Kevin O’Leary: Why Trump Might Save Us, China Can’t Compete, and the Middle Class Is Screwed | PT 1

In this powerhouse episode of Impact Theory, Tom Bilyeu sits down with the legendary investor and entrepreneur Kevin O’Leary, famously known as “Mr. Wonderful” from Shark Tank. With his trademark candor and economic insight, Kevin breaks down what's really happening with America's global negotiating power, the controversial tactics of Donald Trump, and how America's financial future hangs in the balance. Tom and Kevin take you behind the headlines to dissect America's true leverage in global trade, the economic chess match with China, and what investors should be watching for in the chaos of tariff wars and shifting alliances. This conversation is essential listening for anyone concerned about economic security, the future of US policy, and the policies shaping markets worldwide. Get ready for an unfiltered perspective on tariffs, taxation, and the fate of American innovation. SHOWNOTES 00:00 – America’s Precarious Position & Global Leverage 01:05 – Are Tariffs Hurting or Helping? Trump’s Negotiating Style 03:00 – How Value Added Taxes Shape Trade Deals 04:18 – Political Chaos vs Policy Outcomes 06:53 – Investor Mindset in Uncertain Times 08:35 – What Would Ring Kevin’s Alarm Bells? 11:01 – China: The Real Economic Battleground 13:08 – How China Rose by Ignoring the Rules 16:28 – TikTok, Nvidia, and the Next Phase of US–China Relations 19:33 – America Gets “Screwed” One Innovation at a Time FOLLOW KEVIN O’LEARY Instagram: https://www.instagram.com/kevinolearytv/ Twitter: https://twitter.com/kevinolearytv YouTube: https://www.youtube.com/@kevinolearytv SUPPORT OUR SPONSORS Vital Proteins: Get 20% off by going to ⁠https://www.vitalproteins.com⁠ https://www.vitalproteins.com and entering promo code IMPACT at check out SKIMS: Shop SKIMS Mens at ⁠https://www.skims.com/impact⁠ https://www.skims.com/impact #skimspartner Allio Capital: Macro investing for people who want to understand the big picture. Download their app in the App Store or at Google Play, or text my name “TOM” to 511511. SleepMe: Visit ⁠https://sleep.me/impact⁠ https://sleep.me/impact to get your Chilipad and save 20% with code IMPACT. Try it risk-free with their 30-night sleep trial and free shipping. Jerry: Stop needlessly overpaying for car insurance - download the Jerry app or head to ⁠https://jerry.ai/impact⁠ https://jerry.ai/impact Shopify: Sign up for your one-dollar-per-month trial period at ⁠https://shopify.com/impact⁠ https://shopify.com/impact CashApp: Download Cash App Today: ⁠https://capl.onelink.me/vFut/v6nymgjl⁠ https://capl.onelink.me/vFut/v6nymgjl #CashAppPod iRestore: For a limited time only, our listeners are getting a HUGE discount on the iRestore Elite when you use code IMPACT at ⁠https://irestore.com/impact⁠ https://irestore.com/impact What's up, everybody? It's Tom Bilyeu here: If you want my help... STARTING a business:⁠⁠⁠ join me here at ZERO TO FOUNDER⁠⁠⁠ https://tombilyeu.com/zero-to-founder?utm_campaign=Podcast%20Offer&utm_source=podca[%E2%80%A6]d%20end%20of%20show&utm_content=podcast%20ad%20end%20of%20show SCALING a business:⁠⁠⁠ see if you qualify here.⁠⁠⁠ https://tombilyeu.com/call Get my battle-tested strategies and insights delivered weekly to your inbox:⁠⁠⁠ sign up here.⁠⁠⁠ https://tombilyeu.com/ ********************************************************************** If you're serious about leveling up your life, I urge you to check out my new podcast,⁠⁠⁠ Tom Bilyeu’s Mindset Playbook⁠⁠⁠ https://open.spotify.com/show/47VE90Cittmo6TGGFqg2xf —a goldmine of my most impactful episodes on mindset, business, and health. Trust me, your future self will thank you. ********************************************************************** LISTEN TO IMPACT THEORY AD FREE + BONUS EPISODES on APPLE PODCASTS:⁠⁠⁠ apple.co/impacttheory⁠⁠⁠ http://apple.co/impacttheory ********************************************************************** FOLLOW TOM: Instagram:⁠⁠⁠ https://www.instagram.com/tombilyeu/⁠⁠⁠ https://www.instagram.com/tombilyeu/ Tik Tok:⁠⁠⁠ https://www.tiktok.com/@tombilyeu?lang=en⁠⁠⁠ https://www.tiktok.com/@tombilyeu?lang=en Twitter:⁠⁠⁠ https://twitter.com/tombilyeu⁠⁠⁠ https://twitter.com/tombilyeu YouTube:⁠⁠⁠ https://www.youtube.com/@TomBilyeu⁠ https://www.youtube.com/@TomBilyeu Learn more about your ad choices. Visit megaphone.fm/adchoices https://megaphone.fm/adchoices See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Tom Bilyeu?

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• 1:07Speaker 01

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• 1:37Tom Bilyeu?

  America is in a precarious position. We show no signs of being willing to cut spending, so without massive growth, we will go bankrupt. But where is that growth going to come from? We're supposed to be the ultimate deal maker on the global stage. We're supposedly the ones holding all of the leverage. Donald Trump claimed he knew the art of the deal better than anyone, but what's the reality behind America's negotiating power? Are we making progress, or have we lost our edge? Today, Kevin O'Leary, one of the most candid and incisive economic and entrepreneurial minds around, joins me to give a rare inside look at what's really happening. If you want to ensure your economic future, you are not going to want to miss Kevin's take on China, taxes, and the future of the economy. This is an episode you simply can't afford to miss.

