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

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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.

And

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 that hunk of steroid love.

I liked our show letting this My 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.

I will help you do that.

I will definitely do that.

So Lucky can turn to Bezos and 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.

So President Biden is revoking former President Trump's executive orders 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 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 summarize 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 words.

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.

Yeah.

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 to.

I'm 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 and nor should they be.

This is not, at the same time, this is, you know, we'll see how 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 was 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 had, you know, runs Alibaba, owned, created all kinds of ant, all kinds of stuff there.

Just essentially, if for people who don't understand, Jack Ma is like if you took Elon Musk and mashed him together with Mark Zuckerberg,

Bill Gates,

and all of them, really, you know, and Elon Musk, throwing 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.

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, you know, a billionaire of its rights.

But there is,

you know, when you think about how fortunate we are in the U.S., in China, you have to, I don't think

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 want to 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 that 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'd 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.

I mean, what would they do?

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 Maw 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,

you know, 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.

You know, 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 it's just, there's just so many reasons, I think, to be grateful that you don't live in China.

Well, whereas innovators obsessed 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.

You'd rather be Mark Zuckerberg here because it's going to be slow.

He's 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, 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.

You know, 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 don't like it.

I don't know.

It's crazy enough.

That's actually really interesting.

Whereas Apple has said you have to opt in for the tracking across

different sites for ad targeting.

So the difference between opt-in-the-scenes.

No, no, no, no.

Apple has enabled mesh networks without your permission.

They all do it.

They all do this without your performance.

But 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.

That's about the Times story you talked about.

Yeah.

Their systems haven't been hacked to the same extent that some other systems.

And people, well, 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 in exchange.

And Amazon has a habit of doing that.

So, I mean, just as personally,

I just should say, here's why we want to do it, Or at least explain it as they're turning it on much better.

I just don't, I don't have, I

don't have echoes or, and I don't have rings.

I just, you know, I just, I don't, I, it's more irritation than anything else.

I'm not necessarily as nervous as I love it.

That's how we speak to each other in the house.

Oh, we do.

Nolan, come finish your dinner.

You know, Alexa announced, don't, don't, Nolan, come finish your dinner.

And then, you know, don't, don't.

No, dad.

Leave me alone.

I hate you.

That sounds familiar.

We have Alexa.

Wow.

We have Alexa throughout the house.

Really?

I just yell up the stairs.

I'm a yeller up the stairs.

Like that kind of thing.

We love it.

No, it all.

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?

Anyway, I know we live the same life.

Oh, my God.

You just have a nicer house.

So let me move on.

Speaking of overreaching.

Going into space compared to an animal.

Can I have your house when you go into space?

Kara, you're welcome anytime.

No, but can I have it?

Can I own it?

I'd like to own it.

Just pay me a lot.

Because here's the deal.

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.

So can I have your stuff when you go into space and eventually, you know, meet, marry, and live with jeff bezos on mars

you know if it happens i just want to be super high because i think it'll burn a little bit brighter i mean rapture on its own would be pretty cool but it'd be awesome high yeah oh to be up with jeff

on mars there we 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 it

i just think you're married to 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 for, I think it's $401 billion.

According to the 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 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 to their wealth, about 4.5 percent to the governments.

Is it less than that?

Yeah.

So they basically found that.

It's like one bucket under 1 percent.

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 you mean 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 $2 million a year or $3 million 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 $3 million against your holdings, right?

And 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 percent a year, you have more net worth, and you pay 1 percent, but you don't pay any tax break.

You get a tax break on the loan.

That's right.

And you get a tax 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 $1 million 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,

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.

Aaron Powell, Jr.: 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 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.

That 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.

Carl Icahn summarized it.

He said, they said you paid no income tax.

And he rightfully said, well, I had no income because

he's able to offset it with expenses and charitable giving such that he can report zero income year after year.

Right.

Well, the whole idea behind this is you don't, you can pick your income.

That's what it is.

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 tech companies do that.

The CEO is 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 have make income, who make big salaries.

Like a lawyer makes a big salary, doesn't get stuck.

And so they're like, look, I pay 37% right now, and I can't, I can't borrow against, you know, ghost stock, essentially.

And so I pay, 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's easy to sort of soak the rich, but in this case, you're not really soaking the really rich.

You're soaking, you know, 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 a, 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 tax is, 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 $200,000 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 to have the biggest burden.

And the middle class, 14%.

Fair enough.

But the super rich, the super rich, boom,

once the majority of your 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 and 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 Arnaud did.

When France tried to put a wealth tax on people, Bernard Arnaud 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 you said, look, there's been a windfall here, and that would probably not motivate people to move countries, kind of a one-time thing.

And then we're 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

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 tax advantage, and that's people who own real estate.

Trevor Burrus, Jr.: 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 percent a year.

So I get a tax write-off, even though it's likely going up in value

4 to 6 percent.

