Speaker 1: Pushkin. Welcome back to Risky Business, a show about making
Speaker 1: better decisions. I'm Maria Kanakova and.
Speaker 2: I'm Nate Silver. On October twenty first, the NBA season
Speaker 2: will be back. One team will end the year with
Speaker 2: a dark cloud hanging over it, The Clippers. Have you
Speaker 2: heard of the company aspiration?
Speaker 1: I heard of it when preparing for this segment. So
Speaker 1: that's what we're going to start the show off with.
Speaker 1: And then we're going to talk about a very important question,
Speaker 1: which is does New York City need more millionaires.
Speaker 2: Millionaires or billionaires?
Speaker 1: Millionaires millionaires but billionaires too. I think does New York
Speaker 1: City need more very wealthy people? All right, Nate, let
Speaker 1: us start with your house, which is the NBA and
Speaker 1: the Clippers. So do you want to get us set
Speaker 1: up here since this is something that you know a
Speaker 1: lot more about, at least background wise. Yeah.
Speaker 2: Yeah, So the NBA has a salary cap. It's kind
Speaker 2: of an attempt to prevent owners, many of whom are
Speaker 2: extremely rich. In fact, one of whom is the principal here,
Speaker 2: Steve Ballmer, owner of the Clippers, Microsoft guy, one of
Speaker 2: the I think six to ten richest people in the world.
Speaker 2: But it's a way important to protect these guys who
Speaker 2: are very competitive and basically have infinite amounts of money
Speaker 2: from spending irrational amounts to have their toys be cooler
Speaker 2: when they're in the box and their team makes a
Speaker 2: deep run in the finals or wins a championship. So
Speaker 2: the league set the rules, and increasingly in the NBA,
Speaker 2: these rules are getting pretty strict and the idea of
Speaker 2: circumventing the rules is taken very seriously. Several weeks ago,
Speaker 2: the journalist Pablo Tory journalists kind of people might call
Speaker 2: him a talking head, but he did. He also has
Speaker 2: a show where he does at times very serious journalism,
Speaker 2: discover that this fraudulent carbon credit company, allegedly fraudulent carbon
Speaker 2: credit company called Aspiration, which had been a sponsor for
Speaker 2: the Clippers.
Speaker 1: It's a great name for a fraudulent company, by the way,
Speaker 1: Nate Aspiration.
Speaker 2: But basically it turns out that this fake tree planting company, Aspiration,
Speaker 2: was paying the Clippers Kawhi Leonard of probably their best
Speaker 2: player if Ka Zubach stands might disagree, but their most
Speaker 2: famous player, right multiple time NBA champion, was paying him
Speaker 2: seven million dollars a year to do literally nothing for them, right.
Speaker 2: The fact is that for anybody who scoured this right,
Speaker 2: you know, he could have tweeted something or done one
Speaker 2: little ad that got one hundred views on YouTube showed
Speaker 2: him like planting trees or something. He did not do
Speaker 2: any of that. Right. There's also been disclosures by other
Speaker 2: news outlets that Kawhi Lenary received twenty million dollars in
Speaker 2: equity in Aspiration, which is now worth precisely zero, to
Speaker 2: be fair, but a total package of like forty eight
Speaker 2: million dollars in cash inequity. And it also turns out
Speaker 2: that Seve Balmer, the owner of the Clippers, made a
Speaker 2: fifty million dollar investment in Aspiration, or the official sponsor
Speaker 2: of the Clippers, right, So that set of circumstances alone
Speaker 2: is pretty suspicious. Pablo Torri also had an anonymized source,
Speaker 2: somebody he went through the kind of vocal processing that
Speaker 2: gave him like a very millennial vocal fry. Right, say
Speaker 2: that this company's going bankrupt, right, and they actually hire
Speaker 2: legitimately famous people, and the famous people getting paid way
Speaker 2: too much to actually do something for the company. Robert
Speaker 2: Downey Junior was one, for example, gravelly voiced adr Kawhi
Speaker 2: was getting paid seven million dollars to totally ghosts this company. Right,
Speaker 2: And when people ask why is this bankrupt company paying
Speaker 2: this guy who has done nothing good offer us? Nobody
Speaker 2: even knows he's in a relationship with US seven million
Speaker 2: dollars a year, people would say things like it's CAPSIR
Speaker 2: convention loll in text messages. Right. So yeah, the theory.
