How Economic Systems Shape Our Future: Capitalism, Socialism, and the Lessons from History | Tom Deepdive

Welcome back to Impact Theory with Tom Bilyeu. In today's episode, we're diving deep into the roots of economic inequality, unpacking the differences between capitalism, socialism, and communism, and exploring why the systems we rely on shape our lives in profound ways. Tom Bilyeu breaks down how wealth is distributed, why debt and money printing are at the core of our current financial challenges, and what history—from Argentina's boom and bust to the fall of East Germany—teaches us about the consequences of government intervention and top-down control. We'll look at real-world examples like rent control policies in New York City and around the globe, examining how well-intentioned measures can spiral into devastating housing crises and urban decay. Along the way, Tom Bilyeu challenges us to rethink populist solutions that may feel right in the moment but often backfire in the long run, and to focus instead on the structural incentives driving our problems. Whether you're passionate about economics, history, or social progress, this episode will equip you with the insights and mental frameworks needed to navigate today's rapidly changing financial landscape. Get ready for a thought-provoking journey that blends hard-hitting data, historical case studies, and actionable advice—so you can see beneath the surface and make better decisions for yourself and your community. Quince: Go to https://quince.com/IMPACTPOD for free shipping on your order and 365-day returns. Linkedin: Post your job free at https://linkedin.com/impacttheory HomeServe: Help protect your home systems – and your wallet – with HomeServe against covered repairs. Plans start at just $4.99 a month at https://homeserve.com Shopify: Sign up for your one-dollar-per-month trial period at https://shopify.com/impact Huel: 15% off with this exclusive offer for New Customers only with code impact at https://huel.com/impact(Minimum $75 purchase). 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: 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 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: https://tombilyeu.com/call Get my battle-tested strategies and insights delivered weekly to your inbox:sign up here. https://tombilyeu.com/: 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. ********************************************************************** FOLLOW TOM: Instagram:https://www.instagram.com/tombilyeu/ Tik Tok:https://www.tiktok.com/@tombilyeu?lang=en Twitter:https://twitter.com/tombilyeu YouTube: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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• 0:45Tom Bilyeu?

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• 1:07Speaker 01

  Can you break down the difference between capitalist, socialist, communist?

• 1:10Tom Bilyeu?

  There are more systems than just capitalism, socialism, communism. But given that these are the three that we see most frequently, let's talk about them. So capitalism is meant to be a free market system in which capital goes to the places where people are going to get the biggest return on their capital. The workers and you've got the capitalists. And the capitalists say, I'm going to build this factory, not because I make money today, but because over time I think I'm going to make money. And so as you aggregate capital, you then deploy that into assets that you think will make a return. That asset could be a business, it could be a factory, it could be a stock, it could be a bond, it could be a treasury, like all of the things, whatever you think is going to return that principal plus plus interest back to you. Socialism is where you confiscate the means of production.

• 1:55Tom Bilyeu?

  And you say, okay, the state now owns all of the means of production. And we're going to give as many things away as we can for free to make sure that people have the distributed profits of the economic engine.

• 2:10Tom Bilyeu?

  Instead of going to capitalists who are using intelligence, market signals, hard work, discipline in order to figure out where to put their capital. And they sometimes win, they sometimes lose. And they take a disproportionate amount of the rewards. We're gonna spread that out across everybody. The vast majority of people will just never own assets. And so that's why we're in the situation that we're in right now in real life in America. 10% of people and 93% of all assets. So that's the wealth inequality that people are talking about. But like the sort of vague nebulous capitalists are evil. Socialists are good people. Leave the socialists and communists alone and everything is going to be fine. Money has physics.

• 2:53Tom Bilyeu?

  And the best explanation of capitalism is capitalism is a terrible system, but it's the best of the terrible systems. So what I hope I can get people to take away from this video, or even most of the economic content that I do is things feel broken now because they are. They're broken because of inflation. Inflation is a product of modern monetary theory. But modern monetary theory is a trade off. If you re harden the money, base it on gold or whatever, that has its own trade offs that are going to create problems. And so we just have to be honest about what happens when you print money. So hopefully we can interrupt it and focus on like if we were just going to focus people on

• 3:38Tom Bilyeu?

  one metric, it would be debt to GDP ratio. And so if you can start driving that we're now at 122%, 130 is a historical red line over which only bad things happen. And then if we can start pushing that in the right way by being more fiscally responsible, then we can make things better. But when we have this sort of vacuous argument, it's we're just going to death loop. So welcome to part one, where we are and what Argentina tells us about our own future. In the early 1900s, Argentina was attracting more immigrants than America. People were literally choosing Buenos Aires over New York City for opportunity. Today, more than half of Argentina's children live below the poverty line.

