay taxes. So, the wealthiest people in the nation are the most tax-advantaged. So, there's all kinds of loopholes we could close that would hit kind of the most fortunate among us.

The borrowing against it is really interesting, this ability to borrow. And that's not going away. And again, they get a tax advantage. This story, again, we've been aware of this. And actually, we talked last week about the corporate tax, right? And the idea of doing that. It's the same kind of thing that they're pulling. What's interesting is that how angry people will get about this. I interviewed one of the reporters who did this story. And he, of course, is like, there were issues around the sourcing of this thing.

Not that they were bad sources, because these turned out to be very accurate but the the leaking of it and stuff like that and they're being very cagey about that as they should because they could be in legal jeopardy um but um one of the things he you know he wouldn't say what he thought was the best thing to happen but certainly this administration is not going to do that is not going to put a wealth tax which is they're going to soak the sort of rich, the less rich, but rich kind of thing. And then ignore these billionaires who, the run up in value of the stocks of these tech guys is, and they're all guys, is astonishing. an astonishing amount of billions and tens of billions of dollars of which they will give themselves a dollar salary and then actually take deductions and write-offs. And so, we have to pay them. And then they lord it around when they give away money, right? They, oh, I'm such a good

giver. It's good for them to give. It's a tax advantage for them to give. You don't even have to designate who you're giving to. Elon Musk got the GDP of Hungary in the last 12 months. You don't even have to designate who you're giving to. Elon Musk, who added the GDP of Hungary in the last 12 months, he has a worth of $150 billion. He takes a billion dollars at 1% loan against his stock in Tesla. And then if for some reason he has a $100 million triggering event because he sells some stock, he just says, you know, I'm going to take a billion dollars and put it in a fund that's designated for charity. And that's a tax write-off. And not only that, you can borrow money against the money in that designated charitable trust. The borrowing thing was really well done in this thing. But we'll see what happens. We'll see if there's anything. But of course, they cry like stuck pigs, like, how dare you take my taxes?

And I get that. I get that. These things should be confidential, but the fact that they can do this so legally and so easily is really... So the next time a CEO says, I take a dollar in tax, tell them they're assholes. I don't know what to say. Or I'm starting this giant charity.

It is not in... Look, we may benefit from it, but they also get to pick and choose the policies they're going to... Like, why does Mark Zuckerberg get to pick education as a well-known education expert? Mark Zuckerberg, give me a break. And then, of course, people suck up to them because they want that, those nonprofits do want that money. So, it is, they are not paying taxes the way they should, these very rich people. And everybody else, and I mean everyone else, including rich people, are getting screwed. Well, and then anything that you propose around it, the Republican Party will%. These aren't radical ideas.

America has generally bought into the notion that the most fortunate, the most productive, whatever you want to call the top 1%, should pay more in taxes. And unfortunately, I don't think much is going to happen because I think the problem is us. And that is deep down, I think we no longer go to church. We no longer believe in a super bang. Yeah, we believe in Elon Musk. We believe in Jesus Christ. We believe in Jeff Bezos. Yeah, and this is what's different about America versus China, regulatory arbitrage, being very aggressive, starting a business without business licenses, hiring a lot of people, a lobbyist to go to the most coin-operated senators in the U.S. Senate. Of which there are many.

And not pay a lot of tax. But regulatory arbitrage is a fantastic investment in business in the U.S. It'll probably get you disappeared in China. They do not go for the regulatory arbitrage trying to put pressure on the government or screw it. They just take their money. Well, look what they did in the Gulf. Remember when they put them all up at the Ritz Carlton for three days and said, by the way, this is about to become a prison unless you give us- That was MBS. That was Bonesaw. Right. Unless you give us 30% or 50% of your assets. And when you have three days,

even at the Ritz Carlton, to contemplate being in prison for the rest of your life. Should we do that? Should we do that, Scott? Should we just take the money from them? Just show up. We go into space with them. We're going to space with them. Baby, we go to space.

