Brad Gerstner makes the case for Invest America: $1,000 investment accounts for every American child at birth

pretty small and he wouldn't necessarily have the management fees to support, you know, buying the top for the top spot or the spot. But what is the game of venture if not aum if not just just returns? I mean, a venture fund is a business at the end of the day.

Whether you make money from fees or carry, it's all just profit at the end of the day. Well, we have a very special guest calling in now. Let's bring him in. Welcome to the show. Well, what's going on? Hey guys, it's great to be here. Thanks for having me.

You know, when you told me you guys were going to do this, um, you know, I was I thought, okay, there's there's probably a market gap for doing this. Um, but you guys have killed it. It's a great show. I hear so many people talking about it. You filled a real void.

Um, so congrats to you on on all the momentum and, you know, and and adding something new to the ecosystem. I think that's really important. And uh great to be here. Thank you so much. I mean a huge fan of BG2.

Obviously I was listening to it last night and uh yeah I mean very excited to talk to you about the uh the the the idea into the Invest America accounts and I liked how you took you took the listener through the genesis of the idea but then also some of the inside beltway politics of like how these things kind of actually play out.

The idea of losing ball control something that I hadn't really considered. It seems obvious once you break it down, but um where did the idea actually come from? And can you kind of introduce that idea? Um and just kind of set the playing field before we go deeper into it. Yeah.

I mean, I I guess at some level the idea has been just stating for my whole life, right?

I was a kid whose dad went broke and I was on the outside looking in and I I remember when my grandfather who sacrificed everything um you know left me uh 20,000 bucks and I was able to invest that really day trade it and put myself through law school and business school and and the feeling of going from the outside to actually owning something having something.

Yeah. Right. That you can get that snowball rolling down the hill. So I think that was the seed planted in a young kid.

Um but over the course of the last five to seven years started getting a lot more concerned and COVID really punctuated this for me about kind of this growing wealth gap the halves and the have nots over 50% of the population under 40 having a negative view of c capitalism and Ray Dallio he g he did this great um uh uh uh uh he did a great presentation at the all-in summit where he talked about the rise and fall of the great countries and one of the princip principle reasons that great empires or great countries fall was wealth concentration among a very few.

Yeah. Right. And so you have kind of French revolution type moments. And it seems to me that the natural byproduct of the technology revolution has been you know that you can now have somebody like Mark Zuckerberg who serves three billion customers around the world. Right? Henry Ford couldn't do that.

John Rockefeller couldn't do that. Right? Their TAMs were much smaller. And so you see the increasing concentration of wealth.

And the question was how do we protect and preserve capitalism, the free enterprise system, the golden goose which is created this this innovation which has driven humanity forward at the same time not drift into socialism and redistribution and try to kill the patient in order to save it. Right?

And it seemed to me the answer was to make everybody a capitalist from birth.

If you gave everybody ownership and allowed them to compound in the upside of capitalism, right, rather than disincentivizing people by taking money away or creating some kind of socialist state to to to create UBI or some other cockame scheme, but really to make everybody a private owner of assets from birth, treat it like a 401k, let it compound for their life, get them excited about what it means to a day like today when the the markets are doing well, it's up.

There's a lot of excitement among our community, right? You know, people even just tracking the price of Bitcoin by itself, but every American should be bought into that to some degree, right?

And and even just seeing that the number go up by a few percentage points is enough to get people excited about participating in the system. I must have been I must have been like eight years old or something, but my parents took a uh a 12-pack of Coca-Cola that comes in a cardboard box.

They cut out a uh a stock certificate out of it. I didn't grow up wealthy or anything, but they bought like five shares of Coca-Cola or 10 shares of Coca-Cola. And I just remember it concretized this idea of like owning stock, which was very abstract to an eight-year-old or something like that.

And I had that on my wall for a long time. And then at certain point, it realized that, oh no, this has financial value because obviously it wasn't literally tied to the stock, but they had been holding the stock in an account for me.

And and I was able to kind of experience that, which I think a lot of people are missing out on. Um I want to I want to ask you about um the idea of of holding specifically. There were some ideas about 18 age 30 uh ret day one retirement fund.

Um how do you think about unlocking that value and how do you think about any of the risks around like obviously you don't want people going and writing forward contracts against it on day one, right? Although I'm sure someone will try and financialize this. Yeah.

