A Retired Investment Banker on Why Warren Buffett Is Wrong About Bitcoin and Cities Going Broke

Vance Crowe [00:00:00] This is The Vance Crowe Podcast. Welcome to the channel. This first interview that you're about to watch is with a man named Tim Hosler. Tim is one of those people that as soon as you meet him, he can't hide his intellect. He's a very smart guy, and the words he chooses and the way that he listens to you, you're immediately drawn into just how quick you know that he is. But he's got this lighthearted personality that he's always looking for the quick joke, or to be able to kind of smile and talk out of the side of his mouth, as he says, some clever quip. I met Tim because I'd written an article and published it in the local paper, and as soon as he saw it, he wrote me and asked if I would meet him for coffee because he thought I was an interesting character that had just moved to town. Anytime you meet somebody like that, you know that they've got something they're curious or they've, they've gotten interest in things that you can learn from. So I sat down with Tim and we immediately became friends, and shortly after we became friends, I started hearing some of the hijinks and things that he had done in his younger days when he first started being out in the financial world. And you'll hear in this interview some of the things that he did and how I ended up using them to my own benefit. This is a fun interview. I hope you enjoy it. And as always, if you have any comments or ways that I can get better, please leave the comments below and, and definitely leave a like, or sub and click that subscribe button so we can keep having these conversations.

Vance Crowe [00:01:31] If I, if every gonna say that there was one person that my wife was always a little bit suspicious of as I walked out the door once a month, you know, when we get together for coffee, I think the number one person that she was a little bit like, I'm not so sure if that's a great idea or not, would actually be you, Tim Hosler,

Tim Hosler [00:01:51] Who's that?

Vance Crowe [00:01:52] Because I think it was maybe the second or third time we ever met, I came back and was like, Annie, I've got an idea. And two days later I was in the national news having written about how Warren Buffett was wrong about Bitcoin and it radically changed my world. And probably the most fundamental change that happened was that her family now thought that she was married to a crazy person, radical person,

Tim Hosler [00:02:20] Radical and anarchist.

Vance Crowe [00:02:22] So that is, that's you. That is probably the best introduction I could give of you is that you were the guy that makes my wife a little nervous. And I was wondering maybe if we could start off by telling your Warren Buffett story and what story you told me that got me to come back and try something a little different.

Tim Hosler [00:02:41] Yeah, no, I'm happy to. I had some experience with Warren Buffett back earlier in my career when I worked for a broker dealer. And one of the responsibilities I had was to help to create products that would be appealing to our customers. And so we were at the time working with a lot of unit investment trusts, which is like a mutual fund, except it's not married managed, sorry. It's just a basket of securities you buy and hold. And the basket of securities I suggested that we buy was one share of Berkshire Hathaway's, which at the time was, you know, $17,000 a share, one share of Gillette, one share of Shearson Lehman, you know, just everything that Warren Buffett owned and everybody knew he owned. But when you gathered one share of each of those, the trust was 97 or 98% Berkshire Hathaway's. But because it was a unit investment trust, you could actually buy just $5,000 worth. Well, $5,000 worth of Berkshire Hathaway's was just not something that anybody could buy because one share of it traded for $17,000. So we were trying to democratize investing in Berkshire Hathaway, and it was spectacularly successful. The, the, the marketplace really accepted this idea and we sold, you know, hundreds of millions of dollars of, of that security and then sort of faced the wrath of Warren Buffett.

Tim Hosler [00:04:22] He did not like what we had done. You know, one of his theories, and it is a true theory, is that you, you can have more success as an investor if you limit transactions costs. And one of his principle criticisms of Wall Street is that transactions costs play a big part in the acquisition of a securities portfolio. So he's always sort of felt like Wall Street made too much money, and, and so he's has this high stock price because when you invest in a hundred shares of Berkshire Hathaway's at the time, you know, you're putting away $170,000 and it's costing you the same is that if you bought a hundred shares of a stock that was substantially lower in price, so you were able to pay a lot less to put a lot more money to work. Of course, the problem is our clients who don't have millions and millions of dollars as a rule, couldn't put money to work at Berkshire Hathaway's. So he was upset that we had done that. And, and his annual report that year, he spent a page railing against the, you know, the villains on Wall Street. And, you know, it hurt my feelings because I, I thought I was doing good, right? I, you know, getting people an opportunity to invest in Berkshire Hathaway's, I thought was a noble thing. And frankly, the market thought so too because we were so successful.

Tim Hosler [00:05:57] The next thing that happened is that Warren Buffett said, I'll get even with you nasty guys on Wall Street, and he created B shares. So now if you wanna buy a a b share of Berkshire Hathaway, that's only, I, I don't even know today, 13, $1,700 a share, something like that. So it's still very difficult for a person with an average size portfolio that seeks diversification to buy a hundred shares of Berkshire Hathaway's and buying fractional shares. You know, nobody likes to see 18 shares in their portfolio. Frankly, it doesn't matter, but people just don't like that. So anyway, he, he ruined our opportunity to, you know, do that again and make even more money, but I felt like I had an impact because he ended up creating the B shares. He by himself democratized investment in Berkshire Hathaways and gave an awful lot more people the opportunity to benefit from his investing wisdom and guidance. And so anyway, I I,

Vance Crowe [00:07:02] Well, that, that, so for me, hearing that story for the first time, I remember we had talked about, you know, you had essentially said to me, Warren Buffett is very, very smart, but he's not a God and he is really a marketing genius, and so he is going to go out and explain to the world how the economy works in a way that maybe slanted a little bit more towards his perspective. And, you know, that was actually the first time I'd ever encountered that idea before.

Tim Hosler [00:07:31] Yeah, he, it's interesting, you know, he's, he's very much opposed to pipelines to move fuel, but he loves tank cars, moving fuel. He just happens to own a tank car manufacturing company and one of the nation's largest railroads. So I, I don't think that he has no bias. I think that generally he is an, an honorable man with tremendous integrity. But it is interesting that, you know, even, you know, the Oracle of Omaha has an opportunity to take advantage of his place and position and the way people have honored, you know, the work that he's done. I think I told you in that same conversation that it, it's interesting to me that at the turn of the 20th century, it was really all about generating tremendous wealth. It didn't matter whose back you climbed over, or, you know, whether people exploded in the DuPont era or, you know, Rockefeller and Carnegie. They, they were interested in making wealth. It's the, it's the next, a hundred years later that people interested in making wealth, but also being liked, you know, and being admired. So it, it's, I just think it's strange that we've, you know, people still have sort of the same animal ambitions and instincts, except now they've got public relations firms to help them.

Vance Crowe [00:09:02] And you really think that's different. You think, you think human nature has changed, or you think that

Tim Hosler [00:09:07] I think that it, it's, we're better able now with media and, and certainly with the advent of the internet, we're better, better able to shame people into doing, you know, good things. So Warren Buffett still wants to get as rich as anybody and maybe richer than anybody, but at the same time, he wants to be liked and respected. And that was, that's a change from I think the Vanderbilts and the people who, you know, just had such extraordinary wealth and frankly paid no taxes, you know, at all. So, you know, the, the Warren Buffett, I'm not taxed enough scenario, always kind of rubbed me the wrong way because Warren Buffett structures his entire investment approach around minimizing taxes, and it, it, he, he intentionally avoids taxable income so that he doesn't have to pay taxes. And then he turns around and says, oh, my tax rate's lower than my secretary. Well, okay, you know, that's because of the way you do things. He could absolutely pay himself a $25 million salary to work for Berkshire Hathaway, and then he would pay, you know, the highest tax rate there is.

Vance Crowe [00:10:24] Well, so this is, so this is what I, I was listening to these ideas and I come home and I decide, you know, I'm looking up Warren Buffett, and it happened that at the same time that I was just beginning to really understand Bitcoin and cryptographic currency, that he came out and said, Bitcoin is a mirage and Reddit, and you, and I may disagree on this, but Reddit is now all a flutter. And the people on the Bitcoin sub Reddit are saying like, oh, isn't this terrible? You know? And, and so I just popped in there and wrote a single comment like, you know, he, he has a perspective and he's playing into a, a very good marketing role of what he's doing here.

Tim Hosler [00:11:05] Right?

