00:56:40 · Casey Handmer
[00:56:40] S1: unfunctional agency nonfunctional system. USAID, but, like, agencies... Like, here's a radical idea. The the executive should be allowed to spool up agencies to solve problems. That makes sense to me. Some of those agencies are chartered in the constitution. Some of them are not. For the ones that are not, they get automatically sunsetted after ten years. That solves all the problems. Right? Because you could then you could then... You could always recharter it. DARPA does this automatically. Right? So whoever invented DARPA was a genius because they knew that the problem of all agencies is that you get a founding team, that team sits in in place, and they hire people like them, and over time it gets captured and sclerotic, and it can't do its job anymore. And we've just seen this over and over and over again. There's 400 something agencies in The United States and their ability... Like, if they were actually independently operated businesses, like, with paying customers, they'd be out of business tomorrow. Like, they just can't... They don't function in a functional way that we'd recognize in the private sector. Okay? They're funded by the private sector. They can never go out of business. Okay? In DARPA, if you're an employee of DARPA, you can only be an employee for a fixed term. Right? And then you're out. And it might even be for life. And so you don't have that problem of, you know, the kind of... I'd say boomer but like there were boomers fifty years ago in these places as well. It's like the people who stay there forever. It's a real problem and this is why in all these agencies, anyone who's got any degree of risk tolerance or labour market value over time will be attrition like a trader from the system because they'll get cross recruited or they'll leave to do something different. And so if you solve for the equilibrium, the people who remain will be the people who either can't or don't want to leave ever. And they might have good reasons not to, but on average, the character of the organization will just trend more and more risk averse and older and older and more and more conservative with respect to decision making. So their ability to actually dynamically execute against their purported and stated goals will diminish necessarily, and their ability to attract new talent to work on them will diminish.
00:58:39 · Casey Handmer, Ty Morse
So you have to have a natural mechanism for sunsetting this. And in in the capitalist system, this happens naturally. Most businesses don't last that long. And the ones that do, sometimes you wish they hadn't. They kind of have a a full life cycle. The resources get recycled. [00:58:53] S0: I do find the government kind of fascinating because you have this organization that over time just grows and grows and grows and grows. It's just a corporation in the limit. It's revenue sources, taxes, or, like, printing money. And then it's [00:59:07] S1: like taxes by disguise because if you're just diluting everyone else's money supply, you're just stealing wealth from them. [00:59:12] S0: Yes. And they're they're... You know, like, effective output is, like, rules and regulations from what I can tell for the most part. [00:59:18] S1: Okay. Well, some some agencies make things as well. I mean, like, be clear, like, NIST outputs, you know, standards. Right? And NASA outputs rockets and space probes and they build things. And and actually, some of these agencies, you know, Department of Transportation, like, outputs roads that generate economic value, and you don't have to pay a toll when you drive to Vegas. So, like, I'm not trying to say here that, like, agencies just can... They burn money up on a... In a in a a a in a furnace. Right? [00:59:40] S0: But if we got 40,000,000,000,000 of value is the question.
00:59:43 · Casey Handmer
[00:59:43] S1: The question is, do these agencies operate with equivalent efficiency or productivity of the private sector? And the answer there is no. Absolutely not. Like, not even close. Not even within a factor of two. In some cases, not even within a factor of 10. And given that... You know, I read the math a couple of months ago. I took out financial data and plugged it into an LLM and and said, hey. Figure out what's going on here. So I don't know. In the grand scheme of things, like, Collisons have put a few million dollars into this business. Okay? That's that's public information. They wouldn't mind me saying that. I'm proud to be associated with them. Whether they're proud to be associated with me, one can never tell. But the Collisons have put some money into this business. And the Collisons are very wealthy. How do they get the money? They built an extremely valuable business themselves. That business is a huge benefit to this country in particular, right, and all the other businesses. Like millions and millions of businesses depend on They're probably responsible, I think they tried to estimate this at some point, for measurable amounts of GDP increase are attributable to Stripe decreasing friction on transactions. Okay? We should throw these guys a parade. Okay? Pin a metal on them and make statues in Silicon Valley of them, you know, a 100 feet tall. Okay? But like any business, they pay tax. They pay a shitload of tax. They pay all kinds of tax. They had to move to South San Francisco because San Francisco was like, we're gonna charge you a transaction tax. Genius move. Okay. So they had to pay... They pay a shitload of tax. The Collisons, like most rich founders, are probably not paid much in the way of salary, but they have equity and they can borrow against the equity. They still pay tax on that. Then in addition to payroll income tax on, some of that money gets invested in companies like ours, and then we pay tax. Okay? So I ran payroll on Monday, and I'm paying on the order of $354,100,000 dollars a month in payroll. And of that payroll, almost half of that goes into either payroll tax or income tax. So the actual amount of like... And then when my employees go out and like try and rent a building to live in around here or buy food or something, they're paying tax on that as well.