• 4:20Tom Bilyeu?

  Does a country that once lured dreamers away from the land of opportunity end up with over 50% of its kids growing up waiting in breadlines? That's where socialists like Mamdani come in. Let me walk you through the tragedy step by step. Debt and money printing cause countries to weaken their own economy, leaving them vulnerable to crisis. And when that crisis hits, the country tears itself apart from within. The Soviet Union, Cuba, Venezuela, Rwanda, Bosnia and Herzegovina, just to name a recent few, all fell apart due to economic reasons. But instead, what we read about in history is the violent clash between the two sides. There is just so much hatred in a country. By the time they fall, history often misses that the hatred was born out of the economy.

• 5:03Tom Bilyeu?

  The economy is the thing to watch. By the time polarization is set in, the system is already in big trouble. Here's how it plays out. The cause and effect that leads to the battle between capitalism and socialism. The overaccumulation of debt causes inequality. People think it's billionaires hoarding money. But that's not how the economy actually works. Billionaires are the result of three factors: debt, money printing, and owning assets. Roughly 70% of all millionaires and billionaires in America are self-made. But in a world where people, companies, and countries take on too much debt, the government eventually has to print money to cover the inevitable shortfall.

• 5:44Tom Bilyeu?

  And when they do, asset prices go up and the dollar goes down. So asset holders, AKA the people that build successful companies and the people that own equity in a successful company, get richer and the people who don't own assets get poorer. It's that simple. And this happens in runaway fashion, pushing ordinary middle-class people either up into being wealthy if they own assets or down into being poor if they don't. That is how inequality sets in. But what happens next is the real kicker. Inequality leads to populism. And populism, which is just a fancy way of saying inequality, makes people really mad. It leads to people voting emotionally instead of rationally. And once people start voting emotionally, things spiral.

• 6:30Tom Bilyeu?

  Fast debt goes up because politicians get elected by promising free stuff. And sadly, there is no such thing as free stuff. Government deficits come out of your pocket via inflation. I know if you don't know how this all works, that sounds crazy, but it is actually true. Populist politicians also promise to punch the enemy right in the kisser. And the enemy is always the other guy. So the left promises to punch the right and the right promises to punch the left. This drives everyone into tribes because you need a team to protect you when it's all going down. If you're in the middle, you're going to get clobbered from both sides. So very few people stay in the middle. And when they do, they are the first killed in the revolution. And I don't mean that figuratively. That is a true story.

• 7:15Tom Bilyeu?

  So people pick teams and they fight. Ethics go out the window because everyone believes in a populist moment that they are fighting for survival. And the political candidates that get elected in a populist moment are the strong men who don't mind fighting. That's because everyone wants to elect a tough guy who will fight for them and get them a bigger piece of the money printing pie. So money printer go burr and rage skyrockets. So what does this have to do with Mumdani? I'm glad you asked. The right already has a tough guy, Trump. But the left is still trying to find their new identity post the 2024 defeat. The question everyone has been asking is, will the left go towards the middle or towards the extreme?

• 7:54Tom Bilyeu?

  Mumdani's rapid rise to popularity indicates we're going to be following in history's footsteps here and choose the extremes. With that thought bubble hovering over my head, enter Zoran Mumdani, the self proclaimed socialist who wants to make New York City more affordable. He was just elected as the Democratic mayoral candidate for the Global Financial Center, New York City. The problem is, like Argentina before him, he has not learned the lessons that even the Chinese Communist Party has learned. Namely, that if you want to pull people out of poverty and make things affordable, the only proven tool is capitalism. You have to orient towards private citizens getting rich off their innovations. Remember, the problem is debt, not capitalism. More on that coming up.

• 8:40Tom Bilyeu?

