Death of the Middle Class: Billionaire vs Entrepreneur DEBATE - Daniel Priestley v Nick Hanauer
In a Nutshell
Billionaires like Nick Hanauer and entrepreneurs like Daniel Priestley agree that technology and financialization by mega-corporations and trillion-dollar funds have hollowed out the middle class by eroding wages, cutting out middlemen, and concentrating ownership. They diverge on solutions: Hanauer pushes higher minimum wages, progressive taxation, overtime rules, and government ownership stakes in AI companies to recycle value back to citizens, while Priestley argues these policies have already failed in the UK and that the real fix is reducing taxes and regulations on small businesses so more people can own assets—houses, family businesses, and shares. Both conclude that capitalism requires broad ownership and participation to survive, not just better labor standards, because technology will continue displacing wage labor.
These notes were generated by AI and may contain inaccuracies.
There is literally no example on planet earth of a high functioning society without big government. Big government is sucking the life out of small businesses. Businesses in the UK state that as soon as they earn anything the government taxes it away. The suggestion to pop off to Dubai and run the business virtually to pay no tax is described as idiotic. The position is that taxes and pressure on small businesses need to be reduced because everyone in the economy needs to own stuff including a house, a business, and shares.
Not everybody can be an entrepreneur. Ownership starts with earning enough money so that people can save money and begin to own something. The problem is wages because most people want to go to work, be treated decently, earn enough money to feel secure, get married, have kids, and own a house. Houses are unaffordable, local jobs do not exist, technology has cut out all the middlemen, and no one is paying healthy wages, resulting in the most unhappy population.
Nick's policies have been seen implemented and are viewed as not enough. The rules that people grew up with have changed and people have to learn the rules of the new economy. To get the economy back on track, the starting point must be addressed.
Nick Hanauer sold a company for almost $7 billion. He was raised in a civic family that takes civic responsibility seriously and came from middle class people. His father started working for a tiny family business his grandfather had started manufacturing bed pillows and down comforters. Hanauer had an early intuition about the internet and its role in commerce. He had a friend named Jeff Bezos who wanted to start an e-retailer. Bezos was working in New York for a hedge fund and ended up sending his stuff from New York to Seattle to Hanauer's house. They started Amazon.com together. Hanauer later helped run manufacturing businesses and e-commerce businesses. His friends and he own a bank.
This broad perspective informed an intuition that everything people are taught about economics today, the conventional view, is a pack of lies. If taken seriously and policy enacted on that basis, the only thing that can happen is that the rich will get richer and everyone else will get poorer.
In 1980 the top 1% of Americans shared about 8.5% of national income. By 2007 that share had grown to 22%, nearly triple. The bottom 50% of Americans saw their share fall from about 18% in 1980 to 12% in about 2007. These numbers were placed in a spreadsheet with the projection that if the trend continued for another 30 years the result would be revolution. It is impossible to sustain a capitalist democracy if the top 1% controls 45 or 50% of income and the bottom 50% shares 5%.
Even a cursory reading of history shows that when societies get as unequal as current societies, terrible things start to happen. This leads to either a police state or a revolution. The pitchforks are here. The Trump administration is one of the canonical examples of a society beginning to tear itself apart. People with power and resources have the responsibility to do the right thing.
Daniel Priestley grew up in Australia. As a teenager he discovered entrepreneurship and got an entrepreneurial mentor very early on. He did two years in a startup. At 21 he started his own company, his first agency, which grew rapidly from zero to a million in its first year and 10 million in year three. He fell in love with entrepreneurship, small business, and family business. 15 years ago he started an entrepreneur accelerator where people get together to talk about entrepreneurship and figure out how to run their businesses. He has spent countless hours with 5,500 businesses all over the world.
Priestley reached a similar conclusion that the technological revolution in the last 25 years has hollowed out the middle class. The rules of the old economy no longer apply and the rules of the new digital economy must be learned quickly or displacement and disruption will occur. He did not come from any form of wealth or money and self-funded and bootstrapped his own businesses using credit cards. If more people cannot participate in the benefits of capitalism they are going to do crazy things and vote in socialism. The pitchforks will come and inequality is a toxic corrosive force. Priestley is a capitalist who wants lots of people to benefit from capitalism and wants to include more people in the benefits of capitalism.
Taxing people like the speakers a lot more is the prevailing narrative. When looking at what is draining the economy, mega corporations and mega funds are identified. In the UK houses are being bought up by BlackRock, a massive private equity fund that wants the entire population to be a rental class forever. The prime minister walked down the street hand in hand with the CEO of this big fund. Big companies like Microsoft and Amazon want to do business in a country but pretend they are in Luxembourg or Ireland so they do not pay tax. Starbucks sells coffee next to mom and dad family business coffee shops but sends license fees for the Starbucks logo to Bermuda. Massive mega corp businesses are bigger than could ever have been conceived and are as big as nations. Mega corp funds are also trillion dollar funds.
A dynamic entrepreneurial person or a billionaire like Nick is not the enemy. James Dyson who invents a cool vacuum cleaner and sells a lot of them is not the enemy. Paul McCartney who writes songs and becomes a famous Beatle and makes a billion dollars is not the enemy. The enemy is the financialization of homes and big mega corps that do not want to pay tax. More nuance is needed to identify who is hollowing out the middle class and make policy choices.
Taxing the rich is a headline that creates enemies who are not actually the enemies. Increasing the tax rate on the top 1% could be done for political reasons because it would make people feel good, but it will not change the economy. What needs to happen is a thriving entrepreneurial class. Small businesses are the answer. The biggest mistake the UK government is making is not seeing that the 5.7 million small businesses are their biggest asset. Curbing the issue with mega funds and stopping the pretense that Amazon is in Luxembourg and Google is in Ireland are necessary steps.