Vance Crowe [00:11:06] Don't worry about it, it doesn't really matter. Well, within 10 minutes, a reporter that had been from CNBC who had been scouring all of the Reddit ouch. Said, would you be interested in writing an article? And I was like, here's my Tim Hosler moment, all right? And so I did. So that, that's then that shot me off into the world. And that article has followed me around and popped up in the weirdest of places. I, one time was actually interviewing for a job, and they red flagged my application because they said the hr,

Tim Hosler [00:11:38] He's a radical, said

Vance Crowe [00:11:39] He's a radical and, you know, he's probably dealing drugs or something, or, or in the mob if he's into Bitcoin. So,

Tim Hosler [00:11:46] Well, I'm sorry that I might have poisoned you against Warren Buffett. I, I, I, I hesitate to suggest that he might've been right about Bitcoin. I think it might've been a little bit of a mirage, but you know, obviously we're only hours into a lifetime of, of cryptocurrency. So I, I think the jury's still out on what ultimately will happen. You, you mentioned your wife. It's so funny because I've gone back home and said to my wife, I met this really great young man, Vance Crowe. It's so much fun talking to him. And I realize now why it's so much fun talking to you. You just give me a topic and I pull my soapbox out and I stand on it and I lecture for 45 minutes and then we empty our coffees and we go. So I enjoy the opportunity to talk to you as well. So,

Vance Crowe [00:12:36] You know, it's an interesting thing how we met. And actually I think that one of the things that you did actually has been another thing that changed me is do you remember how we met? I do.

Tim Hosler [00:12:46] I I was very impressed with an article you wrote about St. Louis and your views on St. Louis sort of moving here. I think your wife was relocated here and, and you wrote an article that really struck me about how St. Louis is different than what you would expect and and you really enjoyed it here. And so I reached out to you and said, man, I loved reading your article. Can I buy you a cup of coffee? And that's my memory of how we

Vance Crowe [00:13:14] Got connected. Yeah. And I had spent a year, I had, I had moved here, I had been working at the World Bank. My wife had been working at an aerospace engineering firm and decided she wanted to become a physical therapist. So we moved here and I said, I'm just gonna start a business. And I really had no idea what that meant.

Tim Hosler [00:13:29] Appreciate your courage

Vance Crowe [00:13:30] And I think naivety is all what that was. And, and I didn't know anyone here. I'm not a single person. So I had spent a year meeting somebody, having coffee with them and then having them introduce me to other people. And it was, it was a fantastic way to be introduced to the city. Sure. But there is some level of asking other people for coffee that's tiring. And I wrote that article and from like the Heavens came this email just from this random person.

Tim Hosler [00:13:57] Well, again, the pen is mightier than the sword. I, I wish I had your, I don't know what it is, courage initiative, something to actually take some of these ideas and write them down and shove them out there and see what happens. I I talk about them a lot with my wife and my family and my brothers, but I've never really captured any of my thoughts.

Vance Crowe [00:14:19] I mean, I think a lot of it's hilarious because if anybody, if you ever had to listen to me for the next 45 minutes after we get done with a conversation, it would be like you being incredibly frustrated that the game of telephone clearly didn't work. No, I don 'cause I'll be like, but the idea was really well thought out when Tim is describing it. So you are retired now,

Tim Hosler [00:14:38] Semi-retired. I'm still consulting. I'm a fractional CFO, which I really enjoy for startups. I really like the energy around emerging companies and developing activities. So I spend about half my week doing that.

Vance Crowe [00:14:53] So we go in a bunch of different directions on that. The the funny thing I think about startups is most of the people that are investing in technology appear to be investing in what I think of as a mirage. I was just at a dinner the other night and somebody was telling me how they were running a marketing company that sold tech firms that did artificial intelligence, natural language processing, machine learning. And I said, can you tell me what the difference is between any of the three things that you said? And this guy says he's the CEO of the marketing company, right? And, and in front of his wife, I didn't mean to embarrass him, right? I was just asking a genuine question.

Tim Hosler [00:15:32] Right. No, right. And

Vance Crowe [00:15:32] He had no idea,

Tim Hosler [00:15:33] Idea, right?

Vance Crowe [00:15:34] Is the whole market this way,

Tim Hosler [00:15:37] You know, there's an awful lot of trying to position your company and areas that are particularly compelling from an investment standpoint, artificial intelligence. Boy, if you can slap that onto the description of what you're doing, that's a big deal. Machine learning, you know, so, you know, it's all about elevator pitches and having the right terms, and you're really just trying to, you know, in the 10 seconds you have, you're trying to get enough attention from somebody that they say, well, let's, let's sit down and have a conversation. But

Vance Crowe [00:16:06] If you run into one person that knows that, they'll, they'll blow you up. Are they? They're,

Tim Hosler [00:16:12] Well, it is, I would, I would advise the person you were talking to to go back and, and make sure he understands what he's telling people they do so that he can explain it. But yeah, it, it, it's just exciting. I mean, it's an exciting time right now, you know, the animal spirits are, are as high as I've ever seen. And so I I I think it's, it's fun to be involved in something like this. You know, there's all ages, a lot of diversity associated with what's going on with new business.

Vance Crowe [00:16:44] Is the startup world increasing? So I heard the other not long ago.

Tim Hosler [00:16:47] It is in St. Louis, I think.

Vance Crowe [00:16:49] Well, so is that because private equity is searching, you know, like there's money out there. They're saying, I I have so much money in the stock market, I wanna do something else. Like when you say the animal spirit is coming up, you know, you, you're not a metaphorical guy, you're a neurological guy. So why is that?

Tim Hosler [00:17:07] I, I think it has something to do with private equity, but private equity really needs an established business. Private equity isn't the way I define it. It's not investing, you know, like venture capital does. So there are all these different stages of a company lifecycle, and you know, clearly the startup is more on the emerging side, private equity's really looking for established business cash flow certainty or, or at least more certainty than a startup. And the, the, the interesting thing is, if you were to stack the ways institutions can invest like a pension fund that's trying to generate returns, you know, you've got treasury securities, you can take a big hunk of money and put it into treasury securities, and you're gonna make, you know, the near riskless rate of return, which right now is somewhere between two and three and a half, depending upon where you invest on the government curve. And then there's corporate bonds on top of that and other fixed income securities. And then you kind of move into equity. The, the larger multinational companies are gonna gonna return more than the debt securities would. At least that's over time they're expected to. 'cause you're, you're taking on more risk. And then as you get into private equity, you're taking on more risk than, than you would if you were buying a diversified portfolio of publicly traded stocks. And then venture capital is probably near the top, top of a stack.

Tim Hosler [00:18:38] So if you look at as a portfolio manager for a pension fund, you're, you're really gonna try and slice off a lot of that stack so that, you know, there's all kinds of analytics and strategies around doing this. But in general, you're, you're just trying to create a diversified portfolio of asset classes as well as investments. So venture capital's really where all the investment activity is in, in the emerging company side. At least that's my perspective. And, you know, St. Louis is doing a, a really admirable job of fueling an ecosystem for, you know, generating new business. And it's funny, you know, people think of Boston, they think of Palo Alto, maybe Austin, Texas. A lot of those activities were driven by the major universities. So you got MIT and Harvard, you got Stanford, you got te, university of Texas, you know, taking research and kind of spinning it out into business activity. Wash U is not necessarily the leader of the ecosystem development in St. Louis, even though they, they could play a, they, they do play and could play even more important role, but it, it's really developed more grassroots, which I, I think is kind of compelling. So we're a little behind some other major areas in the country, but I, I think we're accelerating pretty aggressively in terms of exciting things that are happening here.

Tim Hosler [00:20:14] Hopefully it'll draw young people and, you know, more diverse population and, you know, hopefully we'll develop the large customer, sorry, large corporate base that used to be a real part of St. Louis, you know, when I first moved here 35 years ago, there were lots of Fortune 500 companies. And now, you know, that number's really dwindled.

Vance Crowe [00:20:37] Is that just because of the consolidation in markets? There's just not that many large companies anymore?

Tim Hosler [00:20:42] I think so. Well, no, there, there are still 500 Fortune 500 companies. They, they tend to move to, you know, larger metropolitan areas where they can attract workforce and resources and support, that sort of thing. And, you know, St. Louis is a great community, a large metropolitan area, but it's not as dynamic as some of the larger metropolitan areas that, you know, that really drive, you know, student activity after college. You know, people from here wanna go to Chicago, people wanna go to Dallas, people wanna go to Atlanta. It, it's gonna take a while before people say, oh no, I, you know, my ambition is to really move to St. Louis and get involved in that ecosystem.

Vance Crowe [00:21:26] You know, one of the ecosystem, one of the interesting, so I spend huge amount of my time traveling around the country, and I get out on the coast and Boston and DC and, and all over California. And I think there's something deeply undervalued about living in the middle. And that is that on the coasts, the established way of thinking is much harder to question. Yeah.