Speaker 2: The theory is that Seve Balmer, I'll be vaguer. The
Speaker 2: claim is that the Clippers found a way through this
Speaker 2: company aspiration that their owner is also an equity investor
Speaker 2: in to pay Kawhi Leonner a bunch of extra money
Speaker 2: so he'd sign in LA with the Clippers and not
Speaker 2: the Lakers, or not stayed in Toronto or back to
Speaker 2: San Antonio or the Houston Rockets or whatever else. And
Speaker 2: if you're into NBA gossip, Maria, this story at what's
Speaker 2: normally a slow time for the league has been has been.
Speaker 2: The hot dish? Is that a real thing? I don't use.
Speaker 2: Hot dish is like a Minnesota thing. And I think
Speaker 2: it's a real term. I think I picked that up.
Speaker 2: The hot dish.
Speaker 1: It's okay, it's okay, we'll pretend well, we'll make.
Speaker 2: It a thing like Amy Kloba Sharp brings the Minnesota
Speaker 2: State Fair. I don't think that's.
Speaker 1: That's a very funny visual, you know, it's so funny.
Speaker 1: So when I started researching this, because you know, this
Speaker 1: is not in my wheelhouse, the first thing I thought
Speaker 1: about was mob stuff, and specifically on the Sopranos, where
Speaker 1: they had these contracts where they had no show jobs,
Speaker 1: right and you were guaranteed a certain number of no
Speaker 1: show jobs, where like that was just a way of
Speaker 1: getting kicked back, getting money around. And when I was
Speaker 1: reading this, I was like, wait, they're taking they're taking
Speaker 1: a page out of the mob playbook to try to
Speaker 1: circumvent caps and get money to the right person in
Speaker 1: a kind of kickbacky way without actually having a paper
Speaker 1: trail all aught. This time they did have a paper trail,
Speaker 1: but that's the first thing I thought about. I was like, wow,
Speaker 1: this is like a very mobby type of thing. And
Speaker 1: then it also reminded me, do you remember back this
Speaker 1: summer or maybe even earlier, and we mentioned it, I
Speaker 1: think briefly on the show there was a probe in
Speaker 1: Las Vegas, which you know, when you think mom and
Speaker 1: no show jobs, Vegas, Vegas is certainly a top of
Speaker 1: mind as well when the Aces were getting one hundred
Speaker 1: thousand dollars sponsorships from the Las Vegas Convention and Visitors Authority.
Speaker 1: I think we talked about that right to try to
Speaker 1: get around those salary caps. So it seems like this
Speaker 1: is a tactic that's been gaining steam, and so to me,
Speaker 1: it's just very interesting if we talk about it from
Speaker 1: kind of a risky business game theory angle, is this
Speaker 1: the natural devolution of evolution, devolution of salary caps and
Speaker 1: of trying to curve some sort of behavior where people
Speaker 1: end up going around it, right and trying to figure out, well,
Speaker 1: I still really want this player, or I really want
Speaker 1: this person to come, you know, to the Clippers. I
Speaker 1: really want this person on the Aces. Whatever it is,
Speaker 1: So let's figure out how we make it happen and
Speaker 1: try not to run a foul of the letter of
Speaker 1: the law while just totally disregarding the spirit of the law.
Speaker 2: Well, accept it clearly violates. I mean, you know, the
Speaker 2: NBA Constitution is not the US Constitution, but like the
Speaker 2: NBA Constitution says that, like.
Speaker 1: Yeah, I know nothing about this, so please tell me
Speaker 1: what is what it's there?
Speaker 2: Are quite a lot of provisions that pertain to the
Speaker 2: anticipation of this type of activity. Right, if you've watched
Speaker 2: the Problatory Show, he has thousands of pages of documents
Speaker 2: printed out, and it gave me flashback to when I
Speaker 2: was on debate team going to copy shit at Kinko's
Speaker 2: late at night. But like, you know, but.
Speaker 1: The good old Kinkos.
Speaker 2: The consution basically says that, like, we can rely on
Speaker 2: sufficiently compelling circumstantial evidence if there is, I think it
Speaker 2: might actually use the term circumstantial, because it's not a
Speaker 2: legal standard, right, And you know, if there is no
Speaker 2: rational explanation for what happened apart from the fact that
Speaker 2: it was cap circumvention, right, there's like no rational explanation
Speaker 2: that I've seen offered. Well, let me take that back slightly, right,
Speaker 2: you know, there's not really a rational reason for the
Speaker 2: value produced to aspiration to pay Kawi million twenty eight
Speaker 2: million dollars or four years and twenty million dollars in
Speaker 2: equity to do nothing. Right. I'm sure he's a smart guy.
Speaker 2: I don't think he was like providing good advice to
Speaker 2: the board or anything either. And if he was on
Speaker 2: the board, you know, not a very successful venture by
Speaker 2: by Kawhi right now, that however, goes to an arbitrator. Right,
Speaker 2: so the league is going to have its findings. They
Speaker 2: hired some three or four name white Shoe law firm.
