Death of the Middle Class: Billionaire vs Entrepreneur DEBATE - Daniel Priestley v Nick Hanauer | The Diary Of A CEO Transcript

Billionaire Nick Hanauer and entrepreneur Daniel Priestley debate inequality, wages, and the future of capitalism

Steven Bartlett hosts a debate between billionaire Nick Hanauer and entrepreneur Daniel Priestley on the causes of middle-class decline and how to fix it.

Summary

Steven Bartlett hosts a structured debate between Nick Hanauer — a billionaire who was among the earliest investors in Amazon and has spent years working on economic reform — and Daniel Priestley, a serial entrepreneur and co-founder of Dent Global and ScoreApp. Both agree that inequality is dangerously high and that technology and financialisation have hollowed out the middle class, but they diverge sharply on solutions. Hanauer argues the core problem is suppressed wages driven by neoliberal policy since the 1970s, and that labour standards, progressive taxation, and breaking up monopolies are essential. Priestley contends that worker protections alone are insufficient — as demonstrated by the UK's experience — and that the real answer is expanding ownership: of homes, businesses, and shares. The conversation also covers AI-driven job disruption, sovereign wealth funds, corporate tax avoidance, the history of the theory of marginal productivity, and whether socialism or a managed market economy offers the best path forward.

Key Takeaways

FULL TRANSCRIPT

Introductions and backgrounds

Steven Bartlett: Nick, I want to start with your background and your context so I can understand your perspective and who you are. You sold a company for almost $7 billion — correct? And what's so fascinating about you is that billionaires typically have a certain narrative and perspective on the world. You seem to have a very different one. Who are you, where have you come from, and what is your perspective on the world as it relates to the subjects we're going to discuss today?

Nick Hanauer: I was raised in a civic family. That means a family that takes civic responsibility seriously. We were middle-class people, and my father started to work for this tiny family business that his father had started — manufacturing bed pillows and down comforters — which is how I got my start in business. To make an incredibly long story short, I had a very early intuition about the internet and the role that it would play in commerce. And as luck would have it, I had a friend who agreed with that proposition, and his name was Jeff Bezos. He wanted to start an e-retailer. He was working in New York for a hedge fund, dating one of my closest friends. For a variety of reasons, he ended up sending his stuff from New York to Seattle to my house, and we started Amazon.com together.

From that, I started other tech companies. I've helped run manufacturing businesses, e-commerce businesses. My friends and I own a bank. I think that very broad perspective on markets began to inform an intuition that everything that people are taught about economics today — the conventional view — is a pack of lies. And if you take it seriously and enact policy on the basis of it, the only thing that can happen is that the rich will get richer and everyone else will get poorer.

A signal piece of evidence for me — something that really galvanised my interest — was that I got a look at the IRS tax tables in 2007 and 2008, which showed American income shares throughout history. In 1980, the top 1% of Americans shared about 8.5% of national income. By 2007, that had grown to 22% — roughly triple — as a share of national income. While the bottom 50% of Americans saw their share fall from about 18% in 1980 to 12% in about 2007. I took those numbers, stuck them in a spreadsheet, and asked: what happens if this trend continues for another 30 years? The answer is revolution. It's just arithmetic. You cannot sustain a capitalist democracy if the top 1% controls 45 or 50% of income and the bottom 50% shares five. This is not a deep political insight. This is just math. I freaked out and decided I needed to devote myself to figuring out why this happened and how you could fix it. I've been writing about this and working on it since then.

Steven Bartlett: Why did this feel so important to you? I've heard you talk about pitchforks.

Nick Hanauer: Even a cursory reading of history will tell you that when societies get as unequal as the societies we now live in, terrible things start to happen. This leads to either a police state or a revolution. I believe that the pitchforks are here. I think the Trump administration is one of the canonical examples of a society beginning to tear itself apart. I just think it's the responsibility of people with power and resources to do the right thing.

Steven Bartlett: Dan, same question for you.

Daniel Priestley: I grew up in Australia and as a teenager I discovered entrepreneurship. I got an entrepreneurial mentor very early on and did two years in a startup — it was really exciting and I loved it. I felt like I'd discovered a cheat code in life, which was entrepreneurship and starting businesses. At 21 I went off and started my own company, which was my first agency. It grew really rapidly — zero to a million in its first year, then ten million in year three. It was this exciting young company with all these cool young people working there. We actually were in a big house and spent a lot of time together. I just fell in love with entrepreneurship and small business and family business.

Fifteen years ago I also started an entrepreneur accelerator where people who want to talk about entrepreneurship and figure out how to run their businesses can get together and do that. For the last 15 years I've spent countless hours with 5,500 businesses all over the world. Over the years I've come to a similar conclusion — that the technological revolution we've seen in the last 25 years has hollowed out the middle class. I basically said I can't play by the rules I grew up with. I have to learn the rules of this new economy, this digital economy, pretty quickly, or else I'm going to be displaced and disrupted.

I didn't come from any form of wealth or money. I didn't take on any venture capital. I self-funded, bootstrapped my own businesses by cobbling together credit cards and things like that. One of the things I truly believe is that we are in very big danger at the moment — if more people can't participate in the benefits of capitalism, they're going to do crazy things and vote in socialism. The pitchforks will come, and inequality is going to be a toxic, corrosive force in the economy. I'm a capitalist who wants lots of people to benefit from capitalism. That's been my whole position forever. I just want to include more people in the benefits of capitalism before we do dumb things.

Who is really hollowing out the middle class?

Steven Bartlett: The prevailing narrative — one of the most dominant ones — is that we need to tax people like us a lot more. What's your view on that, Daniel?

Daniel Priestley: It's very easy to make a rich person the bad guy. You could imagine this billionaire — Nick maybe could be the bad guy — and you could sort of do that. But when I look at the economy and what's draining it, it's harder to conceptualise. We have these mega corporations and these mega funds. Here in the UK, all the houses are being bought up by BlackRock — a massive private equity fund that wants the entire population to be a rental class forever. Our prime minister has walked down the street hand-in-hand with the CEO of this big fund saying, "Yeah, come in and buy up stuff." That is causing a lot of trouble.

Then you've got big companies like Microsoft and Amazon saying, "We want to do business in your country, but we don't want to pay tax there. We want to pretend we're in Luxembourg or Ireland. We're going to send something from our British warehouse to our British consumer, but we're not really in Britain at that time, so we don't pay tax." And then you've got Starbucks saying they want to do business and sell coffee next to a mom-and-dad family coffee shop, but they have to pay a licence fee for the Starbucks logo that has to go to Bermuda.

So when I look at who's hollowing out the middle class, you've got massive mega-corp businesses that are bigger than we could have ever conceived — as big as nations now. And you've got mega-corp funds which are also trillion-dollar funds. One thing I'm worried about is that a lot of people think that a guy like me — basically a dynamic entrepreneurial person — or even a billionaire like Nick is the enemy. When you get a James Dyson who invents a cool vacuum cleaner and sells a lot of them, that's not the enemy. When you get Paul McCartney who writes a bunch of songs and becomes a famous Beatle and makes a billion dollars, that's not the enemy. The enemy is the financialisation of our homes. The enemy is big mega-corps that don't want to pay tax. We need to be a little bit more nuanced and clear about who's hollowing out the middle class.

Steven Bartlett: So you're saying taxing the rich isn't the answer?

Daniel Priestley: Taxing the rich is a headline that creates enemies who aren't actually the enemies.

Steven Bartlett: But let's say in the UK — if you were prime minister, would you increase the tax rate on the top 1%?

Daniel Priestley: You could do that for political reasons because it would make people feel good, but it won't change the economy. What needs to happen is we need a thriving entrepreneurial class. Small businesses are the answer. The biggest mistake the UK government is making is they don't see that the 5.7 million small businesses are their biggest asset. If we could get those going, create an entrepreneurial uplift, that would create jobs and better opportunities. I would definitely curb the issue we're having with these mega funds, and I would definitely stop pretending that Amazon is in Luxembourg and Google's in Ireland. Those sorts of things I would definitely do.

Steven Bartlett: What about yourself, Nick? Do you want the top 1% to pay more taxes? Is that important?

Nick Hanauer: It is not true that the richest people in the United States pay a lot of tax, because the American tax system is riddled with loopholes that allow the richest citizens to pay taxes at a rate of half of what ordinary people pay. I absolutely believe that in a high-functioning democracy, the wealthiest citizens will pay taxes equal to or greater than the typical citizen. That is just objectively not the case in the United States — as a percentage. I think that is table stakes in making an economy function and a democracy go. But it is not the biggest problem.

The problem is wages. The most important socioeconomic fact in the United States is that the median full-time worker today earns in the range of $60,000 a year. If that person had maintained their same share of the economy since 1975, instead of earning $60,000 a year, they'd earn close to $120,000 a year. That effect goes up to the 90th percentile. If you earned $180,000 in 2018 or 2020, and had maintained your same share of GDP, instead of earning $180,000 you'd earn like $250,000 a year. So in the United States, over 50 years, the only people who benefited directly from economic growth and productivity gains were people in the top 10%, and the majority of the benefit went to the top 1%. That is the problem. That is trillions of dollars a year that used to be wages for ordinary Americans and now ends up in the pockets of the richest people — utilising precisely the mechanisms that Dan just outlined.

What we have done is massively tilted the economic playing field, which once favoured small and medium-sized businesses and local companies, towards these giant corporations. We used to have an economy that actively encouraged small businesses and entrepreneurship. What we call neoliberalism — this set of ideas around economic cause and effect that came into force in the '70s and '80s, Reaganomics, Thatcherism, all this stuff — cut taxes for rich people, deregulated powerful people, and suppressed wages for working people. Basically trickle-down economics. Those policies went into effect in the '70s, '80s, and '90s. What happened was a huge shift in concentration from smaller businesses to bigger businesses, and a huge shift in income from ordinary Americans to the very rich. That's the core of the problem.

Of course I think rich people should pay their fair share. It is ridiculous for somebody who makes half a billion dollars a year to pay a 15% tax rate while somebody who makes $200,000 a year pays 40. I just think that's stupid and wrong, which is the case in the United States. But the bigger problem is wages. And if you want to get the economy back on track, you have to address that problem.

Optionality, wages, and the theory of marginal productivity

Steven Bartlett: Dan, you say that optionality in entrepreneurship will do more to raise wages than any government policy.

Daniel Priestley: I believe that optionality is the most important thing. When someone has lots of options, they don't accept terrible conditions.

Steven Bartlett: Give me some colour on that.

Daniel Priestley: Well, if I have 10 companies that want to hire me, I'm going to choose the best option. But if I live in a town where there's only one employer — let's say there's one massive company and you either work for that company or you're unemployed — then I have to accept whatever they're dishing out. So the most important thing in creating better quality of life is optionality. We need lots of it. One of the options I want people to have is to teach entrepreneurship in schools, so that people have the option to start a family business. They may not take that option, but at least it's not a mysterious black box. Also, let's say you had no minimum wage, but if you had 10 employers and a limited pool of people available to work, they're going to have to bid against each other to create better working conditions and better pay. You kind of only need minimum wages when there's not enough optionality. If there's enough optionality, it pushes everything up.

Nick Hanauer: I agree with the spirit of that. It just turns out that is never the case. There's a lot of economic theory that sounds a lot like that, but it exists in an imaginary world where people have power and optionality. In the real world, that doesn't ever exist. By way of example, there's a principle of economics called the theory of marginal productivity. Have you heard of that?

Steven Bartlett: No.

Nick Hanauer: That's a theory embedded at the centre of economics which says that because markets are efficient, the amount of money you earn reflects precisely the contribution that you make. If I make $15,000 a year, that's because I'm giving $15,000 of value in the world. And if I earn $500 million a year rubbing money together to make more money, that is an accurate reflection of the value I'm creating in the world.

Steven Bartlett: Which is really central to capitalism, isn't it?