It is not true that the richest people in the United States pay a lot of tax because the American tax system is riddled with loopholes that allow the richest citizens to pay taxes at a rate of half of what ordinary people pay. In a high functioning democracy the wealthiest citizens will pay taxes equal to or greater than the typical citizen. This is not the case in the United States. The problem is wages.
The median full-time worker in the United States today earns in the range of $60,000 a year. If that person had maintained their same share of the economy since 1975 they would earn close to $120,000 a year. The effect goes up to the 90th percentile. Someone earning $180,000 in 2018-2020 who had maintained their same share of GDP would earn like $250,000 a year. Over 50 years the only people who benefited directly from economic growth and productivity gains were the people in the top 10% and the majority of benefit went to the top 1%. Trillions of dollars a year that used to be wages for ordinary Americans now end up in the pockets of the richest people using the mechanisms of mega corps and funds.
Neoliberalism, the set of ideas around economic cause and effect that came into force in the 70s and 80s including Reaganomics and Thatcherism, cut taxes for rich people, deregulated powerful people, and suppressed wages for working people, which is trickle down economics. These policies resulted in a huge shift in concentration from smaller businesses to bigger businesses and a huge shift in income from ordinary Americans to the very rich. Rich people should pay their fair share. It is ridiculous for somebody who makes half a billion dollars a year to pay a 15% tax rate while somebody who makes $200,000 a year pays 40%.
Optionality is the most important thing. When someone has lots of options they do not accept terrible conditions. If there are 10 companies wanting to hire a person they will choose the best option. If someone lives in a town where there is only one employer they have to accept whatever is offered. Teaching entrepreneurship in schools gives people the option to start a family business. With no minimum wage but 10 employers and a limited pool of workers, employers will bid against each other to create better working conditions and better pay. Minimum wages are only needed when there is not enough optionality.
The theory of marginal productivity is embedded in the center of economics and says that because markets are efficient the amount of money earned reflects precisely the contribution made. The theory asserts that earnings accurately reflect value created in the world. This idea is central to capitalism and economic policy. In 1879 Henry George wrote the book Progress and Poverty. JP Morgan brought John Bates Clark to Columbia University to fix the problem Henry George presented. Clark wrote the book The Distribution of Wealth in which he invented the theory of marginal productivity. Clark stated the quiet part out loud that the theory must prove to working people that no matter how much they make it reflects their value because if they conclude their work is worth more than they are paid they will revolt.
Ability to earn is related to power to negotiate, not some magical number the market decides. It is how easy a worker is to replace. Running a job ad and receiving 400 qualified applicants means no need to raise wages. There are almost zero circumstances where workers have more power than owners. Adam Smith in The Wealth of Nations outlined this asymmetry of power. Persuading people that what they earn is all they are worth creates a narrative that makes rich people richer and everybody else poorer.
If the stylized invention dating back to 1787 is taken seriously and policy enacted on that basis the only thing that can happen is that the rich will get richer and the poor will get poorer, which describes the last 50 years. The starting point to solving the problem is getting people to understand economics in a way that actually reflects how the economy works.
A policy solution is to apply a standard requiring companies to pay a living wage. The minimum wage is a perfect example of a great policy. Another important policy in the United States is the overtime threshold, the salary threshold below which workers automatically get paid overtime at time and a half. In the United States the standard is 40 hours. That standard used to apply to virtually every worker in America in 1965-1970. Today that standard applies to less than 10% of workers. People have turned three 40-hour a week jobs into two 60-hour a week jobs and pocketed the difference. With gummy bears in the lunchroom and a ping pong table, people are forced to work 60 hours a week allowing two employees instead of three. Doing this 30 million times takes 10 million jobs out of the workforce.
The UK has had many of the recommended policies for the last 20 years including a minimum wage pegged at two-thirds of the median that ratchets up, 28 days of paid holiday every year, sick leave, maternity and paternity leave, and it is very difficult to fire someone after they have been employed more than 6 months. Despite these workers rights the UK has the most unhappy population, the economy is not growing, a million young people are out of work, and no one is hiring. This gives pause to think something deeper is going on.
Capitalism is about ownership. People have to own an asset. If people are just selling labor in the current economy with digital technology, AI, and robots, wages are affected. Technology has cut out all the middlemen and hollowed out the middle class. Video rental stores that used to have 12 people working are replaced by Netflix. Local retailers selling CDs are replaced by Spotify and Amazon. Supply chains that used to create amazing jobs are hollowed out. The value of labor has been eroded because it is very easy to outsource labor to another country and simplify jobs down to automated parts using technology. The fundamental value of actual labor has diminished because of technology. Technology has reduced the actual utility of labor for 90% of people.
Technology and AI are making many jobs obsolete, and this trend will continue downward. Simply focusing on lifting work standards misses the fundamental point that humans cannot compete with technology in many areas. The solution lies in ownership—everyone in the economy needs to own assets including houses, family businesses, and shares in growing companies.
The UK has already attempted to address this through improved working conditions without success, resulting in widespread dissatisfaction. Ownership cannot be outrun through marginal improvements in labor conditions.
The minimum wage in the United States stands at $7.25 per hour or $2.13 plus tips, representing roughly half to a third of the UK minimum wage. Despite this disparity, US median wages are one and a half to two times higher than UK median wages, giving Americans significantly greater disposable income.