Tim Hosler [00:21:50] And

Vance Crowe [00:21:50] I think that people have this like image that by being out on the coast, that they, you know, they, they, they have the latest ideas and the biggest and the freshest ideas. But I get there and I find like you are, I, I find many times, and I'm talking with people at the highest echelons of science and technology, they're repeating the same things. Whereas I have many, many people in St. Louis that, that having a heterodox idea does not create doesn't make you an outcast here.

Tim Hosler [00:22:19] It, it's interesting, people seem to feel very proud of the fact that they live in San Francisco or New York or Chicago, but it's not a, it's not an exclusive club. Any, anybody can move there. I, you know, so it, I guess it's just, you know, for me it's a quality of life thing. I've been to New York quite a lot in my career, and it's just a hard place to live. And I guess you prove something to yourself when you can live there in a, an apartment that's 400 square feet. And, but it, I I just, I'm not sure that the quality of life is great. Years and years ago, there was a, an employer in St. Louis Mark Twain bank, and, and they got very excited about hiring Harvard MBAs and they really wanted to put a lot of, you know, what they thought, high quality, and they probably were high quality graduates into the banking system in St. Louis into their bank. And the, the fellow who was the chairman, his name was Adam Aronson, and his whole spiel was, you know, in New York you can, you can pick amongst 10 Greek restaurants and 30 Italian restaurants and 60 Asian restaurants. And St. Louis, we got, you know, two good Asian restaurants and one good Greek restaurant. So it was all about, there's still the diversity here, there just isn't as many choices in, in and amongst the diversity. So I think that's true. I think St. Louis has an awful lot to offer. I'm, I'm excited about being here.

Tim Hosler [00:23:49] I hope my other child comes back. I have one that's already back. So

Vance Crowe [00:23:55] The, so speaking of heterodox ideas, that's kind of your stock and trade. So what would you say right now are the ideas that you've been playing with?

Tim Hosler [00:24:05] So it, it, it's interesting Vance what what I'm recognizing, and, and you know, we're, it's no secret we're in an environment in our country where there's a lot of opposite views. I I'm concerned that the parties are having too much influence on what people in the parties are able to do and say in, in an effort to develop solutions that are good for the people of the United States. So in, in my thinking, I'm, I'm all about, well, let's forget for a moment that we're a D or an R, what would work, you know, what is a solution that would actually work? And so, so I I'm particularly interested in minimum wage.

Vance Crowe [00:24:52] Oh, here we go. Okay.

Tim Hosler [00:24:53] So it, it's interesting to me because I do believe that everybody in our country should have an opportunity to earn a living wage. And, and so there's a part of me that says, yeah, yeah, it's fair. I mean, it's fair that you should have a minimum wage. And then the other part of me that studied economics and has been, you know, in a capital position for all my career, says, yeah, but you can't force that. I mean, if somebody doesn't have skills, if somebody doesn't have, you know, the reliability or, you know, whatever you're looking for in a job, if, if, if the job that you're looking to fill isn't worth X dollar, it seems odd to say to them, well, that's okay. If you wanna hire somebody, you have to hire them at that higher wage. That's just the way it's gonna be. And I think what happens is we end up going into our camps, right? So we've got one camp that says, oh, you know, you're greedy. And the other camp that says, oh, you're stupid. And ultimately, I think there is a way to make this work. And I think it's, it's a way to make it work with government playing the role that maybe government could play. And that is, I've also thought it was really odd that a, a woman with two children, and you know, her minimum wage is the same as a a 21-year-old single person. And so you've got, you know, two, two children and your, you know, a a woman trying to raise your family by herself in Chicago, and you've got a 21-year-old that lives in Des Moines.

Tim Hosler [00:26:30] Well, I don't know that the minimum wage for each of those people should be the same. I, you know, they, they have much different sorts of requirements and their circumstances are different and the cost of living's higher or lower. So I think it would be really interesting for the federal government to do, I don't know, a study or come out with some recommendations to say, here's a category of minimum wages. And, and, and so somebody who's, you know, a, a a sole provider for a a, a family of four, his minimum wage should be set here. And the the other person that's single and footloose and fancy free and young, maybe their minimum wage should be set here. And whatever skills they have, they go out and they try and find the best job they can. And the economy values those sets of skills that they have and prices them for the job that they want to do and the skills that they have. So if the sole provider family of four, the best he can do is make, you know, $13 an hour and his minimum wage set by the government is $22 an hour. He can go and petition the government through the tax system to say, I'm making 13, you say I should make 22. The federal government should provide me the difference. So the employer gets to employ somebody who's great.

Tim Hosler [00:28:02] The, the, the individual gets a job and an opportunity to improve their skills with time, obviously in learning. And the rest of us support the effort of this sole provider who's making, you know, a, a, a concerted effort to try and care for his family and improve himself. So the federal government would make up the difference between what the job pays him and what his level of minimum wage should be. What's going to happen, I believe, is that over time that person's going to improve their skills. They're gonna go to work every day, they're gonna understand, you know, what to do in order to get on a career path and develop more skills and become maybe a manager of something. And then they're gonna put themselves through their own minimum wage scale, but it's gonna take them some time to do it. They can't do it in a weekend. I mean, you know, you can't get a job and then say, okay, I have a job now I'm worth more. It, it's really more about developing skills, understanding what work and how work works and, and finding that better job. Even if you have to move. I mean, even if it's, it's a mobility thing. The, the more skills somebody develops over that period of time, the more hireable they are, the more money they're gonna make. And at some point as they move up, they're gonna move through that level of minimum wage, and all of a sudden they go from being somebody who's relying on the federal government for part of their family sustenance to somebody who's contributing to everybody else, who's still not able to, you know, meet their own minimum requirements.

Tim Hosler [00:29:47] So anyway, I, I think the, the solution is there and there's a really bright people, I happen to know a congressman that I think very highly of. He's not able to come up with solutions like this.

Vance Crowe [00:30:02] But I mean, I, so before we consider it like a foregone solution, like I can see some, it's really good idea. I can see some challenge, like, first of all, you know, you were talking about setting somebody's wages for the work that they've make based on decisions that they've made. So children that they've had, or you know, how quickly they got into the workforce. You, you then think that the, the taxpayers of the United States should collectively be responsible for making sure that those people as individuals, well

Tim Hosler [00:30:31] Don't we do that now? I mean, you know, somebody decides to have seven children and, and age dependent families is gonna pay them more than if they have three. I I think right now we already have that dilemma. I think this would be a way forward that, that hopefully over time would move us sort of ahead as, as a society where we are kind and gentle if that's, you know, what you wanna say. And we are trying to create safety nets that are workable. Safety nets, not safety nets that, you know, mire people in poverty their entire lives. You know, I remember a lot of conversation about how it takes a village, you know, to raise a family. It doesn't, it takes generations to raise a family. My dad's dad didn't go to college when, you know, he, his lifetime earnings potential was what it was because he had the skills that he had and he did very well. He, he raised two kids, he sent both of them to college. But it was my dad's generation that actually had more opportunity than his dad. And my dad's generation put his kids through better schools than he went to because he had the benefit of inherited a little bit of inherited savings and, and wealth beyond money, you know, intellect and, and help and support from his parents to help his kids. And now my kids are doing much better than I ever did.

Tim Hosler [00:32:06] I think it takes generations. I think it's probably inappropriate to think that, you know, in one generation we're gonna take a a, a family that's, you know, starting up and saying, you know, they ought to be equal to the, to the medians in the United States in, in one generation. It's very hard.

Vance Crowe [00:32:27] So when you're thinking about this as a employer, right, what, what's the incentive to have an employer not say, well, everybody's worth 13 because the delta now between what I'm gonna pay you and the government that's gonna be, that's gonna be picked up by somebody else.