Nick Hanauer: It is absolutely central to capitalism and to economic policy. But here's the thing. If you understand where that came from, it gives you pause. In 1879, a guy named Henry George writes a book called Progress and Poverty in the United States. Basically it's the first book about the rich stealing from the poor. This book isn't just a bestseller — it is the bestseller in the history of the United States. The powers that be freak out. JP Morgan brings this guy John Bates Clark to Columbia University — sort of the home of Wall Street — and says, "Fix this." And so Clark writes a book called The Distribution of Wealth in which he invents this idea called the theory of marginal productivity. He says the quiet part out loud in the book. He says, "Look, we have to prove to working people that no matter how much they make, whether it's a little or a lot, it reflects their value, because if they conclude that their work is worth more than they are paid, they will revolt and kill us all, and that would be bad."

That idea, it will not surprise you to learn, was very attractive to a bunch of rich people and got swept up into economics. Today it is a core idea in economic theory. It would be true potentially if markets were perfectly efficient and all this optionality existed. But there has never been a case where that was true. It has materially harmed the welfare of most people because, as Dan says, your ability to earn is related to your power to negotiate, not some magical number that the market decides.

Daniel Priestley: And it's how easy you are to replace. Because if I run an ad for a job and 400 people apply, which really does happen — I know this happens for you, Steven — you don't think about raising the wage because 400 people applied and they're all really super qualified. This happens all the time in the UK right now.

Nick Hanauer: Happens everywhere. There are almost zero circumstances where workers have more power than owners. Even Adam Smith in The Wealth of Nations outlined this asymmetry of power. And the thing is, if you persuade people that what they earn is all they're worth, then you've created a narrative that makes rich people richer and everybody else poorer.

Steven Bartlett: So what's the solution? Is it to put a higher minimum wage on society?

Nick Hanauer: Well, that's a policy solution. But if you really want to solve the problem, the starting point is getting people to understand economics in a way that actually reflects how the economy works — not this stylised invention dating back to 1787 that, if you take seriously and enact policy on the basis of it, the only thing that can happen is that the rich will get richer and the poor will get poorer. Which is the story of the last 50 years.

Steven Bartlett: So what is the policy solution?

Nick Hanauer: A policy solution is most definitely to apply a standard which requires companies to pay people a living wage. The minimum wage is a perfect example of a great policy. Another policy in the United States which is really important is the overtime threshold — the salary threshold below which you automatically get paid overtime.

Steven Bartlett: Which I don't know whether you have here in the UK. We do — 48 hours is the upper limit of a working week.

Nick Hanauer: In the United States it's 40 hours. So if you work more than that you get paid overtime. That standard used to apply to virtually every worker in America in 1965 and 1970. Today that standard applies to less than 10% of workers. Why does that matter? Because people like me, at the scale of tens of millions, have turned three 40-hour-a-week jobs into two 60-hour-a-week jobs and pocketed the difference. You put gummy bears in the lunchroom and a ping pong table and you force people to work 60 hours a week, and then you can have two employees instead of three. If you do that 30 million times, you've taken 10 million jobs out of the workforce.

The UK's worker protections and the ownership argument

Steven Bartlett: Do you agree with this approach, Daniel?

Daniel Priestley: Not as much. Here's the issue. I agree with it at one level, but almost every solution that Nick has recommended, the UK has had for the last 20 years. We have a minimum wage that is pegged at two-thirds of the median and ratchets up. We've got 28 days of paid holiday every year. We've got sick leave. We've got maternity and paternity leave. We've got very difficult rules around firing someone if they've been with you for more than six months. We have this unbelievable set of workers' rights — all of these recommendations from minimum wage right through to how to handle employment. And we have the most unhappy population. Our economy is not growing. We have a million young people out of work. No one's hiring at the moment. Those conditions have not created runaway prosperity. That gives me pause to think something deeper is going on.

I think we need to make more participation in capitalism. Capitalism is about ownership. You have to own an asset. And if you don't own anything — if you're just selling labour in the current economy with digital and AI and robots — the real reason wages are suppressed is that technology has cut out all the middlemen. Technology has hollowed out the middle class. We used to go to the video store and the video rental store used to have 12 people working there, and now we just go to Netflix. We used to go to our little local retailer and buy a CD, and now we just go to Spotify or Amazon. It's hollowed out all of those supply chains that used to create amazing jobs.

The value of labour has been eroded because it's very easy to outsource labour to another country. It's very easy to simplify a job down to automated parts using technology. The fundamental value of actual labour has diminished because of technology. Technology has reduced the actual utility of this thing we call labour for 90% of people.

Steven Bartlett: And it's only going to get worse with AI.

Daniel Priestley: And with AI and with robots, it's going to go down. So if you simply say, "Oh, this is about lifting work standards," you're going to miss the point that we can't compete with technology. Technology is better at this stuff than we are. The answer — the solution — is ownership. Everyone in this economy needs to own stuff. We need to own a house, a family business, shares in the companies that are growing. You cannot outrun this. This is like trying to run against someone who's in a car and they say, "Oh, you just need nicer shoes." No. The shoes won't change things. We've already tried nicer shoes in the UK economy and it's made no difference. Everyone's miserable. That's where you and I would disagree.

Nick Hanauer: Both things can be true. The minimum wage in the United States is $7.25 an hour — or $2.13 plus tips. It's a third of what it is here in the UK.

Daniel Priestley: But you have twice the disposable income that we have. Your median wage is one and a half to two times what our median wage is. We're now a poor country relative to the US. And even though your minimum wage is terrible and horrific and inhuman — your country and your citizens are so much richer than ours.

Nick Hanauer: Yeah. Except if you consider that out of that median wage, you have to take $20,000 a year to pay for healthcare.

Daniel Priestley: I think adjusted it's still 30% better even adjusted.

Nick Hanauer: I think if you look at the OECD data it would be interesting. I can't remember, but I bet it's about 10% different.

The average US salary is around $74,000. The average UK salary is around $50,000. Americans pay heavily for healthcare — the average employee in America pays about $6,000 to $8,000 a year in premiums and out-of-pocket costs. Brits do not pay for healthcare because of the NHS. If a US worker makes $74,000 and spends $8,000 on healthcare, they are at $66,000 before relatively low taxes. The UK worker starts at $52,000 before relatively high taxes. The gap in base salaries and tax rates is simply too large for UK free healthcare to close. The US wins on pure disposable income per person.

Nick Hanauer: There's no doubt the US has had a much more successful economy than the UK. Brexit being, you know, a catastrophe.

Daniel Priestley: Can I push back on one thing with the minimum wage? The companies that hollowed out the middle class are big tech companies, big finance companies — those mega corporations. And I agree with you, they can afford to pay their workers more money. One of the issues I feel — and this is what I'm concerned about — is that in the UK, the majority of businesses that do pay minimum wage, like a friend of mine who owns a pub, have razor-thin margins. He's losing money. He's not taking any money out of it. He's massively impacted by taxes and minimum wage. The companies that have to pay minimum wage workers and give people the on-ramp into the economy — pubs, little retailers, mom-and-dad businesses — these are the ones that really do get squeezed. They have razor-thin margins and you put more pressure on them. They just go, "I've had enough. I can't do it." And the companies that hollowed out the middle class — the Microsofts, the Googles, the Amazons, the Starbucks — they go, "Yeah, we can absorb it." And also, we're not paying tax anyway.

Nick Hanauer: So one of the things you could do — one of the things we recommend — is that you impose these standards progressively. The biggest companies have to pay the highest minimum wage, medium-sized companies pay slightly less, and small businesses pay less. But even within that context, ensuring that everyone pays enough for people to have enough money to continue to buy stuff. It's fine and good to say, "Look, I don't want to pay high wages in my pub." But surely the people working in the pub should make enough money so that they can go to the pub themselves and buy a beer. The National Restaurant Association in America is famous for this — they want everybody in America to be able to go to a restaurant and eat, except for the people who work in the restaurants.

Steven Bartlett: Can I just say something about your friend that owns the pub? Say you own Starbucks and you own a pub. I'm a worker. If you're going to pay me more because you have this progressive minimum wage and you're going to pay less — I'm sorry, Daniel — I'm not going to apply for the job. I'm going to want to go work at Starbucks. Is there not an issue where you're not going to be able to attract talent?

Nick Hanauer: There are many reasons why you would work for a small business as opposed to a mega-corp.

Steven Bartlett: But I'm saying you're paying me £4 minimum wage and he's paying me £8. Does he not end up getting all the best talent?

Nick Hanauer: He might get the best talent. And also for the pub, you might have to match £8 — you're just not necessarily legislated to pay £8. As a small business owner, there are all sorts of techniques you can use to retain people.

One of the interventions I was part of in the United States was the $15 minimum wage. We cooked that up in Seattle, Washington. I spoke to many, many small business owners who were absolutely terrified by this — because you can do a calculation in seconds about the risks and expenses of higher wages. But what you cannot calculate is the benefit of living in — of operating your company in — a regime where everyone earns more. A ham sandwich in Somalia costs 25 cents. It costs $25 in Switzerland. What kind of economy do you want to live in?

Daniel Priestley: Well, the friend who owns the pub — his pub is actually full most nights of the week. The issue is taxes and costs. He's got a big government in the UK. We have all of these things. Everything that you've mentioned, we have it and we've had it for 25 years. We don't have an affluent middle class that's been created. We have an eroded middle class. My friend took no money himself and the pub lost £180,000 last year — because of VAT. He feels like he's carrying the weight of training people in their first job. He's creating jobs as one of the only employers in his little town. And he didn't create this mess. Amazon and Microsoft and Google and Facebook and big funds — they are sucking money out of the economy.

Nick Hanauer: We're in violent agreement about this.

Daniel Priestley: I just feel like small businesses are currently squeezed here in the UK. They are squeezed by big tech, and now AI has come along. They feel like they have to learn this new thing, start posting on LinkedIn 45 times a day using AI posts, edit videos and become a TikToker as well. It's all this constant pressure caused by the tech sector. And one of the biggest threats to my friend's pub is that a big American private equity fund wants to buy it and turn it into a block of flats. They want to financialise this community asset and he's trying to fight to keep his pub.

What I don't want is big government creating a new framework that basically squeezes small family businesses even harder. We're losing two pubs a day here — they're closing down. They go out of business and then we end up with big corps and big funds who can afford to absorb it, and they own everything. And I want to be clear that the reason people are struggling is they don't own anything. It's not because of working conditions.

Nick Hanauer: It would be wonderful if everybody owned something. But ownership starts with earning enough money so that you can save money so that you can begin to own something. One of the lessons we learned was that trying to give stock options to everyone in a company often doesn't work. It's a catastrophe because for 90% of the workers in a company, their concerns are immediate and they don't value stocks. If you give them the choice between cash or stock options, it's not even close. I agree with this sentiment. I just have never seen and do not believe there is an existence proof for it working on planet Earth. What certainly worked great in the United States for 40 or 50 years was a set of standards that required companies to fairly split the value they create with their employees — through unions, which can be problematic, but also through labour standards like the minimum wage and the overtime threshold — coupled with policies to discourage consolidation and the kind of exploitation that Dan has very smartly articulated.

Daniel Priestley: The only difference that happened back in the time you're describing — where workers had to be included — is that it was nearly impossible for a company to outsource their customer success team to the Philippines, and nearly impossible for a company to come up with a piece of software that would do 80% of the heavy lifting of a job. When you put a lot of pressure on companies, we're living in the age of AI and robotics. One of the options companies have is just to outsource the labour to another country or automate it.

Nick Hanauer: But the rules that enable people to do that were written by the same people who are consolidating industries and taking advantage. You don't have to live in a world like that. There are other ways to organise the world. The neoliberals promised that free trade was going to make all of us richer. What it did was flood our markets with cheap stuff from China, but it is absolutely not clear that it made people's lives better.

Daniel Priestley: It made Chinese people's lives better.

Nick Hanauer: It made Chinese people's lives better, but it certainly didn't make people in the UK's life better. And it certainly didn't make people in the United States's life better. I guarantee you that if the United States could go back and do it again, we would have rethought it.

Sovereign wealth funds, baby bonds, and housing financialisation

Daniel Priestley: There are a few ownership models that I think are important and could be looked at. Number one is a sovereign wealth fund. Countries like Norway and Singapore own natural assets in a sovereign wealth fund, and essentially every citizen therefore owns a piece of some asset. It's a very successful model. It seems to work so incredibly well that it's dangerously well. Half of London is now owned by the Qatari sovereign wealth fund, the Norwegian sovereign wealth fund. We're literally losing all of our property to the sovereign wealth funds of the world. So the sovereign wealth fund model is incredibly powerful.