Speaker 2: They will come back with a report, not anytime soon,
Speaker 2: by the way, probably in six months, if not longer.
Speaker 2: And then it goes to arbitration.
Speaker 1: And by the way, and what happens in the meantime
Speaker 1: while it's being deliberated and arbitrated? Are there any consequences?
Speaker 1: Are there any suspensions? Is there anything like that? Or
Speaker 1: does life just go on as usual while all of
Speaker 1: this is happening.
Speaker 2: Well, the Clippers are a team that is kind of
Speaker 2: at a crossroads, right. They were pretty good last year,
Speaker 2: lost in seven games to the Denver Nuggets, who were
Speaker 2: a better team. But like, but they're in the upper
Speaker 2: half of NBA teams. They're also older, spent a lot
Speaker 2: of money this year on veteran players, right, don't have
Speaker 2: that many draft picks going forward, but like, you know,
Speaker 2: one punishment. So Joe Smith was a Minnesota Timberwolves player
Speaker 2: back in the day that the team had a sweetheart
Speaker 2: deal with to say, hey, look, we can only afford
Speaker 2: to give you this much now, but we'll take care
Speaker 2: of you on the back end. Right, And this somehow
Speaker 2: came out I think in like where there was vankrupcy
Speaker 2: proceedings or so like. By the way, a lot of
Speaker 2: the stuff that comes out it comes out because so
Speaker 2: many fucks up in there's discovery and a lot of
Speaker 2: things were like you get in legal trouble all of sudden,
Speaker 2: the things said no one ever believed me be public
Speaker 2: become public. But the Timberwolves were fined five draft picks,
Speaker 2: people were suspended, ownership were suspended for like a year. Right.
Speaker 2: The Clippers barely even have five draft picks. But if
Speaker 2: I were them, I would fucking trade my draft picks
Speaker 2: before I still could you want to take my draft picks? Sorry,
Speaker 2: we don't have them anymore. We traded them for player talent.
Speaker 1: So so thinking ahead in this game, if you think
Speaker 1: you're gonna get fined and you're gonna be putalized, that
Speaker 1: would definitely be the thing to do.
Speaker 2: And we'll be back right after this.
Speaker 1: The funny thing is, you know, in the case of
Speaker 1: the Aces, like, there's a good case to be made
Speaker 1: that there was good reason for the Las Vegas convention
Speaker 1: and visitors authority to give them to give them money
Speaker 1: because they're bringing people to Vegas, right, and they're bringing visitors,
Speaker 1: and it's actually something that's mutually beneficial. And as you say, Nate,
Speaker 1: like the dude could have tweeted once or made one
Speaker 1: statement that went out to a few hundred people to
Speaker 1: at least pretend. I think even on the Sopranos, the
Speaker 1: No show guys sometimes came to work to just wave
Speaker 1: and say, hey, yes here I am just to make
Speaker 1: big a show of it, and here we had none
Speaker 1: of that. Right. I think rules exist for a reason
Speaker 1: and people should face the consequences if they if they
Speaker 1: try to do something underhanded. What do we think is
Speaker 1: the probability of the Clippers actually getting fined in a
Speaker 1: significant way, in a way that's not a risk slap,
Speaker 1: but something that is actually deter deter's future behavior like
Speaker 1: this on the part of the Clippers and other teams.
Speaker 2: Yeah, let me say I would give of an eighty
Speaker 2: to ninety percent probability that the Clippers, that's somebody with
Speaker 2: the Clippers, maybe not Steve Balmer. Maybe Seve Balmer didn't
Speaker 2: know that much. Right, My basim prior, is an eighty
Speaker 2: nine percent chance that like this was intended by somebody
Speaker 2: who works at Los Angeles Clippers working with someone or
Speaker 2: some things who are working for Aspiration to circument the
Speaker 2: salary cap. Right that might include snaries where Kawai himself
Speaker 2: doesn't know about it. You know, he was known, his
Speaker 2: representation was known to be asking around for all types
Speaker 2: of things that are against the league charter, that are
Speaker 2: way outside the lines, right, so you know they have
Speaker 2: been investigated for that before, you know. I think the
Speaker 2: true chance that, like you know, the other explanations would
Speaker 2: be like maybe somehow that if you give money to
Speaker 2: Kawhi that's kind of just transferred to somebody else, then
Speaker 2: you get money on your balance sheet, and having money
Speaker 2: in your balance sheet makes a financial statement look better
Speaker 2: if you're getting other investors. Right, So, ironically, because this
Speaker 2: company was allegedly so shady, I just want to use
Speaker 2: allegedly because they're so sketchy, we're drawing to a gut shot.