01:01:55 · Casey Handmer
So if you think like what we want here is the net economic surplus to make it from the Collison's hyper productivity into actual physical things that my employees need to survive, what fraction of that value gets siphoned off by the government, it's like 70%. It is unbelievable how much just disappears. And you say, well, why is it that this neighborhood here is no longer full of like vibrant businesses building state of the art aircraft that allow... Enable people to fly around the world? Could it be that two thirds of the net value between the source of capital and the goods and services that the the people actually doing the actual work need in order to survive is just yoinked out of the system along the way. It's it's nutty. It's absolutely crazy. I'm I'm... I'll give one more example. I'm I'm blessed to be married to a very talented woman, Christine, and and she has always and continues to earn more than I do, which is my own damn fault. I set my own salary, but, like, it's not even close. And and so I I I asked Croc the other day, like, in our net family income, does just my income, like, cover the tax or something? And Croc was like, your income covers less than half of the tax. And I was like, I should just retire. My wife should just retire. We're we're, like, comfortably middle class. We effectively buy the company a luxury car every couple of months. Like, it's kinda nutty. And and the thing is maybe for some people maybe some people it's different, but to me, I feel like The US people are no longer getting out of the government what they were putting in.
01:03:25 · Ty Morse
[01:03:25] S0: Do you think that civilizations just have to do a hard reset every couple hundred years to start situation fresh?
01:03:32 · Casey Handmer
[01:03:32] S1: Like, this year, we're in the AI takeoff. We're in the the singularity. And, like, this is thing that, like, you can you can kind of argue this way or that way about demographics, this birth rate, that tax rate, this, you know, offensive drone warfare that all this stuff is swamped by hyper intelligent AIs. And so the the correct question to ask really is what is... It's it's kind of like... You know, New York City was in a crisis over a century ago due to their inability to dispose of a horse manure from people using horses to try... Tow things around the place. And even in the Second World War, the German army depended on horses to drag artillery pieces from place to place. Right? It was not fully mechanized. And the answer was not like, oh, taxation on horses or something. Right? The answer was we invented new technology, a motor car that has its own problems but its own benefits, and here we are. So we're literally in the process right now of not so much changing this legacy tax and spend economic system, but, like, just superseding it entirely. Yeah. So if you think, like, let's run the block ten years forward in a in a good outcome scenario, 90% of the net benefit that accrues to humans will be downstream of AI, and AIs will be, you know, incorporating their economic system in a way that's very different from the way that FDR's team and, you know, the presidents or the congresses around that time decided that they were going to essentially fund the operations of the government by appropriating a fraction of everyone's labor through income tax. Right? Tax makes sense if if most of the people in your economy are working for businesses that run payroll where they're, turning screws in a factory or something, which was, you know, reasonably descriptive of the of the of the twentieth century. But most of the economic activity in our economy today is not that. You know, The United States still does a lot of manufacturing, but it's not the nexus of economic productivity here. And in the future, won't be either. Most of the economic productivity will be machines emitting streams of ones and zeros in low Earth orbit.