We're going to send Lucky. We go to space. Lucky in space. But one of the disappointing ones here is obviously Warren Buffett, who paid the very least. I mean, they're going to release more of this stuff. They only picked five or four or five to show the specifics, Bloomberg. But Warren Buffett paid less than 1%. And he did say i want to pay more like i am paying what i'm supposed to pay and you know he gets to pick and choose his income and as much as it's not their fault it's

our fault it's not a hundred percent we have to we have he did say i want to pay more this is wrong but i don't know we have to like people who have the backbone to put in place to return to our proud legacy of a progressive tax structure and And most wealthy people will support, or let me put it this way, a lot of wealthy people will support these policies. They're just not going to disarm unilaterally. They're not going to say- What is income, Scott? What is income? We've got to redefine income. What is income? There you go. Anyway. What is wealth? What is true wealth?

Anyway. All right, Scott, let's go on a quick break and come back to talk about the future of wearables industry as Facebook jumps in and a listener mail question. Fox Creative. This is advertiser content from Zelle. When you picture an online scammer, what do you see? For the longest time, we have these images of somebody sitting crouched over their computer with a hoodie on, just kind of typing away in the middle of the night. And honestly, that's not what it is anymore. That's Ian Mitchell, a banker turned fraud fighter. These days, online scams look more like crime syndicates than individual con artists. And they're making bank.

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They're coming back with a smartwatch. Obviously, they're an Oculus. What could possibly go wrong? The watch reported coming to cameras for direct upload to Facebook and Instagram. This puts Facebook in direct competition with its big tech nemesis, Apple, in the wearable space. Apple sold 34 million watches last year. That business,

even though people made a little bit of fun of it, is doing rather well. It was interesting because Facebook also took, Adam Masseri took aim at Facebook's, about the 30% around creators. They're also pushing heavy into the creator space and trying to help them monetize outside of the app store. But what do you think about this? The Facebook Watch, would you buy a Facebook? I didn't buy their other one, whatever their version of Echo is, like Portal? Someone gave me one as a joke

and I literally left it in the box and wrapped it in cellophane. But what do you think about this? Well, the only non-hardware company that's had any luck building hardware has been Amazon with Alexa. Alexa is a very elegant device. And buying Ring.

They spent tens of billions on it. The Google phone, the Google Pixel phone is supposed to be a superior phone, but it hasn't really gotten any traction. Facebook's portal has been a disaster. Hardware is really difficult. This is no easier for Facebook to do than for Apple to start a social network.

Yeah, which Ping, it was called Ping and it was a disaster. There's a natural, and I do think there's a lesson here. I talk to a lot of young people all the time and some of them are in good jobs and some of them also have small businesses and they think,

hey, I'm thinking about getting into that business. And I'm like, just trust me on this. Every business looks much easier when you're looking at it from afar. Yes. And building a piece of hardware, especially a piece of hardware that people want to put on their person.

People put things on their person for two reasons, for warmth and to find people to have sex with. And it's either for utility, and that's about 3% of it, and another 97% is you want to signal strength or attractiveness. And these hardware devices, the only wearable that has really worked in my view is the AirPods Max, which on their own are a Fortune 50 company. The Apple Watch, no other company could have pulled that off. It took massive investment. It was a big thud in the beginning. It has such a strong brand. And I would argue it's not a wearable.

It's a second screen for your phone. I think wearables are— I see a lot of people with it. I've had four of them, and I don't wear any of them. I don't like them. I wear the AirPods all the time. Remember the Nike Fuel Band? Yes, I had that too.

Remember Jawbone? Jawbone. I mean, you couldn't go to a conference without someone giving you a wearable. We introduced Jawbone at one of our All Things D conferences. But the majority of people are only going to put on, you know, something that they think makes them look, I put on a Panerai. So what do we think about this? So you're saying no one wants to put on a Facebook watch? Dead on arrival, even if they don't know it. Facebook, I think it is so difficult. Let me put it this way. I think Apple has about as much,

there's a greater likelihood of Apple launching a very successful social media network than Facebook producing a wearable that people want. The hardware that you put on, I think wearables is right up there with 3D printing and VR in terms of overhyped technology. I call them unwearables for the most part. I've tried all the wearables. No one that's a success that I didn't name. You can see.

I have them all. I have a box of them. They just don't. I have a box of them from San Francisco. Even my son, who was like going crazy for an Oculus, we got it. It was a ton of fun for two or three hours, and that's it.