  For now, I'll just say this: Mumdani and reality agree on one thing. The inequality in America has become intolerable. And if it is not addressed, America will tear itself apart. Where Mumdani and reality diverge, however, is on the causes of the intolerable inequality: the danger of short-term, top-down solutions. In 1989, when the Berlin Wall came down, the world got to witness a shocking natural experiment. What happens when you divide one of the world's most productive cities and run one side with a top-down command economy and the other side with a bottom-up capitalist economy? The answer: the economies were starkly different across multiple dimensions. Remember, this is a city divided in half.

• 9:25Tom Bilyeu?

  In East Germany, the communist side, GDP per capita was only about 30% of West Germany's. Not 30% lower, 30% of the total. The capitalist West Germans produced roughly three times more economic output per person than their East German neighbors. Average wages in East Germany were approximately 1/3 of what workers earned in West Germany. This means that for the same work, East Germans only earned 30% of what the capitalists across the street literally earned, equating to significantly lower standard of living. East Germans had a life expectancy approximately 2 to 3 years shorter than their West German counterparts. Communism literally shortened their lives. West Berliners enjoyed modern infrastructure,

• 10:10Tom Bilyeu?

  reliable public transportation, and high-quality housing. In contrast, East Berlin struggled with outdated infrastructure, crumbling buildings, and chronic housing shortages. Over 25% of buildings in East Germany were considered severely deteriorated by the late 1980s. East Germany filed fewer than 1,000 patents annually, compared to over 70,000 patents per year filed by West Germany. The difference in innovation was staggering, nearly 70 times more innovation in the capitalist side of the city. Remember, these are people that are sharing streets. In East Germany, basic consumer goods typically cost a far greater share of workers' monthly salary. Than in West Germany. For example, a colored TV might cost roughly five times an average East German's

• 10:55Tom Bilyeu?

  monthly salary compared to less than one month's salary in West Germany. Plus, everyday things like cars were extreme luxuries in East Germany. East Germans had to wait an average of 12 to 15 years to get even a small car. Same city, same culture, same language, same genetics. In many cases, we're talking about families that were divided. We're hitting pause for a moment, but there's plenty more ahead, so don't go anywhere. There's a reason Quince sells cashmere for $60, and it isn't the cashmere. It's real 100% Mongolian cashmere. It's the same stuff luxury labels charge a fortune for. Quince just works directly with ethical factories and cuts out the middleman.

• 11:39Tom Bilyeu?

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• 12:24Tom Bilyeu?

  UK, too. And when Quince asks where you heard about them, let them know it was Impact Theory. It's the best way to support the show. Let's talk about something that genuinely keeps me awake at night. My team at Impact Theory gets hit with phishing scams from bad actors pretending to be me all the time. And they keep getting more sophisticated attacks with details specific enough to look legit. AI has made a lot of things possible, including scams like this. But AI still needs raw material. It gets it from data brokers who sell your name, address, phone number, to anyone willing to pay. Incogni goes after that supply. They handle removal requests across 420-plus harmful broker sites,

• 13:07Tom Bilyeu?

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• 13:49Tom Bilyeu?

  Thanks for staying tuned. Now, let's get back to it. Half on one side, half on the other. And despite all of that similarity, just by changing the economic setup from top-down to capitalism, radically different economics and lifestyle outcomes were achieved. When inequality spikes, it is understandable why people start asking things like, "Should billionaires exist?" But top-down economic control doesn't just fail to rectify it and deliver prosperity, it systematically destroys the economy. And even more importantly, it doesn't just destroy the economy, it destroys innovation and the human spirit itself. People living in the East didn't just lack money, they lacked optimism, hope, and confidence in their future.

• 14:33Tom Bilyeu?

  And that's not peculiar to the East German variety of top-down control. That's the nature of top-down control itself. And yet today, when faced with extreme wealth inequality, they still gravitate towards trying to fix the problems of runaway wealth inequality by going after the symptom, in this case billionaires, rather than the actual cause: ever-escalating debt and money printing. It's understandable to pursue dramatic change when social mobility is declining, and debt and insanely high prices make the American dream effectively impossible. But the fundamental problem is that top-down populist solutions might feel good in the short term. Because they punish the wealthy, but they make our problems worse, not better.

• 15:14Tom Bilyeu?

