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Should We Rebuild In Disaster-Prone Areas?; Are Anti Price- Gouging Laws Misguided?; The Political Impact Of How Leaders Manage Disasters; Galloway: America Is "A Nation Adrift." Aired 9-10a ET
Aired October 01, 2022 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
MICHAEL SMERCONISH, CNN ANCHOR: A word before we rebuild. I'm Michael Smerconish in Philadelphia. The deadly storm Ian now categorized as a post-tropical cyclone is now moving inland across North Carolina, as communities in Florida and South Carolina begin to recover from three days of torrential rain, powerful winds and cataclysmic flooding.
Ian first slammed into Southwest Florida Wednesday just shy of a Category 5 with sustained winds of 150 miles per hour. The current death toll as at least 45 people likely to climb in the coming days as search and rescue crews access additional areas blocked by debris and floodwaters. As of early this morning, more than 1.3 million Florida homes and businesses still in the dark.
According to the latest estimate, Ian may have caused as much as $47 billion in insured losses which could make it the most expensive storm in the state's history. The figure comes from CoreLogic, that's a research firm that estimates losses from natural disasters. The estimates combine insured losses through private insurance, which typically covers wind damage, and famous natural flood in -- National Flood Insurance Program that covers water damage.
Their estimates as of Thursday, wind damage $22 to $32 billion, flood damage $6 to $15 billion. So the low end of the combined estimate would be $28 billion. Before we spend, let's ask ourselves, is there a lesson here that we keep refusing to learn when the same disasters keep striking in the same regions?
On Wednesday, Florida Governor Ron DeSantis sent a letter to President Biden formally requesting a, quote, major disaster declaration and federal aid under the Stafford Act, which covers disaster relief and emergency assistance. Many noted the irony of the move since when DeSantis was a freshman Congressman after Hurricane Sandy hit, he voted against a federal bailout for the New York region, labeling it a put it on the credit card mentality, that's part of the reason we find ourselves nearly $17 trillion in debt.
And yet this week, here was DeSantis, asking in his letter for 100 percent federal cost share for the debris removal and emergency protective measures during the first 60 days and 90 percent thereafter, as well as 90 percent for all other categories of public assistance. The only hard figure that he mentioned, estimated the cost of debris removal alone will easily exceed $600 million.
These disasters they keep striking and the money keeps flowing. Florida has been hit by three of the top 10 costliest hurricanes since 1900 adjusted for inflation. Andrew 1992 cost $54.3 billion. Irma 2017, another $57.5 billion. Michael in 2018, $28 billion. This week came devastating images of Sanibel Island, home to some 6,500 people just south of where Ian made landfall.
Portions of the 3-mile causeway connecting Sanibel to the mainland destroyed. Occupants of about 200 homes had stayed behind. Authorities have already confirmed 12 deaths there. Following his first aerial tour of the hurricane's destruction, Governor DeSantis declared that Sanibel had been hit with, quote, really biblical storm surge.
But it's not the first time that the island has been hit. In fact, it was a 1921 hurricane that severed it from what is now nearby Captiva Island. In the past 150 years, no fewer than 20 hurricanes have passed within 75 miles of Sanibel. So averaging one every seven or eight years, each of which at some point posed significant threat to property and lives there.
In 2004 and '05, three different storms caused mandatory evacuation orders. In August of 2004, Hurricane Charley with winds of 131 miles per hour was the most destructive hurricane to hit the city of Sanibel, since it incorporated in 1974. It caused 10 deaths and an estimated $24.6 billion in damage adjusted to today's dollars. The very next year, 2005, the eye of Hurricane Wilma passed within 75 miles of the city of Sanibel.
Look, of course, this is all so horrible and so sad and so many people's lives have just been disruptive. But is it surprising anymore? And this is not just about hurricanes the same holds for California wildfire regions, or tornado alley.
Should we still be rushing to rebuild in the same place every time it happens, especially where climate change is believed to be responsible for making our weather more extreme? I want to know what you think. Go to my website at smerconish.com and answer this week's poll question, Should we rebuild in disaster-prone areas?