It's like, okay, I feel nauseous. So how does that fit with what they're doing? I agree with you on this. I agree with you. I think eventually augmented reality glasses will be interesting, but I think Apple will give them to us, not Facebook. You know, even though Apple's in, Facebook has their VR thing, I think this will be an Apple business. I worked with a lot of luxury brands, everyone from LVMH, Caring Group, Richemont. And when you go to- Maybe an Amazon business.

The headquarters in Hermes, and you see that they are buying Python farms in Brazil because they want to make sure they have access to the best Python skins. And then you meet this 78-year-old woman who stitches the Birkin band by hand. Do you realize that the grace and artisanship that goes into things

that people will pay a lot of money for to put on their person, it's extraordinary. Or you go to the design labs at Porsche or you see what the history of Ferrari, and these tech companies are so incredibly arrogant that they think they can figure out a way to get you to wear something because it connects to Instagram. What do you imagine is happening, meaning, where they're going, we're going to do this. Let me just say, Mark Zuckerberg, you're in the social media business, and that's all you're going to get. I don't see them making anything else. Listen, let me be wrong about this, but that's your business, my friend.

And this idea of wearables and everything else, I mean, it'll be very nice if you make a nice Oculus, but it's not a huge business for you. And again, I could be wrong. And in 10 years, someone could pull this quote out. But this is not a space. I mean, and Amazon has tried to do, if you remember the phone, and they've done pretty well with the Kindles.

Pretty well. Not great, but good. Like, it's a good business. So, the only two players here that are actually good at one is Apple far and away. They run laps around everybody else. That's what they do. That's what they do. And then Amazon has put in a pretty good show. By the way, Microsoft made a very, very good phone. I liked that phone a lot, but couldn't handle it. That said, they then pivoted into all their gaming stuff. And now there's a good story in the Wall Street Journal today, I think, about how they're not relying just on consoles. They bought Minecraft.

They bought 15 different gaming services. That's really smart and plays right into their business. So you need to play into your social media business. And the problem Facebook's going to face going forward is they don't have a device. They don't have a TV. Well, they're not vertical, right? They don't control screens. They don't have a device. They don't have a TV. Well, they're not vertical, right? They don't control screens. They don't have a network. They don't own. I feel like they kind of got to move into content or something, but they're not going to. They're not going to. I don't know. The gangster move and what could happen is that if, I mean, assuming the antitrust

slumber continues is this new Discovery Plus throws up in its first earnings as they try to transfer to CNN Plus and then Facebook comes in and buys Discovery. Yeah, but that's still not a distribution. That's still not distribution. Like they kind of got to buy Roku, like you say, or something like that. That's a good point. You know, I don't know if it says much about the battle between Zuckerberg and Cook, but I'm sorry, Mark, you're not up to him in this space. You're just not.

It's literally like watching a very tiny person play LeBron James. It's like watching Mark Zuckerberg play. Like Tim Koch. And by the way, Apple has plenty of problems. They've got a real issue with this app store. It's very vulnerable in China. Everybody has vulnerabilities. But in this space, no.

They are good, and they recover well, by the way. Can you believe that? AirPods, if they were a distinct company, if they were a distinct company, would be a Fortune 50 company. Just that one product. I love my AirPods.

It's the most successful wearable, and the Apple Watch, if it didn't have Apple behind it, it wouldn't have worked, and it took a decade, and I still don't think it's a great product, and it's not a wearable., wouldn't have worked. And it took a decade. People love it. And I still don't think it's a great product. And it's not a wearable.

I agree. I agree. But I got to tell you, I see it on everybody's wrist. And these are regular people, not Silicon Valley. I've just been noticing everyone's wearing one. And I'm like, huh. I think they use it for exercise and health. What about the Amazon Halo?

Did you try that? Yes. It's not a watch. It was terrible. It figures out your mood. It was terrible. I gave it up. I had it. I don't know where it went. It's in my box. It's out your mood. It was terrible. I gave it up. I had it. I don't know where it went. It's in my box. It's in my box. I have a box of things and I've got every

single job on. You know what I had when I was in the 10th grade? What? I had a mood ring. I have a mood ring. Remember those? I have one. Ooh, Scott's happy. I have one. I couldn't figure out what the color was for deeply insecure and acne riddled. That was the color that I basically had all the time. Red and orange. That's the color. Cynical, deeply insecure and acne riddled. That was the color that I basically had all the time. Red and orange. That's the color. Cynical, deeply insecure. Blue is good.