Even when adjusting for healthcare costs, the average American worker remains approximately 30% better off. The average US salary is around $74,000 compared to roughly $52,000 in the UK. Americans pay $6,000 to $8,000 annually in healthcare premiums and out-of-pocket costs, while UK workers receive free healthcare through the NHS. However, the gap in base salaries and tax rates remains too large for UK healthcare savings to close.
The US economy has significantly outperformed the UK economy, with Brexit identified as a major contributing factor to UK economic struggles. Large technology companies, big finance firms, and mega corporations including Microsoft, Google, Amazon, and Starbucks have hollowed out the middle class and possess the capacity to pay workers more.
Small businesses operating on razor-thin margins—including pubs, retailers, and family-owned operations—face disproportionate pressure from minimum wage increases, additional taxes, and government regulations. These businesses often lose money and provide no income to owners while serving as critical entry points into the economy.
A progressive minimum wage structure is proposed where the largest companies pay the highest minimum wage, medium-sized companies pay slightly less, and small businesses pay the lowest rate. This approach aims to ensure workers earn enough money to participate in the economy as consumers.
The National Restaurant Association in America exemplifies contradictory positions—wanting all Americans to patronize restaurants while resisting wage increases for restaurant workers.
Progressive minimum wage structures create concerns about talent competition, as workers would naturally prefer employment at larger companies offering higher mandated wages. Small business owners may need to match higher wages voluntarily rather than through legislation.
Small businesses can employ various retention techniques beyond compensation. Higher wages across the economy benefit small businesses by increasing customer spending power—workers earning more can afford to patronize local establishments.
The $15 minimum wage implemented in Seattle, Washington, generated significant concern among small business owners regarding increased expenses. However, the benefits of operating within a higher-earning economy—including increased customer spending—cannot be easily calculated but provide substantial advantages.
The comparison between a ham sandwich costing 25 cents in Somalia versus $25 in Switzerland illustrates the type of economy desired.
A UK pub owner example demonstrates the current crisis: the business lost £180,000 in the previous year with the owner taking no salary. The business faces high VAT, training costs for first-time employees, and serves as one of few local employers. Large American private equity funds threaten to purchase such community assets and convert them into residential developments.
Small businesses in the UK face constant pressure from big tech companies and financial institutions, including requirements to master AI tools, maintain LinkedIn presence, and create video content to remain competitive.
The fundamental issue is that people struggle because they own nothing, not because of working conditions. Ownership begins with earning sufficient wages to enable saving and asset accumulation.
Stock option distribution to all employees often fails because 90% of workers prioritize immediate cash needs over equity. When given the choice between cash and stock options, workers overwhelmingly select cash.
For 40-50 years, the United States successfully maintained standards requiring companies to share value with employees through unions, minimum wage laws, overtime thresholds, and policies discouraging industry consolidation. However, modern conditions differ fundamentally—companies can now easily outsource work to countries like the Philippines or automate 80% of job functions through software.
Neoliberal free trade policies flooded Western markets with cheap Chinese goods while making Chinese lives better but failing to improve conditions for UK and US workers.
Norway and Singapore operate successful sovereign wealth funds that own natural assets, providing every citizen with ownership stakes. The UK discovered North Sea oil in the 1980s alongside Norway but chose to sell licenses to British Petroleum rather than establish a sovereign wealth fund. Australia similarly lacks a sovereign wealth fund despite abundant natural resources.
The UK historically operated sovereign wealth fund-style structures including the East India Trading Company during its imperial period.
Baby bonds represent another ownership model where newborns receive approximately $1,000 worth of stock market shares that compound over 18 years, providing young adults with assets to leverage. Donald Trump has proposed similar mechanisms.
Housing financialization represents a critical problem where approximately half of property value represents utility value for living, while the other half represents financial speculation value for rental income. Private equity firms and banks including Lloyds Bank through Citra Living are purchasing thousands of homes to create permanent rental properties.
The UK maintains better worker rights including paid vacation and up to 39 weeks of statutory maternity pay, compared to zero mandated maternity leave in the US. The US exhibits greater inequality with the top 1% holding over 30% of national wealth versus roughly 20% in the UK, making the US the most unequal G7 nation.
However, the US economy has grown over 100% faster than the UK between 2019 and 2026. Brexit has reduced UK growth rates by 8-10% and affected unemployment and productivity by 4% each.
Germany, Australia, New Zealand, Canada, and Western European countries all maintain strong worker protections and safety nets including healthcare and welfare systems. The United States stands as the outlier among modern capitalist economies regarding minimal safety nets.
Despite comprehensive worker protections across English-speaking democracies and Western Europe, public discontent and social tension persist everywhere, indicating that worker rights alone do not resolve underlying economic grievances.
During the George Floyd riots, an interviewee explained lack of respect for property rights by stating that people own nothing and therefore see no reason to respect property. Inequality extends beyond economic inconvenience—it destroys reciprocity norms essential for social cohesion and democracy, creating conditions where people feel they must grab what they can.
Small businesses create approximately 70% of all new jobs, not governments or large corporations. Entrepreneurship provides individuals with control over their circumstances. If 100,000 entrepreneurs each hired 10 people, this would generate one million jobs and create diverse employment options.
The current K-shaped economy—where outcomes diverge dramatically between different population segments—previously occurred during the Engels Pause from 1790 to 1840. Headlines from that era mirror contemporary complaints: record profits for industrialists while workers experienced no improvements.
The solution implemented during the Engels Pause involved exporting people to Australia. The underlying cause was technological—the Industrial Revolution introduced steam engines, spinning looms, and tractors. Technology owners and operators advanced while non-participants declined.