Joining me now is Stephen Strader, Professor of Geography and the Environment at Villanova University. He studies natural disasters and he wrote this piece for cnn.com, The Hurricane Problem Florida Could Have Avoided. Dr. Strader, thanks so much for being here. How could it have been avoided?
STEPHEN STRADER, ASSOC. PROFESSOR OF GEOGRAPHY, VILLANOVA UNIVERSITY: Well, one of the things that we've learned over and over again is that as we build along the coastlines, as we build into these regions that are highly prone to hazards like tropical storms and hurricanes, that we're seeing these losses occur over and over again. And there's a lot of reasons for that. But there's a lot of lessons to be learned and things that we can do better and improve on going forward.
SMERCONISH: It seems like all the conversation is about how we build not whether and where we rebuild. I guess no politician wants to be the one to stand up and question and say, hey, hold on, are we really going to erect homes and office buildings, et cetera, et cetera, in the same location?
STRADER: Yes, I mean, one of the things that we know is after these disasters, there's momentum and inertia to building back to where we were because it's more than just houses and buildings that were lost, its people's homes. And the desire to build back there and get back to a sense of normalcy is incredibly strong, particularly after disasters.
I hope that sometimes we can step back and take a take a good look and say, OK, is the decision to move back the smartest thing to do for the next event that comes along? But that's a difficult decision because there's a lot of money to be made after these disasters to construction workers and communities and economies, local economies depend on sort of this this type of development.
SMERCONISH: I made reference to Hurricane Andrew three decades ago. You know the data on Andrew, it was particularly destructive. You say the climate in Florida has gotten even worse because of a combination of factors. What are they?
STRADER: Yes, so I think of our atmosphere, it's changing. Global climate change is happening. We see that the ingredients that make up these tropical storms are intensifying the ones that we do see occur, like Hurricane Ian. But on the other side of the disaster coin, what we see is rapid development that's been going on for over 100 years now along Florida's coastlines.
We're replacing mangroves and wetlands with new subdivisions. And that type of growth isn't sustainable. When those two items come together, we're really looking at a double-headed monster that is something that's threatening not just people living along the coast, but also in other regions, we see the same thing happening, as you mentioned before, with wildfires and drought conditions.
SMERCONISH: In other words, amidst climate change in Florida, in particular, they've had an explosion of growth in the last three decades since Andrew, but this same logic could be applied to other parts of the country, right?
STRADER: Yes, I think that Florida is sort of a perfect example of where we've seen growth over the last 30 years. We've seen a 60 percent increase in the number of people living in Florida. We've seen almost a doubling of the number of homes being built in Florida.
And if you look at our entire population in the United States, a far majority of it lives in what we call a coastal county. So we see people moving towards the coast, which along the Gulf and the East Coast, or the Atlantic coast, is problematic for hurricane risk. And unfortunately, now sea level rise. But it's not unique to hurricanes. We see people moving to the desert southwest for water resources are becoming more scarce. And people living in wildfire prone regions in the western parts of the United States. So this is what I would say is not a tropical storm problem, but in every hazard problem.
SMERCONISH: So final question, what's the ask? What is it that you are here to frame for conversation?
STRADER: Well, I think the ask here is, is that we have to be smarter about where we build. We have the ability and we have success stories of homes and communities being destroyed after events. I think about the Greensburg, Kansas tornado back about 15 years ago, 95 percent of that town was destroyed in the middle of Kansas, and they rebuilt it to be something that is relying on renewable energy, it's relying on green energy. And in general, that was a positive thing that that community decided to do.
That's a good lesson to be learned here is that we can be better, we can improve. And they might not matter to the individual that wasn't hit by Hurricane Ian, but it might matter to that next person when the next hurricane comes along.
SMERCONISH: Dr. Strader, stick around for a second. Here comes some social media. Maybe I'll call on you to help me respond. Catherine, what do you have? Put it up on the screen and I'll read it aloud.