Speaker 2: I think right now, will the NBA want to pursue
Speaker 2: a death penalty five draft pick type of situation? Right?
Speaker 2: Like that's kind of more of a political question, you know.
Speaker 2: I think the league constitution gives the commissioner, Adam Silver,
Speaker 2: in a relation a fair amount of wiggle broom.
Speaker 1: Right.
Speaker 2: The other owners aren't happy about this, in part because,
Speaker 2: like the Clippers, already you spend as much money as
Speaker 2: end up in the league. They built one of the
Speaker 2: most expensive basketball areci Intuit dome ever built. And people
Speaker 2: are already concerned about this, right, and so like they
Speaker 2: might want punishment, but like, there are actually three things
Speaker 2: the league could do. Adam Silver could say, uh, we
Speaker 2: have found that we believe that, you know, salary cap
Speaker 2: tri convention was committed, and now we're going to go
Speaker 2: to arbitration for a bruling.
Speaker 1: Right.
Speaker 2: They could say this does not meet our threshold for punishment.
Speaker 2: It was bad, does not mean a definition of capture
Speaker 2: convention beyond an extent to which we can prove. We're
Speaker 2: going to take away second round draft pick and find
Speaker 2: Steve Balmer five million dollars, which to him is like
Speaker 2: a parking ticket kind of literally if you do the
Speaker 2: math right, yeah, and call it a day. Right. And
Speaker 2: then the third snary is like a plea bargain where
Speaker 2: they said we don't want to take to arbitration, we
Speaker 2: want us to last another two years. Right, So we
Speaker 2: think we could get three draft picks and avoiding Kawhai's
Speaker 2: contract and suspending Steve Balmer for a year, but instead sorry, Steve,
Speaker 2: six month suspension, two draft picks, maybe one of which
Speaker 2: you can get back for good behavior, the largest fines
Speaker 2: because you'll pay the money. That's good for both of us,
Speaker 2: because you don't care about the money, and the other
Speaker 2: owners we pacified. Right, Like if I to if I
Speaker 2: to guess right, I'd say that like twenty per chance
Speaker 2: slap on the wrists forty percent chance, plea bargain forty
Speaker 2: percent chance that the league wants to come down pretty
Speaker 2: hard and it goes to arbitration conditional on that eighty
Speaker 2: percent chance the arbitrators agree. So the odds of like
Speaker 2: the nuclear option happening, I think are lower than the
Speaker 2: odds of something happening, which in turn now lower than
Speaker 2: something actually happened having happened, because like you know, if
Speaker 2: it's borderline, then I think you're get to slap on
Speaker 2: the risk territory.
Speaker 1: Yeah, And I think that the the other part of
Speaker 1: this is what do they want, Like, if they're looking
Speaker 1: in the future, right, what do they want to see
Speaker 1: happen because all of those different scenarios reward. You know,
Speaker 1: we talk a lot on the show about how game
Speaker 1: theory is all about, you know, incentivizing different types of behaviors, right,
Speaker 1: and that happens both with rewards and with punishments. And
Speaker 1: so the three scenarios that you've laid out spell out
Speaker 1: very different kind of futures that the league might might
Speaker 1: see and might be signaling that they want to see. Right,
Speaker 1: Because if you get like a slap on the wrist,
Speaker 1: they're saying, we don't actually care that much about this
Speaker 1: kind of stuff. Keep on doing it.
Speaker 2: And this is why like you or I right, who
Speaker 2: play competitive games or follow competitive sports, right, we have
Speaker 2: a very efficient market. Right. If you do not enforce
Speaker 2: your rules, I guarantee you that there's not going to
Speaker 2: be some gentlemen's agreement not to highlight them that you
Speaker 2: will have. You know, you will have a bigger problem, right,
Speaker 2: It's just fucking it's guaranteed. That's how an equilibrium works
Speaker 2: in an efficient market in the NBA is a regional
Speaker 2: approximation of an efficient market run by players that are
Speaker 2: very smart and agents that are very smart, and owners
Speaker 2: that will talk about their intelligence in the moment, but
Speaker 2: certainly owners who are very, very competitive and accomplished and
Speaker 2: have the financial means of social connections to accomplish what
Speaker 2: they want the large majority of the time. And I
Speaker 2: think Adam Silver is smart enough to know that, right.