  Economies, like ecosystems, are complex, adaptive systems that respond to incentives. When you disincentivize innovation by confiscating the rewards of your most successful citizens, economic growth slows, wages go down, prices go up on a purchasing power basis, innovation declines, and everyone suffers. Redistribution, forced wealth seizure, and aggressive top-down control might temporarily reduce symptoms, but the core economic and cultural illness remains untouched, and all you have effectively done is equalize everyone at zero. Given the importance of a thriving middle class, if taxing billionaires out of existence worked, I'd be all for it. But historically, we've seen this scenario play out again and again.

• 15:56Tom Bilyeu?

  When governments attempt aggressive top-down interventions like the Soviet Union, North Korea, or East Germany, economic prosperity disappears, replaced by widespread poverty, cultural stagnation, and a pervasive sense of hopelessness. And the Nordic countries, Denmark, Finland, Iceland, Norway, and Sweden, which are often praised for their social democracies, have their own set of trade-offs. They trade low-income disparity for high taxes, lower GDP, curtailed growth, and extensive welfare systems that create immigration problems. In 2023, US GDP per capita was $81,000, significantly higher than Denmark, Sweden, and Finland. Only Norway beat the US, and that's because of massive oil reserves, not because their economic policy delivers strong growth.

• 16:39Tom Bilyeu?

  Further, Sweden's GDP per capita growth slowed noticeably post-1970, when they implemented high-tax policies unlike the US, which has lower taxes and has consistently outperformed them. In 2024, the US alone accounted for 49% of all global venture capital funding, while the entire EU, including the Nordic countries, only accounted for 13%. The scope and scale of America's innovation dwarfs the entire world, and the Nordic countries in isolation are a rounding error. Their markets are small, and their high-tax environments deter the kind of risk-taking needed to compete on the world stage, especially when you're Competition is China.

• 17:21Tom Bilyeu?

  Oil and gas make up a full 20% of Norway's GDP. Without oil, Norway's GDP per capita drops below the US. Additionally, the Nordic model's high taxes and generous welfare only work in homogeneous small populations with high trust and face massive challenges when scaling to a large diverse country like the US. In 2023, Nordic countries had among the highest tax-to-GDP ratios: Denmark at 46.7%, Sweden at 42.6%, Finland at 41.9% versus the US at 27.7%. Also in the Nordic countries, aging populations are also beginning to strain the welfare systems.

• 18:02Tom Bilyeu?

  Finland's pension costs have risen at an exponential 3.2% annual compounding growth for nearly a decade. To get specific about immigration, Sweden's immigrant unemployment rate is 15.4% versus just 3.6% for natives. Tensions are mounting. Like everything, it's a trade-off. If you don't regulate capitalism at all, you get the madness of the Gilded Age in America. If you regulate it too much, you get socialism. If you aim for the middle, you stagnate. So how do you do this well? Welcome to part five, "The Real Solution." If you want to delete billionaires, you've got to focus on the structural problems that give rise to them in the first place.

• 18:44Tom Bilyeu?

  Just as you don't cure brain cancer by taking Advil, you don't cure inequality by taxing billionaires back to millionaire status. Advil just masks the root cause of the headache, and taxing just stagnates our economy. Said another way, focusing on billionaires is like blaming a fever instead of the infection causing it. And the infection we face right now goes to the very heart of America's monetary structure, economic incentives, and cultural values. Billionaires emerge naturally, inevitably, from a system that rewards debt-driven speculation, asset-price inflation, and entitlement instead of real productivity, genuine innovation, and disciplined ambition. Debt and money printing. Debt and money printing. That should be the area of focus.

• 19:30Tom Bilyeu?

  inequality that makes people so angry arises out of debt and money printing. And the gimmies that angry people vote for only makes things worse. And so we begin to spiral. The more we deficit spend, the more inequality there is. The more inequality there is, the more we vote for a bigger piece of the pie. And the more we do that, the more we hollow out the middle class and create the phenomenon of the rich getting richer and the poor getting poor. It is mechanistic. To pull out of this nosedive, we've got to get out from under the thirty six trillion dollars in government debt that is costing us a fortune in interest payments alone. And to do that, we have to execute on what Ray Dalio calls a beautiful deleveraging.

• 20:13Tom Bilyeu?