"The problem is defining disaster prone. Repeated wildfires, tornado alley, coasts, they're all disaster prone. We do need to stop building on land, barrier islands, that is not meant to be built on." I guess my question for you, Dr. Strader, do you distinguish between those tornado prone areas versus a hurricane prone area versus a wildfire area, or do you see them all the same?
STRADER: You can distinguish between them. One thing that we've learned and we learned this after Hurricane Andrew is -- and we're going to see that unfold over the next few days with Hurricane Ian, is that improve the building codes work. We see that if you improve this quality and you follow the building codes to a higher standard, you can save lives and these homes won't be complete losses in some cases, if they were built after Hurricane Andrew, when Florida's building codes were really improved.
We can do the same in places like the Central Plains where we have quite a few tornadoes. We can build storm shelters. There's things that we can do. So, you know, it's not a this or that, there's a lot of gray areas. Some places we don't need to move into like along the coastlines. But, you know, we're not going to stop people from living in Florida for the most part. So we have to learn to --
STRADER: -- live with disasters, and that affects how and where we build.
SMERCONISH: We're working hard. We got to work smart. Thank you, appreciate your time.
STRADER: Yes. Thank you for having me.
SMERCONISH: Continue to give me social media reaction during the course of the program. Tweet at me, YouTube, Facebook, however, I'll read some responses as we move on. Remember, I want to know what you think, go to the website at smerconish.com. This is this week's survey question, Should we rebuild in disaster-prone areas?
Up ahead, President Biden warned oil companies in advance not to jack up prices because of Hurricane Ian. But when prices go up during a disaster, is it unwelcome gouging or unnecessary market correction and function?
Plus, response to disaster has made or unmade careers of mayors and governors and presidents alike. What can Florida Governor DeSantis and President Biden learn from the fates of their predecessors?
And in 2020, the rate of new entrepreneurs among immigrants to the U.S. was nearly double that among those born here. It's one of 100 compelling statistics and charts from Best Selling Author Scott Galloway. He'll be here to discuss his brand-new book, it's called, "A Drift."
SMERCONISH: When prices rise in the aftermath of a disaster such as Hurricane Ian, is it because of exploitive gouging or natural market forces? This week, President Biden tried to get out ahead of the issue on gas pricing twice warning the oil industry not to manufacture a price surge.
(BEGIN VIDEO CLIP)
JOE BIDEN, PRESIDENT OF THE UNITED STATES: Do not. Let me repeat, do not. Do not use this as an excuse to raise gasoline prices or gouge the American people.
The oil and gas executives, do not, do not, do not use this storm as an excuse to raise gasoline prices or gouge the American public.
(END VIDEO CLIP)
SMERCONISH: The oil industry pushback a spokesperson for the American Petroleum Institute wrote, "Gasoline prices are determined by market forces, not individual companies, and claims that the price at the pump is anything but a function of supply and demand are false."
There are anti-price gouging laws on the books in 35 states and the District of Columbia, but they vary widely. And while they keep prices low for buyers during natural disasters, that encourages hoarding. Plus, sellers have no incentive to expend extra effort to ramp up supply, which causes shortages for all. Joining me now to discuss is Rafi Mohammed. He's a pricing strategy consultant and author of the book, "The Art of Pricing" and of a Harvard Business Review article called "The Problem with Price Gouging Laws." Dr. Mohammed, remind us of the case of John Shepperson. This was post-Katrina, the gentleman with the generators, what's the short version?
RAFI MOHAMMED, PRICING STRATEGY CONSULTANT/AUTHOR, "THE ART OF PRICING": The short version is he was very entrepreneurial. He got a bunch of generators. He went to Florida, and he tried to sell it at a profit, and he was arrested for gouging. So the question is, is that unethical or is that someone adding to supply in a manner that gives people options?
SMERCONISH: What's your answer?
MOHAMMED: I think that that was a very minor case and it should be encouraged for the free market to add supply in that type of manner.