Speaker 2: I mean, like the other defense I've heard prominently by
Speaker 2: by Mark Cuban, former Dallas Mavericks owner, another smart, accomplished guy,
Speaker 2: has been a big defender of Balmer. His defense is
Speaker 2: Steve Balmer couldn't do something this stupid, to which I say,
Speaker 2: have you ever fucking met a billionaire before? Like the
Speaker 2: billionaire I haven't met Elon Musk, right, who was until
Speaker 2: recently advising the President of the United States. And I
Speaker 2: think I have a high opinion about some aspects of
Speaker 2: Elon Musk, but like, but you know, I also have
Speaker 2: the opinion that Elon Musk would be one example of
Speaker 2: how billionaires can can believe in wrong and things and
Speaker 2: be sloppy and be very arrogant, and like I think
Speaker 2: arguably also like you know, maybe it's like rational for
Speaker 2: him to say, Okay, we didn't expect this company to
Speaker 2: be fraudulent and to have all this discovery that uncover
Speaker 2: these under the table relationships, and Okay, we know what's
Speaker 2: the worst case. You're not going to take away the team.
Speaker 2: They're not gonna take away the team. So maybe you
Speaker 2: have a twenty percent chance of discovery times a fifty
Speaker 2: percent chance conditionally that you get punished for it, right,
Speaker 2: so like a ten percent chance you get suspended for
Speaker 2: a year. And yeah, there's some draft picks. The Clippers
Speaker 2: are pretty fucked anyway, right, you know, when you don't
Speaker 2: have many of good draft picks, removing the remaining few,
Speaker 2: I mean, he can just sell them and go buy
Speaker 2: a soccer team or WNBA team or whatever else. Right,
Speaker 2: So it might be quite rational even given the possibility,
Speaker 2: but not the certainty of this harsh punishment. I mean,
Speaker 2: isn't all the literature that like, it's the certainty of punishment,
Speaker 2: not the severity that actually deters crime. Maybe it's yeah,
Speaker 2: maybe it's actually wrong.
Speaker 1: And it's both, it's both, but the certainty is definitely
Speaker 1: quite important. And I think, I mean, the hilarious thing
Speaker 1: of the calculus that you've just laid out is it's
Speaker 1: one of these like ah shit, Like I didn't realize
Speaker 1: that microoked dealings would come out because the company that
Speaker 1: I'm using it has even bigger crooked dealings. Right, we
Speaker 1: didn't realize that that wasn't part of the calculus. We
Speaker 1: thought the company was more legit, which which is quite amusing,
Speaker 1: Right when you're doing something wrong and it turns out
Speaker 1: that you get punished because the entity that you're partnering
Speaker 1: with did something even more wrong.
Speaker 2: And there are other like Kawhi Leonard always gets hurt
Speaker 2: in the playoffs, right, Like if you removed his salary
Speaker 2: from their books, they might not mind that so much,
Speaker 2: you know what I mean. It's so there's all types
Speaker 2: of perversion centers. And like arguably, if you're not willing
Speaker 2: to like say, see Bomber, you have to sell the team.
Speaker 2: We're moving the team to Seattle, even though he just
Speaker 2: built this new arena, the Lakers can move in there instead.
Speaker 2: How pissed would he be then, right, you know, I
Speaker 2: mean that would create a real deterrent.
Speaker 1: But like yeah, yeah, no, no, people need real to terms.
Speaker 2: I think the NBA understands although Adam Silver is not
Speaker 2: the draconian ruler that former commissioner David Stern was, necessarily
Speaker 2: you know the other thing about billionaires, they could just
Speaker 2: be sloppy, right, they they they delegate to know that, Like,
Speaker 2: you know, this is partly why the League, spartly in
Speaker 2: the constitution says that, like we have to look at
Speaker 2: circumstantial evidence because, like you know, you don't do this
Speaker 2: in an email. You do this in a phone call,
Speaker 2: or better than a phone call, you do it in
Speaker 2: a meeting over coffee at some lemonade at the country club,
Speaker 2: and you have the conversations there, and then you hire
Speaker 2: like a middle man who might have a slightly more
Speaker 2: fingerprints on it, right, or you're kind of informed, you know,
Speaker 2: you tell somebody, hey, do you haven't you don't know
Speaker 2: anybody who could maybe help Kawhi get some sponsorships, right,
Speaker 2: maybe a little step further and say, you know what,
Speaker 2: anything within you know, within the higher end of market value,
Speaker 2: you know what I mean, Like if you instructed somebody
Speaker 2: to do that, they would kind of get the right impression.
Speaker 2: If you're a billionaire caterer, I imagine you're quite good
Speaker 2: like taking the implicit instructions from your billionaire So is
Speaker 2: not to create legal liability for them?