And of course they they they will that will be illegal as will payday loans against it and other things. Um Treasury Department will have to put together the rules and the regulations to make sure that this is implemented and executed in a way that we all feel great and proud of.

We have some incredible people lining up who will design the product. Um but you know the the basic goal is every kid has on their phone this. I own a little bit of Apple of Bergkshire Hathway. Um you know and that will make them feel like they're they're they're in the game.

Um, but when you when you think about this, we want it to be a one-way lock box, a 401k where parents and and kids can add money into the account. Birthday money, bar bar mitzvah money, as easy as Venmoing in 10 bucks, 20 bucks, 50 bucks, 100 bucks, right?

And you'll have this register that will show all the all the deposits in the account over the life of the count. So when the kid looks back at 18 and sees like where did all this money come from? And the first one will be $1,000 from the US Treasury Department. Yeah, you know, an internship too, right?

If you, you know, just just showing that sort of long-term thinking. It's like a basically a track record that you can go and use throughout, you know, your early career. Yeah.

I mean, there's also these viral moments where a lot of kids will build something and they get a bunch of attention and they try and kind of monetize it, but it's hard, but it's like it can very it can be very easy money, easy go, easy come, easy go with those kind, right? So, this is a lock box, right?

Money can go in, money can't go out. And now we have corporations Dell Corporation, Nvidia, AMD, Salesforce who've all T-Mobile, uh, iHeart Media have all raised their hands say we love this idea and we will add money to the accounts of the kids of our employees.

That's so now we have Uber companies representing millions and millions of employees who are going to add to the accounts of the kids of their employees as a corporate benefit, right? Which makes perfect sense. Mhm.

Um, on top of that, we we'll be announcing major multi-billion dollar philanthropic gifts from large philanthropists who say, "You know what? I don't want a middleman taking a scrape.

I just want to be able to give a,000 bucks to every kid in the state of Texas or every kid in America whose family earns under $200,000 or who graduates from public high school or whatever rules they stipulate. " Yeah. Right. They'll be able to donate that money to the Treasury Department C3.

They'll still get the tax deductibility, but that will go directly into the accounts of kids. 3. 7 million kids a year will have this account. So now you have the power of philanthropy. You have the power of families, the power of churches or community groups.

And now the final one is I had a couple people who are governor or running for governor call me up and say if I'm elected we're going to donate money to the account of the kids who are born in my state and who graduate from high school in my state because we want to attract and retain the best kids.

So I think this is going to be a 100 to one a th00and to one private sector match. What the federal government's going to do is simply set up the accounts and get out of the way like a good 401k. just get the ball rolling down the hill and let the private sector do what the private sector does so well.

The S&P 500 is compounded at 10. 2% for 75 years. The way out of this problem is to get kids in the game from birth. And by the age of 18, if you start with a,000 bucks, you add just $750 a year, right? By age 18, you're going to have $50,000 in that account.

By age 30, you're going to have upwards of $200,000 that in that account. And if you start with $1,000, you add $750 a year, and you don't touch it at age 50, you have a million dollar in that account. Wow. Right. That is the power of compounding. I think it totally changes the game for the country.

I think it's the cheapest insurance policy we can possibly buy in defense of free market capitalism, our democratic way of life, right? And it does it in a way that gets people excited about capitalism, not in a way that penalizes people for being successful. Totally. Yeah. We talked about this.

Uh it's hard for somebody to be feel bought into capitalism if they have negative capital, right?

if they have this is from the it's from that email between Peter Teal and Mark Zuckerberg uh talking about how a lot of the next generation they come they come into the world or they become adults with debt from student loans which people very anti- student loan debt and then also the housing prices have gotten so expensive because of regulation and a whole bunch of other factors that you can't get on the housing ladder to start building capital because most people if they get a 30-year mortgage even if it's expensive when they're 25.

By 65 or 55, they paid that off and they have a ton of capital and then they they are more bought into the capitalist system. And so, yeah, this feels like a great a great way to solve the problem in in a free market way. And and let me let me give you one final thing.

So, we we had Kevin Hasset, who's now the chair of the National Council of Economic Advisors, and a guy named Rob Shapiro, who's key uh econ economic adviser under Clinton. We had them come together and and do uh uh for Milkin a study of this over the course of the last year. Mhm. Okay. And here's what the study found.