SMERCONISH: In other words, you think that the John Shepperson among us looking now at Hurricane Ian should be saying, hey, how can I go deliver goods even at a marked-up price to all those folks who are suffering?
MOHAMMED: I think that's one part of the solution. I think the bigger solution is really it's the sort of public shaming of companies that do raise prices. Biden and mayors and governors had been very clear not to raise prices. But I think the big game changer these days that are sort of moderating price increases is society's more politically correct. They're more willing to come out --
MOHAMMED: -- and say this is wrong. But the big game changer is social media, and social media is really the governor to reducing these drastic price increases, because who wants to risk their brand on on a couple $1,000 profit.
SMERCONISH: If I go into a convenience store that has a limited supply of flashlights, I might buy far more than I need. But if the price has been jacked up, all of a sudden, maybe I'm buying one instead of buying five, and I'm leaving more for the next guy.
SMERCONISH: That's true, but a jacked-up price also, one could argue that's a solution that's unfair to the poor. That's a solution --
MOHAMMED: -- that favors the wealthy and encourages life and death to be really a matter of how much you make. And I'm not so sure that our society wants to condone that policy.
SMERCONISH: OK. So is there some middle ground here where the prices can be raised? And, therefore, we prevent hoarding, but somehow we're protecting the poor at the same time? And if there is, what's that solution look like?
MOHAMMED: Well, I think we should be happy with the evolution. You don't see a lot of -- you don't really see a lot of complaints about gouging, it's not prevalent. And I think consumers are now attuned to price -- to demand and supply pricing due to Uber, Bruce Springsteen, $5,000 tickets. We understand demand supply.
And I think that corporations are moderating their price increase due to sort of the moral pressure on them. So that's one thing. And I think that's really it's -- without the government doing anything, but also, I think, in the article that you mentioned, I suggested subsidizing -- the government subsidizing certain types of products, for instance, water and gas, and bread and milk.
And what what you would do is sellers would sell at the normal price, and then they would receive a government subsidy for the amount of products that they sold. And this would encourage the invisible hand to go and get more supply.
SMERCONISH: I was on a libertarian website on this issue, by the way, a lot of economists out there are of the opinion that we should not have so-called price gouging restrictions. But on the libertarian website that I visited, they said which would you rather have, expensive water or no water at all? Your thought?
MOHAMMED: I think economically speaking, raising prices is the right answer. However, I believe this is a societal issue, not an economic issue. And I would lean towards a society that aims that life and death is really not about how much you make, you know, annually.
So it's --
SMERCONISH: Dr. Mohammed, I'm leaning on my experts today for assistance with social media. So stick around. Put it up on the screen, Catherine. Let's see what it is. And I'll ask my guest to assess me. What do you got?
"Won't deny there are gougers, some will always exploit others. But most is supply and demand as people stockpile often unnecessary items," says Chris Bigelow. And Dr. Mohammed, it reminds me that, for reasons I still don't understand that the outbreak of COVID, the pandemic, you know, all the toilet paper was gone. Every time there's a catastrophe, we see the film footage of cleared out shelves in grocery stores. So react to that response.
MOHAMMED: Well, I mean, this the tension between the two options, a high price certainly can solve that but there's societal issues to that. A low price encourages this type of hoarding, there should be quantity restrictions, as Costco certainly did with toilet paper at COVID. So the -- it's these two extremes, the economic versus societal issues that we're trying to merge together. And this is why I think social media is so important today to publicly shame companies that do increase price and encourage them to serve the community by adding supply.
SMERCONISH: OK. But I don't want to villainize the guy who's now going to deliver generators where they're needed down south and if he's making a good buck, God bless him, is my attitude. Thank you so much for being here.
MOHAMMED: Thank you, Michael.
SMERCONISH: Still to come, from 2008 to 2017, the share of adults who reported talking with neighbors a few times a month, it fell from 71 to 54 percent. Just one of many eye-opening statistics and charts compiled by Best Selling Author Scott Galloway from his latest book, which asks why America is to use his word a drift. He'll be here.