Speaker 1: Yeah, no, I mean I think this is the one
Speaker 1: thing that they did not take from the mob playbook.
Speaker 1: They got the no shows correct. But the one thing
Speaker 1: the mob always knew is that someone is always listening.
Speaker 1: Someone's always watching, right, watch it, watch it, and don't
Speaker 1: leave a paper trail, and never communicate things on you know,
Speaker 1: landlines or things that might be tapped, and try to
Speaker 1: hold meetings while walking outside, you know, et cetera, et cetera,
Speaker 1: et cetera. But I think that billionaires forget that and
Speaker 1: do get sloppy because they think they can afford to
Speaker 1: be And so you do need to have punishments that
Speaker 1: are larger, kind of a magnitude larger, in order to
Speaker 1: deter that kind of behavior. And it's very interesting to
Speaker 1: me to see, yeah, to see this playing out in
Speaker 1: a realm that I know very little about, and it
Speaker 1: turns out that it has all these parallels with realms
Speaker 1: I know a lot about, because billionaire behavior turns out
Speaker 1: to be pretty similar. Across the board. We're thinking, you
Speaker 1: going to get away with shit and skirt the rules,
Speaker 1: and you know what, usually you can. So on that note, Nate,
Speaker 1: do you want to take a break and talk about
Speaker 1: whether New York needs more of them? Do we need
Speaker 1: more millionaires? Do we need more billionaires? In the state. So, Nate,
Speaker 1: there has been a report that recently came out by
Speaker 1: the Citizens' Budget Commission that argues that New York needs
Speaker 1: more millionaires because it's been adding millionaires at a lower
Speaker 1: rate than that of other larger states. And what that
Speaker 1: means is that the state is not getting as much
Speaker 1: in tax revenue. So there's this, you know, theoretical unrealized
Speaker 1: potential revenue that it could be getting if millionaires were
Speaker 1: coming to New York at comparable rates to other states,
Speaker 1: and instead it is not. And we see increases in Florida,
Speaker 1: we see increases in Texas. We even are seeing increases
Speaker 1: in California, which has someone say, even more punitive kind
Speaker 1: of tax rules than New York does. But for some reason,
Speaker 1: you know, they're adding millionaires at a much faster rate
Speaker 1: than New York is. So in between twenty ten and
Speaker 1: twenty twenty two, the New York millionaire population has almost doubled,
Speaker 1: but in the other states it's more than tripled. And
Speaker 1: so the argument of this report is that, you know,
Speaker 1: we should have more rich people so that they can
Speaker 1: pay more taxes. Of all, Nate, you know, this is
Speaker 1: obviously where we've talked about Mom, Donnie affordability. You know,
Speaker 1: we're getting to elections. It's interesting timing for the report
Speaker 1: to come out.
Speaker 2: But what do we what do we think?
Speaker 1: What do you just think in general about this argument that,
Speaker 1: oh shit, you're not keeping up with the Joneses, Right,
Speaker 1: you're not keeping up with other states in terms of
Speaker 1: the rate of millionaire acquisition as a metric.
Speaker 2: Oh, it's it's only it's only doubled. I guess it's
Speaker 2: a little surprise, you know, I know.
Speaker 1: A little less than doubled in over twelve years.
Speaker 2: Do you know where they're going? Are they going to
Speaker 2: Florida or New Jersey?
Speaker 1: So so they're going. I don't know where the where
Speaker 1: the New York ones are going. What we know is
Speaker 1: that so the three states that are having larger increases
Speaker 1: are Florida, Texas, and California.
Speaker 2: Look, the New York tax code is fairly pinitive to
Speaker 2: high earners, and there's a New York City tax on
Speaker 2: top of that. So you know, you're you're effective tax
Speaker 2: rate is over fifty percent if you're earning ordinary income
Speaker 2: as a high earner in New York City, right, I mean,
Speaker 2: you know, are used to there with like the the
Speaker 2: Laugher curve. This is kind of Reaganomics, right.
Speaker 1: Yeah, talk about the Laffer curves.
Speaker 2: So Art Laugher was a Reagan economist who drew a
Speaker 2: curve and said, well, you know, there is some optimal
Speaker 2: tax rate where you maximize government revenue. But it hasn't
Speaker 2: inverted you because at some point, like if you tax
Speaker 2: every dollar one hundred percent, then nobody works because there's
Speaker 2: no one sentive to work because the government gets all
Speaker 2: the money anyway. So there are some optimal tax rate,
Speaker 2: and there are all these debates about how to quantify
Speaker 2: like where that optimal tax rate might be, you know,
Speaker 2: I mean it's possible. And by the way, you know,
Speaker 2: even as if you're not on the other side, So
Speaker 2: if you're on the wrong side of Laffer curve, then
Speaker 2: you actually make less money by tax people more because
Speaker 2: people less and or relocate. You know, even if you're
Speaker 2: not in in the upper part of the Laffer curve
Speaker 2: right then or at the peak, then you do still
Speaker 2: encounter diminishing returns. You can imagine like a parabola. Right.