Tim Hosler [00:32:43] Well, because as a person, I'm still trying to maximize my earnings. My hope ultimately is to get through, you know? Right. It's, it's not enough for me to make $23 an hour for my whole life. I've got as ambitions that are greater than that. So if I'm on a path to improve my skills and develop my skills and put myself in a position where I can earn more, I'm not gonna accept $13. If I'm worth more than $13, I'm going to, I'm gonna say no, I'm, I'm worth more than $13. And the employer that says, well, but you know, between you and I, government's gonna pick up the difference. Do I wanna work for that person? No, I don't wanna work for that person. I'll go find another job. And I know it's hard to find jobs and I know people would say, oh, it's very difficult. It's easier to find a job when the economy is robust and you're improving your skills. So if the federal government did their job and managed to a robust economy that needs constantly needs workers, and I do my job of improving my skills, I think we've got a combination of things that could work pretty well. So

Vance Crowe [00:33:54] You, you know, you, you slipped in that thing, the federal government managing the economy is that the federal government's role you, when you look at the federal government, you say, I want those guys managing the economy,

Tim Hosler [00:34:06] Whether I think it's their role or not. They think it's their role, right? So the, the federal government does influence the economy to, to a great degree. And it's very interesting, you know, you're bringing up one, one of my other pet peeves. Legislators don't like taking responsibility for the legislation that they can create through compromise because their parties and the members of their party, the voting members of their party sort of hold it against them if they didn't get enough of whatever it was that they were searching for. And a great example of this is that up until 1977, fiscal policy and the economy was really the responsibility of the legislature and the administrative branch. They're supposed to work together to establish budgets and policy for tax collection and other fiscal policies. But Congress got sort of bent out of shape about having to do all that work. So they said, Hey, federal Reserve, we're gonna make you responsible. Now you have a dual mandate, not only is your mandate to manage the money supply, which from the very beginning in 1913, that's what you were supposed to do from 1977 on, you're also supposed to manage to full employment and inflation. Well, they gave them the mandate, but they didn't give them the tools to do that. The tools are still resting with the administrative branch and Congress. They're the ones that set tax policy.

Tim Hosler [00:35:37] They're the ones that set spending policy. The Federal Reserve can't do anything to do that except influence the animal spirits we were talking about earlier. So, you know, you think things are a little too aggressive and people are making too much money. You come out and you say, well, if you've got exuberance is extraordinary and we know how to not do that. Or you say, oh, we're gonna lower rates down to zero and then we're gonna buy every freaking dollar that the government needs to issue. And, and, and so you create an environment through the Fed that is influencing the economy in the best way that they know how or can invent for certain circumstances. And, and you say, you know, Hey, the responsibility for, for doing this now is yours. It's no longer ours. So I did some research recently and I don't even know what to think of this, but I was curious and I went back at, in, at the Fed's own data and I looked at where the feds set the Federal reserve rate, which is their prerogative and, and only theirs. Nobody else can set that. And they don't.

Vance Crowe [00:36:43] So, so say a little bit about that. When, when you say they set the rate, talk a little bit more about what that means. Well

Tim Hosler [00:36:48] They, they set the, essentially it becomes the overnight interest rate. 'cause they set, this is what we're gonna provide to, to the members of the Federal Reserve system to influence money supply. If they set low rates, you would expect the banks to lend it out. 'cause they can get a better return somewhere else. If they set high rates, you would expect the banks to, you know, not. So the money supply expands and contracts based on, you know, the open market committee and whether, whether they're buying bonds or not buying bonds, whether they're setting rates higher or lower. So what the only thing they can absolutely control is that reserve rate. So if they set that reserve rate at 25 basis points, everything else sort of fixes off of that. If they set it at 125 basis points a point and a quarter, everything fixes off of that. So when

Vance Crowe [00:37:45] You say basis points, you're saying put the decimal in front of, you know, after the, the

Tim Hosler [00:37:50] 1.25% is 125 basis points.

Vance Crowe [00:37:53] Exactly right. Okay.

Tim Hosler [00:37:54] So ultimately nobody except the 12 smartest men in the room and women, sorry about that. 12 smartest people in the room say, we're gonna decide where to set this rate. And they recorded all the way back to when Dwight Eisenhower was president on a monthly basis where they set that rate. And I was just curious, you know, if you go back to 1950, that's, you know, right now, 70, almost 70 years, you have that many data points, 12 times 70. That's how many times they set the interest rate. And again, they set it based on their best judgment of where the rate should be set. If you were to ask whether there's a republic or or a Democratic president in the Oval Office, does it matter in terms of their rate setting? I would hope your answer would be, well no, of course it doesn't matter. They're, you know, they're looking

Vance Crowe [00:38:52] Not supposed to, right? Yeah.

Tim Hosler [00:38:53] They're looking at the economy and they're saying, this is what we should do. When you go back and you take a simple average, all the way back to when they first started recording the data for what the federal reserve rate is, when Republican presidents are in office, the Federal Reserve sets the, the overnight rate 40% higher than when Democrats are in office. Now, I don't know why. And, and, and it's not like it's my judgment. I just added all the numbers up and divided by the number of months that one or versus the other was in office. If you looked since 1977 when the Federal Reserve got the dual mandate from Congress, it's actually 50% higher. So an average rate. So

Vance Crowe [00:39:36] What ends up being the consequence of that then?

Tim Hosler [00:39:38] Well, I don't know. Right? The consequence of having a higher reserve rate is, is a constrained a economy. The consequences of having a lower reserve rate is an expanding economy. You know, you're wanting people to, to do more and, and it's all relative, right? So I mean it, a low rate can be 4% in an environment where the rate before was 5%. Lowering the rate is gonna cause people to theoretically be more aggressive and lend more. So the only way the Federal Reserve can influence, one of the only ways the Federal Reserve can influence the economy lately is by coming out and, and you know, people wait, wait on this, like they waited on the orange juice crop report, you know, during trading places. It's like, what's the Fed gonna say? What's the Fed gonna say? And the Fed says, we're not gonna raise rates. And people just start going crazy because it's not so much that the rate matters. What's the difference between one and a quarter and one and a half? You know, what's the difference? The difference is what is the Fed's judgment for what they should do to either help the economy to be more robust or slow the economy down? That's what everybody's waiting for because that has an impact on earnings. And earnings have an impact on valuations, and valuations have an impact on wealth. And wealth has an impact on spending. So all these things sort of domino, the first domino that goes is what's the Fed gonna do next quarter?

Tim Hosler [00:41:11] What's the Fed gonna do next year? Because

Vance Crowe [00:41:12] It's, what do they think it, it's the barometer. That's the how do they think how healthy things are or not healthy or right, okay, are

Tim Hosler [00:41:19] We gonna go into recession? Well, if the Fed thinks we're gonna go into recession, they aren't gonna be raising interest rates. 'cause that's just gonna exacerbate an, an an already anticipated problem. If, if the Fed thinks that inflation is starting to pick up, they may raise interest rates and kind of slow things down a little bit because in their judgment, you know, too much money is out there ta chasing too few goods, and we've gotta sort of get back in alignment. So it used to be that their responsibility was to manage the money supply, and it was congress and the administration's responsibility to manage tax policy and spending and, you know, those things that impact fiscal policy versus monetary policy. But it's, it's, it's uncomfortable taking responsibility for that stuff. And, and our party says, oh, well we can't be in favor of lowering taxes or we can't be in favor of raising taxes no matter what is necessary for the economy at that point, if you're a Republican and you say, no, I, I think we really should raise taxes for this, this and this reason, you know, Grover Norquist comes out and says, you're no longer, you know, we're not gonna support you anymore. And, and so it happens both ways and you can't end up with these solutions that would be good to end up with because people say, well, you know, between you and me Vance, I really do think that it's fair to have a minimum wage, you know, a a a safety net for people because we are a rich enough country, we can afford to help everybody.

Tim Hosler [00:42:53] But boy, if I come out and say that I'm gonna get my hand slapped, I'm gonna get my head cut off. So it, it creates some anxiety. And, and so they speak openly in private, but in public it's all about we're on this side, I'm on this side. And but

Vance Crowe [00:43:09] You, you're not necessarily saying that that's different than in the past. Right? I mean, partisan politics, you, so I'll, I'll tell you, I read,

Tim Hosler [00:43:16] I think it is a little different. When I was your age, it wasn't quite this way.

Vance Crowe [00:43:19] So I I I read a book not that long ago. I think it's probably one of the most compelling books I've read in years. And it was written in 2012. And the book is called Trust Me, I'm Lying by Ryan Holiday. And it's all about how the media infrastructure of the internet has changed the, the nature of news. I

Tim Hosler [00:43:40] Agree with that. So,

Vance Crowe [00:43:41] So it gives you, by, by, and the way that he starts off this book, or actually when he tells the history of the news, is kind of shocking because what he says is, you know, the, the problem that we're having right now is actually the very same problem when we first got newspapers, right? Because the first people that could afford newspapers were the political press, right? Which is why you had, you know, a two party newspaper system in any given town, right? And the, and the only thing the local news was about was what's coming up in your election and what's going on and why those guys are the enemy. Yep.

Tim Hosler [00:44:15] I can understand that. And so you

Vance Crowe [00:44:15] Had that, and it wasn't until you get to the news boys who are then selling papers based on hyperbole. 'cause it's like, I want you to buy this paper right now, right? Headline. So I'm gonna tell you

Tim Hosler [00:44:25] Those

Vance Crowe [00:44:25] Extreme things, headline, and then you move into, when telephones came out, now you could get people to buy subscriptions. So then you start selling a brand of news, right? So now you're selling, you know, our news says the, the, you know, all the news that's fit to print and now instead of trying to get the polls, you're getting the middle of the distribution because there's way more people there Sure.