For approximately two generations (50-75 years), everyone except capital owners experienced declining conditions. Political consensus eventually shifted, allowing working people to reclaim value through organized action.
The conversation addresses how businesses can now easily relocate to avoid taxes while still benefiting from a country's market, rule of law, and infrastructure. Nick Hanauer describes this system as idiotic and suboptimizing. As an American, he notes that individuals cannot simply operate in a place and avoid tax obligations, highlighting the difference between individual and corporate tax treatment.
Hanauer identifies corporations as the primary problem, pointing out that companies can set up offices in Ireland or Luxembourg to minimize taxes. UK-based entrepreneurs face the choice of staying and paying 40% tax or moving operations to places like Dubai. The discussion explores whether UK citizens should pay UK tax wherever they go, with Hanauer arguing this would address one issue while acknowledging corporate tax avoidance requires separate solutions.
Hanauer proposes that tech platforms like YouTube should pay broadcast licenses based on where their customers consume content. He references the UK's historical broadcast licensing system where companies paid a flat fee to broadcast. The argument is that companies should pay tax based on where their customers are located, regardless of where profits are shifted through offshore entities.
The speakers discuss whether corporations should be taxed based on customer locations and whether individuals should pay tax irrespective of where they relocate. Daniel Priestley expresses concern about preventing people from making new lives in different countries, noting he moved from Australia to the UK 20 years ago. He argues that individuals should be able to establish new tax residences when they genuinely relocate their lives.
Priestley argues that wealthy individuals are not the main problem, as they pay substantial taxes and create economic activity. He identifies mega corporations as the entities extracting trillions from economies through tax avoidance. The discussion examines whether taxing corporations based on customer locations would lead to price increases passed on to consumers and small businesses.
Research indicates corporations rarely absorb new taxes, instead raising prices or blocking users in affected countries. Examples include Meta blocking news content in Canada under the Online News Act rather than paying local publishers, and Amazon terminating affiliate accounts in US states attempting to collect local sales tax. These cases demonstrate how large corporations can avoid compliance costs that smaller entities cannot.
The speakers note that major tech companies rarely exit markets entirely despite threats, as they operate global business models. Hanauer argues that after 20-30 years of favorable tax treatment, the system needs reform. He points out that the USA has become wealthy partly because it serves as the end valuation point where profits ultimately flow.
Priestley advocates reducing taxes and regulatory pressure on small businesses while creating special economic trading zones for smaller companies based in the UK. He suggests tilting the playing field toward small businesses and startups rather than punishing large corporations. The goal is making the UK competitive for small businesses that pay local taxes.
Priestley mentions joining the board of Enterprise Britain, founded by Brent Herman of Founders Forum and Steve Fitzpatrick of OO. The organization aims to improve Britain's business environment, particularly for small and medium-sized enterprises, and find structures allowing companies to scale while remaining in the country.
The discussion shifts to artificial intelligence and its effects on jobs. Eric Schmidt's commencement speech is referenced, along with Anthropic's statement that entry-level jobs are at risk. Data shows declining entry-level job postings on LinkedIn. The conversation explores whether AI will cause significant job displacement.
Hanauer references Bernie Sanders' idea that the US should own 50% of AI companies, suggesting a sovereign wealth fund approach similar to Norway's model. He proposes recycling 50% of AI-created value to cushion economic disruption. Priestley notes this approach may benefit China and the US but could damage countries like Senegal, Southampton, or the Philippines that have benefited from outsourcing.
Priestley highlights that the UK has 5.7 million businesses and 1 million unemployed people. He argues AI can improve small businesses through marketing assistance, legal contract support, and other functions, potentially enabling these businesses to hire additional staff. The proposal includes training businesses on AI use and providing tax breaks for small businesses that hire.
The speakers discuss AI agents capable of performing computer-based tasks including data entry and cold calling. Priestley shares that his companies have implemented AI across operations and subsequently hired entry-level people whose value is augmented by AI tools. He describes an AI layer providing context, skills, models, and security that generates information, data, reports, and recommendations.
Hanauer notes businesses compete through being cheaper or being better. AI enables one person with good tools to perform work previously done by five people. Rather than eliminating jobs, companies could retain staff with AI tools to outcompete competitors. He draws parallels to calculators and computers, which initially caused concern but ultimately increased rather than decreased work volume.
Priestley contrasts AI's instant global distribution with the slower rollout of computers. He notes his team has no intention of letting staff go due to AI and is focused on reskilling. However, some companies are managing workforce reduction through natural attrition rather than new hires, with one CEO reporting 25% annual attrition in call centers without replacement hiring.
Priestley describes a husband and wife video production agency in northern England that used AI to create software automating script writing. The software attracted 5,500 people to a waiting list, signed 1,500 clients, and led to hiring a team of 10 people. This growth occurred without raising millions in funding or hiring 30-40 people initially, demonstrating how AI enables small constrained businesses to scale rapidly.
The speakers reference the Jevons Paradox, noting that when tractors displaced agricultural workers, those workers moved to cities seeking employment. This transition produced social upheaval documented by Charles Dickens and contributed to Karl Marx's ideas. The discussion explores how to manage sudden economic shifts caused by technological change.
Options discussed include Universal Basic Income and sovereign wealth funds. Hanauer argues that if AI valuations are predicated on job disruption, some of that created value should be recycled to cushion the transition. Priestley questions whether this approach differs from broader proposals to recapture value from companies and wealthy individuals disrupting the economy.