• 2:22Tom Bilyeu?

  Without further ado, I bring you Kevin O'Leary.

• 2:28Tom Bilyeu?

  America prides itself on having the most leverage internationally on trade. Trump was supposed to use that strength to help America win. From your vantage point, though, are we winning or are we now falling short?

• 2:43Speaker 02

  Well, it depends which index you want to use to determine success. If you look at the stock market, market cap valuation, the market is happy with the outcome of the tariff wars so far. Inflation hasn't come back yet, although many pundits believe that you just have to wait a couple more quarters. It probably, as a result of the uncertainty, has stalled the Fed for any rate cuts, which is frustrating Trump. You hear that every day. I think Powell is wise to wait and see what happens as this comes through the system. But I want to make a point about the actual tariffs themselves and how you should look at it as an investor, whether you're just putting aside a retirement fund or you're

• 3:27Speaker 02

  actually doing direct investing or you're a sovereign wealth fund. It's all the same. Think about it this way. Let's take the negotiations going on with England, which is not in the EU, the EU itself, Japan, Thailand, Indonesia, Canada, Mexico, et cetera, et cetera. Most of these countries have a VAT tax, a value-added tax, which is a tax that is a consumption tax at a consumer level. So to keep it really simple, let's say an American company ships a product up to Canada into the province of Quebec, like a stick of butter.

• 4:06Speaker 02

  And whoever buys it in the province of Quebec pays a 13% VAT tax, value-added tax. And that goes to the Canadian government or the Quebec government. It's a split. They kind of split it almost half-half. Well, Trump looks at that and says, well, wait a second. Isn't that a tariff on an American product? And so all he's doing, and then he comes back and says to the Canadians, "Okay, I'm proposing a 35% tariff on you, on everything you ship into the United States." And they say, "Well, wait a second, that's a little heavy, we already have an agreement with you." But basically what Trump is doing, and I think people should think this one through,

• 4:49Speaker 02

  there's no way on earth Congress is ever going to do an American consumption tax. It's just not in their DNA. There's no American VAT tax. However, what Trump has done is exactly that, and he's called it something else. So if the Canadian deal, let's just take the Canadian deal, because it's easier to talk about, which is being negotiated as we speak, today as we speak, if they end up with a reciprocal tariff of 10%, let's say, which has already been established for the oil coming out of Alberta, Canada, the cheapest source of energy, to Cushing, it's already been negotiated. And so it's a 10% tariff on that oil, and that energy, and that gas. What if that's for all of Canada?

• 5:32Speaker 02

  So basically, you've got a VAT tax up in Canada, let's call the blended rate 10 or 12%, and you end up with a tariff, a blended tariff on all goods and services leaving Canada and the United States to 10 to 12%? Well, there you have it. Trump put his VAT tax in place, everything's equal. Even Stephen, so to speak. I think that's where we're going.

• 5:55Tom Bilyeu?

  Is it just a negotiating tactic, though? Because Trump will have us believe that we've been getting battered, abused, taken advantage of by the global community, and it's got to stop, or America has, something bad is going to happen. Is that actually true? Or is he causing mass chaos?

• 6:11Speaker 02

  Trump is, I mean, I always say this about Trump. You know, I've known this guy for 17 years. We actually met when he started this celebrity. You know, apprentice show, it was the same year that I did Shark Tank for Mark Burnett. So we both know Mark Burnett. We both sold forwards to the car companies, the ads in New York. And I think he has a remarkable presence and is an extraordinary salesperson. I mean, I've just seen him in action. But he is bombastic. He says outrageous stuff. And what I've learned to do, just to be pragmatic, because I have to live under his policy

• 6:50Speaker 02

  and invest under his policy, is to filter out the noise from the signal. I think the signal in the case we're talking about is reciprocal value-added taxes. He calls his a tariff. The Europeans and the Canadians call theirs VAT. Who cares what it's called? It's a tax. And so can the economies live with reciprocal 10%? Yeah. What Trump is unhappy about that he'll never be able to fix, you take a country like Vietnam. They don't have enough people to ever have trade balance with the United States. They simply can't buy enough stuff to offset how much stuff we buy from them.

• 7:31Speaker 02

  Because many companies, including mine, have moved out of China to Vietnam, or Cambodia, or India. So these countries have massive trade deficits in the United States because we manufacture stuff there. Now, can Trump get all that stuff repatriated? Not during his mandate. You can't do that in 34 months. You can't move all the factories back to the US. But the policy itself will slowly self-correct. I don't think we need to make plush toys in America. We don't, there's no value added in making a Barbie doll in the United States. That job is not a high-value job. I think it makes sense to make chips here. You know, semiconductor chips, that makes sense to me. High-value add, that makes sense to me. So Trump is trying to balance all that.

• 8:16Speaker 02

  But you gotta, you can't listen to all the noise. I mean, he's a walking press conference. Like, he just says whatever he wants to say when he says it. I'm so used to it now. It doesn't faze me whatsoever. I just focus on the signal.

• 8:30Tom Bilyeu?

  But is it moving us forward in international negotiations? I will talk very specifically about China in a minute, but right now I just like if you were going to rate his negotiating skills, is he actually moving us forward? Because now that the the whole idea of 90 deals, 90 days, it's just sort of dragging on. We're not seeing like enough wins that really make a press conference worthy. Like, is is anything actually happening?