Blue and green are good. What color was that? Adding up to nothing. Black. Remember mood rings? Do you remember mood rings? I remember them. I have one still.

I have one in that box with all the other stuff. It's a lot of the bread machines. I remember going out on a golf course with my father. That was the only time we got to spend time with each other was he would go play golf and I would try and find lost balls because he was such a cheap motherfucker. That is a poignant and sad moment to think about. And it would be really windy and cold on the golf course and I would sit there and hold my hand in the air and go, dad, look at all the moods I'm in. Shut up, you wee bastard.

Find my Titleist ball. I mean, anyway, hold me. That sounds like a loving, loving relationship. Hold me. Oh my god. I literally spent the morning like playing. Meet your new mother. Meet your new mother. Oh, Scott. Oh, I'm so sad for little Scotty. And tell that bitch

your mother her child support is not coming this month. Little Scotty. This week on the Hallmark Channel. I liked your show last week the trillionaire's house um this one's sad i don't want to watch this show everyone's like everyone's like this is where you cross the line why people like to tell me people like to tell me and i'm like come on bitch that line was crossed about three seasons ago why would they why did you cross the line what what i was

people didn't like that the rocket blew up because of all the gorilla semen. I should have said that it's steroids or something. Come on. And not only that, Rebecca, she edited out the most crazy bits. She saved me for myself. Okay. All right. Anyway,

we do not feel good about the Facebook watch. This is our thing. So let's pivot to a listener question roll tape. You've got, you've got, I can't believe I'm going to be a mailman. You've got mail. Hi, Karen, Scott. It's Leland in New York. Given your access and insight to technology, how has what you have learned actually changed

your actions as parents? During the gloom of the pandemic, we traded off the risk of our 11-year-old learning some new words from Cardi B for the joy that she got from dancing with TikTok. But now we're back to the usual concerns. Kids used to be able to mature in relative obscurity, making mistakes, having remorse, and changing. Today, the mistakes are permanent and public, while remorse and growth don't show up on Google. Our kids have to be adults before they actually mature or else fall behind by staying off the web. What real-world precautions do you recommend for other parents?

Thanks very much. That's a really good question from Leland. He's a good parent. Geez. I'm going to give him my kids to raise. Leland, will you adopt me? Yeah. My God, that guy sounded very thoughtful.

Oh, gosh. What do you think, Scott? I think about this all the time, because now Claire is liking the moan. Leland will you adopt me yeah my god that guy sounded very very thoughtful what do you think Scott you know I think about this all the time because now Claire is liking the moan she calls it the moan the phone

but we just show her photos on it we make those Apple has this thing where you can make little movies it makes it itself by you click on someone's face and it makes beautiful

I think about this all the time I think this constantly you have teenage boys. I'm not there yet. What, what, what have you, or what are the guardrails?

It's hard to get it out of their hands. They, you know, they're not quite as jacked into the internet as I thought they would be. They use it for communication for sure. My, one of my sons uses it for watching a lot of videos, but they're kind of good videos.

I have to say, I can hear them in the background. You know, he does a few memes that I'm, but it's entertainment. And so I'm not feeling very bad about it. There have been issues over the years of videos they've done or little memes they've sent that especially my oldest son that were not good.

You know what I mean? That had problems. And they got into trouble at school over them. He was not the instigator, but he was still involved. But, you know, and there's been that kind of stuff. I don't take as many precautions as I should. But I certainly am thinking about it a lot with Clara as a girl, especially around self-esteem. And there is a difference of how girls and boys interact on these things

I would never let her use Instagram for kids I think they shouldn't have phones in school I do think these streaming networks are kind of good in a lot of ways because we can pick and choose the movies that they see and the things

so she watches only Teletubbies because I enjoy it also so there's not any tech companies I trust with my children, I think. There's a couple others that are trying to do some good things like Roblox and others. But I got to say,

the more I can keep them away from this stuff and jacked at the internet, probably the better. Scott? Yeah, one of the most stressful moments in my life and one of the most frightening things I've ever encountered is slowly but surely, my youngest suffered from device addiction. And about three, two, three months when it was homeschooling, and he was on his iPad all day, and then on video games, and it just rewired his

brain. And one day, we just noticed even his voice was different. And he had to be near a device that would give him some sort of interaction. And when he was off the devices, he was a different person. And it's like, when did this happen? And it was the first real look into addiction I had ever experienced. And then when it's when you're a kid, it's really jarring. And so the problem is, this is how they socialize with their friends now. The communications. And you say, well, just don't let them on their devices. And I'm like, anyone who says that doesn't have kids.