Tim Hosler [00:44:45] That

Vance Crowe [00:44:45] Get both little bit of left, little bit of right, little bit of republican, a little bit of Democrat. But once you decentralize that and you're now back to the attention phase, you go straight back to hyperbole and back to that polarization.

Tim Hosler [00:44:58] Yeah. Well, and, and I, I do think media and social media have an awful lot of influence as well, but it, it, it all comes back to that party affiliation, right? I mean, you, you've got to fit into that brand and if you don't fit into that brand, you, you're not gonna get supported. And the, you know, the news cycles, 24 hour news cycles are constantly looking for things that they can do to support the brand or, or support the person who is, you know, consistent with the brand. And I think there's a lot to that book. I'll have to go out and get it and read it.

Vance Crowe [00:45:38] Do do you, do you watch television news?

Tim Hosler [00:45:43] Generally not. I don't, I I sort of know what's gonna be on there based on the headlines I read, you know, on the internet.

Vance Crowe [00:45:50] Do your friends,

Tim Hosler [00:45:54] I don't know. You know, we, I don't talk with my friends a lot about political stuff. My wife said if I did, you know, they wouldn't

Vance Crowe [00:46:00] Be your friends anymore.

Tim Hosler [00:46:01] I wouldn't be our friends anymore. So I, I try to, you know, keep the topics sort of non-political and, but it, it, it definitely has an influence. There is some group think associated with both, you know, polls, sides of the spectrum.

Vance Crowe [00:46:19] I mean, I think that one of the biggest issues is that it, it narrows the window on on which conversations people are having. So when I was in college, fascinating professor that said, you know, we have done many, many, many studies that have shown that the news doesn't tell you what to think. It tells you what to think about,

Tim Hosler [00:46:39] About Yeah. And,

Vance Crowe [00:46:40] And that smart and that Overton window that, that says these are the acceptable topics that we're gonna be discussing today. The mainstream news doesn't, if you filter it out, so there's a hundred different subjects going on, that means that people could flip over to somebody that has a deeper expert than you or a more compelling story, right? So they keep it there and then you push the politicians into this very narrow band.

Tim Hosler [00:47:04] I think that's right. Of

Vance Crowe [00:47:04] Which subjects they can talk about at all. I, you know, I don't think I actually have a friend that right now is paying for television. I don't, I don't, I don't think

Tim Hosler [00:47:16] That's a difference between single person, between your generation and mine. My kids don't have cable television.

Vance Crowe [00:47:22] It would seem, it would seem, it would seem hilarious. Like I see the way that I remember when old people, when they first got like DVRs and satellite and they would try and press on the buttons and didn't know how. I'm that same way now. Yeah.

Tim Hosler [00:47:34] If you,

Vance Crowe [00:47:35] If you handed me that giant remote, I'd be like, I don't, I don't know.

Tim Hosler [00:47:37] Well, you should call me. I'm not operate,

Vance Crowe [00:47:40] But, but this transition I don't think has hit, I'm not sure where on the technology adoption curve that's hit.

Tim Hosler [00:47:48] You know, it's so funny, my wife comes home and when we're having dinner or I'm preparing dinner, she'll watch, you know, Lester Holt on the NBC nightly news, when I go to visit my daughter and grandson, she's on her phone going through social media or, or Facebook, I mean, whatever she's looking at, it's, it's a screen. You know, it's like right there. That's where she gets her news. That's where she gets her information. And you know, she shares some of that with us. But for the most part, Celia's saying, yeah, I, you know, I saw that on Lester Holt, you know, he had that same story. But it's interesting, you know, if, if you were to, if you were to say so, so in 2008, too big to fail was something everybody heard of. Everybody understood too big to fail and what it meant, and that banks were threatening the economy because they were just too big. Too big, too big. And the Federal Reserve, who's responsible for managing the banking system in the United States? I, I went to a lecture and, and Jim Bullard at the St. Louis Fed, you know, I had an opportunity to ask him a question and I said, what are the smartest people in the room thinking about too big to fail? What, what is the solution there? And he says, oh, that's, that's a tough one. We really don't know what to do. And I said, I know what to do if,

Vance Crowe [00:49:15] Did you actually say

Tim Hosler [00:49:16] I did? I said, I know what to do. If you limited FDIC insurance for any and every bank in the United States to $500 billion, I don't think there would be a bank bigger than $500 billion. Oh,

Vance Crowe [00:49:31] You mean the total of all of their deposits that

Tim Hosler [00:49:33] Yeah, because

Vance Crowe [00:49:34] Right now the FDIC limits is, is like $200,000 per account,

Tim Hosler [00:49:38] $250,000 per account. But you can open up four accounts, right? There's, there's your account, there's your IRA account, there's your wife's account, there's your 5 29 account. And, and so the, you know, the theory is that it's about helping the consumer, but in truth, you know, I, I don't know exactly how big JP Morgan Chase is two point something billion, trillion dollars. And a large portion of that two point something trillion dollars is guaranteed by the federal government. So if you put money there, you know, you're, you're not worried about them failing and you know, not having money to pay you back. Because if they do something lousy with, with the money making bad loans and, and buying bad securities and they lose the money, well, you just dip into the FDIC and which is the, you know, taxpayer and you get your money back up to those limits. And, and so my thinking is eliminate the limits. Don't, don't limit it to a $250,000 because

Vance Crowe [00:50:38] You could have one $500 billion

Tim Hosler [00:50:40] Depositor

Vance Crowe [00:50:41] Deposit, or you could have, you know, 50 much smaller levels. Okay.

Tim Hosler [00:50:45] And, and so my theory is that I think if you had a $500 billion limit in order to get bigger than $500 billion, JP Morgan Chase is gonna have to convince investors or depositors oh,

Vance Crowe [00:51:01] That they take on that risk,

Tim Hosler [00:51:02] That it's okay, don't worry, we'll never fail, we'll never do anything bad. We'll never do anything wrong. There wouldn't be a bank bigger than $500 billion because you wouldn't take that risk. You would say, oh, I'm gonna, I'm gonna put, you know, to use your analogy, my first 500 billion with you, and then I'm gonna take the next $500 billion. I'm gonna put that at Wells Fargo, or I'm gonna put that at bb and t. So you end up in a situation where the market, instead of the government, would determine how big banks could be.

Vance Crowe [00:51:33] And how did he

Tim Hosler [00:51:34] React to that? He didn't say a thing to me, because I think he understands that would be a very simple solution, but it wouldn't, it wouldn't go down well with Jamie Dimon and the other guys that, you know, that are using that implicit moral obligation of the federal government to grow and grow and grow and grow and grow. How hard would it be for you and I to start a business doing anything and say to investors, you give us a million dollars, we're gonna go out and try and do something great. If we do something great, we're gonna give you a share of that in a return. If we lose it, uncle Sam's got our backs.

Vance Crowe [00:52:17] Yeah, but that's not entirely how banks work. I mean, it's

Tim Hosler [00:52:20] Not,

Vance Crowe [00:52:20] I mean, it's not if they, if they're doing bad loans, if they're,

Tim Hosler [00:52:24] They get shut down,

Vance Crowe [00:52:25] They get well, they get shut down or, I mean, you know, their investors start losing their money. Nobody gets,

Tim Hosler [00:52:30] Well, the investors lose the money first. Right, right.

Vance Crowe [00:52:32] But

Tim Hosler [00:52:32] The depositors don't lose them money. That's

Vance Crowe [00:52:34] True. But that's

Tim Hosler [00:52:34] Who's funding their loan portfolio is the depositors the investors only fund, you know, seven to 11% of the asset class of, you know, of the entire balance sheet. The rest of it's deposits and notes that they can issue or debt that they can issue. But that's the problem in 2008 was you had a lot of these firms where they let their equity percentages drop lower and lower and lower. So if their, you know, huge asset base lost 6% of its value, they wiped out all their equity. That's what happened to those firms.

Vance Crowe [00:53:09] So let's, let's assume something about your idea. Let's say Tim has got this great idea. He has got a group of people that also agree with him in your small circle. How would you go tell people about this in today's day and age? How would you get people on board?