The UK did a stupid thing. We discovered the North Sea back in the '80s, and Norway had half and we had half of this North Sea oil. The Norwegians said, "We'll just own this in a fund that all of our citizens will benefit from. It'll be a state-owned fund, and we'll take the profits and reinvest them into assets, and every citizen will benefit from those assets." The UK said, "We'll just sell a licence to British Petroleum." We made the rich people richer. And Australia is so stupid — we have all this incredible natural resource and no sovereign wealth fund.

The other model is to put shares into a baby's name — so when a baby's born, you have a piece of the stock market, like $1,000 worth of shares. It's a baby bond idea.

Steven Bartlett: Trump's doing both of these things, isn't he — sovereign wealth fund and the baby bond? He's calling it the Trump fund or something.

Daniel Priestley: Yeah, they're experimenting with some version of this right now. If a baby by the time they hit 18 has had 18 years of compounding of owning that asset, then by the time they hit 18, they're literally getting an asset that they can then turn into another asset if they want to. That's pretty powerful.

And then the biggest issue is the financialisation of houses. About half the value of a house is what you might call the utility value — it's a house to live in. And the other half is the financial speculation value — how much value does a fund have if it can rent this out to people for the rest of their lives.

Steven Bartlett: I looked at the BlackRock thing and it said the idea that BlackRock is buying up UK homes is a myth. They are a financier, not a landlord. They provide loans and debt facilities to property developers, but they do not directly own or manage residential housing stock.

Daniel Priestley: Lloyd's Bank is buying 70,000 UK homes to rent forever.

Steven Bartlett: The number of single-family homes BlackRock directly owns and manages in the UK is zero.

Nick Hanauer: Okay, but he's right. I don't know what the details are, but this is a private equity thing that's going on in this country and in the United States right now. They come up with structures to do it at arm's length. But the meta point here is that homes used to be owned by people. They bought them to live in. One of the nefarious things going on in the West — driven by this neoliberal consensus that the only purpose of the economy is to make rich people richer — is this idea that private equity should buy all these homes and turn ordinary people into a rental class.

Just to confirm: Lloyd's Bank are doing that through something called Citra Living. They are buying up thousands of new-build homes and apartments to act as a direct private corporate landlord. They view the structural shift away from home ownership towards long-term renting as a major profit opportunity for them.

Nick Hanauer: They want to have a permanent rental class. People will own nothing and be happy — that's the idea. And people are not like that. People love to own stuff.

Inequality, growth, and the UK versus the US

Steven Bartlett: I want to go back to the central point — how do you solve this? Because you've got two different views on how you solve this inequality. What I find interesting is the UK has better worker rights. But you also have much less inequality here.

Nick Hanauer: That is true. The US top 1% holds over 30% of the nation's wealth compared to roughly 20% in the UK. The US consistently ranks as the most unequal of the G7 nations.

Steven Bartlett: However, the US is growing much faster. From 2009 to 2026, the US has grown over 100% faster than the UK. And the UK is vastly more protective of workers — paid vacation, paid maternity leave. The UK mandates up to 39 weeks of statutory pay. The US mandates zero.

Nick Hanauer: One of the things that's happened in the UK is Brexit. That's taken eight or ten percent out of UK growth rates. It has affected unemployment by 4%, productivity gains by 4%. Part of why people in the UK are feeling down is this unbelievable mistake that the country made.

Daniel Priestley: But it's the same in Germany. It's the same in Australia. Germany has unbelievable workers' rights. Australia has unbelievable workers' rights. In fact, the USA is the outlier of all the modern capitalist economies.

Nick Hanauer: Absolutely. But we're confusing things. People are pissed off everywhere in the world.

Daniel Priestley: I don't want the pitchforks to go away any less than you do, but these workers' rights are not putting the pitchforks away. We've given this stuff to Australia, New Zealand, Canada, all of Western Europe, all the English-speaking democracies other than the USA. The USA is the only one that has virtually no safety nets or safeguards. Everywhere else has healthcare systems that are much more generous, welfare systems that are more generous, maternity leave. It's just inhumane that the USA doesn't have maternity leave. But we've got all of that, and we've got the pitchforks here too. This is why I'm really zoning in on the idea that people need to own a house, a business, and shares. If they own stuff —

Nick Hanauer: I could not agree more. And I don't know how to get them there unless they are paid well enough to do that.

Daniel Priestley: Let me tell you an anecdote. During the George Floyd riots, people were burning stuff down in the United States. There was this fantastic interview with a woman, and the reporter said, "I cannot believe that you don't have respect for property rights." And the woman said —

Nick Hanauer: We have no property. Why should I respect property rights? No one I know owns anything. I am 100% with you. But I think at the core of it, inequality is way more than an economic inconvenience for the people it affects. What it does is it shreds the reciprocity norms that make social cohesion and democracy possible. It's this dog-eat-dog, you're all on your own, grab what you can. Obviously Donald Trump has created a permission structure for the worst kind of behaviour — the worst kind of corruption. Basically stealing has come back into style. There are all sorts of reasons generating this malaise, this sense of unfairness and lack of control. I agree 100% with your sentiments about entrepreneurship and ownership. At the end of the day, the cool thing about entrepreneurship is you're in charge.

Steven Bartlett: But not everybody can be an entrepreneur.

Nick Hanauer: Correct. And so I do think that's a little bit unrealistic.

Daniel Priestley: The issue is that 70% of all jobs that get created are created by small businesses — not governments, not big companies. They don't create jobs. Small businesses create jobs. Not everyone can be an entrepreneur, but if we had 100,000 entrepreneurs who were all hiring 10 people, we'd have a million jobs and 100,000 options for people with jobs. I don't think we should discount the whole idea that entrepreneurship is a big part of the solution.

The K-shaped economy and the Engels Pause

Daniel Priestley: Can I take us briefly back in time? This is not the first time this has happened. The K-shaped economy has happened before — in the Engels Pause.

Steven Bartlett: What do you mean by a K-shaped economy?

Daniel Priestley: A normal economy is one where everyone agrees it's going up or down or sideways — a rising or falling tide. A K-shaped economy is where it's really good for some and really bad for others. It's a disrupted economy. The top percentage are going up and the bottom percentage are going down. The headlines we run today are the exact same headlines that were run in the early 1800s in Britain — record profits for industrialists and workers haven't had any improvements. You could almost take every grievance we have today and overlay it in the early 1800s and get the exact same words.

One of the big solutions in the early 1800s was to export people — they sent everyone to Australia. Same sort of thing: mass remigration. We call this the Engels Pause, and we understand what caused it.

Nick Hanauer: 1790 to 1840.

Daniel Priestley: Yeah. What caused it was technology — the industrial revolution. We introduced the steam engine, the spinning loom, tractors, all of this new technology. The owners of that new technology went like that — they levelled up. And the people who were not part of that technology went down. A simple picture: a farm that had 100 workers farming versus one farm that had a tractor. The tractor farm went up and all the workers went down. It's because of technology.

Nick Hanauer: The interesting thing about the Engels Pause is that for approximately two generations — 50, 75 years — with the exception of the owners of capital, basically everybody else on planet Earth went backwards. It was hell. And what happened is that over time the political consensus changed and working people clawed back some of that value through unions, through labour standards, and so on and so forth.

Steven Bartlett: One of the things you've always talked about, Dan, is that if you start applying pressures on these companies or entrepreneurs, they can just now get up and leave. That was quite different from that era — we weren't dealing with technological businesses, with IP. So if you start imposing some of these measures, will these companies get up and leave and go somewhere where market conditions are preferable? A lot of UK entrepreneurs are, as we've seen from some of the numbers recently, choosing to go work elsewhere.

Nick Hanauer: One of the challenges you have here is that the world has built this incredibly stupid system where you can operate a business here, take advantage of the UK's market, the UK's rule of law, the UK's infrastructure, put your stuff in a box, move to Dubai, and pay no tax. It's idiotic. It's just suboptimising. As an American, I pay tax wherever I go. I cannot come to a place and take advantage of it and then skirt the laws. This is such a profound disincentive to do the right thing.

Daniel Priestley: Yes. But the real culprit is what companies can do. US companies can set up an office in Ireland or Luxembourg — and it's the corporations that are the bad guys. But you also have UK-based entrepreneurs who are like, "Well, I can stay here and pay 40% tax, or I can pop off to Dubai, run the business virtually, and pay nothing."

Steven Bartlett: So what are you saying should be done with those people?

Nick Hanauer: I think that UK citizens should pay UK tax wherever they go, and German citizens should pay German tax wherever they go.

Daniel Priestley: I don't think that will solve it because it's not citizens — it's corporations that are the bad guys.

Nick Hanauer: Well, it will solve one problem. This other problem needs to be handled too. The giant vampire squids of the world are companies that are pumping money out of economies. They're faceless corporations that have figured out how to play this game. Take YouTube, for example. YouTube is serving up a ton of videos to people all over this country and running ads, but it's pretending to be in some distant place. We used to have a broadcast licence in the UK — if you want to broadcast in the country, you pay a flat fee. Why is YouTube not paying a broadcast licence? If they are effectively a broadcaster running ads, they sit there and say, "Oh, but we shift our profit through here, we have to buy our licensing from this company over in Vanuatu." No. Look at how you do business in the UK — you should pay tax. You've got this many views and the broadcast licence for you is this much.

Steven Bartlett: Do you agree on both points — that you should tax corporations based on where their customers are consuming, and tax individuals irrespective of where they decide to fly off to?

Daniel Priestley: Look, I think in a globalised world, an individual should be allowed to make a new life for themselves if they want to. If I genuinely make a new life for myself in the UK — I came here from Australia 20 years ago, I've got three kids here, a house here, my whole life is here — I don't like the idea that just because I was born in Australia, it's not possible for me to make a new life.

Nick Hanauer: We have tax treaties. There are ways of handling this. But this ridiculous situation — every rich person I know in Europe is playing this ridiculous game of trying to avoid taxes. I don't know how you can look at that and think this is a good system.

Daniel Priestley: I'm seeing so many people demonise people like Nick. They go, "Oh, this guy, he's a rich guy, he shouldn't be so rich." Honestly, he's not the problem. I'm sure you pay a bunch of taxes and you create economic activity around you. These mega corporations do trillions of dollars out of economies.

Nick Hanauer: If we take a mega corporation and decide to tax them where their customers are —

Steven Bartlett: I was looking at some of the research and it says corporations rarely just absorb the tax. When countries like the UK or France introduce taxes based on local users, tech giants immediately raised fees and prices for the consumer and small businesses inside those specific countries to offset the cost. If we had a global tax system that prevented this, then they wouldn't do it. They couldn't do it. If the compliance cost of tracking user locations and paying local taxes outweighs the profit from the region, companies also tend to simply block users in those countries or pull their products entirely.

Daniel Priestley: Great. And that opens up a possibility of a local company to do it.

Steven Bartlett: Worse, maybe?

Daniel Priestley: Maybe better. I was thinking about the large language models as an example. If the UK tried to take on Gemini or ChatGPT, we would be using a significantly worse technology.

Nick Hanauer: Those mega-corps — they don't do this. They want to own the world and dominate the world. They're not interested in cutting countries out. None of them actually cut countries out. Do you think Facebook is just going to leave the UK?

Daniel Priestley: They might do it very briefly as a way to punish political dissent, but ultimately they operate globally. They have a global business model. We just need to say, "I'm sorry, you've had your 20 or 30 years of not paying taxes anywhere, but we're not doing that anymore." We are very good at coordinating when we want to coordinate. The bad guy here is really just pulling money out of our economies and taking it to other places. One of the reasons the USA has become so wealthy with its stock market is because it is the end valuation where all of these vampire squids end up.

Steven Bartlett: What happened in Australia and Canada — they passed a law called the Online News Act requiring tech giants to pay local publishers whenever Canadian users shared or viewed news links. And immediately, instead of paying, Meta simply blocked all news content from every user in Canada because the cost of compliance wasn't worth the hassle for one particular market. You had the same thing happen with Amazon, where several US states like California tried to force Amazon to collect local sales tax simply because Amazon had independent affiliates living in those states, and rather than dealing with complex local tax collection, Amazon instantly terminated thousands of affiliate accounts. If every state required Amazon to collect local sales tax, obviously they couldn't do any of that — they would have to deal with it. These big corporations have a massive advantage over the jurisdictions they're operating in because they have so much more power and flexibility.