• 8:56Speaker 02

  Yeah, yeah, I mean, we're never going to get 90 deals in 90 days. It's never going to happen. I mean, it takes, it used to take two years to get a deal done with one country. He's just accelerating it very, very quickly and he's getting sort of letters of intent. What the market really wants to hear is they don't care about the granularity of the deal itself. They just want to know what the tariff itself is going to be. So if you're an investor in a country, in a jurisdiction like Switzerland for me, or Canada for me, and there's other places I invest, I just simply like to know what's the deal? Is it going to be 10, 12, 15, 14, 13, 7? What is the actual reciprocal tariff going to be? So I can adjust my capex accordingly. And the rest of it, I don't care about.

• 9:37Speaker 02

  I don't, you know, I don't care about the, you know, the detail. I need to know what the reciprocal tax is. And in the case of Canada, because it's the largest trading partner of 28 states, they're going to have to resolve that one pretty soon because both countries need each other on that. And the Canadians are going to have to give up their, their, their supply chain, you know, tariffs like on butter and eggs and milk and against Vermont. They have 200% tariff. That's just not sustainable.

• 10:12Tom Bilyeu?

  All right, you seem pretty sanguine about the sort of what many people will point to as the chaos of Trump, but there are things that ring your danger bell. So from a, an outcome perspective, what would make you worried that, yo, this is putting us in a bad place? Either specifically from an American standpoint or just from a global investor standpoint? And what would put us in a good place?

• 10:37Speaker 02

  Yeah, I mean, the red bells would be ringing and I would be very concerned about unsustainable tariffs for a long period of time, like 35 percent. That wouldn't work. That would never work with anybody. And it would cause major chaos in financial markets. I think Trump knows that. I don't get caught up in politics per se, or show for politicians, even Trump. I show for policy. So I wait until I see the actual policy. And lately, because I'm involved in certain sectors like stable coins or data center development, I have to get my hands dirty in Washington.

• 11:22Speaker 02

  And I go there to meet with senators and governors and representatives in the administration to understand where they're taking their policy. And so, because I have to know what that is, or I can't be successful as an investor. My point is, I don't have Trump Derangement Syndrome. I don't care. I only care about policy. And so, if I believed that Trump was going to do 35 percent tariffs on major economies that I'm an investor in, that would be a big problem. And you would see the markets correct pretty quickly around that. But the market doesn't believe that anymore. You've had this volatility in Trump's, now it's 35 percent, now it's 10, whatever it is. The only thing that matters is what is the end game? What does it end up at?

• 12:07Speaker 02

  And if you told me it's 10 percent, reciprocal worldwide, yeah. I think the market's betting on that right now, and I think we're going to get there. And then, at the end of the day, all this stuff was just a bunch of noise and volatility based on gnashing of teeth. But there's a lot of people that don't like this guy. I mean, they just don't, and they're never going to get over it, and they can't believe he's president. I say, deal with it. He's president for the rest of his term. Get over it. And if you want to do business, focus on that, and just focus on policy.

• 12:38Tom Bilyeu?

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• 14:59Tom Bilyeu?

  Thanks for staying tuned. Now, let's get back to it. Alright, so China, I think, is the game. I've heard you say similar things. I'm routinely trying to refocus my audience on, listen, China matters a lot. Everything else, for the most part, is a distraction. Do you think that we can apply enough pressure to China that they're going to be forced to come to the table? Because obviously Xi would have us believe, nah, whatever, I don't care. I've minimized my exposure to the US more than you guys think. I can outwait you. You guys are going to come on our terms.

• 15:32Speaker 02

  No, he can't do that. It's not going to happen. And we need to work a deal out with China. You're right, though. Everything else is a distraction compared to China. Because these two economies are going to, are entering an economic war against each other. Hopefully, it's not a military war ever, but an economic war and an AI war. Because the country with the best AI is going to win all the wars in the future. You've got some essence of that in the Iran situation, where very few American boots on the ground there. The entire operation was done using technology, some of it very advanced,

• 16:16Speaker 02

  and robotics and everything else, and very, very precise missiles led by GPS technology that also uses predictive AI. And so all of this stuff, that's the first time we've seen a 48-hour war that way. China was watching, the Russians were watching, everybody was watching. And it gives you an idea that this race of technology and AI and the economy are all kind of fit together. So here's the way to view the Chinese situation from 30,000 feet.

• 16:54Speaker 02

  In my view, it's my personal opinion, and I've been dealing there for over 22 years now. Ever, remember, they came into the WTO in, back in 2000. And there was a lot of assumptions about compliance back then, it was during the Clinton period. They never complied. They cheated, they stole IP, they built many of their sectors around American stolen IP, German stolen IP, and nobody made them pay any consequences for that. They just kept saying, "Well, as they get bigger and they'll understand the value of democracy, this will be better for us." That never happened.

• 17:36Speaker 02

  They basically stole it all and then became very proficient at advancing it. So, particularly their tech, their automotive, and, you know, all kinds of different sectors are built off someone else's tech. Now, you can find the DNA of any of this stuff just by reverse engineering anything they build over there. So, it's, we don't have to argue fact, I believe it's a fact. It's, what matters is, what happens now? Are we going to continue to let them steal American IP? Or are we going to somehow hold them accountable? And I think we're in it for decades now, for various administrations.

• 18:20Speaker 02

  Nobody has taken them to task on this issue, until now. And so, you've got a whole bunch of issues wrapped up in this narrative going on the next few weeks, including the September 19th decision on TikTok, which is blatant spyware in the US. There's no question about that, and the law's been already passed. It's either going to go dark, or somebody's going to buy it and rewrite it under American laws. So, who knows how that's going to shake out? And we haven't decided or know what she wants to do, only he and Trump can decide. But... I'd argue that by the time this narrative is over with China, they will comply because if they lost access to the largest consumer market on earth

• 19:04Speaker 02

  through massive tariffs, there'd be a lot of unemployed Chinese rioting in the streets. And if you're the supreme leader, you cannot afford that. You can't afford that. And so Xi is not an idiot, he knows that. He doesn't want to back down, either does Trump. They're going to have to find that accommodation. But it's not just about tariffs. It's about IP, access to their courts to resolve trade disputes, access to their financial markets. They get access to the New York Stock Exchange and the NYSE's rules are not even abided by.