Yeah, they need to talk to their friends. This is how they talk to their friends. So what we do is we just, we limit it by time. And we just say, all right, during the week, it used to be no devices during the week. That became impossible. Now we try to limit it to an hour during the day. And then on weekends, we let them play in the morning. But there is something really, especially I I think, with the young male brain.

I think it actually rewires the male brain. I think with young women or girls, it's more like what you're talking about. And that is we put these nuclear weapons of destruction of self-esteem. I always say boys bully verbally and physically, girls bully relationally. And then you put social media, and they are really brutal. I mean, they can be very mean to each other. But these companies haven't taken responsibility. And I would like to see our school does not allow devices at school.

Yes, ours does too. They have a thing. They put them in when they come in. But the stuff about your permanent record, the other issue you talked about is, and I think this cancel culture, I think the latest, whether it's Reuters or Condé Nast deciding to punish people 10 years after a mistake they made when they were literally minors. They were younger than 18. I think we have to start that zeitgeist bullshit from our society. I think you get to etch-a-sketch your history before the age of 18 for your professional life. And I think if you said

something stupid on social media when you're 17, I just don't think it should be allowed to haunt you. Agreed. Agreed on that. Except if it's egregious. There is egregious. There is some egregious, but yes. Well, some minors are tried as adults when they start killing people. Yes. But we have enough nuance to say if someone says something stupid or off-collar when they're 17, they shouldn't be fired when they're 28. Agreed. And I think you take that into account in some ways. I mean, I had an issue with a video at my son's school and he didn't do the video, but he was in it. And we made him apologize to the girls. It was a very anti-girl thing that one of the teams did that he was on. And he was there in the background laughing. And again, he got up and apologized to the girls

in a public setting. He did this himself. He's a really good kid. But still, it was cringe-inducing. Like, oh, why don't you leave? But of course, you know, social pressure and things like that, it's really hard. Or maybe you didn't know it was being taped or whatever.

In any case, any parent is gonna deal with this issue over and over again. And especially as they get older in a much more sexualized way, the trading of pics happens. I'm sorry to tell you, Scott, but there's going to be that. It's going to happen. And so you have to really pay attention. At the same time, you don't want to be sort of this, let me have your phone. You can't use it because it does, it does hinder them in so many ways, especially with online. Because a lot of like, by the way, all their classes are online and their assignments, they're all their assignments. And, you know, nobody, everyone operates in an online environment at that school, at least for assignments and homework and turning it in and writing it up. I am going to be so relieved next year when everything's in person.

And by the way, Clara's going to school too. But I'm just going to be so relieved when everything's in person. I can't even. I think it's been a big experiment in crappy education during the pandemic. No doubt. But there's – I'm sort of – I mean, another thing you have to contend with is that I think that there's something, and I have two boys, so I think about boys a lot. I think there is an advantage and there's something to their aggressive, you know, rebellious exploration where they don't get caught. I don't, now they get caught on everything.

Now everything, give me your phone, give me your password, and you see everything they've done the last 24 hours. I don't know if that's good either. And when their mom asks- You do that? I don't do that. I don't do that. Well, that's the thing. When their mom says, here's about something at school, or here's about something off color with one of the kids

and says, all right, everyone's phone. I'm like, I think they need some room and some privacy to screw up. And if I look at the shit I got into, first off, when my mom left at eight in the morning, we didn't see each other until 10 o'clock at night. I mean, it just, kids have, kids are so over-programmed and so over-supervised that there's a difference between guardrails and concierge and bulldozer parenting where they don't learn, you know, it's that Jonathan Haidt notion,

we use so many sanitary napkins on their life, they don't develop their own immunities. It's that Jonathan Haidt notion. We use so many sanitary napkins on our life, they don't develop their own immunities. It's a tough balance. And these companies, keep in mind, these companies are not concerned with their children. They want to addict them. Certainly. They want to addict them. These devices are purposely and these social media platforms are purposely addictive. I think you can get involved in your school.