So what is your solution, Daniel, to solve for this inequality problem? You seem to be less interested in the workers' rights piece because you're saying we've tried it.

Daniel Priestley: What I would like personally is to see way more small businesses, and I want the government to favour small businesses. Essentially say: we're going to reduce the taxes and the pressure on small businesses. We're going to advantage local small businesses that are here and paying tax. We're going to create special economic trading zones if your business is based here and is a smaller size. We're going to make ourselves highly competitive for small businesses to show up and do their thing.

Steven Bartlett: And what about big businesses?

Daniel Priestley: I wouldn't punish them. I would just tilt the playing field. I'm 100% with him — tilt the playing field towards smaller businesses and startups. I'm not sure if you've heard about this thing I just joined the board of called Enterprise Britain — Brent Hoberman who does Founders Forum and Steve Fitzpatrick who founded OVO just started it. It's a group of us who have gotten together with the express purpose of doing exactly what you describe — trying to make Britain an even better environment for business, mostly small and medium-sized businesses. One of the great challenges here is to try to find capitalist structures that allow small companies to turn into larger companies while remaining here and not fleeing to a better place.

Nick Hanauer: I am 100% in agreement with this. And you can have an incredibly dynamic, fast-growing economy where all of the benefits flow to the people at the very top and everybody else gets screwed. You have to do both.

AI, job disruption, and the future of work

Steven Bartlett: One of the most important subjects at the moment in society is artificial intelligence. Anthropic recently said that entry-level jobs are at risk, and there's a graph showing the consistent decline of entry-level job postings on LinkedIn. AI is something I think about so often. I was up late last night trying to think through some of this stuff because Anthropic released a report showing that AI models will theoretically be able to improve themselves in the future. How disruptive do you think AI is going to be as it relates to job losses?

Nick Hanauer: I don't think Bernie Sanders' latest idea is terrible. He's proposed the US own 50% of all the companies. It is absolutely true that AI is monetising — for free — humanity's intellectual property, and a few people are going to directly benefit from that. In the same way that Norway created a sovereign wealth fund with this enormous asset they had, creating a sovereign wealth fund with 50% of the value created by AI and recycling that back in — I think it's unclear exactly how those benefits should be recycled, but trying to find a way to make some of that value a cushion for the disruption that AI will inevitably cause. I don't think that's a crazy idea.

Daniel Priestley: It's a good idea for China and the US.

Nick Hanauer: Yes.

Daniel Priestley: But not for anywhere else necessarily. It's not going to help Senegal or Southampton much.

Nick Hanauer: No. In fact, it'll damage a lot of those places. The Philippines has benefited enormously by being the outsourced back office for a lot of small businesses that AI can now do a lot of those jobs.

One of the things I always come back to is the idea that the UK has 5.7 million businesses and a million unemployed people. We need one-fifth of the businesses to employ one person. AI does actually make your business better — it's really good at helping you with your marketing, great at helping you do legal contracts. There are 100 ways that AI could actually make 5.7 million businesses a little bit better to the point where they want to hire someone. If we can incentivise those things to happen — businesses are trained on how to use AI to their advantage, tax breaks for small businesses that are hiring — there's actually a good match there.

Steven Bartlett: A lot of people have been talking about AI agents. What an AI agent can do is go on your computer and get any task done — whether that's editing tasks, manual data entry, clicking around and doing things. A lot of the entry-level roles were often given that kind of work. My entry-level job after I dropped out of university was kind of doing that kind of thing, plus a sales component where I'd cold-call people. AI can now do the cold calls too. And increasingly, if we just play the rate of development forward, we'll be able to do those things. So if these businesses get more and more efficient, what role will entry-level team members have in these kinds of companies?

Daniel Priestley: What's interesting for me is that I have a group of companies — small businesses, dynamic small businesses — and we've implemented AI in all of them. As a result, we've hired people. We've hired some entry-level people who are augmented by AI, so they become more valuable because of AI. Things like appointment setting — we've ended up hiring more salespeople because we get more appointments. We use it with our marketing and we end up hiring people who can actually have those final conversations with people. At the very core of my organisations, we have an AI layer — it has context, skills, models, a security layer — and it spits out amazing information and data and reports and tells us who to talk to and why and what to talk to them about. All these things are happening because of AI.

Steven Bartlett: But it doesn't get around the point that, if you think about Uber, Dara has been pretty clear that the 9 million drivers they have are going to lose their jobs in the future. If you think about the other white-collar professions we've described, those roles will be changed.

Nick Hanauer: If I put on my more optimistic hat — all businesses operate in a competitive environment and there are two ways to compete. One is to be cheaper. The other is to be better. The thing about AI is that yeah, there are tasks you can automate away, but one person with good AI tools may be able to do the job of five. And yeah, you could eliminate that job, or you could keep that person, give them the right tools, and out-compete your competitors.

Steven Bartlett: I mean, this is of course what happened with computers. I am older than you guys, so I remember when calculators hit. You had to be there to realise how freaked out people were about calculators. People were talking about what are the accountants going to do, will kids learn maths anymore. It was extremely controversial to bring a calculator to school. And then along came computers. The truth is that computers didn't reduce the amount of work that people did — they increased the amount of work that people did. I do believe there are ways in which AI is probably going to do that. The job loss may not be as apocalyptic as it now feels, because at the end of the day you have two ways to choose to compete. You can get rid of somebody and do X, but you could keep that person and have them do 5X and out-compete your competitors in another dimension. Doctors are just going to be better doctors.

Daniel Priestley: I definitely agree that there's going to be this sort of augmentation of certain individuals. I think maybe the difference between calculators or computers versus this is that AI is coming into a technological economy with instant scale. When Anthropic shipped their new model last week, it went to all of us at once.

Steven Bartlett: Everywhere in the world, we were all boom — step-changed. With computers, I remember the day my dad ordered the first computer for our house. We waited for weeks and weeks, then we got it. It was super expensive. We unboxed it. I remember us all standing around it — it was this Windows 95 machine that had like no memory on it. The distribution, the disruption, was much slower.

Nick Hanauer: The pace was much slower.

Steven Bartlett: And with our team, there's no intent to let anybody go because of AI. We're reskilling people, training people. However, would we end up hiring fewer people, especially in the near term, than we would have otherwise? I think that's conceivable. A lot of companies are in that position. I was speaking to someone yesterday and they said, "We're just letting the natural attrition in our call centre take care of the shift" — which means they lose 25% of people from their call centre naturally and they're just not hiring other people back in. Klarna's CEO said the same thing: "We're just letting the attrition take care of it."

Daniel Priestley: I'll give you another example to counter that. I work with a husband and wife couple in the north of England who had a little video production agency with one or two people who did a little bit of contracting with them. They used AI to create a piece of software that helps automate script writing and a few of the things they do. They launched a waiting list for this, got 5,500 people to join the waiting list, then signed up their first 1,500 clients to a piece of software that cost almost nothing for them to build — in four months. Now they're hiring a team of 10 people. This is a husband and wife who had a small constrained business who are now building out a bigger business. This could never have happened before. They haven't had to raise millions of dollars. They haven't had to hire 30 or 40 people. This tiny little SaaS opportunity is suddenly possible because of AI.

Steven Bartlett: I think anecdotally I could come up with lots of examples as well where particular people who are highly entrepreneurial come across an opportunity. But if you just zoom out on the way that people generate value in the economy at the moment, so much of that is going to change and it's going to be quite quick.

Nick Hanauer: Oh, totally.

Steven Bartlett: And I don't know what you do about that sudden shift.

Daniel Priestley: Well, this happened in the Jevons Paradox. The person who had a tractor displaced a hundred people who were in the field, and those hundred people went into the city looking for work all at once. Charles Dickens wrote A Tale of Two Cities, he wrote Oliver Twist. Guess who else came out of the Jevons Paradox? Our good friend Karl Marx, who came up with the most toxic ideas ever created and written down. He came off the back of the Jevons Paradox.

Steven Bartlett: So what do you do about it?

Daniel Priestley: UBI.

Nick Hanauer: I'm not a big fan of UBI at the moment. Isn't that kind of what this 50% Bernie Sanders thing would do?

Daniel Priestley: Well, it's a sovereign wealth fund basically. But you have to find a way to help manage through this transition. The whole valuation that AI is predicated on is job disruption. You can't get to those numbers unless you're displacing lots of jobs.

Nick Hanauer: Exactly. And if that's true, then we should grab some of that value that is created and recycle it into the economy to try to cushion the disruption that it creates.

Daniel Priestley: This is a bit of a socialist idea, right?

Nick Hanauer: I don't call that socialism.

Daniel Priestley: What do you call that?

Nick Hanauer: Just common sense.

Daniel Priestley: But wouldn't that broadly apply to all companies and rich people? If they are disrupting the economy and taking an unfair share of that disruption, should we not just grab and recycle back in?

Nick Hanauer: But that is the basis upon which every high-functioning democracy in the world operates. Every high-functioning democracy in the world has progressive taxation and labour standards. There's a difference between seizing private property — which would be a socialist or communist way of doing things — and owning strategic assets. For example, the Dubai government owns the physical hotel buildings that run Dubai and leases those out to hotel operators, but keeps money in its sovereign wealth fund because it says a big part of Dubai is that we own these land assets.

Daniel Priestley: So do you think we should go and take a portion of these companies?

Nick Hanauer: Well, the difference was the Dubai government actually developed those assets. But we might say that data is the new oil, and data is a common good and a common asset that has been sequestered illegitimately by these companies. So you're not seizing what they created. You're basically saying, "I'm sorry, but you need to pay a licence back to this sovereign wealth fund because you're using a common asset that you were able to essentially seize."

Daniel Priestley: You stole it from Africans and British people. You stole it from people in Australia. You stole it from people in Canada.

The biggest issue we're having is that the nature of the entire economy is changing. This happened 250 years ago where the nature of the economy was land and we had an economic system called feudalism and colonialism. Then the nature of the economy was industrialisation and we had socialism and capitalism. Now the nature of the economy is fundamentally changing. In economics there are four factors of production: land, labour, capital, enterprise. We're now swinging like a pendulum from land through capital and labour, and now we're actually in an enterprise economy. We need some sort of economic system that reflects the reality of how money and wealth is made.

Steven Bartlett: What is that? Is that: go to OpenAI, take 50% of their company, and then pay out the profits of that 50% to the people?

Daniel Priestley: I'm always sceptical of any socialist ideas. If it comes from Bernie Sanders, I'm sceptical.

Nick Hanauer: Okay, but Bernie Sanders is not a socialist. Socialism — the government owning all the means of production — look, there are a million forms of capitalism. Every country operates slightly differently. I don't think Bernie Sanders is saying we should abandon markets. What he is saying is we should manage markets for the public benefit, not exclusively for the benefit of the owners of capital. And I think that's really different.

Daniel Priestley: With an Amazon, they're using the roads and the infrastructure.

Nick Hanauer: Correct. We effectively do take part of them in the form of taxes. Now, the taxes that we impose on those companies, I would argue, are insufficient. They do not accurately reflect the value that we give them.

Steven Bartlett: So you think we should increase the taxes on companies like Amazon? You both agree?

Nick Hanauer: Amazon is very successfully avoiding taxes. We need to close tax loopholes — taxes like all other companies that operate within the economy.

Daniel Priestley: One of the biggest issues we have is widespread incompetence in governments. In the UK government, you are 10 times more likely to die than to be fired for poor performance, and the UK government fires people at 1/1600th the rate of normal businesses for incompetence. So we have an accumulation of massive incompetence in government. We can come up with all the best ideas under the sun at this table, but we have a fundamentally incompetent set of people with misaligned incentives. We have basically a revolving door between the financial-industrial complex and the technology-industrial complex. The Singaporean government basically said we're going to have a very high degree of meritocracy in government — we promote and fire based on outcomes and merit.

Nick Hanauer: Singapore is a miracle of governance. Amazing governance.

Daniel Priestley: It's a miracle of governance, but it is a very small place.

Nick Hanauer: And perhaps the only place in the history of planet Earth that has benefited from a well-meaning dictator.