Tim Hosler [00:53:26] That's, that's not my area of expertise. Right. That that's what I would rely on, on you for, I, I don't know how to reach people, and I don't frankly even know if my message or my idea is a good one. But, and, and I don't have the resources to evaluate and analyze the idea and compare it to, but, but there is a body of people that, that do have those resources. And frankly, there is a large percentage of the population that think that that body of people does no wrong. Right? We we're a, as a society, we're, we're really a little hesitant to believe in the big corporation, you know, that profit making machine, that large organization. But we're really happy to vest a lot of confidence in the federal government or state governments or city governments. And in truth, when you look at who's efficient and effective, successful corporations, the larger they are in ma many cases, the more efficient and effective they are. The governments state, local, federal governments are frankly not terribly efficient and effective. Why are we putting all of our hope in the federal government when they prove not to be as effective as Apple computer?

Tim Hosler [00:54:58] If if Apple starts making a bad product, they lose, right? I mean, people sell the stock, people go to lg, they go to Hawaii, they go, you know, somewhere else. If the Fed federal government starts generating a bad product, they just issue more debt. You know, they, they don't need to worry. They've got an infinite supply of resources. American Red Cross, if they're no good, they don't get donations. You know, they've got to compete in the marketplace. And, and if their service is bad, their ideas are bad, their, their output is bad. They don't get what they need in the way of resources to sustain. It's not true with the city of Chicago or the state of Illinois.

Vance Crowe [00:55:42] Well, it's, it's funny that when you're talking about the people's belief in this, so, you know, as you know, that I go out and speak a lot to people that have really large concerns about biotech. And one of the things that I've pointed out to rooms full of angry people that really shocks them is, you know, the, the challenge of going out and protesting and saying, these GMOs are poison, they're, they're gonna kill us all, is that the regulators know that we need agricultural commodities as exports. We need it to feed our population. We, we need these things. So in order to mitigate the risk for themselves, what they do when people are angry is they say, well, we'll just tack on another two years and another 15 studies. And so therefore, in order to get a, a new gene that you've put into corn or soybeans, deregulated, now you've gone from it being 10 years of regulatory trials to 13 years, and let's say each one of those years is $10 million. You've just shifted it from a hundred million dollars to get it to market to $130 million. Right. Which means there's that many less companies out there that can do it, which means the very companies that you're the most afraid of have just gotten bigger and larger and more integrated. So

Tim Hosler [00:56:57] It's happened with the banking, I mean, every bank that was too big to fail as twice as big as they were 10 years ago

Vance Crowe [00:57:03] Because of the cost of being able to regulatory regulation,

Tim Hosler [00:57:06] Regulatory. Right, right. And, and you know, there, there's a, there's an eco economic theory that says that those large corporations even though they rail against regulation. They're really the ones Yeah.

Vance Crowe [00:57:18] Regulatory capture.

Tim Hosler [00:57:18] Yeah. They're really the ones supplying all the ideas. So I, I, I'm, I, I think that, that the results are what people should focus on. So we, you know, we've had this issue in, in the United States and, and I agree, people should be able to get quality healthcare. 'cause we have quality healthcare in the United States, and it's not fair to me, like education, right? Where I can go to a private high school or I can go to the high school that's funded by tax dollars. Theoretically the objective is to make those as close together as possible, but I still have access to the free education. Wait,

Vance Crowe [00:57:58] Theoretically, what do you mean? Theoretically it's to make, I mean the, the private school has every incentive to make it the best possible

Tim Hosler [00:58:03] School you can. Sure. Because they're, they're competing,

Vance Crowe [00:58:05] Right?

Tim Hosler [00:58:06] But the, the public schools, you know, are, are also competing and they're saying, oh, you know, we're just as good as, you know, put the name in whatever the parochial high school or, or private high school. So, so there's this dynamic around, you know, we want the public schools to be as effective as the private schools, but they're not. But, but we want them to be, and I think that same dynamic could work in the healthcare space. The problem is the, there's this belief that you can't have this separated system, even though of course we do. Some people get better healthcare than others. If they have more money, they can afford more healthcare. So this theory started out that we need to create legislation and rules and laws that, that direct, you know, how insurance companies can participate in the United States to offer insurance. And the objective became delivering insurance, not delivering healthcare. So you end up in a situation where you say, oh, I feel so good today because, you know, 40 million more people have insurance, but the insurance is rotten insurance. It doesn't help them to get more healthcare. You know, when you look at some of those plans, it's like you're paying for half of the healthcare costs. Now half is better than all, but people still can't afford quality healthcare with a bronze policy on the, on the exchange because the bronze policy is no good.

Tim Hosler [00:59:49] It doesn't support what you need it to support. And so I've come up, you know, with, with I'm, you know, looking at this. Okay,

Vance Crowe [00:59:56] It, so, I mean it sounds like right now though, you're, you're mincing words, you're saying people are paying for insurance when, what they should be paying for is healthcare. And, and

Tim Hosler [01:00:06] Sorry, the, the federal government is providing a mechanism to get insurance when they should be providing for a mechanism to get care.

Vance Crowe [01:00:16] Okay. So how, how would you say this

Tim Hosler [01:00:18] Then? So first go back and look at the value, the enterprise value of United Healthcare. Before the federal government said, okay, United Healthcare, you've been bad. You've been terrible. Now you've gotta abide by our rules. They said, oh, please don't make us do that. Don't throw us in the Briar patch. Lo and behold, they're worth three times as much as they were before. So how did that happen? Well, it happened because the federal government said, Hey everybody, you got to buy their product. If their product was a big screen TV instead of healthcare, you know, Panasonic would be the, you know, a wealthy company wealthier than they were before it. It's not about getting access, keep going. It's not about getting access to healthcare. It's about getting access to insurance. I think we ought to not mandate, but promote an insurance policy that gives people access to healthcare. So the, the, the concept of a high deductible policy that deals with catastrophic things.

Vance Crowe [01:01:30] So when you say high deductible, you mean you, something happens, you have to pay a certain amount in order to start having your insurance kick in, right? Before then you're, you're, you're covering the cost up till 10,000, 15,

Tim Hosler [01:01:41] $10,000. That's a good number. So let's say what would United Healthcare or Aetna or anybody sell a $10,000 deductible policy for as a monthly premium? It would be lower substantially than the $1,500 deductible policy. Because they're

Vance Crowe [01:02:00] At

Tim Hosler [01:02:00] Risk with a much larger population. Right? The idea that someone's gonna have $1,500 or $600 worth of costs in a year versus $10,000 of costs in a year. There is a number, I don't know exactly what it is, where the insurance companies would say to you, oh, well if you could get the deductible up to here, you know, we might give the insurance away because, you know, very few people are gonna reach that level. They wouldn't, obviously there'd be no economic value for that, but the policy premium on a monthly basis would be much lower. So what I have to pay to get that insurance would be lower than what I'm paying today. Now the next thing you say is, well, Tim, you elite, you know, rich guy. Yeah. Then people

Vance Crowe [01:02:49] Don't

Tim Hosler [01:02:49] Have, 10,000 people don't have $10,000. They

Vance Crowe [01:02:51] Don't even have $2,000.

Tim Hosler [01:02:52] So again, we petition the federal government, if something happens to me, and I've gotta pay some of that deductible over the $1,500 that the federal government says today, it's okay for you to pay first by yourself between 1500 and 10,000 if that's the magic number you can apply to the federal government and we'll reimburse you for that. And it's gonna be based on your means. So it'll be a means tested thing, just like the earned income tax credit or a dependent families or however we do what we do in terms of re distribution. But use the insurance company to manage that because they're much more efficient and effective than the federal government would be managing the, you know, the adjudication of claims and, and you know, evaluating whether somebody's cheating or not cheating in, in terms of the healthcare. People would get the care. And if you went into the hospital and you said, you know what, I, I don't know anything about this. I know I've got this policy where it's a $10,000 depu and I don't have $10,000. So the hospital, the medical provider would be incentivized to say, don't you worry Vance, we can figure it out for you because we want that $10,000 that you're entitled to as much of it as you're entitled to from the federal government. So we're gonna create the mechanism that you sit down with somebody and you give us your, you know, tax returns or you know, whatever.

Tim Hosler [01:04:23] However, they would do it. And they'll say, okay, we got this. We're gonna go to the medical healthcare equivalent of the IRS and we're gonna say we think based on vance's circumstances, he's entitled to 800, sorry $8,649 and 86 cents. Now we'll go to Vance for the difference between 8,600 and and $10,000. We'll take our chances on that. But we're getting everything from the policy above 10. We're getting everything above whatever standard deductible, you know, the geniuses and the federal government say, you know, is the right amount that people should be able to handle on their own. Everything else is taken care of. So that person walks into the hospital just like the Vanderbilts and the Carnegie Mellons and everybody else. They've got a policy that's covers them, you know, millions and millions of dollars if they have healthcare problems. So there is this, there isn't this difference.