I'm really thankful our school does a really good job. The only thing we seem to be able to do is to put a time clock on it. But I'm really thankful our school does a really good job. The only thing we seem to be able to do is to put a time clock on it, but I'm not exaggerating. When we go in to the den and we ask our youngest to get off of Minecraft or whatever he's playing, it's literally like telling someone to stop smoking crack. He literally looks at me like, nemata self, kill father and sleep tonight. It's just – Now you've gone too far. Yeah. I don't know.

Now you haven't. I agree with you. I agree. It's really – it's addictive. There's no question. And one of – you know, we believe that kids should make mistakes. And obviously, you know, Scott Galloway always makes mistakes right here publicly. And we love it.

I'm going to space. Good luck-y. Anyway, that's a great question, Leland. And I – if I had to name – I guess Roblox, I suppose, if I had to name a company. There's several others that try really hard. And by the way, pick and choose what they're watching on television, too. That's what I do. That's the one great thing about streaming now is you can really pick and choose and you don't have to be part of an endless, you know, vomiting up of ads and stuff like that for kids.

So, by the way, just a quick note on space. Yeah. These guys are tempting disaster. Every really terrible decision usually involves in the corporate world involves ego. And these guys competing against each other. And this is where capitalism meets space exploration. There'll be some externalities. And that is you now have three megalomaniacs,

and that's probably not true of Richard Branson, but three people who explicitly or implicitly are putting pressure on their organizations to get them into space. And I'm telling you, Kara, space travel is expensive and really dangerous. They are- Is this your prediction?

They are tempting disaster. It's just, it'll be really, I don't know, the whole thing, quite frankly, and I'm more anxious, the whole thing makes me nervous because I think that there's now individuals nobody wants to let down and they've announced through their press that they are going to go into space. This is space travel. And by the way, it might be worth it. I had a kid who works with me say, I think it's wonderful that billionaires are spending money on exploring space and opening new worlds. And I'm like, that's a nice optimistic view. It'll come at a cost and the cost will be more than money. It is dangerous, expensive work, space travel. Okay. All right, Scott, one more quick break. We'll be back for predictions.

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slash Claude. The Capital Ideas Podcast now features a series hosted by Capital Group CEO, Mike Gitlin. Through the words and experiences of investment professionals, you'll discover what differentiates their investment approach, what learnings have shifted their career trajectories, and how do they find their next great idea? Invest 30 minutes in an episode today. do they find their next great idea? Invest 30 minutes in an episode today. Subscribe wherever you get your podcasts. Published by Capital Client Group, Inc. Okay, Scott, you just sort of predicted something with space travel that JetPlace is going to blow up. I believe that's what you're just saying, or one of them is going to, there's odds are. Maybe, maybe not. Maybe they'll come back safely or not come back at all and stay there and live and enjoy themselves

up in space. But what is your prediction besides that dire prediction? I think we're going to see, I think we are going to see an examination of the difference between income and wealth. We're going to hear a lot more about what it means to be wealthy and what is your role as a citizen. And I think it's going to be an interesting conversation. And I don't know if it's going to be a wealth tax. I think most likely they'll go after trust. I think real estate taxes are probably a lot of those loopholes are going to be closed. But we have hit, I really, I'm very encouraged. I think a lot of immunities are kicking in. And people have said, you know, enough is enough. And I think COVID-19 has really laid bare a lot of those externalities.

But we're probably going to see some sort of AMT introduced where it says, all right. So AMT, explain how that would work. It's just alternative minimum tax. It says, okay, if you reported $10 million in income or wealth or whatever it is, and you ended up paying less than X percent, we want you to pay at least X. And I mean, that's what the AMT, basically the new G7 intra-sovereign or the international tax treaty is basically saying these guys are going to have an AMT of 15%. And that is they've got to pay at least 15% on their profits. And no matter what tax deductions or gymnastics or low tax domain they managed to get into, the minimum is going to be 15%.