Speaker 2: I think New York City still offers a pretty unique
Speaker 2: I mean, I'll be frank, like, I choose to live
Speaker 2: here and pay I pay a lot of taxes, and
Speaker 2: I also have a home in Westchester County where I
Speaker 2: pay a lot of taxes. Right, because, like, I really
Speaker 2: like New York and there's not any particularly close second.
Speaker 2: Maybe if maybe if Iroba be like Las Vegas better,
Speaker 2: it's been half the year out there with you or something.
Speaker 2: But like, I think progressives need to understand that, like
Speaker 2: you do encounter diminishing returns when you just tax rich
Speaker 2: people more and more. They can decide to work less.
Speaker 2: They can decide to especially with Trump having good at
Speaker 2: the irs, right, they can decide to legally hide income
Speaker 2: were illegally high income. Right, they can decide to move
Speaker 2: and like when you start to have you know, if
Speaker 2: they feel as though that they're not getting their money's worth,
Speaker 2: if they feel like the quality of New York City
Speaker 2: is declining, right, Like I don't know, Like, you know,
Speaker 2: if we had the crime problems in New York City
Speaker 2: that they have in some other cities, then I'm not
Speaker 2: super sensitive to crime, but then I might leave right then,
Speaker 2: you know, if if if they hadn't really built sure
Speaker 2: La Guardia Airport, if the subway weren't I think still
Speaker 2: one of the best transportation systems in the world, if
Speaker 2: we didn't have so many you know, beautiful we.
Speaker 1: Have the best rats. Nay, we have the best rats.
Speaker 2: We have a lot of trash cans. We figure that out, right,
Speaker 2: if we didn't have these beautiful parks and all five
Speaker 2: burrows and and things like that, Right, if you didn't
Speaker 2: have those things, then I might say fuck it. And
Speaker 2: you know, you do have to worry potentially about like
Speaker 2: downward spiralles where But like I again, I'm kind of
Speaker 2: a free market guy, right, I also recognize that, as
Speaker 2: an empirical fact, wealthy people have a disproportionate amount of
Speaker 2: influence in politics, so it's hard to you know, I
Speaker 2: think it'd be great at New York hadbar billionaires. My
Speaker 2: guess is that the current tax co is probably something
Speaker 2: close to two optimal for the overall welfare of the city.
Speaker 2: If you tried to increase it more, I could see
Speaker 2: I could see them being problems. I mean, I think,
Speaker 2: you know, I have friends who are who are wealthy.
Speaker 2: I should say, you know, I'm pretty wealthy myself relative
Speaker 2: to a lot of people, and some of them I
Speaker 2: think seem irrationally concerned about Zarron because like tax policy
Speaker 2: in New York is art addictated by New York State anyway,
Speaker 2: and there are lots of political and practical constraints and
Speaker 2: other things like it's not I'll put it like this,
Speaker 2: it's even as a free market guy and a guy
Speaker 2: who pays a lot of taxes in New York, maybe
Speaker 2: a member of the class, even this is not the
Speaker 2: most sympathetic cause I don't think.
Speaker 1: Yeah, no, I agree with you that it's definitely not
Speaker 1: the most sympathetic cause. By the way, I'm just looking
Speaker 1: at more from this report and their contention is that
Speaker 1: if New York City's rate of growth rate of millionaires
Speaker 1: had kept up, that would have been thirteen billion in
Speaker 1: additional taxes in twenty twenty two, which is the most
Speaker 1: recent year of data. So that's kind of where where
Speaker 1: they're coming from numbers wise. But you know, it is
Speaker 1: it is like it's not a zero sum game necessarily.
Speaker 1: As you say, a lot of the migration, because this
Speaker 1: is something that you just asked about, Nate, like, well,
Speaker 1: you know where are they going? That a lot of
Speaker 1: the families that are leaving are actually not millionaires. They're
Speaker 1: kind of the middle at least for New York middle
Speaker 1: class families. For other parts of the country, they would
Speaker 1: be considered I think upper middle class that make two
Speaker 1: hundred three hundred thousand, those are actually that's the demographic
Speaker 1: that's leaving the fastest, that's the biggest outflow. A lot
Speaker 1: of millionaires are not that sun sort of to like
Speaker 1: a marginal few percent tax, right if they're living where
Speaker 1: they want to live, because they want to live where
Speaker 1: they want to live, right, Like, that's part of the
Speaker 1: point of having of being a millionaire, that you want
Speaker 1: to live in a place where.