And disasters can force politicians to cross party lines to cooperate like after Hurricane Sandy when New Jersey Governor Chris Christie, famously thank President Obama suffering some slings and arrows as a result. What dynamic might emerge in the disaster relief interactions between presidential hopeful Ron DeSantis and the current holder of that office?
I want to remind you go to my website at smerconish.com. Answer this week's poll question, Should we rebuild in disaster-prone areas?
SMERCONISH: When weather disasters like Hurricane Ian strike, state and federal politicians, they're put to the test. So what might be the impact for presidential hopeful Florida Governor Ron DeSantis of how he deals with his first hurricane? When leaders rise to the occasion, they get a huge boost.
Think previous Florida Governor Jeb Bush, who handled so many storms so well that he was nicknamed Governor Hurricane or subsequent Florida Governor Rick Scott, who rode the storms there to become a regular on The Weather Channel. During Katrina, freshman Louisiana Congressman Bobby Jindal grew to such prominence that two years later he was elected governor.
But we remember them more when the elements caused them to flounder. Think George H. W. Bush whose 1992 loss was partly blamed on his insufficient response to Hurricane Andrew, or any number of New York City mayors during snowstorms from John Lindsay to Michael Bloomberg. Or Katrina's toll on George W. Bush, Brown, he's doing a heck of a job.
New Orleans Mayor Ray Nagin and Louisiana Governor Kathleen Blanco who didn't even run for re-election. There are also complications that come with the bipartisan cooperation that is often required local politicians to coordinate with the federal government. After the devastation wrought by Hurricane Sandy in 2012, Republican New Jersey Governor Chris Christie famously embraced President Obama and paid a political price.
Joining me now is Neil Malhotra, professor of political economy at Stanford Graduate School of Business. Among his fields of expertise voting and the politics of natural disasters. Dr. Malhotra, which is more important politically speaking the preparation or the response?
NEIL MALHOTRA, PROFESSOR OF POLITICAL ECONOMY, STANFORD GRADUATE SCHOOL OF BUSINESS: So what we found is that politicians benefit a lot for sending in the cavalry after a disaster takes place but basically receive no benefit for trying to prepare for disasters in advance and this creates really bad incentives. So they basically go against what Benjamin Franklin said which is that an ounce of prevention is worth a pound of cure. Politically speaking it's the pound of cure that matters a lot more than the ounce of prevention.
SMERCONISH: Why do you think that's the case?
MALHOTRA: Well, I think there's many reasons. So, one is that the relief is just very salient. So, disasters are really covered a lot by the media. You oftentimes see the weatherman in the midst of the hurricane being pushed around by the wind. You see the politicians in their windbreaker helping out communities. FEMA sends checks directly to victims of disasters.
Whereas, I think the coverage of the preparation is a lot less. So how much coverage have you seen recently of everything that's been going on with the Bipartisan Infrastructure Act months after that act was passed? Probably not very much. So, I just think in voters' minds --
SMERCONISH: Right, in other words there's a -- there's a bias --
MALHOTRA: -- they see the images of that and not much the images of the preparation.
SMERCONISH: -- there's a bias in support -- there's a bias in support of that which we can see, and, you know, if you're building the bridge, chances are, we're not watching that.
By the way, as you're speaking, I'm thinking about 9/11. I'm thinking about the fact that President George W. Bush, one month in advance of September 11th got a PDB famously titled Bin Laden Determined to Strike in the United States. At least I think that's what it said.
And yet in the aftermath, he had very high numbers as a result of pursuing al Qaeda at least initially in Afghanistan and then in Iraq. Later it took a turn. But that fits your model. Does COVID fit your model as well?
MALHOTRA: Well, I think the interesting thing about COVID is that President Trump's response was not viewed as very strong. But if it had been strong, I think the theory would say that he would have benefited and he would not have been punished for the preparation. So contrast Trump to George W. Bush, George W. Bush, the image of him with the bull horn rallying the country together, that's what people remember, and his approval ratings went to 90 percent. Not ignoring intelligence reports and not trying to prevent the attack before it occurred.