And I think that's the beginning. I think we're about to see a lot more of that. And what happens is, I mean, to a certain extent, it's sort of the bad LBO of America. And LBO is people show up, It's sort of the bad LBO of America. An LBO is people show up, layer a company with debt, take out- That is leverage buyout. The leverage buyout, and then take out a bunch of payments or dividends to themselves or lever it up more and take all their money out and then say to the company, all right, best of luck to you. And if things work, we want even more money back.

There's been sort of an LBO of America, and that is we've issued incredible debt. It's like, well, our debt has skyrocketed. Our government spending really hasn't gone up that much as a percentage of GDP until the last year. Taxes on the middle class and the lower income have actually not gone up. They've stayed flat. What's changed is that we've decided to lower taxes as a percentage of GDP on the wealthy. And I think that's changing. And so, anyways, I think this G7 tax treaty is going to – there's going to be different forms of it that come into America. And I think there's going to be some sort of AMT on the top 1%. It's going to put a lot of energy into Elizabeth Warren and all those who are calling for this.

For sure. 100%. And there's more to come. They only did five, really, of the people. I'm going to make a prediction, Scott. Go for it. So, I just noticed, nobody really knows. Carolyn Everson, who has been working at Facebook forever, very close to Sheryl Sandberg, is leaving the company after a long time.

I mean, I'm assuming she's just retiring and she's got a lot of money and everything else. I think it's going to be a hot summer for Facebook and I would see some other major executives there leaving. There's a book coming out by Shira Franklin, Cecilia Kang of the New York Times called An Ugly Truth Inside Facebook's Battle for Domination. I think there are some things in here that are not going to be good for many executives there. So, I haven't read it. I haven't seen it, but I am hearing a lot. They're very worried at Facebook internally about it. They're worried about the book? Yes. And so, we'll see. We'll see. I just think, you know, I saw Carolyn leaving. I was like, huh, that's interesting. I think there's going to be a lot of people front-loading this situation.

Why wouldn't she go be? I would think it's, I met her once. She struck me as a very talented executive. Why wouldn't she go be? I would think it's, I've met her once. She struck me as a very talented executive. Why wouldn't she go be the CEO of TikTok or something? I don't know. Maybe she is. I don't know. She is a very competent executive. She's been their ad chief for a long time.

Anyway, I just, I don't know. I just feel like there's going to be quite a few departures and a real turnover there. I think at some point it's so wearying and exhausting. And especially there's going to be a drumbeat around this book. It just, this isn't going to stop for them. And so, at some point, these executives are like, that's, I've had enough or something like that. Or maybe I should get, or I don't want this to be what I have to say at dinner parties or I don't know. I just, I don't, I have a feeling. That's my feeling.

That's your feeling? That's my feeling. That's my feeling. I just, it didn't get a lot of attention, Carolyn Levy, and she's a very important executive. Also, someone who's been very close to Sheryl Sandberg in the past. They're very good friends. Anyway, don't forget, if there's a story in the news that you're curious about and want to hear our opinion on, go to nymag.com slash pivot and submit a question for the show. Leland, your question was excellent.

I love all the excellent questions we get. Scott, read us out and try not to cross the line. Okay? Try. Today's show was produced by Rebecca Sinanis. By the way, this is the third take of the credits because the dog is feeling salty and I did an NC-17 read on the first one and everyone's saying no. So here we go. Ernie Intertot engineered this episode. Thanks also to Jubros. Yeah, we thank them every week. Snooze. Make sure you're subscribed to the show on Apple Podcasts or an Android user. Check us out on Spotify

or frankly, wherever you listen to podcasts. If you like this show, please recommend it to a friend. Thanks for listening to Pivot from Vox Media. We'll be back next week for another breakdown

of all things tech and business. Kara, have a great weekend. Thank you, Scott. Support for this podcast comes from Anthropic. It's not always easy Thank you. few. Well, Claude by Anthropic is AI for everyone. The latest model, Claude 3.5 Sonnet, offers groundbreaking intelligence at an everyday price. Claude Sonnet can generate code, help with writing, and reason through hard problems better than any model before. You can discover how Claude can transform your business at anthropic.com slash Claude. at anthropic.com slash plod.

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