• 19:41Tom Bilyeu?

  Have you heard Trump making noises about that? Or is he just focused on the trade aspect?

• 19:46Speaker 02

  No, no. Trump has already talked about this. It started in Geneva three months ago, whenever that was. But everybody knows that within the administrative narrative with China right now, at the level of discussion, they're trying to resolve these issues. Each of these is a separate issue. TikTok's a separate issue. Chip sales from Nvidia, separate issue. You know, all of these things are separate multi-billion dollar issues that are unique to the China negotiation. They're not having that narrative up in Canada or in Mexico or in the EU that they're having that narrative with China. Because if China wants to play with the big boys and have equal access to the American market,

• 20:31Speaker 02

  they have to play by the rules now. The legal systems, the IP laws, access to financial markets under the rules and regulations of the SEC. All of these are sub-issues, but the old way of doing it is over. I mean, if China wants to keep stealing IP, it'll end badly for them. Because the US is still the largest consumer market. That's the stick. That's the hammer. Trump has that leverage now. He may not have it forever. Congress understands that.

• 21:06Speaker 02

  And we, obviously, I would like to do business in China. That's a huge consumer market. There's many products and services I want to sell there, but I don't want to get screwed doing it. Yeah. And so, you know, I've got to be honest with you. What's happened over the last 20 years, no one ever looked at the granularity of this. And I see it through a lot of the small startups I fund. Let's say you come up. Let me give you an example. Let me give you a very simple example that I think your viewers would appreciate. Let's say I come up with an innovation and I patented it called Drain Wig. It's a real product. It's so simple. You put it down, your drain, in your own home or in a motel or a commercial, you know, resort or whatever,

• 21:50Speaker 02

  and it collects all the hair. And it does it in a unique way that actually works. Many designs have been tried to do this. They failed. Drain Wig figured it out. And they patented it. And they sold it for $29.95. And it really worked. And so, commercial institutions said, "Well, I can cut my plumbing costs by 60% by just stopping." Right? Huge.

• 22:15Speaker 02

  The minute it got to 5 million in sales, 40 knockoffs. Four zero knockoffs. 40 knockoffs on the market at $8.99. Wow. They didn't have to pay back the R and D the company had spent or all the money they, you know, spent creating the product in the past and creating distribution. It already had been done by them. And then they got knocked off. Company went out of business or changed hands as a result. That happens millions of times. Nobody made... You didn't hear that tree fall in the forest. It was a tiny little company of 5 million. Could have been $100 million plumbing supply company one day, but that didn't happen because it got knocked off by China.

• 22:57Speaker 02

  That's what I testified about in Washington. I gave them examples of that that they'd never heard of. They did their diligence. They realized that's how we're getting screwed. One innovation at a time. Screwed over and over again with... Because nobody brought them to task. "Well, I think there's a new sheriff in town. Maybe you like him, maybe you don't." But basically, Congress has had enough and they're pissed.

• 23:25Tom Bilyeu?

  Do you think that we're gonna see two egos that have no, they have no incentive to back down? Trump can be very pragmatic at times, but he's very bombastic in a way that I think Xi responds allergically to. I think Xi has proven with the zero COVID policy that he'll go hard in the paint and is perfectly willing to see his people suffer to get what he thinks is the right outcome. Does this get disastrous before we find resolution?

• 23:55Speaker 02

  I think it's a good debate for you and I to have because I think this will be the toughest negotiation. I think you're right about that. I don't think Xi wants, you know, when you're the supreme leader for life, you can't make many mistakes because you gotta keep everybody happy. You're only the supreme leader while the people that support your supremacy back you up. If they see weakness, and you've seen this happen in China before, you're gone pretty fast. And so he's got a pretty big pressure cooker there, a real balance. He cannot have mass unemployment. That would be mass inflation because he would have to print money, people to buy bread, and the price of that bread would go through the roof.

• 24:39Speaker 02

  And so it's, and he knows that. He's not stupid. This is a smart leader. And I think that's the pressure cooker. So my guess is there's going to be a deal. And it doesn't cost a lot for Xi at this point to give up on IP theft. He's already stolen all he needs. And, you know, it's sort of, at this point, he can compete. And I think he is. I think he's competing in aeronautics. He's competing in biotechnology. He's competing in AI. And he did it all on the backs of other people. He stole it all. And so now, you can't take back what he's stolen, but he is advancing his own versions of all these things. And I think it's easy, it's an easy gift for him to actually comply with the World Trade

• 25:21Speaker 02

  Organization, to have disputes. He's got a, he's got, I don't know how many thousand disputes are unresolved at WTO. So maybe he should get kicked out of that, or at least, you know, fix that, which I think the WTO could pressure him and might do so. But they're gonna need the lead of the US to start that. And I think China wants to be... Playing with the big boys, the G8, so to speak. I think they want to get there. And I think they're going to be vicious competitors. But I think it's good and healthy to have a competitor like China. And I'd like just for them to play by the rules. And I think that messaging is the one that the market is anticipating. If we really thought it was going to be disastrous outcome. If you and I believe that and the majority of investors believe that,

• 26:06Speaker 02

  this market would correct 40% right now. And I don't, I don't see that happening.

• 26:11Tom Bilyeu?