Daniel Priestley: It's an astonishing story of capability, competence, and foresight.

Steven Bartlett: So what is the solution with this AI revolution? We all agree there's going to be job disruption and a new type of job, and probably a delta of people transitioning to those new types of jobs. Within our recruitment processes now, we are really looking for people that have a certain set of skills, and it's harder and harder to find those people.

Nick Hanauer: Well, that's training. That's education and training. The school system needs to produce people that you would want to hire. And that takes a lot of time.

Daniel Priestley: In my hiring, I ask the question: how deep are you in the AI rabbit hole? And anyone who says, "A lot" — I'm like, okay, join the team.

And if you think about humanoid robots — Elon Musk's pay packet mandates him to deliver millions of humanoid robots or else he doesn't get his big pay packet. We watched the other day Figure AI release a video showing a humanoid robot sorting packages on a production line for eight days straight, beating a human sorting those packages. My car in Los Angeles now drives itself, and so do the taxis. There's a huge race to make autonomous vehicles. I assume there'll be more human jobs, more sales jobs. My only thing I can say is that the future is small businesses. It's small teams of 10 people making YouTube channels. It's small teams of 10 people making software. When you have millions and millions of little small businesses, everyone's happier.

Steven Bartlett: But if you read what Anthropic released yesterday, they're making the claim that we're getting to a point where it will be an individual with a team of agents who can now make a trillion-dollar company without hiring a single person. And actually, when you said about making software, they might argue that'll be agents making that software. Anthropic said that the amount of code each individual is producing on their own is eight times what it was. And this one particular quote which I actually screenshotted on my phone last night comes from an engineer at Anthropic who was saying they feel useless because they haven't written a line of code in months and months and months. This Anthropic engineer was basically saying, "I come to work, this agent writes the code for me, and I kind of sit and watch and I feel useless."

Daniel Priestley: What would happen in that situation is you would have a massive deflationary effect. If there was one person doing all sorts of things in the economy, then the cost of that would go to the cost of the electricity to run it. Massive deflation. And then the question becomes: well, what does everyone do? We do human things. Humans always come up with things to do with each other. If I was to tell my grandfather that there is a job called a personal trainer who takes you to the gym and counts your reps, my grandfather would go, "That's insane." And I'd say, "Oh, there are 50,000 personal trainers in gyms all over the country." There are always these crazy new jobs that get created. I look at what trust fund kids do — a lot of trust fund kids, they don't have to worry about money and they go find something to do and it's always weird. We're going to traverse through, potentially involuntarily, this transition moment where I think history is quite clear on what happens.

Steven Bartlett: It gets ugly.

Daniel Priestley: It gets ugly. And then we'll come to — what I'm hearing is that you're saying we will come to some kind of utopia on the other end of this.

Nick Hanauer: No. I don't think there's going to be utopia. I don't think utopias exist. I do think that markets are the greatest social technology ever invented for creating prosperity and for ennobling the human spirit. That is not because markets are efficient allocators of scarce resources, which is the conventional view. Markets are an evolutionary system that enables groups of people to come together and solve complex problems, and solutions to human problems is what prosperity actually is. It isn't GDP or money. Going from aspirin to antibiotics is economic progress. The beauty of markets is that they are evolutionary systems where every business effectively is an organism competing to fill a niche — the perfect product for whatever market segment they're creating. You are a canonical example of this. In a world without capitalism, there's no way you would have independently created what was effectively a television network. You have more reach than MSNBC. That is the power of markets. But they have to be harnessed to benefit people broadly.

The best world you can build on earth is a market economy governed by a robust democracy that robustly includes all citizens in that economy. Your answer is small business, and I'm 100% behind you. My part of the answer is that a lot of people are going to end up working for large or medium companies, and we have to have standards in place to ensure that those companies treat people well enough so that they can be dignified participants in both the society and the economy. That will require innovation in laws and rules and all sorts of mechanisms. But there is no alternative if you want to live in a decent society.

The new economics paradigm and the narrow corridor

Steven Bartlett: So to simplify that — from a policy perspective, what does that mean?

Nick Hanauer: It is very hard to answer in an uncertain future with AI. We have no idea how much job loss there will be. We are going through a transition where the shape of the economy will change.

Steven Bartlett: So do we do nothing through the transition?

Nick Hanauer: No. We aggressively experiment with ways to include more people in the economy. Bernie Sanders' idea is an experiment. What's the worst that can happen? Just think about it. The worst that can happen is that there will be a few dozen guys who are worth $100 billion and not $200 billion. Will it work perfectly? I have no idea. But what I do know is that democracies need to move aggressively to try to make sure that these technological innovations benefit the society broadly, not just a few people narrowly.

Daniel Priestley: If I think about the UK — if you implemented something like that here, say we had an AI company here and you said the UK is going to own half of it — would that company just restructure somewhere else because it's digital?

Nick Hanauer: They probably would. But you're back to this old problem. We've even seen this with data centres. I read a report that said the reason OpenAI didn't open their data centre in the UK, which they said they were going to, is because energy costs four times more here.

Daniel Priestley: And the risk with the Bernie Sanders model is that we leverage the government's balance sheet to take out huge debt in the name of our kids and grandkids that they have to repay. They buy up all these intangible assets and then they're left holding those assets that may or may not perform — and will have debt regardless. And then the super clever little Anthropic guys say, "Oh, actually we're just going to restructure to Vanuatu now. Leave you guys holding all of that toxic debt and we're going to go run this from somewhere else." That could happen. The other thing is if OpenAI are making $100 profit at the moment and Bernie Sanders says we want $50 of that profit, China are going to theoretically have an additional $50 to invest in their frontier models.

Nick Hanauer: Bernie isn't saying take $50 of your profit. He's saying take 50% of your stock, which means the US would have equal voting.

Daniel Priestley: Well, then you're going to get gridlock in terms of voting. If the US owns 50% of the company and Sam Altman owns 50%, they're going to have to vote on decisions.

Nick Hanauer: You could put some directors from the public on that board.

Daniel Priestley: And what happens to a company when you have the government on the voting board? You effectively have this in lots of countries where labour has a seat at the table. With one of your companies, if half of your board were government, do you think you'd be able to be as innovative, move as fast?

Nick Hanauer: I'm not suggesting that half the board should be government.

Daniel Priestley: Mind you, that's what China has as well. China has essentially the CCP on the board of all of those companies.

Nick Hanauer: And they move pretty fast.

Daniel Priestley: There's a slightly different government, isn't it? And there are different levels of competence and meritocracy hierarchy. I worry about all of these solutions that empower government because I don't trust government. My entire life has been one thing after the next made worse by government. Born in 1981, I've never had a good experience with government.

Nick Hanauer: Okay, but dude, you grew up in Australia and you live in the UK. If you hate government so much, move to the Congo. Seriously. There is no libertarian paradise in the world where nobody follows any rules, nobody pays any taxes, and everybody lives like a king. If you hate government, there are 220 countries in the world. 150 of them effectively have no government. Why do you not move your base of operations to those places? Because you would instantly be somebody's, you know, lunch.

Daniel Priestley: I'm not an anarchist. When a government doesn't fire incompetent people —

Nick Hanauer: Everybody agrees democracy is the worst except all the others. Of course it is easy to point to these things and say they're incompetent, but it is just not honest to say that government doesn't improve our lives. There is literally no example on planet Earth of a high-functioning society without big government.

Daniel Priestley: I'm not saying without big government. That's not true.

Nick Hanauer: Give me an example.

Daniel Priestley: Singapore.

Nick Hanauer: Singapore is insanely big government.

Daniel Priestley: 22% of GDP.

Nick Hanauer: Okay, but they are involved in every element of people's lives.

Daniel Priestley: High competence. They fire incompetent people.

Nick Hanauer: And again, we're in violent agreement that we should have governments that do that. You should work hard on the politics in the UK to bring in reforms that would increase the velocity of competence. That is the answer — to work hard and build a government that is as high-functioning as they can be. But here's the thing — big companies are equally incompetent. Microsoft bought my company Aquantive for $6.4 billion. This was a company growing at 30 to 40% year-over-year, $750 million in sales, $200 million EBITDA or something like that, 3,000 to 4,000 of the best internet advertising people on planet Earth. In one year it was gone.

Daniel Priestley: Wow.

Nick Hanauer: Gone. And they wrote the entire $6 billion off five years later. Incompetence lives everywhere. I just don't think it is realistic to say, "Pox on them, they suck." Dan, there is no place on earth without government co-creating prosperity.

Daniel Priestley: For sure. Here's where I put my hope in this post-AI world. I want to stack the economy in the favour of the small family business and the small business.

Nick Hanauer: I'm 100% with you. The question is how do we get there? You and I are completely aligned in some ways. We need to aggressively tilt the balance of power in the economy from the biggest, most exploitative companies to small and medium-sized businesses.

Daniel Priestley: I see big government and big corporate sucking the life out of little people and little businesses.

Nick Hanauer: And I think you are no doubt correct in some cases. But the only thing in human societies that has the power to confront big business is big government. In the history of the world, there has never been another force that had the power to address this problem. And the reason I care so much about this economic paradigm is that all of the problems you were describing are a consequence of an economic paradigm that was designed to create those problems. That's why we are in the box we're in. Neoliberalism literally said bigger is better, that we should afford no protection to small businesses, that we should actively advantage the largest players, that free trade is good for everyone. All of these things weren't true and ended up advantaging — in this room — me effectively, and a few thousand people from around the world, and disadvantaged everyone else.

The starting point for change is addressing the fact that we just understood economic cause and effect inadequately. The things we thought would lead to growth led to concentration. And the things we thought were bad for the economy — in many cases those were good for the economy. You cannot sustain a capitalist system unless most people are paid enough to buy the stuff that the system produces. And in the history of the world there is no example of a thriving economy that did not impose those standards or create through some mechanism the countervailing power that enabled the owners of capital and everybody else to work together to benefit everyone in the long term.

Daniel Priestley: You and I are in so much agreement on most of it. Like an inch apart. And what is that inch? I've seen Nick's policies implemented and I don't feel it's enough. I think people are more than consumers. They're more than wallets.

Nick Hanauer: You've only heard me talk about the minimum wage and something else. You haven't seen all of the policies.

Daniel Priestley: The missing piece for me is ownership. When people had houses, they felt really good about communities. When people had small businesses that they owned, they felt really good about their communities. And when people own some shares in the overall economy — in the fastest-growing companies — then they feel like they're participating. The non-negotiables of fixing this problem are that people can easily own a house, own a business, and own shares in the fastest-growing economy.

Nick Hanauer: Yes. Yes. Yes. I totally agree. And I think Dan and I have a slightly different view on the path.

Daniel Priestley: I think capitalism is ownership. That's what capitalism is. If you don't own anything, you're not a capitalist.

Nick Hanauer: How did Nick get rich? He started companies. He owned a family business. He leveraged the family business into an investment into Amazon. It's ownership. And he did a lot with it.

Daniel Priestley: I'm saying other people should do what Nick did.

Nick Hanauer: But it's hard to get born into a family that owns a small business.

Daniel Priestley: Well, if there are more people who own small businesses, then it is easier.

Nick Hanauer: But you overlook the fact of being born on third base. We should aim for more people to be born on third base. Not everybody who is affluent — in fact, a tiny minority of people who are affluent — are small business owners. They are mostly doctors and lawyers and professionals of a variety of kinds who work in big companies in middle management roles.

Daniel Priestley: I'm not saying everyone should be a small business owner.

Nick Hanauer: I just think the high-order bit here — and this may sound too squishy — is that societies have both the right and the responsibility to organise their economies in ways that benefit everyone.

Socialism, capitalism, and the sweet spot

Steven Bartlett: Is socialism the answer?

Nick Hanauer: No. Socialism is most definitely not the answer because — we need to operationally define that term. If socialism means, look it up in the dictionary, the state ownership of the means of production, that is a catastrophe. It's a catastrophe because all socialism can do is split up existing prosperity in a fairer way. It can do that. The problem is that socialism does not know how to create more prosperity. So for one minute you can make everybody better off, but 10 years later everyone is poor because the power of markets is what markets do as evolutionary systems — they generate increasing prosperity. Going from aspirin to antibiotics is economic progress. The beauty of markets is that they are evolutionary systems where every business effectively is an organism competing to fill a niche. You are a canonical example of this. In a world without capitalism, there's no way you would have independently created what was effectively a television network. You have more reach than MSNBC. That is the power of markets. But they have to be harnessed to benefit people broadly.