Hanauer distinguishes between socialism and common sense approaches, noting that high-functioning democracies operate with progressive taxation and labor standards. He clarifies the difference between seizing private property and owning strategic assets, citing Dubai's government ownership of hotel buildings leased to operators with proceeds going to a sovereign wealth fund.
Discussion on whether governments should take portions of companies like those in Dubai that developed assets. In a capitalist society, data is described as the new oil and a common good that has been illegitimately sequestered by companies. The argument is that companies should pay a license fee to a sovereign wealth fund for using common assets like data taken from people in Africa, Britain, Australia, and Canada rather than seizing what companies created.
The nature of the economy changes over time. 250 years ago, the economy was based on land under feudalism and colonialism. Then came industrialization with socialism and capitalism. Now the economy is shifting to an enterprise economy. Economics recognizes four factors of production: land, labor, capital, and enterprise. We are swinging like a pendulum through these factors and need an economic system that reflects how money and wealth are actually made today.
Skepticism is expressed toward socialist ideas, particularly those associated with Bernie Sanders. Clarification follows that Bernie Sanders is not advocating for government ownership of all means of production. Instead, the position is that markets should be managed for public benefit rather than exclusively for owners of capital. Amazon uses public roads and infrastructure, raising questions about whether governments should take 50% of such companies for public benefit.
Citizens already take part of company value through taxes, but current taxes on companies like Amazon are argued to be insufficient and do not accurately reflect the value provided by public infrastructure. Amazon is described as very successfully avoiding taxes. Agreement exists on the need to close tax loopholes so companies pay taxes like others operating in the economy.
A major issue identified is widespread incompetence in governments. A UK government statistic shows you are 10 times more likely to die than to be fired for poor performance, and the UK government fires people at 1/600th the rate of normal businesses for incompetence. There is an accumulation of massive incompetence in government with misaligned incentives and a revolving door between the financial-industrial complex and technology-industrial complex.
Singapore is cited as having a very high degree of meritocracy in government, promoting and firing based on outcomes and merit. It is described as a miracle of governance and an astonishing story of capability, competence, and foresight, though it is a very small place that benefited from a well-meaning dictator. The model demonstrates high competence in governance.
All parties agree the AI revolution will cause job disruption with new types of jobs emerging and a delta of people transitioning. Recruitment processes are already changing, with difficulty finding people with certain skill sets. The school system needs to produce people companies want to hire, though this takes significant time. In hiring, the question "how deep are you in the AI rabbit hole?" is used, and strong affirmative answers lead to job offers.
Humanoid robots are advancing rapidly. Elon Musk's pay package is tied to delivering millions of humanoid robots. Figure AI released video showing a humanoid robot sorting packages on a production line for eight days straight, outperforming humans. Autonomous vehicles are operating in Los Angeles with taxis driving themselves. There is a race to develop autonomous vehicles. New jobs will be created, though foresight makes predicting them difficult. The future is predicted to favor small businesses and small teams of 10 people making YouTube channels or software.
Anthropic released claims that individuals with teams of agents could make trillion-dollar companies without hiring anyone. Agents could make software, with the amount of code produced by individuals increasing eight times. An Anthropic engineer reported feeling useless because agents write code while the engineer watches. A massive deflationary effect would occur if one person could do many economic activities, with costs dropping to electricity expenses. Humans always find new things to do with each other, creating new jobs like personal trainers that would seem insane to previous generations.
History shows transition moments get ugly. No utopia is expected on the other side. Markets are viewed as the greatest social technology for creating prosperity and ennobling the human spirit because they function as evolutionary systems enabling groups to solve complex problems. Solutions to human problems constitute prosperity, not just GDP or money. The best world is a market economy governed by a robust democracy that includes all citizens.
One position advocates for small businesses as the future, with everyone happier when there are millions of small businesses. The counterview is that many people will work for large or medium companies, requiring standards and mechanisms to ensure companies treat people well enough for dignified participation in society and economy. This requires innovation in laws, rules, and mechanisms.
The conventional economic view treats including people in the economy as a liberal luxury affordable only with growth. The new economics position holds that including more people more robustly is the technical mechanism that makes economies grow and democracies function. Policy approaches must experiment aggressively with ways to include more people in the economy during uncertain transitions. Bernie Sanders' ideas represent experiments, with the question posed about what the worst outcome could be.
The worst outcome identified is giving government more money leading to leveraged debt. The US has $37 trillion in debt from wars and tax cuts for rich people. Printing money is possible but not connected to the proposed experiments. The worst outcome of running experiments is that a few dozen people worth $100 billion would instead be worth $200 billion. Democracies need to move aggressively to ensure technological innovations benefit society broadly rather than a few people narrowly.
Implementing policies like UK government ownership of 50% of AI companies could cause companies to restructure elsewhere because operations are digital. Energy costs in the UK are four times higher than elsewhere, which already caused OpenAI to not open a planned data center there. Super clever teams could restructure to places like Vanuatu, leaving governments holding toxic debt. If OpenAI makes $100 profit and government takes $50, China would have an additional $50 to invest in frontier models.
Taking 50% of stock would give government equal voting rights, potentially creating gridlock. Government directors on boards raise questions about innovation speed and bureaucracy. China has CCP representation on company boards and moves fast, though the government structure differs with varying competence and meritocracy. Distrust of government stems from personal experience of things made worse by government since 1981, with no good experiences cited.
No libertarian paradise exists where nobody follows rules, pays taxes, or lives like a king. Of 220 countries, 150 effectively have no government, but moving operations there would make one vulnerable. Democracy is acknowledged as the worst system except for all others. Government improves lives, and no high-functioning society exists without big government. Singapore is 22% government of GDP and involved in every element of people's lives with high competence.