  Man, fingers crossed, I certainly hope you're right. Uh, the image that plays in my mind that I'm always looking for somebody to talk me off the ledge is that we have the perfect setup for Thucydides' trap. China has a long history of being the big dog in the world. They have the identity of we are the biggest and the best, that we're this temporarily embarrassed nation. We are finally clawing our way back to the top. Every time you have a rising superpower and a declining superpower, they end up colliding and they find themselves inextricably typically pulled towards a kinetic war. I think we're already in the middle of a cold war with China. Uh, and so I look at, if I'm in Xi's mind, and I don't think like an American inside of a Chinese body,

• 26:55Tom Bilyeu?

  instead I think of the, the way that a collectivist, um, person would think that has, uh, you know, come up through all of the horrors of Mao that personally affected his life. He sees what I call red light, green light capitalism of, hey, we understand capitalism is how you move forward. But we also know that if you kidnap enough of the, uh, top people and re-educate them, that you can keep a level of control on this thing. So to me, this is all going to boil down to, because I think he is going to flex as hard as he believes he can possibly do before there's a coup that he can't squash with violence, if I'm really honest. And it all comes down to how real is the housing crisis? If the, uh, real estate crisis over there is real

• 27:39Tom Bilyeu?

  and they're like in 2008 levels of fragility, then I think he's going to realize, okay, I'm not going to be able to push this as far as I want. He'll go, you know, he'll push. But like ultimately Trump and he are going to come to the table and both realize, all right, we're not on strong enough footing. So we're going to have to come to an agreement. But if the housing crisis isn't real enough, I think Xi will be able to out, he'll be able to get Trump past the midterm elections and then it's over.

• 28:03Speaker 02

  So let's just break down what you just said there. Because I, I think you're on to a very good point here. And I think we should look at it. You just described a scenario where if I were a young, bright individual in any country, anywhere, and I had the opportunity, because I was an entrepreneur and I wanted to exploit my ideas and I wanted to build a business and I wanted to be an innovator, would I want to go to a geography that you just described, or would I like to immigrate to America where for over 250 years it's proven that if I'm good enough and my ideas are

• 28:47Speaker 02

  validated and they do solve a problem, I can build a business and create freedom for my family? So I started that basis as being what makes any country competitive. Can you create an environment, even with all the faults that anyone has? There is not a chance in hell I would want to go live my life in China, not when I could starve or a supreme leader could re-educate me, I love that word you brought up. I don't want any of that. Why would I want that? And so, in the pursuit of intellectual capital that creates all the innovation globally,

• 29:31Speaker 02

  who's going to win on this one? And I think the constant signal between these two economies is just that: the human being who wants to live in freedom, who would rather go to a place with all of its faults. I mean, there's a reason people risk their lives to cross rivers under barbed wire to get into America. You don't see that happening in China. I don't see anybody trying to get into China. And that's why. And so, I'm going to bet my capital on that, and I think the rest of the world is betting their capital on that. And it's sort of, then you can get into the mishmash of, you know, who's the president

• 30:13Speaker 02

  and all the rest of that stuff, but I'm confident that my assumption is correct about the pursuit of freedom being the reason that economies are successful. And...

• 30:27Speaker 02

  I think you can, you can steal all the stuff you want, but if, if people don't want to move there, you have to rely on your own internal policy, which can be brutal. And ultimately, you'll never be the winner. You'll always be number two. And maybe that's okay for Xi. Maybe he can live as number two in perpetuity. Because I'm pretty sure he'll die one day. I mean, I don't think he's a vampire. And so, if they really want to compete and they want to win long term, the only successful philosophy, period, is democracy. Period. Period. That's it.

• 31:10Speaker 02

  Or, a form of democracy that is so trusted, such as, you know, or trusted leadership, like the UAE, which is not a democracy, but has proven, for at least this last 50 years, that they understand what democracy is, and they rule that way. That's the only way it's gonna work. You don't, you see a lot of people trying to get into the UAE and getting a passport there. They want that. They, they like the system, the policy there. But, that's a very democratic, informed country. So, and I'd argue that they are the Petri dish. They could have, that country is only 52, 53 years old. They could have chosen the Chinese way.

• 31:55Speaker 02

  They could have chosen the Russian way. They could have chosen Venezuela, or Cuba, or North Korean way. They didn't. They took the best of culture around the world, the best of policy, and they created a behemoth economy that's competing now. And the metric I use is China's number two in AI spending, the US is number one. Who's number three? UAE. How'd they do that? And so, it's sort of, you know, I teach this stuff. I'm an executive fellow at Harvard. So I have classes with people.

• 32:28Speaker 02

  Explaining to them what I believe works, trying to convince them to think that through, and trying to convince at least a third of the class not to become consultants, because that's what they do. They just make consultants at these business schools. And those people live a life of mediocrity. It's a shame to see it happen. But, that's a long answer. So I'm not as worried as you are, because I think long-term, you can't beat what America has proven works.

• 32:56Tom Bilyeu?

  I agree with you on that. However, where is your confidence level that America, the voting public, is going to maintain their belief in that freedom? When I look at a Mumdani, or I look at just the, look at Minnesota, and the types of candidates that are running for governor, running for mayors of local cities, there is a real populist push to the left for policies, whether you call them blatantly socialist policies, or you call them social democracy, for reasons that I can outline in detail. I believe that American youth is losing their enthusiasm for capitalism, full stop.

• 33:38Speaker 02

  Yes, I've heard that, and I think it's a valid concern, and it's a fair point to bring up. And you definitely have evidence in New York City and other states, as you've detailed, 100%. But I've also heard that same claim back in the 50s. I'm a, you know, I go back and I look at history. There was a time when communism was rising up, and it was occurring in places like New York City. There was a very bohemian vibe to it, and people claimed that it was a better way of life. And young people swarmed to, they were, some of them were called beatniks that far back. It's, we have, this movie, I've seen this movie before, and so...