  If you want to learn all about that, just watch this video right here. We've also got to get rid of the Fed and we've got to hold politicians accountable to a balanced budget. And perhaps most importantly, we need to reclaim the top spot globally for social mobility. We've got to get housing prices down. We've got to stop handing out absurd government-backed loans for college that can't be discharged in bankruptcy court. And we've got to get back to the promise on the Statue of Liberty. We have to allow people to breathe free in a well-regulated democracy built on capitalism. The dark reality of rent control. In New York City, sixty percent of rent-controlled apartments are in buildings over seventy-five years old.

• 20:56Tom Bilyeu?

  Many of them are falling apart because rent controls make it impossible for landlords to maintain the building. At the peak of New York City's rent control crisis in the nineteen seventies, the South Bronx was losing nearly thirty thousand housing units per year to abandonment and arson. That's equal to losing an entire apartment building every single day. And politicians are once again running on platforms of rent control. History really does repeat. The South Bronx and part of Harlem have already experienced severe disinvestment and abandonment due to rent controls. In the seventies and eighties, rent controls and related regulations made property maintenance financially impossible for landlords. And as a result, entire

• 21:40Tom Bilyeu?

  Near neighborhoods were left desolate and crime-ridden. By 1980, the Bronx had lost over 300,000 residents, leaving behind empty buildings, burned-out properties, and economic stagnation. 300,000 people left. The story is both insane and highly instructive in terms of how to deal with the current economic and populist crisis. Starting in 1943, New York City had implemented emergency rent controls. This is during World War II and was intended to be a temporary measure to prevent wartime profiteering. The regulations capped rents at artificially low levels, significantly below market value. And this absolutely battered the financial viability of owning and maintaining a building.

• 22:23Tom Bilyeu?

  Now, maybe it wouldn't have been a big deal had the regulations been dropped, but there's nothing quite as permanent as a temporary measure. And so, despite the post-war economic boom of the 50s and 60s creating a massive increase in demand for housing, the regulations held. With rents artificially capped, landlords had little to no financial incentive to invest in building new rental housing, so they didn't. And consequently, supply remained stagnant despite massively rising demand. Now, even if you grant that the politicians had good intentions, which may not be wise, but even if you do, these controls didn't keep rents low. Instead, they created a housing shortage and a dual housing market. It went something like this. Pre-war, rent-controlled units became increasingly rare

• 23:08Tom Bilyeu?

  and severely underpriced relative to market conditions. So, a parallel housing market emerged. Since the small number of new units that actually managed to get built and enter the market weren't subject to the rent control regulations, they reflected the actual free market value and commanded extremely high rents. Government interventions were artificially keeping supply low, creating a massive imbalance in supply and demand. The severe supply shortage caused rents to skyrocket in these new units. Did people realize at this point what was going on? Namely, that housing was so limited and under-maintained due to rent control that people were willing to pay an ever-increasing fortune? For a well-maintained building? Nope.

• 23:52Tom Bilyeu?

  The skyrocketing prices just made the public even more angry. And once again, not recognizing the actual cause of the price increases, people voted for more governmental intervention, the very thing that was causing the problem. And thus, it made the problem even worse. And so, the spiral continued. And under massive public pressure, in 1969, the city introduced the rent stabilization law. This policy sought to also control the newer apartments that were previously avoiding the rent limitations. It was designed to be a separate, less severe form of rent control known as rent stabilization. It allowed for minor increases, but still held rents well below market rates,

• 24:34Tom Bilyeu?

  and forced landlords to seek approval for any major rent increases, which once again stifled the income streams that are necessary for property maintenance and upgrades. And, is so often the case with emotionally-driven government intervention, the new rent stabilization law failed to actually address the root cause. Namely, the lack of financial incentive needed to propel investors to take a risk on building new housing and/or invest in maintenance. The additional layer of complexity brought on by two types now of rent control also served to confuse the market even further, discouraging new development and perpetuating the chronic housing shortages and deterioration. So, say it with me now. The debt spiral continued at an accelerating pace.

• 25:18Tom Bilyeu?

  In 1971, under Mayor John Lindsay's administration, New York City extended stringent rent control rules, significantly limiting landlords' ability to increase rents even when properties required major repairs or capital investments. And guess what happens when you do that? Landlords, who found their maintenance costs regularly exceeding the allowable rent income, decided not to make even basic repairs. Because if they did, they were going to go bankrupt. This only worsened the housing crisis. In response, in 1974, New York established the Division of Housing and Community Renewal, introducing even tougher enforcement mechanisms for regulated rents. Because, well, the beatings will continue until morale improves.

