The Prof G Pod with Scott Galloway
00:46:46 · Aziz Sunderji
[00:46:46] S3: So you guys know the book Abundance, right? By Ezra Klein and Derek Thompson came a few years ago, right? And one of the arguments or maybe the central argument they made was that our failure to build is a function of regulation, which itself is downstream of politics. And in particular, that blue states put in place all this regulation that makes building slow and leads to higher home prices. And I think that argument is is not... It doesn't survive the data. It's just not right. Okay? So if you look at a place like New York, there's a whole constellation of, you know, characteristics about a place like New York. It is it is... The people who live here are quite highly skilled, highly educated, high earning. It's very productive. GDP per capita is really high. It's very, very dense. These are some of the most, like, dense... Even San Francisco, which people are accused of not being that dense, it's still pretty dense in a global perspective. They're also... You know, New York is hemmed in by water, so it can't really expand outwards. These characteristics, it's like this whole constellation of characteristic. That... You could say that about almost every big city in the world that has become really expensive. It's true about San Fran. It's true about Seattle, Miami. It's true about, you know, Paris and London and Copenhagen and Sydney. These are these are characteristics that you see around the world. And actually, all these places, may not be Democratic voters, but they're they're lefty. And so, you know, what what what Ezra Klein and Derek Thompson did was they they, like, they wove a very compelling narrative out of this. They they picked out a few variables, and they said blue equals regulation equals slow building equals expensive housing. And I don't think that's correct. I think it's density. It's really hard to build in dense places. And dense places happen to be the ones that attract highly skilled people who tend to be lefty. So, you know, I'm Canadian. I can't vote in this country. But I... If I could, I'd be a Democrat. And my worry is that the kind of vilification on, like, you know, weak empirical grounds is turning a bunch of people away from Democrats when it's partly their fault.
00:48:56 · Aziz Sunderji, Scott Galloway
Maybe Democrats do regulate a little bit more, but a lot of it is just the fabric of these big dense cities full of people who earn very high incomes. [00:49:05] S1: And Kyla, before you weigh in here, isn't some of it also that young people, I don't think we can really ever appreciate the impact that Instagram is having on the world. And that is people see a life and think that's not a 0.01% life, that's aspirational. That is a normalized life that I should have access to. And everyone aspirational I know is either living in LA and going to hiking in Runyon Canyon and going to Nobuzuma, or they're in New York living in the West Village. And I should and deserve to have access to that. And young people flood into these cities and the prices go up. I couldn't, when I was your age, remember thinking I can't, I left New York because I just couldn't afford it. And that was sort of a natural part. And now I hear just young people say, York or die. We're a memetic species. Isn't some of this just a general expectation amongst young people that they failed if they aren't living in Beverly Hills or Soho? Or am I being, I say this stuff and I realize how boomer I sound. I want to acknowledge that I think housing is a huge issue and we have an obligation to shove more capital into the hands of younger people. But I get the sense that I wonder what percentage of people, young people now feel that a normal life is to live in the West Village or to live in Beverly Hills versus my generation.
00:50:45 · Kyla Scanlon, Aziz Sunderji, Scott Galloway
[00:50:45] S2: I mean, you see the stats on how much money younger folks feel like they need to be successful. It's like double, I think, even what millennials need. I think part of that is inflation, and I think part of that is inflated expectations. We have two types of inflation there. But I I I don't know if all of what's going on in the housing market is, you know, people going on Instagram and seeing influencers, you know, rent out homes and rent cars and pretending that they own them. I I mean, I think that definitely complicates the picture, and there is this sense that you should be able to move to a city, and it should be cheap, and it should be accessible. I think it could be cheaper and more accessible. Like, my rent's extremely high in LA, and sometimes I'm like, why is this so high? Like, what is, you know, the power goes out all the time. Like, what what am I paying for? And so I think that's also part of it, is that it it's almost like so high to the point that it it doesn't even make sense. But I don't know if aspiration is like the core driving force behind some of the dynamics. I think it complicates the picture in terms of financial knowledge and people believing in their economic future. But... Yeah. Aziz, what do you think? [00:51:59] S3: Yeah. I think I I think part of it, like, to be fair to to the folks who do wanna live in the West Village [00:52:04] S1: or New York City or
00:52:05 · Aziz Sunderji
[00:52:05] S3: San Francisco or wherever is that there's been a concentration of economic activity in cities. And so, you know, if you wanna, yeah, if you wanna have a seat at the table, like, one of the things I love about New York and the reason I pay, like, an exorbitant amount of my income in rent is that it's a place stuff is happening. Like, it's a great place to to meet people, to build a business. But I'm like, I'm paying through the nose for it. So I I think that they're... Like, people wanna be in cities partly for for good reasons. It's just... It's not just memeticism, but that's certainly part of it. I'm... I fully agree that walking around with phones in our pockets that are like wormholes to other realities where people are are, like, living much more lavish lifestyles than our own is very, very bad. I've done some work on looking at happiness across countries, and you see this with the... I mean, I'm not the only one who's looked at this, but if you look at the correlation between smartphones and happiness, it's a very strong correlation. It's very hard to deny. I think it's very bad for our mental health, and we should all spend less time on our phones. I I will... Let me ask... Let me add, like, one quick thing to to that, which is that this is part of the the problem. Right? Like, if you look... You know, economists talk about the demand curves and the elasticity of demand. And part of the problem with a place like New York or other big cities is that there's so much demand to live here. And so the amount of housing we would have to build to meaningfully move the needle on rents or home prices is really, really high. There's there's a study that argued that even if every single building in Manhattan was a skyscraper, it would only drop rents by 15%. There's just so much demand to be here.