• 34:22Tom Bilyeu?

  What knocks it back, though?

• 34:24Speaker 02

  Well, I'll tell you what happens. Reality strikes. It's sort of like, what you hear happening right now in New York, because that's a good case study, this Mumdavi thing that's going on. If you listen to his rhetoric, it's basically money for nothing and chicks for free.

• 34:46Speaker 02

  I mean, and I totally get it, I totally get it, and it's very, it's a great message if you want to be elected as mayor. His problem is going to be delivering on that. New York is already the highest tax jurisdiction in America. And it's obviously not that well-run already, and so it's, what happens for these kinds of cycles, and my argument here is going to be very simple. The American democracy, the way it was built, it has the ability to self-correct, and does. It self-corrects in four-to-eight-year cycles, and it has since it was formed. And you just saw it happen in the general election. The country was moving too far

• 35:29Speaker 02

  to policies that didn't make sense to the kitchen table in Champaign-Urbana, Illinois. And so, boom, it self-corrected, and it self-corrects at the municipal level, at the mayor level, at the state level, and it'll do it again, because when you offer money for nothing and chicks for free, you can't deliver. The system doesn't provide for that, and so it's a classic case of you won't get fooled again. Because these young people that are voting for him are gonna want the free food, the free, you know, grocery stores, the free subways, the free, and there's not a chance in hell he can deliver that. And so, they will be pretty unhappy with him in the next cycle.

• 36:14Speaker 02

  Now, I'm not sure he's going to win.

• 36:18Speaker 02

  There's a fair amount of people willing to start to examine his policies. But my whole point, and I don't want to get too far is that, yes, people have gone into this, young people today want communism, young people today want socialism. Not actually. The majority of them want a job. They want to raise a family, they want to be able to support it, and about a third of them have that burning desire of the American entrepreneur that wants to create something magical for themselves, not the greed of money, the pursuit of freedom, which has driven this economy, and I live that every day. And I can guarantee you, every year, and I'm the investor in them, I see a new crop of them.

• 37:00Speaker 02

  We're very healthy there. We're in great shape. So, within my own family, we have these debates. I've got young kids too. And believe me, you know, Thanksgiving dinner is full of this rhetoric. But I look every year at how they too have advanced. The minute they got a paycheck and saw tax, they went from being screaming liberals to raging conservatives. And that's kind of what happens. I watched it happen in my own family. It just happens. People want to know, where did half my paycheck go? Who did I just give that to? The soon as you get a job, you move from being that socialist to that conservative. That's how America works.

• 37:40Tom Bilyeu?

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• 38:48Tom Bilyeu?

  Thanks for sticking around. Let's get right back into the action. All right, I'm gonna give you my best black pill pitch and then I hope that you can dismantle this argument. So I'm a big Ray Dalio person. I believe that Ray has gotten to the physics of how money works effectively by looking at debt and we're nested inside of a big debt cycle. And the problem is in the 50s, we had not reached phase five and a half, which is effectively where we are now, phase six being total collapse, just the debt becomes such a burden that you, there's nothing to do, you have to default. It seems to me that we're on that path, especially given the big beautiful bill, but I don't want to get distracted by the whys right now. Just the structure of the debt goes like this. In a fiat money system,

• 39:31Tom Bilyeu?

  where the only way out of the kind of interest payments that we have to make now to keep giving everybody the money for nothing and chicks for free is that you print money, printing money makes assets go up, houses are the only asset that people understand intuitively. So suddenly that housing becomes unavailable to the whatever 40 ish percent of people that otherwise just aren't going to own assets because they don't understand financial markets. And so now you get this hollowing out of the middle class by pushing the people that otherwise would have been in the middle class up to the upper class because they do understand assets. And then you push the 40 ish percent of people in the middle class and low class down even farther because they don't understand assets. And that hollowing out creates this massive inequality which triggers

• 40:15Tom Bilyeu?

  something that is so embedded in our DNA, which if you've ever seen a monkey do a task next to another monkey doing the same task, you pay them both cucumbers, everybody's fine. You pay one monkey a cucumber and the other one a grape and the one getting the cucumber freaks out. And that's what we have now. And so it, the Gini coefficient, which is the basically, it doesn't matter if everybody's poor or everybody's rich, what matters is are there poor people who can look to their neighbor and see them being rich? That's when people go ballistic. That's the setup that we have. The middle class essentially doesn't exist anymore. Housing is completely out of reach, somewhat, somewhat of an illusion because it's really just money printing. But anyway, you create that setup. So now even these kids that they want to be raging

• 40:59Tom Bilyeu?

  conservatives, they still don't see how they're ever going to get on the property ladder. And so that resentment just builds and builds and builds.

• 41:07Speaker 02

  Well, that's a very eloquent job you just did there of, I read Ray as well. I'm an advocate of understanding his point of view. It's an important one for me. I'm basically a debt guy and always have been. And I came up in the fixed income market. And so 100%, he's a very valid thinker in strategizing that scenario. And the question is, why wouldn't that happen? So let's examine, because you know, one of the things you have to risk when you're an investor like me is if I really believed that that scenario is going to roll out,

• 41:49Speaker 02

  my portfolio mix would be completely different than it is right now. But I'm basically believing that the debt markets, which you know, they call them the bond vigilantes, are asleep right now. The smartest investors are not the equity guys. The smartest investors are the debt guys, a Ray. And the reason is they take duration risk. So they have to be historians in the sense they look back to try and forecast the future. Now here's some things you got to think about. The big beautiful bill, which caused chaos in the relationship with Elon Musk and Trump that's still playing out, was Elon had the understanding in his mandate, his 120 day

• 42:34Speaker 02

  mandate, that he would try and create a balanced budget. Instead, we took on another $3 trillion of debt if we just scored this budget the way it is. What Elon didn't understand, and I think he understands now, is to get stuff done in Washington, and the primary mandate of getting that bill through was to anchor the tax rate. Because the reason the American economy is, and we just got new consumer numbers today, economy's on fire. It's doing so well right now. And that's because this tax rate is competitive against the G20. We don't want to change that. We can't have our tax rates go up into the top quartile of tax in the G20 because it'll slow down GDP growth.