Agreement exists that governments should fire incompetent people and increase velocity of competence through reforms. Microsoft bought a company for $6.4 billion that was growing 30-40% year-over-year with $750 million in sales, 200 million at IBA, and 3,000-4,000 internet advertising people, but the company was gone within a year and the entire amount was written off five years later. Incompetence exists everywhere, including big companies.
Hope for the post-AI world centers on stacking the economy in favor of small family businesses and small businesses. Agreement exists on tilting the balance of power from biggest most exploitive companies to small and medium-sized businesses. Big government and big corporate entities suck life out of little people and little businesses. Big government is viewed as the only force in human societies with power to confront big business.
Problems described are consequences of an economic paradigm designed to create them. Neoliberalism said bigger is better, afforded no protection to small businesses, actively advantaged largest players, and promoted free trade as good for everyone. These ideas led to concentration rather than growth. A capitalist system cannot be sustained unless most people are paid enough to buy what the system produces. There must be balance, and no thriving economy exists without imposing standards or creating countervailing power.
Agreement exists on most points with an inch of difference on the path. People are viewed as more than consumers. Ownership is the non-negotiable fix: people owning houses, small businesses, and shares in fastest-growing companies makes them feel like participants. Capitalism is ownership. The goal is more people born into families that own small businesses with parents earning enough income. Societies have both the right and responsibility to organize economies to benefit everyone.
Socialism defined as state ownership of means of production is not the answer and is a catastrophe because it can only split existing prosperity without creating more. Markets as evolutionary systems generate increasing prosperity through businesses competing as organisms to fill niches. Markets must be harnessed to benefit people broadly while preserving the profit motive.
The discussion centers on identifying an optimal middle ground between laissez-faire capitalism and socialism. Both extremes are considered problematic, with socialism leading to lower long-term economic growth and extreme capitalism producing higher growth alongside greater inequality. Evidence indicates that a market economy actively managed to include people represents the growth sweet spot, delivering more growth overall.
US GDP growth rates averaged 4 to 4.5% during the 1940s, 1950s, and 1960s. Following the neoliberal shift in 1975, rates declined first to 3% and subsequently to 2%. The median full-time worker currently earns approximately $60,000 annually. If workers had maintained their share of GDP since 1975, that figure would be $120,000 today.
The middle ground represents maximum growth, maximum participation, and maximum political stability. This concept aligns with what Daron Acemoglu and James Robinson describe as the narrow corridor—a balance between laissez-faire capitalism and socialism. Socialism undermines markets, while the impulse toward greater egalitarianism can be channeled into market economies that ensure fair worker participation and wage distribution.
Productivity and wages moved in tandem for decades until decoupling occurred in the 1970s, coinciding with declining GDP growth rates. The middle class is not an automatic byproduct of economic growth. Economists historically assumed economies operate under ergodic conditions, where outcomes remain independent of prior events.
Rock-paper-scissors exemplifies an ergodic game, where each round's outcome bears no relation to previous results. Monopoly represents a non-ergodic game, where advantages compound over time, eventually concentrating all resources with one player. Market economies exhibit non-ergodic characteristics marked by luck, path dependence, and compounding effects.
A thriving middle class and high-functioning society with social cohesion requires deliberate policy construction rather than emerging naturally. Current economic conditions stem from policy choices based on flawed economic theory that encouraged policymakers to favor certain approaches, resulting in systemic mistakes that can be corrected.
The early 1970s decoupling of the dollar from gold established a fiat system enabling money printing that inflated asset values, including family homes. Finance subsequently grew to represent 20% of the economy. Two dominant institutions—the technology industrial complex and the finance industrial complex—have driven a wedge through society.
Raising the floor through minimum standards constitutes table stakes rather than a complete solution. Technology and finance function as massive forces hollowing out the middle class. Specific reforms needed include preventing financialization of housing and protecting small businesses from eradication by large corporations.
Thriving towns feature numerous small businesses—local butchers, bakers, and similar establishments. Maran High Street represents London's strongest high street. The minimum wage approach proves insufficient in the UK context, where workers selling labor for money cannot close the gap with technology and finance sectors through incremental improvements alone.
Germany has implemented worker representation on company boards yet faces economic challenges, particularly in its automotive sector being hollowed out by Chinese competition. Stockholm and other Nordic locations demonstrate functional economies. Dubai operates close to laissez-faire capitalism with sovereign wealth fund backing, though extreme inequality characterizes the system. Economic growth itself generates positive sentiment among populations, while stagnation produces widespread dissatisfaction.
The UAE benefits from extraordinary resource wealth. The US reaches its top income tax rate at $700,000, whereas the UK applies 60-62% rates beginning at $100,000 before dropping to 45%. Many ambitious British professionals relocate to the United States due to more favorable tax treatment for building wealth.
Zohran Mamdani's political rise in New York reflects growing socialist sentiment in the United States. However, policies such as asking wealthy individuals to pay slightly higher taxes or establishing grocery stores in food deserts do not constitute socialism. These represent government provisioning of citizen benefits rather than seizure of production means.
Small business formation faces barriers from punitive tax systems combined with regulations that favor established large corporations. Government thinking defaults to solutions involving major chains like Tesco or Walmart rather than enabling independent operators.
Not everyone possesses an entrepreneurial orientation. Some individuals follow safer paths such as university education, while others take calculated risks like dropping out to start businesses. This orientation may stem from privilege, genetics, or parental influence rather than representing a universal trait. Comments sections frequently note that not everyone can or should become an entrepreneur.