And then if I decide to sell it, I have six months to what is it, 10 B1 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 borrowing against it is really interesting this ability to borrow and that's not going away and again they get a tax advantage this this story i again we have 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 um that they're pulling just it's it's what's interesting is that um how angry people will get about this you know i i just i i interviewed the reporters 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 sourcing because these turned out to be very accurate, but 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.

But one of the things, 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, is an astonishing amount of billions and tens of billions of dollars of which they will give themselves a dollar's salary and then

and then actually take take deductions and write-offs.

And so we have to pay them because they're and then they 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 advantaged for them.

You don't even have to designate who you're giving to.

Elon Musk 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, he's going to borrow money against the money in that charitable designated charitable fund.

That's why I think it was really well done in this thing.

But we'll see what happens.

We'll see if there's anything.

But of course, know, 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,

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, you know, a well-known education expert, Mark Zuckerberg?

Give me a break.

It's, you know, 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 say it's a radical idea.

And it's like, that's radical.

We're talking about super rich.

We're talking about going back to like Reagan, where there was no difference between capital gains and current income.

We're talking about going back to the first Bush, where taxes on the top 1% were gas, 40%, not 17%.

These aren't radical ideas.

America has generally bought into the notion that the most fortunate and 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 superbang.

Yeah, we don't believe in the business.

And so we need

to believe in Jeff Bezos.

Yeah, and they do that.

They lord that we created all these jobs.

So what?

So what?

You still have to pay your taxes.

We believe they're innovators.

They're our new Jesus Christ.

And we kind of like, oh, you know, it is what it is.

And here's the reality.

In America, 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.

and not pay a lot of tax.

The 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, try and put pressure on the government or screw it.

They just take their money.

But 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 a press.

Yes, that was bone saw.

Right.

Unless you give us 30 percent or 50 percent 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.

Scott, should we just take that money from them?

Just show up.

We go into space with them.

We're going to go to space with them.

Baby, we go to space.

We're going to send lucky people in space.

We're going to send 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 I do.

It's not their fault.

It's our fault.

It's not 100%.

We have to.

He did say, I want to pay more.

This is wrong.

But I don't know what to say.

It's legal.

We have the backbone to put in place to return to our proud legacy of a progressive tax structure.

And most wealthy people will support.

Let me put this way.

A lot of wealthy people will support.

They will support these policies.

They're just not going to disarm unilaterally.

Yeah.

What is income, Scott?

What is income?

We've got to redefine income.

There you go.

Anyway.

What is wealth?

What is true wealth?

What is 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.

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Welcome back.

The Verge is reporting that Facebook will be releasing its first smartwatch next summer as they screwed up in phones.

They're coming back with a smartwatch.

Obviously, they're in Oculus.

What could possibly go wrong?

The watch will report to come in two 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 the app store.

But what do you think about this?

The Facebook watch, would you buy it?

I didn't buy their other one, whatever their version of Echo is.

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.

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.

Ping.

It was called Ping, and it was a disaster.

It'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 then the other

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, 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.

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 have the Air Force.

Remember Jawbone?

You can go to a conference without somebody giving you a wearable.

We introduced Jawbone at one of our All Things D conferences.

The majority of people are only going to put on

something that they think makes them look, I put on a panorama.

What do we think about this?

So you're you're saying no one wants to put on a Facebook?

Fucking

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 electronic.

I call them unwearables for the most part.

I've tried all of them.

This is success that

I don't, you can see.

I have them all.

I have a box.

I just don't.

I have a box.

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 to Kering Group to Richemont.

And when you go to

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 Birkenband 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 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's connected to the market.

What do you imagine is having a 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, I hope,

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, Amazon has tried to do, if you remember the phone, and they tried to do, you know, they've done pretty well with 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.

They do.

That's what they do.

And then amazon has done has put in a pretty good show by the way microsoft made a very very good uh phone that 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 yeah that's really smart and it plays right into their business so that you need to play into your social media business and the problem face was going to face going forward is they don't have a device they don't have have a TV.

Well, they're not vertical, right?

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.

No, no, no.

The gangster, the gangster move and what could happen is that if, I mean, assuming the antitrust

slumber continues is this new Discovery,

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 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.

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 Tim Cook.

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.

Do you believe that?

AirPods, if they were a distinct company,

if they were a distinct company, it would be a Fortune 50 company.

What a great product.

One product.

I love this.

It's the most successful wearable.

And the Apple Watch, if it didn't have Apple behind 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.

I agree.

I agree.

But I got to tell you, I see it on everybody's list.

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.

And what about the Amazon Halo?

Did you try that?

Yes, it's not a watch.

It was

a 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 there's, I've got every single one of them.

I was in the 10th grade.

What?

I had a mood ring.

I have one.

Remember those?

I have one.

Ooh, Scott's.

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 color that I basically had all the time red and orange that's the color cynical deeply insecure

adding up to nothing what color was that adding up to nothing

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 I remember being 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 like lost balls because he was such a chilly

motherfucker anyways poignant and sad moments and it would be really windy and cold on the golf course and I 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 title of ball.