• 43:19Speaker 02

  That was Trump's goal. He achieved it with the big beautiful bill. Now, how do you deal with balancing the budget? You got to find a way to save $3 trillion. Well? That's where his new task is. And he can't do reconciliation except every 12 months. But you may not, or you may know this. The government timetable starts in September in the new year. So as soon as you get past September, and this is what I don't think Ray is giving much consideration to. If the economy continues to grow, the amount of tax income that comes in just on a normal day basis goes up. In addition, if the tariffs are successful at a 10% to 12% rate, that in itself has

• 44:03Speaker 02

  not been scored yet. That brings in trillions of dollars against this deficit. The third aspect, and I give you on this one, is does Washington have the stomach to actually take these new revenue streams and deploy them into debt reduction as opposed to pissing them away with stupid programs? And that is the challenge that I think is next. Because it wasn't long ago that we had a balanced budget in America. It doesn't have to be this way. There may be, for example, just doing a means test on social security. Maybe not everybody should get that check. Maybe it's a different form of tax. Maybe if you're making over a million dollars a year, you don't need a $4,000 a month

• 44:48Speaker 02

  check. And so that's one aspect. Healthcare could be better. That's another aspect. I'm an optimist in the sense that Ray hasn't given any credit to these other sources of income. He has taken the baseline, assumed it doesn't change. I'm not there yet. And apparently, the market isn't there yet either on either bond vigilantes or on the equity side where we continue to see new highs. I'm more in the bullish on America camp. And Ray, as you know, spends a lot of time, or I do, in Abu Dhabi. He's a global thinker, and I like that.

• 45:32Speaker 02

  But even he knows where half of his dollars go, more than half, as the rest of the world's sovereign wealth goes. Where do you find it? Here in America. Because there's no other market like that. And if the rest of the world believed that collapse was imminent...

• 45:48Speaker 02

  They'd be sitting with all that cash under the streets of Zurich. So, I don't, you know, I'm not agreeing is what I'm saying. I'm on the other side of that argument and I'm gonna stay with it and I'm gonna watch it and I'm gonna be part of it. You know, I worked very hard in Washington on behalf of, and my last point on the Ray thing is, 70% of jobs in America, 7-0, 70%, are created by companies between 5 and 500 employees. Those are my people. Those are the companies I invest in. I am their advocate in Washington. I actually read the Tax Act. You didn't read it, I read it.

• 46:27Tom Bilyeu?

  It's just you, I think, at this point. Which, thank God you did, by the way. So, the more info you can give people to look out for, the better.

• 46:34Speaker 02

  And I saw stuff in there I didn't like. And I worked with Senators Hagerty, Rick Scott in Florida, and Ron Johnson with their staffers, and I said, "Guys, this is bad for small business in America." This line, this line, this line, this line, this paragraph. Help me ward off this catastrophe, because I can't do it. I can only be the advocate for these businesses. And if you don't believe me, why don't we talk to some of these businesses? And thank goodness, these great senators had the guts to get in there and fight for these changes, and I'm extremely proud to have been involved in that, that took out some extremely bad policy.

• 47:19Speaker 02

  But that's the way America works. If you really believe that it's gonna hurt 70% of job creation, you have to stand up and go to Washington and sit down and meet these people. They're not stupid. They're pretty smart. And if they can, if they're influential enough, and those three senators, they are the pillar of small business in America, and I'm so proud to know them. I mean, it worked is my whole point. And so if you're a small business in America and you are first or second generation, my message to you is I have your back. I have your back as I do for all the companies I've invested in. And I now work policy also. You know, I'm just, I'm just a guy that says, look, here are the facts.

• 48:04Speaker 02

  Let's fix this mistake before it becomes law. And thank goodness we did. And now I'm a believer in this bill. Now, are we going to solve the three trillion? Yes, in the ways I spoke up previously.

• 48:13Tom Bilyeu?

  Well, talk to me about how we unlock growth because as I look at it, it as of right now, my bet is, and I'm literally moving my money in accordance with this bet, that America, the bond market cracks within the next 10 years. My barring a radical change in policy or the unlocking of growth, that that's just math. So.

• 48:35Speaker 02

  Well, you're talking, you're talking mass inflation there.

• 48:39Tom Bilyeu?

  Correct. So, yeah, they're gonna either have to print money or openly default. They're both defaults in my opinion. But how do we, how do we open that growth? Because there is that, that, that's a real thing. If we can unlock enough growth, like we can really do it. But what would that take?

• 48:55Speaker 02

  So let's examine that with granularity because it's important what you're raising there. The, in order for that scenario to play out, you'd have to have a lack of confidence in the US Treasury bill, period. You would have to find another place that people are comfortable putting their liquidity in every country on earth outside of the US Treasury bill, which is considered the risk-free asset. And so right now it is, and under your scenario in the next decade, that is no longer the case. It would be more like a Venezuelan telco bond. And so, you know, it's, is that going to happen? Now, why would that happen or why would it not happen?