• 26:00Tom Bilyeu?

  Unfortunately, that kind of strict enforcement and those penalties only further discouraged landlords from investing in regulated properties as profitability was now extremely limited. This caused property values to decline yet again, and the abandonment rate on buildings began to rise even faster. So by the mid 1970s, despite capped rents, property taxes and utility costs soared. This placed enormous additional financial pressure on the landlords, who were already in dire straits. And to make this situation even more impossible, high taxation rates were combined with high inflation at the time, dramatically increasing maintenance and operating costs, driving even more landlords to abandon their buildings.

• 26:45Tom Bilyeu?

  That's the unfortunate cause and effect of policies like rent control. When landlords become unable to cover the escalating cost of their buildings due to frozen or minimally increasable rents, more and more of them will be forced to abandon their properties or reduce maintenance significantly until everyone is living in slumlike conditions. By the late 70s, many landlords, faced with ridiculous regulations and financial hardship, resorted to not just intentionally neglecting the properties or outright abandoning them. In some cases, properties were deliberately burned for insurance compensation, since insurance payouts became more financially viable than trying to work with regulated rental income. Arson rates surged dramatically, with up to 40% of the fires in the Bronx being attributed to arson. Forty percent!

• 27:30Tom Bilyeu?

  Entire neighborhoods became characterized by burned-out buildings, abandonment, and severe urban decay. But if you've been iced out of the housing market and can tell the game is rigged against you, you're understandably going to sour on capitalism. Because people don't map the physics of money, the nature of supply and demand, and the complexity of the economy at large, they are inevitably going to fall back on what they do understand: politicians. So in 1977, yet another attempt at federal intervention was made, called the Community Reinvestment Act. This is getting crazy. The CRA was designed to encourage banks to provide loans to maintain properties despite the rent controls. Unfortunately... Due to local regulatory hurdles, limited market incentives,

• 28:13Tom Bilyeu?

  and financial constraints that come with rent stabilization, the CRA's impact was initially limited, and of course, failed to reverse the decay. With decades of failed interventionist policies, New York fell into a financial crisis, and the city was forced to make substantial cuts in municipal services like the fire department, the police department, and sanitation. The South Bronx and Harlem were particularly hard-hit, with a massive acceleration of property abandonment. The effects of these policies were devastating. Neighborhoods were left economically desolate and crime-ridden, creating conditions often described as economic ghost towns. By 1980, nearly half of the housing units in the South Bronx had been abandoned or destroyed,

• 28:57Tom Bilyeu?

  largely as a direct consequence of regulatory decisions. Economic stagnation became entrenched, with unemployment in the Bronx exceeding 25%. And this kind of self-inflicted wound isn't unique to New York. It's seen all over the world. Stockholm had a housing crisis. Their rent control policies created an 11-year waiting list for a basic apartment by 2022. Severe shortages led many young people and families to live in overcrowded housing or remain with parents into their late 20s and 30s. Additionally, property owners stopped investing in the housing stock, leading to visible deterioration. San Francisco also had their own major problems. Their long-term rent control policies

• 29:40Tom Bilyeu?

  led directly to a 15% spike in housing shortages between 2015 and 2023, dramatically reducing availability and driving up market rents for newer tenants. Stanford researchers found that San Francisco's rent control caused landlords to withdraw from the market or convert units into condos or short-term rentals. In 2020, Berlin ran into similar problems when they imposed stringent rent controls, freezing rents at June 2019 levels, and within a year, new rental housing permits declined by nearly 40%, exacerbating shortages and making housing even less accessible for new renters. The exact opposite. of the desired outcome. Santa Monica also implemented strict rent controls in the late 1970s.

• 30:25Tom Bilyeu?

  And guess what? By the early 90s, research showed that these controls significantly reduced the housing supply and increased rental costs for non-controlled units, pricing out young professionals, and contributing to the economic stagnation in the area. Post-World War II rent control policies also battered the UK, resulting in severe underinvestment in housing maintenance. By the late 1970s, significant portions of the UK's rental stock were classified as unfit for human habitation. If this pattern of governmental intervention, creating the very problem it's trying to solve, is happening all over the world, what is going on? That which is predictable should be avoidable. We are living in arguably the most transformational time in human history.

• 31:10Tom Bilyeu?