Vance Crowe [01:05:25] What about, so, so, okay, fair enough on all the catastrophic, but I mean my understanding, my impression is that most of the insurance right now is being paid out for people's prescription drugs and for their

Tim Hosler [01:05:38] Sure. But it's still the same deductible. Right? So whether it's catastrophic and it's a $57,000 surgery, or whether it's $4,000 a year of insulin, I don't know what insulin costs, thank goodness. But whether it's $4,000, if your responsibility at the, in the bronze policy is to pay the first $2,200, you still have to come up with the first $2,200 before the insurance kicks in. I'm saying the insurance kicks in at 10 over your $2,200. You petition the federal government for everything up to 10. So it can be, it can be nine instances that add to 10, it can be one instance that adds to 10, it doesn't matter. The insurance company's aren't responsible until you get to 10 and it's the village that chips in to pay the 10. So that, you know, you only have to come out of pocket what we think is an appropriate amount for you to have to come out of pocket. And whether you borrow that from your parents or your neighbors, do a, you know, a fundraiser to you, you know, for you to get the first $2,200. That's the world we live in right now. There is no zero de Well, there might be, but for the most part, most people don't have zero deductible health insurance. They gotta pay the first X amount. So the policy that's a $10,000 deductible policy can still offer the same wellness plan that the one that's a $2,200 policy offers. So, you know, prenatal care is free, your annual physical is free.

Tim Hosler [01:07:10] You know, whatever's free now can be free. Then it's just the policy doesn't kick in until you've hit 10 grand. And they're willing to price that down very aggressively and competitively because they've got actuarial stuff that says, oh, you know, the likelihood of this person reaching $10,000 is very low. So if we collect 108 bucks from that person every month of the year, God bless. That's fine.

Vance Crowe [01:07:36] Well, in Tim Hosler's America, there is petitions all the time. Lots of petitions and significantly empowered federal government.

Tim Hosler [01:07:47] So there are petitions, right? 'cause the bottom X, whatever that X is needs to help. And I'm all for as a bleeding heart, whatever I'm all for. Yeah, let's create that safety net. Let's create the help. Let's just do it in a way that allows people to get generationally wealthier. Right? Let's not leave people, you know, generation after generation in poverty because of the way that we sustain them. We sustain them in a, in a livelihood that just isn't all that compelling.

Vance Crowe [01:08:24] What do you, what do you say to people? So I would say that people in my realm where I'm at have a pretty deep suspicion in the federal government and would, would actually prefer much, much more to move to regional governments or mega regions or even even more of like a

Tim Hosler [01:08:46] I'm good with that

Vance Crowe [01:08:47] City state. Yeah,

Tim Hosler [01:08:47] Okay.

Vance Crowe [01:08:48] Doesn't

Tim Hosler [01:08:49] Bother me, except I don't want to be in the region that New Jersey's in. I don't want to be in the region that Illinois's in those states are bankrupt. I mean, there's just no way for them to come out. And I, in the way that I evaluate things, and it's funny, so I spent some time in the municipal finance sector and you would read the articles about the Chicago public school system pension fund. So the Chicago Public School System pension fund has 39 cents for every dollar of obligation. I don't know if that's exactly the right number, but it order of magnitude. And everybody says, well, you know, 39 cents isn't gonna cut it. Those, those bills are gonna come due. And they say, you know, city of Chicago needs a school system. Push comes to shove, they're gonna put the money in the city of Chicago for their pension system has 46 cents of every dollar. And so, you know, you look and you say, well they don't have a lot of resources to help the school system. They don't even have the resources to help themselves. So you talk to the city of Chicago and they say, ah, you know, push comes to shove the state of Illinois needs. The city of Chicago, state of Illinois is gonna step in and and bail us out. Yeah.

Vance Crowe [01:10:06] And then on up to the federal government,

Tim Hosler [01:10:08] The state of Illinois has 52 cents for every dollar that they need. There is nobody to bail out Illinois.

Vance Crowe [01:10:17] You don't think the federal government's gonna bail 'em out.

Tim Hosler [01:10:19] How in the world is, is the federal government gonna step in with 49 other, you know, state senators and all those other representatives and say, yeah, yeah, yeah, it's right to take money from Missouri and Indiana and California and Texas and New York and New Jersey and help Illinois.

Vance Crowe [01:10:39] But we already do that. I mean, like you already see, I

Tim Hosler [01:10:40] Don't think so.

Vance Crowe [01:10:41] Well you, the

Tim Hosler [01:10:42] One time that it ever happened was New York and the federal government, you know, sort of said you're on your own.

Vance Crowe [01:10:48] So you think the state of Illinois would go into the position where they would've to declare bankruptcy.

Tim Hosler [01:10:52] City of Detroit who bailed them out? Nobody, they just, whoever had money, I

Vance Crowe [01:10:59] Don't even know what's going on in Detroit af after the LED situation, you know, blew up around them. I, you know, I didn't hear,

Tim Hosler [01:11:05] So Detroit, you know, ruined itself with pensions because there was a period of time in the eighties when things were going gangbusters and these pension funds returned more than their obligation. So they ended up with larger pools of money than they owed people. And they would sit around and they would say, well, you know, whose money is this really nobody's money. I mean, you know, we, we've got everybody taken care of, as many employees as we have forever. And we got an extra few a hundred million dollars left over.

Vance Crowe [01:11:39] It's unfathomable now.

Tim Hosler [01:11:40] Yeah, unfathomable now, no question. So the city of Detroit for three out of the next 10 years sat down and said, oh, we need to give that guy a better pension. We need to lower his, you know, his years of of work requirement. In order to reach full pension, we need to increase the percentage of his final salary that he gets. It was like a contest to see who could be most generous. And then, you know, the worm turns stock market has trouble returns in the pension fund, you know, aren't quite the same. And all of a sudden, instead of a surplus, we've got this terrible deficit. And, and the pension fund goes to the city and says, well you know, we've done our best to manage this the best we can. You have to give us more money. And the city says, well what are you talking about? We're giving you what we're legally obligated to give you. Yeah, but that's not gonna cut it. You need to take more money out of your general fund or raise taxes to give us a bigger contribution every year. And so you end up with this, you know, downward spiral where when you increase property taxes or other taxes in the city of Chicago, people leave the city of Chicago. And so you've got a lower tax base and an increasing demand because the pension obligation continues to grow and grow and grow and the shortfall is bigger and bigger and bigger.

Tim Hosler [01:13:12] So you end up in this horrible mess where, you know, theoretically there's one person left in the city of Chicago and and living in his $400,000 house, he has to pay $680 million a year in property taxes 'cause there's nobody else to pay them. Right. So at somewhere you tip over and, and you don't know where you tip over because part of what causes the tip over is people just aren't willing to buy your bonds anymore. You can't issue more bonds to throw money in the pension fund. You can't issue more bonds. And

Vance Crowe [01:13:45] How are the bonds going for Chicago?

Tim Hosler [01:13:47] They're junk, right? I mean

Vance Crowe [01:13:49] Literally junk like junk bonds. What are they rated right now?

Tim Hosler [01:13:54] Triple B minus double B plus something I, I don't know. I haven't something

Vance Crowe [01:13:58] That's, I'm

Tim Hosler [01:13:59] Two years away from that life

Vance Crowe [01:14:00] Risk on, on.

Tim Hosler [01:14:01] Yeah. Because

Vance Crowe [01:14:02] They may not get the money back.

Tim Hosler [01:14:03] May not get the money back.

Vance Crowe [01:14:04] And what's the rate of return? Just so you mean be higher, be higher than

Tim Hosler [01:14:07] 7%, 6% When,

Vance Crowe [01:14:09] So, so not

Tim Hosler [01:14:10] When Missouri's issuing bonds at two 80, you know, and

Vance Crowe [01:14:15] Now we're back to move to St. Louis, everybody.

Tim Hosler [01:14:18] Yeah, well I think it's a problem 'cause ultimately the people who are left there are the ones like in Detroit. So when you go to Detroit, there are some really beautiful areas in, in the Detroit metropolitan area. But there are parts of Detroit that look like, you know, they've been abandoned because they've been abandoned. And, and so there's whole neighborhoods that nobody lives there. 'cause they didn't, they don't have the resources to provide services. And if you can't get services, why, why would you live there? So it's happening in a lot of communities, especially where people are, you know, moving and moving and moving. And the only thing that saves that is the gentrification with wealth, right? Of, of improving neighborhoods. So, you know, you've got Long Island and, and you know, boroughs in Manhattan, you know, Manhattan is just expanding, expanding, expanding. 'cause people want to be there and Detroit is gonna go through that renaissance. But the poor suckers that lost were the ones that bought the bonds near the end and thought, well it's okay, you know, I, I've got revenue sources supporting my bond and, and in bankruptcy. And it's not bankruptcy because cities and states can't do that. But in reorganization, somebody decreed, oh, well we're gonna take the we revenue sources associated with yours and we're gonna, you know, put them into the general fund and we're gonna only pay you 20 cents on the dollar and only pay you 36 cents on the dollar.