Steven Bartlett: How though — this is what I'm trying to get to. There sounds like there's this middle ground we're playing with, where socialism on one end and extreme capitalism on the other. On the socialism side you get lower growth in your economy over the long term?

Nick Hanauer: Correct.

Steven Bartlett: And in a capitalist economy you might have higher growth but more inequality?

Nick Hanauer: Correct. And the sweet spot — one of the most important points I would like to make — is that all of the evidence suggests that when you come to the middle and you have a market economy that is actively managed to include people, that is the growth sweet spot. You have more growth.

Steven Bartlett: Absolutely. GDP growth rates in the United States were four, four and a half percent for decades — the '40s, '50s, '60s — and then as soon as the neoliberals took over in 1975, GDP growth rates fell first to 3% and now to 2%.

Nick Hanauer: When they cut taxes for rich people, deregulated powerful people, and suppressed wages for everybody else. The most important socioeconomic fact, as I've said many times before, is that the median full-time worker earns about $60,000 a year today. If they had maintained their same share of GDP since 1975, instead of earning $60,000, they would earn $120,000 a year.

Steven Bartlett: So you're saying there's no trade-off in the middle — there's a sweet spot where there's maximum growth, maximum participation, maximum political stability?

Nick Hanauer: This is what Daron Acemoglu and James Robinson call the narrow corridor. This perfect balance between laissez-faire capitalism and socialism. Socialism is stupid because it kills markets. But this impulse to more fairly share — that's where socialism comes from. What all the data suggests is that when you build a market economy that basically tries to make sure that everyone participates, where workers get a fair share of wages, where as the economy grows everybody benefits — for decades as productivity grew everybody benefited, and then in the '70s it decoupled. As soon as it decoupled, GDP growth rates fell. All of this was a consequence of policy.

Here's another thing the new economics teaches: there's this idea that a thriving middle class is the consequence of economic growth — that if we just let the economy grow, we'll get this great middle class. That is because economists assume the economy is something called ergodic. Ergodic means the outcome of the next game has nothing to do with the game before. Rock paper scissors is an ergodic game.

Monopoly is a non-ergodic game. In Monopoly, no matter how many times you go to Monopoly school, if you play a game of Monopoly long enough, one person will own everything and everybody else will have nothing. And that is what a market economy is. It is characterised by luck, path dependence, and compounding. Some of us started on third base. Some of us, as I recall, started on first base or home plate.

Daniel Priestley: Well, probably second base.

Nick Hanauer: Okay, maybe second base. But in a non-ergodic system, both advantages and disadvantages compound. Surely you know people in your life who have had a couple of things of bad luck and then spiral into oblivion. What that means is that a middle class — and thus a high-functioning society with social cohesion — is always, always a deliberate construction. It is always created by policy. All of these things that we are pushing back against — him in his way, me in my way — are a consequence of basically an economic theory that said to policymakers, "Do it that way." And it was a mistake. We should recognise that mistake and try to heal it. We can have a great society. We can have an ownership society. We can have anything we want. We just have to decide to do it and not let a small group of incredibly rich people dictate the terms of the economy. This is within our grasp.

Daniel Priestley: I agree in principle with all of that, especially the last bit. A small group of very powerful people dictating the economy, meeting up in Davos, coming up with how our lives should be lived. There's more to the story here. In the early '70s, they decoupled the dollar from gold and created the fiat system, which meant they could print money that inflated assets — including the family home — which meant that as soon as we could print money, we could inflate the value of family homes and make it out of reach of most people.

Nick Hanauer: And then finance took over and became 20% of the economy.

Daniel Priestley: We ended up with these two massive institutions: the technology-industrial complex and the finance-industrial complex. Those two institutions have driven a wedge in society. My only difference with Nick — and it's a small difference — is that I don't believe raising the floor is going to be enough.

Nick Hanauer: I didn't say it's enough. It's table stakes.

Daniel Priestley: My experience with that is it's a minimum. And the pitchforks are out here in the UK where we have that minimum. My worry is that the technology economy and the finance economy are racing as if in a car, and all of the workers who are selling time for money — it's as if they're running and we're saying, "You guys just need better shoes. If we give you a pair of Nikes, will you guys be happy?" This is not going to close that gap. We have to acknowledge that technology and finance — big funds and big tech — are basically hollowing out the middle class. And if we don't acknowledge who the real bad guys are, we need to essentially say, "Hey, big finance, big tech, you can't financialise our houses. That's for us to live in and for us to own." And you also can't just eradicate all of our little small businesses. We need to tip the scales back in the favour of those small businesses. Little towns in England — the thriving towns that everyone wants to live in — they have lots of small businesses. They have a butcher, baker, candlestick maker type of thing going on.

Nick Hanauer: By the way, the best high street in London is the one I live on — Marylebone High Street.

Daniel Priestley: So you agree?

Nick Hanauer: 100%.

Tax policy, broadcast licences, and corporate accountability

Steven Bartlett: One thing I find interesting is you're saying there's this sweet spot in the middle where you still get the upside — dynamism and decency. It's a very narrow sweet spot and it's very hard to achieve. Germany has really tried hard and their economy is going badly at the moment. They've got workers on the board of every company, they're doing as much as they can for inclusion, and the German economy is struggling.

Nick Hanauer: It is simply not fair to say the German economy is collapsing. Have you been to Germany? Have you been to Stockholm? These places are incredibly functioning.

Daniel Priestley: There's definitely forward momentum, but the German car industry is getting hollowed out right now by China.

Nick Hanauer: Okay. But just because workers are on the board of German companies and German people are unhappy — you can't necessarily connect these things.

Daniel Priestley: I just want to acknowledge that there are places like Dubai which are very close to laissez-faire capitalism with a sovereign wealth fund. If you talk to someone who lives in Dubai, they love Dubai. They're the happiest people. Entrepreneurial people, millionaires.

Nick Hanauer: Yeah. The rich people. Not the poor brown people who are —

Daniel Priestley: Well, when I talk to a lot of the Uber drivers there and people who work in cafes, they're all quite pro-Dubai as well.

Nick Hanauer: But that's because their other options are horrific. It's probably more extreme inequality.

Daniel Priestley: It is more extreme inequality. But because the place is growing, it feels like there's a rising tide for everybody. There's something about economic growth that makes people very, very happy, and there's something about a lack of economic growth that makes people miserable here in the UK.

Nick Hanauer: But again, Dubai is a place powered by the most extraordinary gusher of free cash probably the planet has ever seen. You can look up the tailwind that economy gets from the unlimited resources.

Daniel Priestley: I wouldn't say that's why people love Dubai. They love it because of the entrepreneurial vibe. Ambitious people. Young people who want to have a crack.

Nick Hanauer: Well, people are looking for a place where their work will be rewarded. Let's imagine the UK where your ability to get onto capitalism — your first million or first two million — is very easily low-taxed in order to get things going for you economically. I just want to see a situation where ambitious young people — what I hate is I see these young people who are really super smart, and they're like, "You can't succeed in the UK. As soon as you earn anything, they'll just tax it off you." And they leave.

Steven Bartlett: What if you're not ambitious?

Nick Hanauer: I'll give you two extremes. In the US, you hit the top rate of income tax when you hit $700,000. In the UK, it's $100,000, and it immediately goes to 60% tax, then drops to 45% after that. It's this insane thing where you basically pay 20%, 40%, 60%, 45%.

Steven Bartlett: You should probably fix that.

Daniel Priestley: The US approach sounds more like what you're saying.

Nick Hanauer: And the US has higher inequality, which means it's probably more likely that the pitchforks will come out.

Daniel Priestley: For an ambitious person, they don't care about inequality — inequality is the opportunity to get ahead.

Nick Hanauer: Yeah, they might not. But from a social perspective, the pitchforks are probably going to come out sooner in the US because of that inequality.

Daniel Priestley: They seem to be coming out here in a big way as well. Look at Nigel Farage — he's gaining a huge political movement.

Nick Hanauer: Zohran Mamdani in New York — we're seeing a rise of socialism in the United States.

Daniel Priestley: Okay, but Zohran Mamdani calls himself a socialist because he does not have another word for what he is doing. He has said "seize the means of production." He said "take houses off landlords." He is a card-carrying socialist.

Nick Hanauer: He hasn't done any really socialist things. I just think there's a bit of confusion. Asking wealthy people to pay a little bit more tax is not socialism. Standing up grocery stores in food deserts because no grocery store will do it because it's not profitable enough is not socialism. This is the government provisioning benefits to citizens, fixing potholes, making bike ramps. These are not socialist things. What they are is not strictly neoliberal things — which is just letting rich people run roughshod over everybody else.

Daniel Priestley: The thing I see with a food desert and a store is that the tax system is so punitive that a small opportunity like setting up a grocery store — with all the taxes and regulations and stuff the government puts on you — it's just not worth doing. I'm not talking about removing it for rich people. I'm saying for startups, for small businesses, for businesses that employ fewer than 200 people — if you create a very positive experience for small businesses to get started, they will set up a grocery store in a bad neighbourhood because they go, "Yeah, I can figure out how this works."

Steven Bartlett: Do you think there's a chance that we have a bit of a bias as entrepreneurs? Everyone at this table is an entrepreneur. For whatever reason — and I think a lot of mine might be some kind of trauma or whatever — I had a bias towards setting up a business and taking that risk. Whereas my other three siblings didn't do that. I don't know what I did to have that bias within me. At 18, when my three siblings went to university and sort of followed that more — one could say safer — path, I dropped out.

Nick Hanauer: How angry were your parents when you dropped out?

Steven Bartlett: They didn't speak to me. My mom was — yeah, my mom's Nigerian as well, so she didn't — she left school when she was a child. Didn't get an education. Can't read. For whatever reason, that's the path I took. I can acknowledge that I'm in a bit of a minority. I sometimes consider that maybe through privilege or through some genetic privilege or whatever, I had this particular orientation towards entrepreneurialism that maybe other people don't always have. And that means that they don't start the grocery store.

Daniel Priestley: I get crucified in the comments — "not everyone can be an entrepreneur." I'm not saying everyone could be. I've never said that.

Nick Hanauer: But the grocery store analogy — there is someone who would start that grocery store if it was easier.

Daniel Priestley: Well, not everybody would. There's always a risk-to-reward ratio, and government brings in all sorts of regulations. Government only really thinks about big businesses. If you talk to anyone in government, small businesses don't exist. They just simply think, "Why hasn't Tesco done it? Why hasn't Walmart done it?"

Nick Hanauer: I've never started a business in the UK, but I can tell you that in the United States, the barrier to setting up a grocery store in a food desert is not the regulation. It's Safeway. It's the supply chain. It's all the stuff that you've described, which makes it incredibly difficult for somebody to operate a single-location grocery store.

What I would do is impose a much higher minimum wage, but progressively. All the labour standards, all the regulations would be imposed progressively. For a big company, there are a lot of regs — you have to follow every rule to the letter. For a small business, you have a lot more flexibility. It would all be progressive. Easy to get capital, easy to start a business, relatively unencumbered by regulation, although constrained to a certain extent. There are terrible things that small business people do too.

Steven Bartlett: How do you make it easier to get capital?

Nick Hanauer: You could have government programmes designed to help small businesses get off the ground. We used to have the Small Business Administration in the United States that did a lot of that work.

Daniel Priestley: We have a lending institution here that is 75% underwritten by government for a £25,000 startup loan. I started all my companies on a credit card. The key thing is there's a difference between entrepreneurials and startups that are intending to scale and just small businesses that want to exist as a small business. I'm really big on the idea that we want communities that have lots of small businesses even if they have no intention to scale and exit.

Nick Hanauer: That old-fashioned thing where you just had a grocery store. You weren't trying to create Walmart. You just wanted to run a grocery store.

Daniel Priestley: It's hard though, because if you've got a mom-and-pop grocery store and next to it you have, say, a 7-Eleven, the problem is if those are next to each other and one has economies of scale — 7-Eleven can buy the cucumber for 20% of the cost of the mom-and-pop shop. Then on that street, the 7-Eleven is going to survive.