  We're nuclear-armed, politically divided, able to bring entire species back from the dead, and AI is racing towards becoming a god. Things are changing so fast, it's dizzying. And whether we're talking about politics, economics, global conflict, or artificial intelligence, we are constantly being spun, lied to, and manipulated. And if you don't have a model for truth-seeking and error-correction, you will get wrecked. Most of the time, you won't even realize it's happening. So I began to evolve my thinking and my channel along with me, using a simple algorithm for approaching the complexities of life at this moment. The algorithm has five parts. One, recognize you're trapped in a distorted frame of reference, and the only way out

• 31:54Tom Bilyeu?

  is to run experiments and think from first principles. Two, map out cause and effect. Three, seek disconfirming evidence and take in information from a wide variety of sources. Four, judge the correctness of something by the results it delivers. Five, remember you're having a biological experience. We all might be divine creatures, but we are still an easy-to-manipulate chemical-processing plant. We're hitting pause for a moment, but there's plenty more ahead, so don't go anywhere.

• 32:28Tom Bilyeu?

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• 33:11Tom Bilyeu?

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• 33:36Tom Bilyeu?

  Thanks for staying tuned. Now let's get back to it. Once you accept that biology shapes how we think, you start to see the world differently. You stop asking, "Why is that person doing something so stupid?" And you start asking, "What incentives are driving that behavior?" One of the most important things I've ever learned is this. People don't do what's right. Not even what they think is right. They do what they're incentivized to do. That includes you, it certainly includes me. You want to understand business? Follow the incentives. You want to understand politics? Follow the incentives. You want to understand yourself? Of each thing you do, ask a simple question. "What am I really trying to get from this?" Let's zoom out for a second. Why is inflation my obsession? And why is it so hard to solve? It's an incentive problem.

• 34:21Tom Bilyeu?

  People want things for free, but until humans will work for free, nothing, nothing will come for free. Inflation, AKA the act of the government printing money out of thin air, creates the illusion of getting something for free. Inflation allows the voter to Demand the government to give them things for free like healthcare and for the government to reach into your wallet and take money out without you noticing. If you don't believe me, watch my video on money printing and inflation, or if you really want to go deep, read The Creature from Jekyll Island. It is about the creation of the Federal Reserve Bank and it will melt your entire brain. Humans want today to be easy, even if it makes tomorrow hard.

• 35:00Tom Bilyeu?

  Homer Simpson has a great line as he's being berated about how he's going to regret his bad choices and he says,

• 35:07Speaker 02

  That's a problem for future Homer. Man, I don't envy that guy.

• 35:12Tom Bilyeu?

  And that is the architecture of the human mind. We will gladly pay Tuesday for a burger today. Sorry, it's Popeye reference. I couldn't help it, but hopefully you guys get the point. Humans respond to incentives and if we're not aware of how we're motivated, we are very easy to lead around by the nose. This is why we have three branches of government. They are meant to be in healthy tension, protecting us from the worst of our impulses. Tyranny arises specifically when one person is able to do whatever they think is best. The human mind is so intrinsically flawed that we need corrective mechanisms baked in to the very structure of our thinking. Don't get me wrong, the human mind is an absolute marvel, but we are best understood as emotional creatures.

• 35:57Tom Bilyeu?

  And rarely does what feels good end up being the most effective path to fulfillment or even accuracy. Hence, the need for religion, bibles, self-help books, technology, a government, and even AI itself. In 2018 and 2019, two Boeing MAX 737 MAX airplanes crashed, killing 346 people. Why? Because of a faulty flight control system. But here's the deeper truth. The system was faulty because of faulty incentives. Boeing had a North Star, beat Airbus to market. That single incentive created a cascade of shortcuts, secrecy, and failure. Nobody wanted to build a plane that crashed, but the incentive structure made it almost inevitable. And that's what happens when people optimize for the wrong thing and call it strategy.

• 36:42Tom Bilyeu?

  You have to judge a tree by the fruit that it bears and iterate quickly when things are going wrong. It is the Only way to find out if you're thinking in an effective way. I don't know that we can save everyone, but I know we can save each other. Focus on yourself, your friends, your family. Let change ripple out from there. Tell them, 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. When your routine breaks, everything tends to break. And that inconsistency compounds against you every single day. AG1 is designed to solve the execution problem.

• 37:27Tom Bilyeu?

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