Speaker 2: You're where you're having. Economist call superstar effects, right, And
Speaker 2: it originally pertains to entertainers. I think there probably are
Speaker 2: some cases where it can apply to something like a
Speaker 2: hedge fund manager to write where they attract the most
Speaker 2: talent and they get more lot your funds to invest with,
Speaker 2: right or an AI researcher. This are more in California
Speaker 2: than in New York. But you know, New York is
Speaker 2: kind of irreplaceable. I think, you know, in fact, I
Speaker 2: think kind of, yeah, California is struggling more in some ways.
Speaker 2: I think you hear that San Francisco is like rebounding
Speaker 2: a little bit, but like you know, since COVID, I
Speaker 2: haven't heard nearly as much La West Coast jealousy from
Speaker 2: from New Yorkers. Right, I'd like to see more more
Speaker 2: housing at all levels of the ecosystem. Right, I'd like
Speaker 2: to see more of that.
Speaker 1: Right.
Speaker 2: But like you know, if you don't like it, then
Speaker 2: then leave, and they don't buy and large leave because
Speaker 2: New York still offers, you know, a high and improving
Speaker 2: I feel like value preposition.
Speaker 1: Yeah, I agree with you that New York is still,
Speaker 1: despite everything, a good value proposition, and for a certain
Speaker 1: type of person there is no other replacement. So I
Speaker 1: think that, you know, my takeaway is that this is misplaced, right, saying, oh,
Speaker 1: we don't have enough millionaires. I think that we'd be
Speaker 1: better served looking at some other areas where we can
Speaker 1: improve in order to kind of just get a better
Speaker 1: experience for everyone in the city. And that the millionaires
Speaker 1: are not going anywhere, at least for now, I mean
Speaker 1: that we're not. We're not at that point.
Speaker 2: The one thing I'll say is these things can have
Speaker 2: cascading effects, at least at least in principle. So, like
Speaker 2: you know, I said, I would never need leave New
Speaker 2: York in the near future. Have like lots of social
Speaker 2: ties here. If half my friends left New York for Denver, right,
Speaker 2: that might be a different story, you know what I mean.
Speaker 2: And likewise, if you have a vicious circle where there's
Speaker 2: lux tax revenue coming in, so things I like about
Speaker 2: New York, the parks and the overly expensive but now
Speaker 2: quite nice airports, and the slightly dirty but very efficient
Speaker 2: subway and everything else, right, if those things deteriorated, then
Speaker 2: you know, that can create a vicious cycle. And we
Speaker 2: have seen the city into.
Speaker 1: Yeah, absolutely, which is why I think it's important to
Speaker 1: try to focus on that kind of stuff, you know,
Speaker 1: focus on the infrastructure, focus on making the experience good.
Speaker 1: Obviously you need tax revenue for that tax revenue. New
Speaker 1: York has still been going up, you know, so it's
Speaker 1: not like we're not yet that in that place. But
Speaker 1: I do think it's very important to keep that in
Speaker 1: mind and to understand that cities have gone through periods
Speaker 1: like that, right, even New York. New York has recovered,
Speaker 1: but there have been some pretty nasty points in New
Speaker 1: York City's history. But yeah, with that said, I think
Speaker 1: you and I are on the same page that we
Speaker 1: don't think that the millionaire port is the number one
Speaker 1: problem facing New York City right now, and so yeah,
Speaker 1: we appreciate that this report is coming out, but billionaires,
Speaker 1: there are lots of millionaire related problems, and I don't
Speaker 1: think this is one of them. On that note, Nate,
Speaker 1: I'm going to enjoy the fact that I'm in New
Speaker 1: York right now and go enjoy this fantastic city. Let
Speaker 1: us know what you think of the show. Reach out
Speaker 1: to us at Risky Business at pushkin dot FM. Risky
Speaker 1: Business is hosted by me Maria Kanakova.
Speaker 2: And by me Nate Silver. The show was a whole
Speaker 2: production of Pushing Industries and iHeartMedia. This episode was produced
Speaker 2: by Isaac Carter. Our associate producer is Sonya gerwit Lydia,
Speaker 2: Jean Kott and Daphney Chen are our editors, and our
Speaker 2: executive producer is Jacob Goldstein. Mixing by Sarah Bruguer.
Speaker 1: If you like the show, please rate and review us
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