A progressive regulatory framework would impose stricter standards on large companies while providing small businesses greater flexibility. Government programs designed to assist small business formation could improve capital access. The UK maintains a lending institution offering 75% government underwriting for £25,000 startup loans. The former US Small Business Administration performed similar functions.
A distinction exists between scalable startups and small businesses intended to remain small. Communities benefit from numerous small businesses regardless of growth ambitions. Historical US law prohibited large companies from purchasing raw materials at lower prices than smaller competitors and required regulatory review of acquisitions that might create excessive consolidation.
The bottom 50% of UK taxpayers contribute 9.5% of total income taxes. Eliminating taxes for this group would cost approximately £33 billion while delivering 10-15% effective pay increases. The UK government budget context makes this proposal feasible for consideration.
Raising the tax threshold to remove 15 million people from paying tax would require finding the revenue elsewhere. The UK's total budget is 1.4 trillion, so finding half of 1% or 1% of that budget could cover the cost. Taxing big corporations who are taking the piss could generate the necessary funds. Giving poorer people more money would increase their spending, which would stimulate the economy.
A broadcast license tax similar to a fixed fee that is very hard to wiggle out of could be implemented. Companies like OpenAI, Facebook, YouTube, and Google would pay a fixed fee to access the UK market. The fee would be based on the number of views and attention extracted from the economy. This would tax attention itself, as spending an hour a day doom scrolling on phones constitutes broadcasting to the population.
Companies might attempt to pass consumption taxes onto consumers by increasing subscription fees in the UK market. Some products already cost different amounts in different countries, with Apple products historically being cheaper in the United States than in the UK. Legislation could require companies to charge on par with other markets to prevent passing costs to UK consumers. Without intervention, nurses, teachers, and normal workers in the economy would continue subsidizing companies like Starbucks, Amazon, and Google that do not pay taxes.
The economy represents a collective action problem and a global collective action problem. Robust solutions require robust coordination of activity across the world. The Biden administration attempted a global profit tax that collapsed under pressure. Nick should talk to his billionaire colleagues about investing in the economies where they do business. Draining the whole economy leaves nothing for the future.
The Big Mac costs $8 in Oregon versus almost $9 in Chicago depending on state tax rates. Bookstores charge $20 on the high street versus $10 online because online sellers pass through lower costs. Companies could pass broadcast license costs to UK consumers and maintain 30% margins by bumping prices. Consumers might use VPNs to access lower prices in other markets, but the broadcast license would still apply if the service is available in the UK.
The targets are BlackRock, big banks, and large mortgage companies. A private conversation with the CTO of a large technology company revealed concerns about UK and EU regulations. A new law requiring removable batteries forces companies to stock more lithium batteries, increases landfill waste, and makes devices less waterproof. The UK is no longer a big market for some companies as South America comes online, so companies may choose not to sell products in regulated markets.
New products launch in the US first because it is the biggest market and UK regulations around software and GDPR prevent certain features from being available. In a previous business, monetization tools were available in the United States 12 to 18 months before becoming available in the UK. Economics involves making trade-offs. The EU is overregulated to the extent that taking a lid off a bottle involves government involvement, killing dynamism. The US is underregulated, with chicken potentially carrying E.coli or salmonella with a one in three chance, and lower life expectancy.
The ultimate conclusion of the conversation centers on morals and ethics around which trade-offs are the right ones to make. Human flourishing should be the purpose of the economy. Maximizing small business power improves human lives because when people work shoulder-to-shoulder with workers, they treat people well. Mega corporations with faceless workers they never meet can treat workers however they like.
Corporate consolidation increases prices, lowers wages, decreases consumer choice, and decreases the rate of innovation. The conventional view of innovation as a great man theory with a smart rich person having an amazing idea is incorrect. Innovation is combinatorial, with technology building on itself. Starting with a rock as the first technology, tying it to a stick creates hammers, spears, arrows, axes, and shovels. A diverse group of people with different ideas and experiences consistently outperforms a homogeneous group of high performers.
When people become successful, inequality emerges unless intervention occurs to recycle wealth. Recycling wealth requires global cohesion because some people will relocate to Ireland, Dubai, or elsewhere. In the new economy, people can leave and take their value with them. Citizens have both the right and responsibility to address this problem. Economics previously told people not to worry because the market would sort it out.
Breaking up companies represents a radical solution. Jeff Bezos would lose more sleep about having his company broken up than paying higher taxes. Breaking up Google from YouTube, AWS from Amazon Prime and Amazon retail would force competition. The biggest thing that scares billionaires is backing competition with the market. Amazon Prime competes against Netflix while being subsidized by the mothership for tax optimization and strategic reasons. Amazon.com succeeded through a negative cash conversion cycle, taking orders and shipping before paying suppliers for 90 days, creating better cash flow as the company grew.
Companies are worth trillions because they have strategic monopolies. Limits should exist on how big a fund can be and how big a strategic monopoly can be. Companies cannot hedge naturally against each other in ways that prevent real competition. Breaking up companies ties up their attention while they focus on avoiding breakup rather than competing. Capitalism runs on competition, as Adam Smith stated it only works when there is competition. One bakery in town means any bread at any quality at any price. Two bakeries can collude, but five bakeries make collusion very hard.
Amazon has a strategic monopoly in online e-commerce. Breaking up AWS, Amazon Prime, and Amazon retail would make it easier for competitors to challenge the company. The retail operation could be broken into a bookstore, an electronic store, and other categories, preventing it from being the everything store. Amazon pulls cash from AWS, subscriptions, and Amazon Basics to fund its retail operations.