SMERCONISH: OK. So politically speaking, and I want to make sure I'm talking about politics now because we want Governor DeSantis and President Biden to work well together, save people's lives, fix everything that needs fixing. But politically speaking, what's the advice that they should take away from your research?
MALHOTRA: Well, I think Ron DeSantis is a very astute politician, and he's probably doing what the advice I would take which is if you'd notice, he hasn't been talking about the immigration flights. He hasn't been talking about the cancel culture. He's put all of that aside for the last week and worked very closely with the Biden administration in a very bipartisan fashion because I think DeSantis knows, and forgive the metaphor, a rising tide lifts all boats. That if the disaster response is viewed as positive he will be more likely to be re-elected in 2022 and it will benefit President Biden as well.
SMERCONISH: You know, you've explained to me why now, and I'm not making fun of it. I'm not minimizing it. But now I get why these officeholders all do have the windbreaker or all do have, you know, the jersey with the state insignia and so forth because the world is paying attention to how they respond much more so than whether they did something that potentially could have been averted and you can't avert a hurricane at cat 5 nearly. But politically speaking I think they understand exactly what you're saying.
Stick around for a second. Here's a tweet. This came in, social media reaction, during the course of our chat.
It says, "Because we have the attention span of gnats, I don't think any of this will have much of an impact. Given all the issues this country faces, if you haven't made up your mind on who or what you're voting for, you've not been paying attention."
Dr. Malhotra, you say what to that person?
MALHOTRA: Well, there could be something to it. So a lot of our evidence of disasters mattering for politics have occurred in much less polarized eras. And so, I think it is to be seen in the post- Trump era, do the swing voters pay attention to disaster management? Or are there so few swing voters that people are just so polarized they're voting based on their party? It's -- we'll see.
SMERCONISH: Yes. And I would say with five weeks on the clock from this Tuesday, as I delivered a commentary last week on it exactly this, we have no idea what issues we will be talking about three or four weeks from now. Thank you so much for being here. I appreciate your expertise.
MALHOTRA: Thank you.
SMERCONISH: Gang, make sure you're voting. Go to Smerconish.com right now. Cannot wait to see the outcome of this poll question. Should we rebuild in disaster-prone areas?
Still to come, in the 1970s, 92 percent of 30-year-olds were bringing home bigger paychecks than their parents did at that same age. Today, only half of them do. And it's just one piece of a troubling data mine by Scott Galloway in his new book. It's called "Adrift: America in 100 Charts." Scott Galloway is here.
You do know he's been dubbed by "The New York Times" as the Howard Stern of the business world. And that's a good thing.
SMERCONISH: "We are a nation adrift. We lack neither wind nor sail, we have no shortage of captains or gear, yet our mighty ship flounders in a sea of partisanship, corruption, and selfishness."
These are the bracing first lines of the latest book by my next guest, Scott Galloway. It's called "Adrift: America in 100 Charts." He uses data to back it all up. Everything from online dating, marriage rates, political censorship, crime, immigration, to inflation.
Scott Galloway joins me now. He's a professor of marketing at NYU Stern School of Business, a serial entrepreneur and a podcast host. His previous books include "The Four," "The Algebra of Happiness," and "Post Corona."
Scott, great to have you back. The book is great. The thesis is this, America is most like itself, when it has invested in a strong middle class. Why did you express it in 100 charts?
SCOTT GALLOWAY, AUTHOR, "ADRIFT: AMERICA IN 100 CHARTS": Well, we've had the alphabet for 1,500 years. We've had images for several millennia. We can process an image six to 60 times faster than words so in sum images resonate. And any good consultant will tell you or any good professor worth his or herself will say, if we can get this across some pictures it will more emotionally resonate.
So, I love charts. I love infographics, and building a narrative through charts just felt like an interesting way to tell a story.
