The Prof G Pod with Scott Galloway
00:38:46 · Aziz Sunderji
[00:38:46] S3: Okay. Here we go. This is the season... Okay. The the the article is called high rents. This is the season of the year when the people of New York break out in loud complaints about the rise of rents, the scarcity of houses, and the impossibility of making both ends meet while landlords demand such exorbitant rates for their tenements. So that last word might give you a clue about when this is from. This is from 1856. So aside from the word tenements, you could kind of just copy and paste that onto The New York Times today, and it would read pretty accurately. So my point is that this is like... This is a big this is a big crisis. It's happening around the world, especially in these big productive cities where the economic opportunities are, and it's been happening for a long time. So I think we should stay very humble about our ability to influence this. I think if I could choose one thing that is driving it that we don't talk about enough, it's income inequality. You know, the fact is that you have some people, like Scott, as you were working at a bank, and when I moved to New York, was also working at an investment bank. They come to the city and they earn these high salaries, and they're competing with everybody else, teachers and, you know, all kinds of people who don't earn high incomes for the same parcels of land. Housing is a positional good. We're all competing for it. And I think inequality is a huge engine explaining the fact that we've been in a housing crisis around the world and clearly for like hundreds of years. So I... You know, it's... I I don't know if there's any, like, silver bullet for it. I I honestly don't have a good answer to your question, Scott. I think it's it's a whole bunch of different things in tandem. It's it's zoning reform. We have to build out infrastructure so that so that, you know, people can commute from further out in reasonable times. Kids are coming out of school with more debt. A lot of people are, like, completely debt laden. And I I... My worry is that this is all gonna get worse because, Scott, you were talking about how, you know, eventually the people who own these homes will die and pass them on. And maybe it'll be late. Maybe it's when we're all, like, 60. Or when I'm 80 and Kyla's 60. But, you know, when that happens, it's not going to be an even distribution.
00:40:58 · Aziz Sunderji, Scott Galloway, Kyla Scanlon, Scott Galloway
It's not going to be like sprinkled across the population according to need. It's going to engender [00:41:03] S1: exactly It's dynastic wealth. It's going [00:41:05] S2: to make [00:41:05] S1: things worse. [00:41:06] S3: Yeah. It's going to just reinforce the inequality lines that we have already in society. So I I... To be honest, I don't have a good solution, but I think it's gonna require a whole bunch of different approaches. [00:41:17] S1: We'll be right back. [00:41:21] S0: Support for the show comes from Yahoo Scout. All day, every day, we're making decisions. From the big ones, like, should [00:41:26] S1: I move cities? To the [00:41:27] S0: smaller ones, like, where do I get lunch? Sometimes we need a little help. That's where Yahoo Scout comes in. [00:41:32] S1: It's the [00:41:33] S0: new AI powered answer engine that you can confidently turn to for life's questions, both big and small. Yahoo Scout doesn't simply tell you what to do. It gives you reliable information with context and sources so you can make the most informed decisions tailored to your life. So if you're just starting your career, Yahoo Scout can help you research your industry, prepare for interviews, learn how to manage your finances, and more. I've been using Yahoo's personal finance page as my starting page on the Internet. I've started using Yahoo Scout. I find the interface very user friendly and approachable, and I think the answers, quite frankly, are just a little bit cleaner, more organized, and sort of easier to absorb. Start exploring today at scout.com.
00:41:33 · Scott Galloway, Scott Galloway
[00:41:33] S0: new AI powered answer engine that you can confidently turn to for life's questions, both big and small. Yahoo Scout doesn't simply tell you what to do. It gives you reliable information with context and sources so you can make the most informed decisions tailored to your life. So if you're just starting your career, Yahoo Scout can help you research your industry, prepare for interviews, learn how to manage your finances, and more. I've been using Yahoo's personal finance page as my starting page on the Internet. I've started using Yahoo Scout. I find the interface very user friendly and approachable, and I think the answers, quite frankly, are just a little bit cleaner, more organized, and sort of easier to absorb. Start exploring today at scout.com. [00:42:19] S1: We're back with more from Aziz and Kyla. Let's move on to listener q and a. We asked our audience to submit their questions ahead of time on housing. First question, what about home sizes? Wouldn't it be easier just to build more if we built smaller? Kyla, I'll start with you.
00:42:19 · Scott Galloway, Kyla Scanlon
[00:42:19] S1: We're back with more from Aziz and Kyla. Let's move on to listener q and a. We asked our audience to submit their questions ahead of time on housing. First question, what about home sizes? Wouldn't it be easier just to build more if we built smaller? Kyla, I'll start with you. [00:42:35] S2: I mean, we have a lot of issues building starter homes. I think, you know, there's a lot of demand in the market, to Aziz's point about wealth inequality for these gigantic homes. And so you see, like, a lot of big old homes being built, whereas the starter home is is having a little bit of a struggle in terms of being built because to Zees's point also about a builder's rate of return, they make a little bit more money when they build bigger. And so we could certainly build more starter homes, and that's definitely, I think, what the market needs is cheap places for people to start building equity, but the builders' incentives are a bit misaligned to that.
00:43:12 · Aziz Sunderji, Scott Galloway
[00:43:12] S3: Yeah. So we we actually are over the past decade... So for decades and decades, builders were building bigger and bigger homes. And then about ten years ago, it shifted. We hit an inflection point, and, and home sizes started to come down. To me, that's a sign of of a of a marketing crisis. I think that part of the problem is that minimum lot sizes have been put in place about seventy five years ago. And so that's prevented how small homes can get. As home prices go up, as land prices go up, you're incentivized to build a bigger home on the existing lot of land. That's changing, though. So so now, hopefully, we'll have more reversals of these minimum lot sizes, and we'll be able to subdivide. You're seeing a lot of legislation in places like New York and California to allow people to subdivide their lots. And I think that's a good thing. And you are seeing builders respond to the housing crisis by building smaller. So my hope is that this continues. We're actually seeing a reversal surprisingly in that trend that's lasted for a long time. We may see even smaller homes like you know ten years from now. [00:44:16] S1: On to our next question. The question was how much are Wall Street landlords really to blame? What do you think of this law that's been, I think it's been passed actually that private companies can't own more than I think it's 25 or 30 single family homes. Kyla, any thoughts?
00:44:16 · Scott Galloway, Kyla Scanlon, Aziz Sunderji
[00:44:16] S1: On to our next question. The question was how much are Wall Street landlords really to blame? What do you think of this law that's been, I think it's been passed actually that private companies can't own more than I think it's 25 or 30 single family homes. Kyla, any thoughts? [00:44:34] S2: I mean in terms of the Wall Street landlords, they're not that big of a part of single family rentals. This is something that I get a lot of comments about whenever I talk about housing that it's really the Wall Street landlords, but they don't own that many at the national level. But they do own quite a bit in some cities. Like, I think it's quite high in cities like Atlanta and Jacksonville. So I think that it it tends to be a scapegoat for this much broader problem. And I also think they're trying to buy up more and more properties, so, like, the rates rather than the level might be the issue here. But, yeah, the Wall Street landlords, they're not as big of a issue at the moment that could change as people make it out to be. [00:45:21] S3: Yeah. I I would I would agree with that. They're... I don't think they're they're a huge chunk of the market. They're they're very, like, visible and very easily vilified group. Know, like who who like who likes Wall Street investors? Like it's a pretty dunking on them is pretty safe politically. But like I just don't think it's I don't think it's a huge factor on the market.