There are no silver bullets to complex problems. Solutions are never perfect and always represent the least worst option. Living in a world that actively limits concentrated power in all forms, includes people as entrepreneurs and workers as robustly as possible, and ensures people are engaged enough in the economy to support democracy rather than burn it down represents high-level principles. Elon Musk, Jeff Bezos, and Mark Zuckerberg want to live in an oligarchical world.
In a world with many challenges, restoring hope requires people to understand that the rules of the game have changed. The industrialized late-stage world has given way to an early-stage digital revolution world. Knowing how the rules work, how to start a business, grow a business, make a million, hire people, and build a great team provides a pathway out of one's birth circumstances. The schooling system needs to explain to kids the relevant information about how to function in the current economy.
The day after explaining the rules, the rules become one day less relevant. There is always a new set of rules. The only consistent factor is change. Lifelong learning is one of the rules. Kids sending CVs to Microsoft do not realize those companies receive 3,500 applications. Most people who have never had an explanation of how the world works now feel completely hopeless.
The entrepreneurial tool set gives people agency and hope. Not everyone will be an entrepreneur. Some people want to work one or two days a week. A fiance created Bali breath work by turning passion into something commercially sustainable, learning pitching, publishing content, and creating product offerings. The entrepreneurial method enables people to feel agency and hope. The world's unfairness means some people are born with inherent privilege.
Vital democracies should manage economies optimized around human flourishing rather than capital efficiency or capital accumulation. The United States has a norm of maximizing shareholder value for corporations, an idea invented in the 1970s. The claim was that maximizing shareholder value would be good for everybody, but it was only good for a tiny minority of people. Growth rates and GDP would supposedly rise, but the promise was a lie.
Modern economics proposes a different construct where society purposefully includes people in a robust way, whether they are workers or small business owners. This approach would deliver faster economic growth, better pay, lower prices, and more innovation. The decision to implement this framework is within reach.
Nick Hanauer is already engaged in politics, using his wealth, power, and influence to change the system. Daniel Priestley emphasizes that while systemic political change is necessary to include more people in capitalism, most individuals feel empowered by taking personal agency rather than waiting for the world to change. Hope comes from having personal agency and knowing the next move that will benefit you and move you forward.
Nick Hanauer reflects on his own privilege, noting that it is not simply having built a business and accumulated money. His privilege stems from something that happened when he was young, possibly related to his parents, which allowed him to see his own bias and an unknown unknown that grows as he becomes more entrenched in his privilege.
He shares that his father left his mother, who still struggles to read and write. She had four kids and worked as a volunteer at St. Luke's hospice. He considers how different his life would have been without that one thing that happened, and questions whether he would be ambitious and optimistic or potentially resentful. He recalls a friend from the same city who could not maintain employment at Subway for three months despite an offer to cover rent for years. This highlighted a deep inherent privilege in his own life, including having two parents and a particular genetic composition.
He tests his advice through the lens of whether it would apply broadly, including to those without his advantages.
Daniel Priestley states that each person wants to do the most with what they have. He describes visiting a small town with 10 to 15 thriving businesses creating optionality for people, versus a town with no entrepreneurs, where everyone feels downtrodden and one big Costco is the only employer. A critical mass of people with agency lifts up the community.
He references Japan, where the Shogun family lifts up the little community, leading to many other businesses around them. When there is one monolith as the only company in town, the only place shipping to your door, the only place for CDs, and the only place for Netflix, everyone else is reduced to being a consumer.
Nick Hanauer agrees with the sentiment but notes that the entrepreneurial paradigm applies to less than 5% of people on planet Earth. He wants to create a paradigm that works for everybody. Daniel Priestley points out that in the UK there are six million self-employed people out of 30 million workers, representing a major opportunity.
Daniel Priestley explains that asking an entrepreneur how to get hope leads to the entrepreneurial method through personal agency. Nick Hanauer suggests asking a broad group of people, who would likely point to the quiet miracle of a normal life. Daniel Priestley responds that this has gone away because houses are unaffordable, local jobs do not exist, and no one is paying healthy wages. His family home that most people would love to raise a family in is now 1.2 million pounds.
Nick Hanauer presents a booklet titled 21st Century Economics aimed at policymakers and professionals. It can be downloaded for free at marketsbuiltforhumans.org. The framework shifts from increasing capital efficiency to human flourishing, from understanding humans as homoeconomicist to homo sapiens, and from viewing the economy as a Pareto optimal equilibrium to a complex ecology.
Understanding economics in this new way leads to different conclusions about how to organize the world and serves as the starting point for global transformation.
Daniel Priestley notes that Nick Hanauer, already a billionaire, has time and resources to pursue this work globally. Nick Hanauer states that all he needs is for people to help explain it.
Daniel Priestley's most recent book is The Lifestyle Business Playbook, which explains how to get started with a small business that provides more fun, freedom, and flexibility. He supports anyone trying to create a better economy but warns that some of the most miserable people are waiting for the system to change. He encourages people to do something in their own life rather than wait.
Nick Hanauer explains that economics is the operating system of the world. If it is the wrong operating system, bad circumstances result. Economics is invisible to most people, yet policymakers make decisions affecting lives based on a particular understanding of how the economy works. Believing that prosperity trickles down from the top leads to one set of policies, while believing growth is built from the middle out leads to an entirely different set. Believing the middle class is a consequence of economic growth versus believing a thriving middle class is the cause of growth produces completely different policy approaches.
All of these approaches align with what Daniel Priestley wants, but the starting point must be the set of ideas that govern how people see economic cause and effect.
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