SMERCONISH: From the conclusion, "Before we can get to intercourse, we need discourse. And our discourse has become so coarse."
It reminded me of a chart, I'll put it up on the screen, that you had from the "The New York Times" based on what makes a most traffic -- there it is, probability of making "The New York Times" most-emailed list by emotion elicited. What does that tell us?
GALLOWAY: Well, as a species we're like is a tyrannosaurus rex. We're drawn towards violence and movement. And we have some of our most talented people and some of our most well resourced tech companies who have a profit incentive around pitting us against one another.
We have campus environments where we're no longer comrades. But we're trying to find soft tissue and call out other people, thinking we can gain some sort of social status by turning on each other.
We are geopolitically stronger than ever been. We're food independent, energy independent, and no one is lining up for Chinese or Russian vaccines but we're constantly arguing with each other. A third of each party thinks the other party is their mortal enemy. Fifty-four percent of Democrats are worried their kid is going to marry a Republican.
You know, take the third grade -- during our research -- recess, Michael, and two kids started having words and everyone surrounded them starts screaming, fight, fight, fight times a billion. That's what haunts us here in America. America is a horror movie. The call is coming from inside of the house.
We need to recognize that Americans will never have better allies than other Americans. It's crazy that we look at other each as our enemies. Our enemy is pouring over the border in Ukraine. Our enemy aren't our neighbors who, by the way, we are not speaking to as often. We're not joining boy and girl scouts. So the problem is our discourse has become way too coarse and there's too many incentives to increase that coarseness.
SMERCONISH: Is the American dream alive and well when 30-year-olds -- this is another one of my favorites. I'll put it up on the screen. When 30-year-olds are just not outpacing -- there it is. The percentage of 30-year-olds earning more than their parents did at 30. That really speaks to me. Offer some thoughts.
GALLOWAY: That's arguably the most important chart in the book. And that is, what is the fundamental agreement between a society, between a government and a tax system and laws and its populous? At the very base of that is that your kids will be better than you.
And for the first time in American history, the first time, Michael, a 30-year-old man or woman isn't doing as well as his or her parents were at 30. And what's the point of all of this? What's the point of studying? What's the point of prosperity? What's the point of the NASDAQ if our kids aren't doing as well as we are? That is the fundamental compact in our society and it's broken down for the first time.
SMERCONISH: Were things just too good? I mean, do you have to tap out at a certain point, we're just not all going to be able to exceed the socioeconomic status of our parents?
GALLOWAY: I don't think so. I think that one of the illusions that we -- have fomented is the illusion that these problems are out of our control. And I wrote "The Four." It started out as a love letter to big tech and ended up a cautionary tale.
I started out with this book looking at the things that really ail us. And what became really clear to me was that these are problems of our own making. Meaning we can unmake them.
We have deliberately taken the wealth of people under the age of 40 from 19 percent of GDP to nine percent. And this isn't an accident. These aren't things beyond our control. The two biggest tax breaks that we have voted in are mortgage interest and capital gains. Who owns home and stocks? Old wealthy people. Who rents and who makes their money from current income? Young people.
We've let tuition rise 1,400 percent. And my -- people my age applaud their school when they embrace this. Awful rejection is culture that consists of, once I have my degree, I like it when my school becomes more elite and rejectionist. Once I own a home, I'm going to go to the local architectural board and try and ensure that no new housing gets approved. Once I have a tech company that's succeeding I'm going to weaponize government through donations such that smaller companies can't emerge.
My generation simply put as enacted the greatest transfer of wealth from young people to old people in history. We did it. It's not by accident. It's not out of our control. We can absolutely change it back.
SMERCONISH: On a related subject, you know immigration is hot as we get toward the midterms. Put on the screen, Catherine, the -- there it is. Entrepreneurship. Share of adults who started their first business. You compare immigrants and U.S.-born. They are risk takers, that is your point.
GALLOWAY: My parents came over here on a steamship. They spent nine days on a steamship with two suitcases and about $150 bucks. And what do you know? They were fairly success here. It just makes sense that people who risk coming here are more risk aggressive.