• 49:36Speaker 02

  I want to point you to some policy that is going to become law hopefully on Friday. The Stablecoin Act. So let's talk about the Stablecoin Act, okay? And talk about the Treasury bill and talk about inflation, all in the context of what you're bringing up here. A lack of confidence in the US Treasury bill. Let's just stay focused on that. So.

• 50:01Speaker 02

  When this law passes and you're a, the US, so just to describe this, the Genius Act, Hagerty Bill, Senator Hagerty, we're going to create a product in America that is now legal that allows you to create a digital dollar. So, a product that you buy, USDC is the one I'm using, out of a company called Circle, and in full disclosure, I was an early shareholder in Circle. I believe in what Jeremy Laird was proposing, although nobody believed him seven years ago, nobody. And today, he is, you know, the CEO of a very successful public company that trades today, that generates and creates these stable coins. Why is this important?

• 50:41Speaker 02

  So, if I can, I can buy a stable coin, as I do right now, and he is forced by law, or this pending law, to be audited for every stable coin he has, it's backed by a US dollar. He has to prove it to be totally transparent. So, instead of holding paper dollars, I could just own USDC on my phone, which I do. Right here on this phone, I have a whole bunch of USDC. I can send it to anybody in the world I want, if they have a corresponding account, and just transfer it, which I do. But think of it this way, let's go back to your, your, your point about the T bill.

• 51:23Speaker 02

  Under your scenario, the T bill has to collapse as a secure form of risk-free investing. If I live in Turkey, you and I talked about Turkey just a little while ago, or I live in Venezuela, or I live in any unstable regime, I can take my local currency and I can buy a stable coin backed by the US dollar. The law says this, it must be backed up by the dollar or an equivalent, including the T bill, under 92-day duration, so complete liquidity.

• 52:06Speaker 02

  Can you imagine if I had that option in Turkey, and I'm just working there as a plumber, and I'm watching my currency have 12% variations in volatility year to year? Or I can take half of it, or maybe two-thirds of it, or all of it, and put it in USDC on my phone?

• 52:25Speaker 02

  I'll buy that USDC even though it pays me no interest whatsoever. Just to have the stability of my trust of the T bill. So all of a sudden, what you didn't take into account and Ray didn't take into account is every country on earth, I believe, over the next three to five years is going to take advantage of an ability to digitally own something they have faith in. The American economy and the American T bill. Now, under your scenario, and it's fair, you know, to be a critic, you're arguing that the country will continue to mismanage itself with deficits, that at some point

• 53:08Speaker 02

  this faith cracks. I'm not there. I think what's happened with this legislation is we have found a way to let every human being on earth buy into the trust of the two-year or 90-day, I should say, T bill. And if there's a better place to put their money, they'll put it there. But there isn't because they're not going to put it in China ever, ever. They don't trust Xi at all. And I'm talking to people that don't have to live in China, like the rest of the world. Who do they trust? Not the president of the United States, the American economy.

• 53:51Speaker 02

  They know the president's going to change every four or eight years, but they trust the way the country operates and how it's delivered value for 250 years. That's my argument, and so far, it's worked. So I don't think in your scenario, you've taken into account the innovation America brings forward. Not the regulation, the innovation that's going to solve for demand of the most trusted piece of paper on earth, the American T bill. That's my case. It's a great debate I'm having with you, and I think the listeners should think about it, and I think I just won that argument.

• 54:29Tom Bilyeu?

  All right. It is a great argument, and I'm very glad that you're making it. There are a couple caveats that will determine whether you win in reality, which is, are they going to make that inflationary? Or is it going to be you can only buy the debt backing it on the open market? That would be question number one.

• 54:45Speaker 02

  Yeah. Well, in the context of, you know, the liquidity of the T bill.

• 54:52Speaker 02

  The more liquid it gets, the more the market determines its value. You'd agree with that, right?

• 54:58Tom Bilyeu?

  Sure.

• 54:58Speaker 02

  Okay, so between Circle and Tether, the two different stablecoins that, until the law was passed, we could call them rogue if you wished. They're now bigger than most countries in terms of owning T-bills. Bigger than most countries, the sixth largest, and I think probably by 24 months from now, they'll be the third largest, bigger than any country, or bigger than 90% of countries' ownership. And that diversity is global. I'd argue the people that are going to own these things are going to be the billions of people around the world. And so, that's pure, open market price discovery.

• 55:42Speaker 02

  Your scenario is going to be very difficult if it's not liquid. But I'm arguing it gets more liquid by the second. And the demand for T-bills, the more the world's volatile, the more there are rogue nations, the more people that live in these rogue nations don't trust their governments, the more liquid stablecoins will become. So, I think there's always going to be rogue nations. There's always an Iran, there's always a North Korea, there's always a Russia. All of those people are not stupid people. In the US T-bill, they will trust. And I rest my case, you're on on that. And so, in my scenario, the probability of what you're worried about never happens,

• 56:26Speaker 02

  which is a lack of liquidity, the inability to get out of a bill, to buy a T-bill and not be able to sell it for what you paid plus interest. Very difficult for that scenario to happen in the way I'm seeing the world coming together.

• 56:39Tom Bilyeu?

  That's it for part one of my conversation with Kevin O'Leary. Part two drops tomorrow, and you are not going to want to miss it. So make sure you are following the show wherever you're listening. And seriously, following is really the best way that you can support us. So if you like what we're doing, please give us a follow. It helps more than you know, and it will make sure that we get more of these kinds of conversations to you guys. Until then, my friends, be legendary. Take care. Peace. Let's talk about a pattern that is guaranteed to be killing your progress. You know what you need to do. You need consistent nutrition. We all do. You need vitamins, probiotics, greens. We all know that we should be doing more of it. When your morning gets chaotic, you skip it. When you travel, you skip it.

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