00:53:42 · Scott Galloway
[00:53:42] S1: So just as a means of walking down memory lane and, know, when I when I was a kid, right out of college, I went to Morgan Stanley, I made $35,000 and I got a bonus I think at 15, so call it 50. And we all put that 15 on our credit cards and paid it off with our bonus. Moved to New York. I had a one bedroom on 73rd. It was $1,900. There were three of us in there. I slept in the entryway. There was a difference though. A lot of my friends were in different industries, the arts. I had friends who were in Broadway, musicians. And the disparity between my pay as an investment banker and their pay was much narrower. I made more money, but not a lot more. It was like we all kind of were in a certain band. And I feel like those bands to your earlier point, as you said, dramatically changed. The really scary one is after graduate school, I graduated from the High School of Business at the age of 27. And I got several offers in consulting that I turned down to start my own business that compensation was around a $100,000. And I bought a house borrowing money from my girlfriend's parents for $285,000 So approximately three times my salary. And now the Haas School of Business, the average salary is $200,000 compensation, which is exceptional compensation. These kids are, going into, you know, they're considered elite young human capital. But the average housing price is 2,100,000. And that's as of last year. I wouldn't be surprised if it rockets to 3,000,000 given all the AI boom that's about taking place. So it's gonna be somewhere between ten and fifteen times. There's just no getting around it. This really is, and the word is overused, it's a crisis. And my sense is all of the things that, or many of the solutions that Aziz and Kyla recommended, it feels like we need to do all of them all at once in different areas and have just a series of pilot programs to see what works and see what really moves the needle. But I don't think, everybody talks about how great it is to rent and it's not as good an investment. I just think it's an another emotional hit on the psyche of young people. That they're not able to do what their parents did. They're not able to invest in their home and make it wonderful because they don't own it. They're less likely to start thinking about procreating. They're less likely to feel they've engaged in the American dream.
00:56:12 · Scott Galloway, Kyla Scanlon
And yet again, it's another transfer of not only wealth, but psychological well-being from young to old. All right. That's my TED Talk. Aziz Sundarji is the author of The Home Economic Substack. He previously spent fifteen years in research Barclays Investment Bank and later worked as a data journalist at The Wall Street Journal. Kyla Scanlon is an economic commentator and also haunts my Instagram feed. [00:56:38] S2: You are everywhere, Kyla. Yes. Yeah. Go to are everywhere. [00:56:42] S1: The algorithms have have have determined that I absolutely love your stuff, which is true. And she's a creator of Kyla... Or the creator of Kyla's newsletter on Substack. Her debut book, In This Economy, question mark, How Money and Markets Really Work, was a New York Times bestseller. Her new podcast, best of luck with Kyla Scanlon, is out now. Aziz and Kyla, thanks so much for joining us on this important topic. Thanks, Scott. This episode was produced by Jennifer Sanchez, Laura Janier, and Asher Schwartz. Our video editor is Bianca Rosario Ramirez. Kami Riek is our social producer. Drew Burrows is our technical director, and Catherine Dillon is our executive producer. Thanks for listening to the Prophecy Pod from Prophet G Media.