If you're a child of an immigrant you're twice as likely to shift up income classes. You're twice as likely to start a new business.
If want continued prosperity and growth -- I mean, Michael, imagine we're a football team. And we have access to the top 100 draft choices every year. And we decide to demonize those people and ignore those draft choices.
America is literally shooting itself in the foot and then taking a gun and putting it in its -- putting a gun in its mouth. Adobe, Microsoft, Google, Mastercard, not only run by immigrants, run by first generation Indians. And also I would add that I believe they're more patriotic and more loyal to America than many of our -- many of our native-born American tech entrepreneurs who were the first to sort of criticize government and not recognize that their companies are nothing but a thin layer put on top of a massive investment by the middle class whether it's GPS or vaccine research and universities.
SMERCONISH: I thought you were on the verge of saying and would have toppled government if they had succeeded on a particular day. We won't go there now.
Final chart, put this up on the screen. This is the one that really spoke to me. It's about participation on a community level. Church membership, Boy Scout membership, Girl Scout membership, rotary club, adults who talk to neighbors. We are totally self-sorting, Scott, that's a problem. GALLOWAY: We're a social species. The key to happiness is deep and meaningful relationships. Any advice to young persons, especially young men, every day you need to get out of the house and try and build something great in the agency and in contact with others.
There's nothing wrong with talking to strangers. There's nothing wrong with initiating conversation. There is nothing wrong with going up to a stranger and being civil and trying to establish a friendship or potentially something that might result in a romantic relationship.
Those soldiers that went into the hills of the Philippine islands, the Japanese soldiers accomplished nothing. Nothing great is accomplished alone. We need absolutely to talk to our neighbors. We need to join church groups. We need to join softball leagues. And we need to start smelling, touching and feeling each other.
Greatness is in the agency of others. Tell your kids, demand your kids get out there and start meeting and talking to strangers.
SMERCONISH: I love the blurbs. Elon Musk calls you an insufferable numbskull. Bill Maher says you are a walking applause break. Christopher Hitchens with an MBA says James Warren at "Vanity Fair." Yours truly regards you as a business world rock star.
That's not my favorite. My favorite, British "GQ." They say you are Gordon Gekko with a social conscience.
Let's do some social media before we lose Scott. Bring one up, Catherine. Let's see what we've got.
"Seems like Galloway might be advocating for more socialism if he thinks the root of our societal problems is widening economic inequality over the years. Is that really the best solution here?" Quick response from you?
GALLOWAY: Capitalism is the way to go. Socialism is when the state controls the means to production. We don't have -- when we have capitalism on the way up, where people or CEOs garner all of the gains. And then we have socialism on the way down. When the pandemic hits, they decided we're all in this together and need bailouts.
Capitalism on the way up. Socialism on the way down. It's neither. It's cronyism.
Capitalism works. Full body contact at a corporate level such that we can produce prosperity and taxes that sits on a bed of empathy to reinvest in the most noble entity in the history of mankind, the U.S. middle class. This is capitalism, full stop.
SMERCONISH: The book is fun and informative. Thank you so much. I appreciate it.
GALLOWAY: Thanks, Michael. SMERCONISH: Still to come, more of your best and worst tweets, YouTube, Facebook comments, and the final result of this week's poll question. Cannot wait to see how this turns out. Should we rebuild in disaster-prone areas?
Go to Smerconish.com right now and vote.
SMERCONISH: Results to the poll question from Smerconish.com. Hit me with it.
Should we rebuild in disaster-prone areas? Wow, 80/20 let's call it with nearly 20,000 -- I should say so say all the people who don't live in those areas, right? Because that's who we are, who voted.
One social media reaction if I have time for it. We're really limited on time.
We give billions to other countries for different reasons and your question is to rebuild here? Where are our priorities? Says, Bob Roth.
Well, we don't seem to learn the lessons though, Bob Roth, do we? I hear your point. It's a good one.
I'll see you next week.