Nick Hanauer: That's why we tilt towards the — the United States used to have laws that expressly prohibited that.

Daniel Priestley: And why did they get rid of them?

Nick Hanauer: Neoliberalism. There used to be express laws to make sure that big companies could not buy raw materials cheaper than small companies. When I was young, if you wanted to buy a competitor, you were sweating bullets because it had to be reviewed by a body, and if they thought you were consolidating too much, they would just say no.

Nick Hanauer: You have never experienced a world in which that used to exist. Your entire business experience is this sort of neoliberal world of giant companies.

Daniel Priestley: True. And the world I grew up in — I remember going to the video store and selecting videos. I remember going to the CD store and listening to music and talking to the retail employees when I was growing up. The cool kids worked at the CD store, the geeky kids worked at the bookstore, and everybody else worked at the grocery store. And all of those business models are gone. We need to tip back towards small business experimentation being protected. The other thing I should raise about minimum wage and giving people more money — the bottom half of taxpayers in the UK pay 9.5% of all income taxes. The government could remove taxes off of 50% of workers in one move and it would cost £33 billion. You just get rid of that and then every single person in the bottom half of income earners gets a 10% to 15% pay rise.

Nick Hanauer: I love it. So where do we get the £32 billion from?

Daniel Priestley: Just keep in mind their budget is £1.4 trillion.

Nick Hanauer: I know. But we're going to have — if you're talking about taking 15 million people —

Daniel Priestley: I agree. I'm just saying where does the money come from? Keir Starmer is saying they found a £20 billion black hole in the finances and that's the reason they've had to cut back on pensions and these kinds of things. So if we add another £30 billion to that, where do we get the money from?

Nick Hanauer: You're talking about reducing the administrative burden to tax 15 million people and keep on top of the tax on 15 million people — just the sheer volume of people who have to work at HMRC. But I'm saying where does the money come from? Out of £1.4 trillion, I'm pretty sure we could find half of 1% of it to get these people out of tax. I think we could tax big corporations who are taking the piss. And the economic spending rounds of getting those people — the poorer half — out of tax. If you give them more money, they'll spend more money.

Daniel Priestley: So you're saying tax big corporations more in the UK at point of consumption?

Nick Hanauer: Personally, I would make it very similar to a broadcast licence — a fixed fee that's very hard to wiggle out of.

Daniel Priestley: So if I'm OpenAI —

Nick Hanauer: You might have a broadcast licence to pay to access this market. Facebook is very much broadcasting videos and content all the time. So is YouTube. So's Google. You just simply say, "Guys, the cost of doing business in this country, if you want access to this market, is a fixed broadcast licence fee of £500 million a year or whatever it is." Based on the number of views you get and how much attention you suck out of our economy, we just essentially tax the attention. If people are spending an hour a day on their phone doom-scrolling, that is a broadcast. You're broadcasting to our people, so therefore we've got a broadcast licence. Those are the types of things I would look at because they're very hard to wiggle out of.

Steven Bartlett: Do you think these companies like OpenAI would then just increase the subscription fee in this market? You see this sometimes — in certain countries something is cheaper. I used to go to the United States to buy my Apple products because it was cheaper there. The same laptop in this market versus that one cost different amounts of money.

Nick Hanauer: They may choose to try and pass on that consumption tax to consumers. Maybe they do that. Maybe we could try and legislate against that — that they have to essentially be on par with where they are in other markets. If we don't do anything, we essentially have nurses and teachers and all the people who are in the normal 50% of the economy whose job is now to hold up the economy while Starbucks doesn't pay taxes, while Amazon doesn't pay taxes, while Google doesn't pay taxes. And Steve, I think all your questions are really good, but they all point to the same thing — the economy is a collective action problem.

Daniel Priestley: It's a global collective action problem.

Nick Hanauer: And if we want robust solutions to these problems, we're going to have to robustly coordinate activity across the world. During the Biden administration they tried really hard to do this global profit tax, but that collapsed under the weight of pressure. All of your questions point to the same fundamental weakness of governance.

Daniel Priestley: And Nick, you need to talk to your billionaire mates and say, "If we don't start investing in the economies that we do business with —"

Nick Hanauer: It's a lonely business. But it's like with those CEOs of those companies — you drain the whole economy out and then what next?

Steven Bartlett: I think on this pass-through problem — if you think about the Big Mac, it costs different things in different states depending on how much tax that state charges. In Oregon the Big Mac is $8, whereas in Chicago it's almost $9. If you think about bookstores, you can buy one book on the high street for $20. The same book online is $10 because they're passing through the cost. It's conceivable that if we say to big corporations, "You guys are going to pay a bigger tax to sell into the UK," they might pass that on to the UK consumer. But doesn't matter — you still have to pay the broadcast licence if you want to be available in our country. These are hard problems and we need to know who we're targeting. It's the BlackRocks of the world. It's the big banks. It's the big mortgage companies.

Daniel Priestley: I had a private conversation with the CTO of a very large technology business and he was saying to me, "I don't think the UK understands the situation it's putting itself in, and the EU with all this regulation." He said, "We sell this particular product — it's a physical product — and because the UK and EU have put this new law in where you have to have removable batteries, the unintended consequence is we have to stock more lithium batteries. More of them go into landfill and also your devices break because they're no longer waterproof." So it's actually harming the environment. And he said, "The thing you guys don't realise is that you're actually not a big market anymore for us, and because South America's coming online, we actually don't have to sell the product here."

You think about this in terms of some of the regulations around AI as well. When a new product launches, it goes in the US first because of regulations, and then maybe nowhere else. In our history of building the previous business I was in, as creators we would sometimes have to wait 12 or 18 months to get the same tools that my competitors in the United States could use. Monetisation tools — they'd have them first and then we'd have to wait 18 months.

Nick Hanauer: The economy is a set of trade-offs. That is the actual definition of economics — making trade-offs and picking your trade-offs. I totally get it. Regulation does actually suck for consumers and for businesses. The EU is now overregulated to the extent that you can't even take a lid off a bottle without the government being involved with how the lid comes off the bottle. And it's killing our dynamism.

Steven Bartlett: And the US is underregulated. If you buy chicken in a store and don't cook it —

Nick Hanauer: One in three chances you'll get either E. coli or salmonella.

Steven Bartlett: And your life expectancy is lower.

Nick Hanauer: Exactly. It's all trade-offs.

Steven Bartlett: Does this not mean our ultimate conclusion of this conversation is around morals and ethics — around the trade-offs that we think are the right ones to make?

Nick Hanauer: Yes. Human flourishing. Yes. 100%.

Daniel Priestley: The purpose of the economy is to improve human lives. The way to do this is to massively maximise small business power. When I have to work shoulder-to-shoulder with my workers, I treat people well. When I'm a mega corporation with faceless workers down on the factory floor that I will never meet, I will never sit next to on a plane, I will never come in contact with — I can treat them however I like.

Nick Hanauer: What Dan is saying is true and massively insufficient. Of course we're in violent agreement about the small business point. Here's what the new economics shows: corporate consolidation increases prices, lowers wages, decreases consumer choice, and decreases the rate of innovation.

Daniel Priestley: I 100% agree.

Nick Hanauer: Because innovation — the conventional economic view of innovation is this sort of great man theory: you have this smart rich guy who has this amazing idea and that's innovation. That is not what innovation is. Innovation is always combinatorial — technology makes itself out of itself. You start with a rock. The rock was our first technology. And you did a lot of stuff with rocks. We also had sticks. But you tie a rock to a stick, you have a hammer, a spear, an arrow, an axe, a shovel. It goes on and on. What that means in terms of policy is that because innovation is combinatorial, the more diverse people in a network who come together with different ideas and different sets of experiences — that is what drives the rate of innovation. This is mathematically demonstrated: a diverse group of people working on a problem will absolutely consistently outperform a homogeneous group of high performers.

Daniel Priestley: And then when they become really successful — which will happen eventually if you let that system play out — you have this inequality unless you intervene at some point and recycle it. And then when you go to recycle it, you get back to this issue of needing global cohesion. Because some people won't want the recycling. They'll say, "I'm just going to go to Ireland or Dubai or somewhere else." This is maybe a function of the new economy where people can just get up and leave and take their value with them.

Nick Hanauer: Yes. This is the conundrum. But the meta issue above the conundrum is recognising that citizens have both the right and the responsibility to want to address that problem. You grew up in a world where it was illegitimate to address that problem — where economics told you, "Don't worry about those problems. The market will sort it out."

Breaking up monopolies and radical solutions

Steven Bartlett: Is there a radical idea of how to solve this? Do we need all the very rich people in the world to come together collectively and say we're going to create a new model? Is there any radical way to solve this stuff, or is it just all trade-offs once again — democracy?

Nick Hanauer: One of the big radical ways is breaking up companies. And it's unthinkable. You know Jeff Bezos, right?

Daniel Priestley: Yes. He was at my wedding.

Nick Hanauer: I wonder if he would lose more sleep about higher taxes or having his company broken up.

Daniel Priestley: Oh, for sure. Broken up. Because if you broke up Google from YouTube, if you broke up AWS, Amazon Prime, and Amazon — the biggest thing that scares the billionaires is backing competition with the market. "Oh my goodness, I don't want to have to compete. I've got this amazing monopoly that just works."

Nick Hanauer: But is that a perfect solution?

Daniel Priestley: It's not a perfect solution.

Nick Hanauer: It's the least worst solution available. It's pretty effective. This is what Teddy Roosevelt did.

Daniel Priestley: These companies aren't making any money though — they're being subsidised by the mothership. Like Amazon Prime competing against Netflix.

Nick Hanauer: Dude, these companies make money where they want to make money.

Daniel Priestley: For tax optimisation and strategic reasons. When we started Amazon.com, the whole hit on it was it's not profitable. The secret to Amazon.com's success is the negative cash conversion cycle. For virtually every business on planet Earth, growth requires capital. But for Amazon.com, we took an order, put up the website, you take an order, you instantaneously transmit that order to a book warehouse which has all the titles in stock. It's shipped the next day, received the next day. You hit the person's credit card, but then you don't have to pay the bookseller for 90 days. What that means is the bigger the company gets, the better cash flow gets, whether you're making money or not. So we didn't have to make money because we had cash flow. We could have made money in one minute just by increasing our prices by 3 or 4%.

Nick Hanauer: Yeah, these companies are not worth trillions of dollars because they're not profitable. They're worth trillions of dollars because they are making money. But the issue is they have strategic monopolies. If you really want to make them lose sleep, you need to break up strategic monopolies. You need to say there's an actual limit to how big a fund can be. There's an actual limit as to how big a strategic monopoly can be. You can't have things that hedge naturally against each other and prevent real competition. These things are ways of — and also it ties up their attention. While they're thinking about not getting broken up, they're also not competing with all the other guys out there. Capitalism runs on competition. This is the one thing we've missed.

Daniel Priestley: When Adam Smith said capitalism works, he said it only works when there's competition. If there's one bakery in town, any bread at any quality at any price is what you have to pay. As soon as there's two bakeries in town, it has to be the best quality at the best price.

Nick Hanauer: Although with two, you can collude. But if you have five, it's very hard.

Steven Bartlett: So Amazon has a strategic monopoly. What does one do with Amazon?

Nick Hanauer: You break it up.

Steven Bartlett: Into what?

Nick Hanauer: AWS, Amazon Prime, Amazon retail.

Steven Bartlett: Fine. But they've still got a monopoly in online e-commerce theoretically.

Nick Hanauer: Well, it's just harder. It's easier for someone to come along and compete right now. It's very, very hard for me to compete with Amazon because they are pulling in cash from AWS, from all these other subscriptions, from Amazon Basics.

Daniel Priestley: You could break up the retail. You could say you can have a bookstore, you can have an electronics store, you can have this — you can't be the everything store.

Nick Hanauer: You have to acknowledge when someone has achieved a strategic monopoly. I think that's a good idea. Do you still own shares in Amazon?

Daniel Priestley: No, sadly.