I mean, anyway, hold me.

That sounds like a loving, loving little child.

Hold me.

Oh, my God.

I literally spent the morning like, meet your new mother.

Meet your new mother.

Oh, Scott.

Oh, I'm so for a little Scottish.

Her child support is not coming this month.

Little Scott.

This week on the Hallmark channel.

I liked your show last week, The Trillionaire's House.

This one's sad.

I don't want to watch that.

Everyone's like,

everyone's like, this is where you crossed 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.

Why did you cross the line?

People didn't like that the rocket blew up with

because of all the gorilla semen.

I should have said that his steroids or something.

And not only that, Rebecca, she edited out

the most crazy bits.

What's up?

She saved me for myself.

Okay.

All right.

Anyway, this was, 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.

Jeez.

I'm going to give him my kids to raise.

Leland, will you adopt me?

Yeah.

Oh, my God.

That guy sounded very good.

Oh, gosh.

What do you think, Scott?

You know,

I think about this all the time because now Claire is lucky in 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 movies.

I think about this all the time.

I think this constantly.

You have teenage boys.

I'm not there yet.

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, there was 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.

Um, he was not the instigator, but he was still involved.

Um, but you know, and there's been that kind of stuff.

Um, 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, especially around self-esteem.

And I, 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 jack to 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 in about three, two, three months when it was homeschooling and he was on his iPad all day and then 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 just like, 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 one of your kids, 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.

And doesn't understand.

This is how they talk to their friends.

So what we do is we just 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 think with the young male brain, I think it actually rewires the male brain.

I think with young women, it's or girls, it's more like what you're talking about.

And that is, we put these nuclear weapons of destruction of self-esteem.

You know, obviously, 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 look, these companies haven't taken responsibility, and

I would like to see our school does not allow devices

to.

They have a thing they put them in when they come in.

The stuff about your permanent record, the other issue you talked about is, and I think this council culture, no, no, cancel culture, this, I think this, the latest, whether it was Reuters or Condon Assemb 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 echo 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 are some egregious people.

Some minors are tried as adults when they start killing people.

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 should take that into account in some ways.

I mean, I had an issue with a video at my son's school, and he was, he didn't do the video, but he was in it.

And, you know, 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, it's you're going to, any parent is going to deal with this issue over and over again.

And especially as they get older in a much more sexualized way, you know, trading, the trading of picks happens.

I'm sorry to tell you, Scott, but there's going to be that.

It's going to happen.

And so

that's, 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 it's,

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.

But there's,

I'm, I'm sort of,

I mean, another thing you have to contend with is that I think that there's some, 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, 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 is...

I don't do that.

I don't do that.

Well, that's the thing.

When their mom says, this hears about something at school or hears 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, you know, the shit I got into, first off, when my mom left at 8 in the morning, we didn't see each other until 10 o'clock at night.

I mean, it just,

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 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 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.

Yeah.

He looks, I mean, he literally looks at me like Nema to self, kill father and sleep tonight.

It's just

now you've gone too far.

Yeah, I don't know.

No, you haven't.

I agree with you.

I agree.

It's really, it's addictive.

There's no question.

And one of the, 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.

Going to space.

You're lucky.

Anyway, that's a great question, Leland.

If I had to name, I guess, 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, vomit, vomiting up of ads and stuff like that for kids.

So, by the way, just a quick footnote on space.

Yeah.

These guys are tempting disaster.

Every really terrible decision usually 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, 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

tempting.

They are a tempting disaster.

It's just,

it'll be really,

I don't know, the whole thing, quite frankly, and I'm more anxious.

I get old, 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 driving.

Okay, all right.

Scott, one more quick break.

We'll be back for predictions.

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Okay, Scott, you just sort of predicted something with space travel that Jeff Blaze is going to blow up.

I believe 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 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 trusts.

I think real estate taxes are probably, a lot of those loopholes are going to be closed.

But we have hit -

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's going to be a lot of fun.

So AMT, explain how that would work.

It's an 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 manage 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.

An LBO is

people show up,

layer a company with debt, take out.

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, you know, 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 one for you.

You certainly put a lot of energy into Elizabeth Warren and all the, all those who are calling for this.

For sure.

100%.

And there's more to come.

They, 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've met her once, who 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 some point it's so wearying and exhausting, and especially there's going to be a drumbeat around this book.

It's 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 know.

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 Cheryl Samper 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 NC17 read on the first one and everyone's saying no.

So here we go.

Ernie Entertod engineered this episode.

Thanks also to Jew Burrows.

Yeah, Yeah, we thank him every week.

Snooze, make sure you're subscribed to the show on Apple Podcasts.

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Thanks for listening to Pivot from Box Media.

We'll be back next week for another breakdown of all things tech and business.

Carol, have a great weekend.

Thank you, Scott.