Tim Hosler [01:15:53] And that was a rude awakening. People were stunned. Puerto Rico, same sort of thing happening. So,

Vance Crowe [01:16:00] You know, there's an, I

Tim Hosler [01:16:01] Don't know how we got on this except,

Vance Crowe [01:16:02] Well, so I mean, I, I guess I would just say there's an interesting combination between what you're talking about here and your, what you mentioned about Apple and the federal government is cities are one of the most amazing things. They're almost like a living organism. And there's a great talk by Geoffrey West from the Santa Fe Institute where he talks about cities can do exactly what you talked about. They can, you know, they're born, they grow, they level off and they die. And companies actually do the same thing and that kind of sigmoidal growth curve, right? But the difference is because a city is a physical place and the infrastructure is there, and typically because there are rivers there and places that people want to be and other things going on that new people come in, inhabit the space and they, it gets to grow again. So it gets to be reborn like the phoenix. Whereas in arbitrary boundary like state lines or even national boundaries, those are the things that can come and go. Whereas the cities, right?

Tim Hosler [01:16:59] It's, it's almost

Vance Crowe [01:17:00] Never does a city go away forever? It's very, very rare.

Tim Hosler [01:17:04] Well, I mean, we're watching Detroit, it'll be very interesting to see if it kind of reemerges like a phoenix or whether it continues to sort of plot along. When, when you talk about that life cycle, i i, is it a long time or is it a short time as a function of how well it's managed? Right? If you manage it badly, it's gonna go through that life lifecycle faster. Whether it's a company a, a 5 0 1, C3 not-for-profit or municipality. The, the more badly it's managed, the, the shorter the lifecycle's gonna be in, in a an extremely well-managed organization for-profit, not-for-profit municipality. The better managed it is, the more sustainable it is and the longer that life cycle's gonna be. So I'm all for fiscal, you know, reasonableness, I'm all for having people managing these things that understand that their principle objective is to be fiscally sound and sustainable. If you end up in a situation where, you know, to get elected, I can promise somebody this and I can promise somebody that, and you mismanage the resources that you know, you're a steward. You're supposed to be taking care of everybody's resources. If you mismanage that for your own benefit, then the life cycle's gonna contract and we can see it. I mean we've got perfect examples of this in all, all across the United States where some cities are managed better than other cities and some cities are sustaining better than other cities.

Tim Hosler [01:18:45] And even the cities that people gravitate to that might cause even more problem, right? Because if they're imbalanced, if they're not taxing people enough to pay for the services, the more people they get, the worse it is. Not the better. So it needs to be managed well and we just don't have a mechanism for putting people into municipalities that are best suited to manage it. We do with corporations and we do with not-for-profits because if poor management gets in there, the organization is gonna fail. And if the organization fails, something's gonna have to come along to provide those services. You know, because there's a demand for those services in, in a municipality. As long as you keep electing people that don't manage things well, it's just gonna continue to get bad and bad and bad until you end up with Detroit. If, you know, if someone were to say to me, how far away is Chicago from Detroit? I don't know. I, I not, not a lifetime away, I don't think.

Vance Crowe [01:19:48] Okay. So probably to wrap up, I've got, I've got two questions. Okay. One is less personal, but you know, kind of gives you a chance to, to talk about something maybe you haven't before. And the other one's a little bit more personal. Which, which one would you want first?

Tim Hosler [01:20:07] I'll take the less personal one

Vance Crowe [01:20:09] First. Okay. The less personal, but I'm gonna give you the other one. So you just have to buckle.

Tim Hosler [01:20:12] I may have to leave though.

Vance Crowe [01:20:13] The, the first one is what, you know, what's the, what's the book that you have read that you think, man, if I could get more people to read that book, they would understand X, y, z something.

Tim Hosler [01:20:26] You're not gonna like my answer.

Vance Crowe [01:20:27] Okay.

Tim Hosler [01:20:28] Atlas Shrugged by Ayn Rand.

Vance Crowe [01:20:30] Why would I not like that answer?

Tim Hosler [01:20:31] I don't know. You're a millennial. You're a millennial. I dunno, I I was fascinated by that book and I read it in, in the middle of my MBA years going back and forth from my aunt and uncle's house into the city of Chicago to work at First Chicago Bank. So I, you know, I would be on the train for 30 minutes and I would read that book. So it was really had a tremendous impact on me because I was doing what I thought, you know, Hank Rearden was doing, you know, I

Vance Crowe [01:21:01] Was making chain and

Tim Hosler [01:21:03] Right. I was making a d you know, making a difference and pursuing my ambitions. So that, that's a book that I would encourage everybody to read.

Vance Crowe [01:21:12] You know, everybody that I know that read that book that had it mean something to them, I think was reading it at a pivotal time for them. And, and

Tim Hosler [01:21:21] In terms of their age,

Vance Crowe [01:21:22] No, in terms of just something going on in their lives. Okay.

Tim Hosler [01:21:25] In

Vance Crowe [01:21:25] Fact, like I, it's, it's almost like a fun game that I play. If somebody tells me they like that book, I ask them what was going on in your life when you read it? And it, it's almost like a hero's journey that somebody, because you don't start that tome and get all the way through it, right. Without, without having some, you know, I was actually learning how to work out as an adult and I, I actually lost, I think, you know, 25 pounds or something like that while listening to that audio book

Tim Hosler [01:21:52] Really?

Vance Crowe [01:21:52] And, and having it be just something that was, that was there. But I've had many friends that that's the same thing. And I get all the way done with saying this one time and I'm making the case and my cousin points out, you know, all of the, all of the heroes are all good and all of the bad people

Tim Hosler [01:22:10] Are all

Vance Crowe [01:22:10] Bad. It's like incredible straw man. And I was like, that's a good point. But at the time it was, that

Tim Hosler [01:22:15] Was, that was Ayn Rand's point,

Vance Crowe [01:22:17] Right?

Tim Hosler [01:22:18] So IIII think that is probably the book that has had the biggest impact on me and I would encourage people to read it if they haven't.

Vance Crowe [01:22:28] Okay. So the next question, more personal, and actually I was, I was talking with a good friend of mine who is going through a major life transition right now. He's trying to figure out what should I do? Should I try and start this startup company? Should I try and join one that I'm doing? And he said something quite profound, and there's several derivations of this question, but, but I thought this one was kind of interesting. He said, you know, as I've thought about this, I've thought about passing on, you know, when I, when I die, who is it that I want to be at my funeral and what is it that I hope that they say? And so, so I would actually ask you that question. You're in a, you're in a transition period, you're working with startups, you, you, you know, write, write young people with that write articles and newspapers to say, let's meet up and chat. Who do you want at your funeral? And what do you hope that they say?

Tim Hosler [01:23:20] So I'm a new grandfather. I have a a nine and a half month old grandson right now. For me, family is like the most important thing. My son is getting married, he's engaged to a beautiful young woman, a beautiful inside and out. So family for me, I, you know, and, and then I guess next would be whoever's left of my friends that, that could come

Vance Crowe [01:23:47] That you didn't engage with politically. Right.

Tim Hosler [01:23:50] They are still my friends, so, you know, family and friends. I, I don't have any, any ambition for Mike Pence to be at my funeral or, you know, anybody political or anybody that is a celebrity. I, I I, I think that happens in life. But at death, I, the most important things kind of rise to the surface. And the most important things are the people you loved and who loved you through the good times and the bad. And so I I, that would be my answer. My grandson

Vance Crowe [01:24:25] Sounds great

Tim Hosler [01:24:25] And sounds great. And actually I would, I would like my 15 grandchildren to be okay at my, at my funeral, but my two children might not agree that I would have 15.

Vance Crowe [01:24:35] Well that seems like great place to leave it off. I am so glad we did this. Thank

Tim Hosler [01:24:39] You. It was fun. Thank you for going on over you. I appreciate it. I'm gonna pack my soapbox up and

Vance Crowe [01:24:43] We'll have you back and you can talk on it again sometime.

Tim Hosler [01:24:45] Thank you.