Nick Hanauer: Okay. I sadly sold my shares too. But I am open to all of these ideas because I know the world would be a better place if these companies were smaller and we had more competition. There are no silver bullets to these complex problems. We are not at this table going to come up with this algorithmic idea that is just going to make the world a better place. None of these solutions are perfect. They are always going to be the least worst thing that we can come up with. But at the level of principle — living in a world where we try actively to limit concentrated power in all its forms, where we try actively to include people in whatever way whether as entrepreneurs or just workers as robustly as possible, where we try to make sure that people are engaged enough in the economy so that they will be supportive of the democracy and not want to burn it down — these are high-level principles that I think reasonable people can agree with. And they come into conflict with people like Elon Musk and Jeff Bezos and Mark Zuckerberg who do not want to live in that world, who want to live in an oligarchical world. I just think that we should have that fight and win.

Closing question: restoring hope and triggering engagement

Steven Bartlett: We have a closing tradition where the last guest leaves a question for the next, not knowing who they're leaving it for. I'll ask you first, Dan. The question is: in a world with so many challenges, what can we do to restore hope and trigger engagement?

Daniel Priestley: Getting back to what we were talking about — we need people to know that the rules of the game have changed. We grew up in a particular industrialised, late-stage industrialised world that had those rules, and we now live in an early-stage digital revolution world. The thing that gives me hope is I know how the rules of that world work. Someone explained it to me. They actually explained: this is how you start a business, this is how you grow a business, this is how you make a million, this is how you hire some people, this is how you get a great team working side by side. That gave me an enormous amount of hope. I have a pathway out of where I was born and the wealth I was born with and where I am now. Someone explained to me the pathway. Here's how the rules work and here's how you make success. One of the things that makes people feel hopeless is that they're stuck in a game where no one explains the rules.

So I would say we need a schooling system — the thing we don't talk about enough — that explains to kids the relevant information as to how to function in the current economy.

Steven Bartlett: I was thinking, okay, you get a million kids and you explain all of the rules to them. At some point, if you just give it a year or two, say they all knew the rules — there's still an edge. Some of them would figure out the edge. And then you've got this pocket where everyone knows the rules, but then others know this particular way to beat the system. And that could be with AI or whatever. And then you're kind of back into the same place. You were one such person who got the edge. Someone came to you and said, "The rules are this" — but actually there's a way to get an edge, and you had it within you for whatever reason to capitalise on that edge. And now you're a multi-millionaire. So there's always going to be the rule, and then the rules get — every single day after you explain the rules to someone, there's a new set of rules.

Daniel Priestley: The only consistent is change. At the moment, most people I encounter who have never had any explanation about how the world works now — they are hopeless. They feel completely hopeless. I see kids who are sending out CVs to Microsoft or some major company, not realising that those companies are getting 3,500 applications.

Steven Bartlett: The day after you explain the rules to them, the rules are one day less relevant.

Daniel Priestley: You'd have to go to school every single day. Lifelong learning. You do have to do lifelong learning. That is actually one of the rules — the only consistent is change.

Steven Bartlett: It sounds like you're saying that if we teach people the rules of business, people will have more hope. But there are so many people I know — like my fiancée — who doesn't care about business. She cares about something else much more.

Daniel Priestley: She set up Bali Breathwork and she was able to figure out how to turn her passion into something that is commercially sustainable. She knows how to enrol people into her success. All of that is called pitching, publishing content, creating a product offering. I only know one thing that I've seen work again and again and again — people who learn the entrepreneurial method suddenly feel agency and hope.

Steven Bartlett: I agree. And I'm saying that's not for everyone.

Daniel Priestley: Yeah, but this is it — it's not for everyone. It's for people who had whatever you had in terms of upbringing, luck, fortune. I'm not saying everyone's going to be an entrepreneur. My answer to that question is the entrepreneurial toolset gives people a lot of hope.

Nick Hanauer: I get that. And one of the things we have to acknowledge is that's a certain type of person with a certain type of goals. There are some people who actually just want to go outside and work maybe one or two days a week.

Daniel Priestley: Sure. I don't want to do push-ups and sit-ups and go to the gym. But if you ask a fitness professional how to improve your body, how to feel good — the fitness professional says, "Hey, these are all the things I've seen working for a lot of people about going out and getting fit." And you might not want to do them initially, but actually the people who do these things —

Nick Hanauer: The people that do those things might have an inherent privilege.

Daniel Priestley: The world's not fair. Some people are born on —

Steven Bartlett: I need to know your answer to the same question, Nick.

Nick Hanauer: I think we need to have vital democracies that manage economies in ways that are optimised around human flourishing and not capital efficiency, not capital accumulation. We live in a world — you completely grew up in a world — where the highest good was capital efficiency. Capital efficiency and godliness were the same. And we have organised society in this way. In the United States, we literally have a norm and a set of regulations around maximising shareholder value for corporations. This was invented out of whole cloth in the 1970s — this whole idea that the purpose of the corporation should be merely to enrich shareholders. The evil of that idea isn't that they were saying "screw the poor." What they said was: if you maximise value for shareholders, it will be good for everybody. And that was the lie. Because it wasn't good for everybody. It was good for a tiny minority of people. And the lie was that when you do that, growth rates will go up, GDP will go up, we'll have a rising tide. And the tide didn't rise — it fell.

What modern economics says is that we can have a different construct. We can have a different society that purposefully includes people in a robust way, whether they're a worker or a small business. And if we do that, everyone will benefit. The economy will grow faster. People will be paid better. Prices will be lower. We will have more innovation. This is within our grasp. We just have to decide to do it.

Steven Bartlett: You should go into politics.

Nick Hanauer: I am in politics.

Daniel Priestley: I hear that. One thing I don't like is waiting for the world to change. I like personal agency. At Nick's level, I love the fact that he's in politics and he's using his wealth and his power and his influence to change the system. For most people, waiting for the world to change does not feel empowering. Yes, tilt towards this because that's the political movement that's required to make sure the world includes more people in capitalism. And I love that. And while that's happening, take personal accountability, personal agency, figure out what is your next move. People who do that end up feeling hopeful because hope comes from having personal agency. And personal agency is knowing your next move that's going to benefit you and move you forward.

Nick Hanauer: I agree. And the older I've gotten, the more I realise my own privilege. My privilege isn't necessarily that I built a business and that I have money now and all those things. My privilege is something that happened when I was young, from the point of maybe even where my parents were about it. I don't feel guilty about it, but it has allowed me to see my own bias and to realise that I have this unknown unknown. Unfortunately, that's growing by the day because I'm getting more entrenched in my own privilege.

Steven Bartlett: What I mean by this is I play out the scenario theoretically. My dad left my mum, and my mum still struggles to read and write. She would have had four kids, can't read or write, can't really get employment. She worked at St. Luke's Hospice as a volunteer. And I go, "God, if that one thing had happened, how different would my life have been?" That's a privilege I've never even acknowledged because it's kind of inherent — it was built into my life. And then would I be sat here now? Would I be the person I am today if that one little thing had happened? No. Would I be ambitious and optimistic about the world? Or would I theoretically be resentful? I said to one particular friend back home, "If you would just get a job for a couple of months, I will pay your rent for years." It didn't happen. He couldn't get a job at Subway for three months so that I would pay his rent for years. I ended up helping him anyway. But I remember saying that ten years ago. It just highlighted to me that there's a real deep inherent privilege that I have that I'm not even aware of. Sometimes it's trauma, sometimes it's DNA. My brothers are all very smart naturally. What if I didn't have those two parents? What if I didn't have whatever genetic composition I had? Then would the advice I give to the world apply? So I mull that and go — it's got to pass that lens for it to be broadly applicable and therefore effective advice.

Daniel Priestley: I love your level of compassion and empathy for people. The fact that you're having that self-exploration means you're an incredible type of person. Each person wants to do the most with what they've got. I'm saying that if I was to visit a small town that had a thriving 10, 15, 20 businesses in there — there were enough entrepreneurs to create optionality for people — that would be a good town to go to. And if I go to a town where there are no entrepreneurs and everyone feels downtrodden and there's one big Costco that's the only employer in town, that's going to be a tough town. So all I'm saying is you need a critical mass of people who have agency, and that lifts up the community. In Japan they call it the Shogun family — the Shogun family lifts up that little community and around that Shogun family you end up with lots of other businesses. It flows out. But when you have one monolith that is the only company in town, the only place that ships stuff to your door, the only place to get your Netflix — then pretty much everyone else is just reduced to being a consumer.

Nick Hanauer: Again, I've said it before — I agree with this sentiment 100%. I am an entrepreneur myself. But I expect that operating in empowerment applies to a high percentage of the people who watch your show. Lots and lots of people who watch this show are entrepreneurial, want to be entrepreneurial, and so on. But I suspect you're talking about fewer than 5% of people on planet Earth that fit that paradigm. And I want to create a paradigm that works for everybody.

Daniel Priestley: Even in the UK, it's six million self-employed people out of 30 million workers. It's not tiny. It's a pretty decent percentage. It is a major opportunity that more people than ever could take part in. If you asked a health professional how to get hope, they'd say go to the gym, go for a run. You're asking an entrepreneur how to get hope through personal agency — I'm going to tell you what's worked. What's worked for me is the entrepreneurial method.

Nick Hanauer: But I suspect that what most people will come back to you with is the quiet miracle of a normal life.

Daniel Priestley: If you want that, that's great. I want that and I want that for everyone. That's gone away. Houses are unaffordable. Local jobs don't exist. No one's paying healthy wages. It's great to sit there and want it, but that doesn't give me hope. That gives me disappointment that it used to exist. The family home that most people would love to raise a family in — it's £1.2 million now. And if you want to fix that, you have to enact this.

Nick Hanauer: Yes. You have to do that. Most people —

Steven Bartlett: What is this? People are going to wonder what's in that piece of paper.

Nick Hanauer: The main body of my work is coming up with a different economic paradigm — a way of understanding economic cause and effect that leads to the world that Dan prefers, that I prefer. What you have to do is rip down the existing economic framework and replace it with a 21st-century thing that inclines policymakers to make good decisions, not bad ones. The booklet itself — can you show the booklet? So this booklet is called 21st Century Economics. It's aimed at policymakers and professionals. But if you go to marketsbuiltforhumans.org, you can download it for free. It is merely an expression of the paradigm itself. Going from believing that we should just increase capital efficiency to human flourishing. Going from understanding human beings as homo economicus to homo sapiens. Going from understanding the economy as a Pareto optimal equilibrium to a complex ecology. All this stuff. But when you understand it in a new way, you come to very different conclusions about how you should organise the world. And that is the starting point for global transformation.

Daniel Priestley: I love it. He's already a billionaire. He's got time on his hands and he's got money to fly around the world doing it. Do it. And while he's doing it —

Nick Hanauer: All I need is for people like you to help me explain it.

Daniel Priestley: And I love it. I'm not against it. I'm just saying what will give most people hope is taking agency over their life where they can do something this week to improve their life.

Steven Bartlett: Dan, is there a particular best book to start with in your opinion?

Daniel Priestley: The most recent one is called The Lifestyle Business Playbook and it's basically how to get started with a small business — a business that will give you more fun, freedom, and flexibility. I like the idea of supporting anyone who's trying to create a better economy. Some of the most miserable people I know are waiting for the system to change. And I don't want you to be that person. I want you to be doing something in your own life.

Nick Hanauer: A starting point for global transformation is — look, economics is the operating system of the world. If it's the wrong operating system, you end up with a very bad circumstance. And economics is invisible to most people. They don't even understand it's the water they're swimming in. They don't understand that policymakers are making decisions that affect their lives based on a particular understanding of how the economy works. And if that's wrong, then you're going to make some terrible decisions. If you believe that prosperity trickles down from the top, you're going to enact a certain set of policies. If you believe that growth is built from the middle out, you will make an entirely different set of policies. If you believe that the middle class is a consequence of economic growth, you will go one way. If you believe that a thriving middle class is the cause of growth, you will do a completely different set of things in terms of policy. All of them aligned with what Dan wants. But that's where you have to start. That's the meta question you have to answer, and then you deduce logically to all of the things that Dan prefers. But you have to start up here — with the set of ideas that govern how people see economic cause and effect. And that is what this is.

Steven Bartlett: I shall link it below. Thank you so much. We're done.

Nick Hanauer: Thank you.

Daniel Priestley: You are fantastic.