It won't surprise you, but like we have control group studies on what happens if you give some kid at birth or in very first few years of life a savings account or investment account. What did we find? More likely to graduate from high school and college. More likely to buy a home. Yeah.

more likely to start a business, more likely to be a taxpayer, less likely to be incarcerated. Wow. Amazing. The net present value of the societal return of just what I told you. You know how many tens of billions we spend a year to try to achieve the things that I just told you. Keep people out of jail.

Get them to graduate. Get them to buy a home. We spend tens of billions of dollars a year to try to achieve that without much effect. Yeah. Now we know from controlled studies if you just get them into the game from birth, they feel more confident. They feel more in the game.

They learn financial literacy in school because now they have a reason to learn financial literacy and you achieve all those positive societal goals. So the net present value is going to be very high.

And um you know, listen, we have a real debate going on in Washington about the national debt, something I'm also very passionate about. I've supported a balanced budget amendment for the country for over 30 years, right? We have $38 trillion in debt. Um, we have a $2 trillion deficit.

And we all know that Doge, something that I've been been working on, you know, how do we go back to a 2019 baseline in terms of federal government spending so we don't bankrupt our kids, it is immoral, saddling kids with $50 trillion uh in debt.

But the truth of the matter is, so some people have said, "Well, Brad, how can you support that? " And on the other hand, you're you you support Invest America because it costs the government 3. 7 billion a year. Well, let me first just contextualize it. $3.

7 billion a year is about the cost of a single Patriot missile system battery, right? It's about six rockets. Okay? So for for taking six rockets or you know in that missile battery or we can have every child in America start it off with an investment account.

So which one better protects capitalism, America and our way of life, right? There are tradeoffs that we can make. We know Elon literally was finding $5 billion a week in terms of proflegate spending that you can eliminate in order to pay for this.

So first it's very small but secondly when you think about the compounding that will occur it compounds tax deferred but at the end of the period of time you have to pay capital gains tax on it. Y the government will generate hundreds of billions of dollars in capital gains tax over the life of these accounts.

But the way congressional scoring works is if it's outside the 10-year window then all those revenues that 100% you know you will capture don't get added back to the score. If you did that, this would not cost you anything. In fact, it would generate revenue for the federal government.

And you and I all know it's customer acquisition cost for tax, right? If we were if this was our business and we owned 100% of it, it's upfront investment that we're going to reap a lot of long long-term return.

And that ignores the things I told you about more likely to graduate from high high school, more likely to buy a house and start a business and pay taxes. So, I'm very confident that the net present value of this to society is off the charts, right?

This is a no-brainer for us to do, but I'm equally passionate to say that it's not acceptable that we're not taking seriously the national debt. I think that, you know, where are we in this reconciliation bill? I posted this and Elon retweeted it. I think we got like 40 million views.

This is how we get back to the 2019 baseline. It's a view. It's basically a chart, a graph that shows how the COVID spending bubble occurred and how we need over a period of four to seven years to get back to the baseline and get you you know deflate that bubble in terms of spending. Um that's going to be hard to do.

But in terms of the process, the Invest America Act is the name of the underlying authorized legislation. So we have the Invest America Act in the House of Representatives led by Blake Moore. You have the Invest America Act in the Senate. That's chief author uh Ted Cruz.

Um I will tell you there are a bunch of Democrats lining up on in both the Senate and the House. This will be a big bipartisan bill in both places. Um now h what happens in a reconciliation process?

Think of that as an omnibus piece of legislation where they take the Invest America Act and they roll it up into reconciliation. So, a bunch of people saw these called Trump accounts in the reconciliation bill.

The underlying legislation is the Invest America Act, but much like Pell Grants or the Roth IRA, not surprised uh you know that the president uh will will take the opportunity to uh name these Trump accounts um when they uh when they go into effect. Yeah.

Can you talk about any of the risks or problems that you foresee needing to work through? I mean, I'm extremely optimistic about this, but I'm just thinking about like, let's assume it gets passed in a bipartisan way. Is this are there going to be technical challenges to actually implementing this?

I mean, the government famously, you know, the healthcare website was a big deal. Uh, what about like is there a risk that this creates like a financial bubble? How are we pricing? How are how are we picking assets?

Is there going to be companies lobbying to get included in the index or are we just doing walk through some of the risks how we're fighting those? Yeah, all great questions. Well, what I suspect will happen is so the authorizing agency is the Treasury Department. Uh Secretary Bessant will put together a working group.

The working group will have terrific people, a lot of whom you would know uh from Silicon Valley who I've already talked to who are some of the best product designers in the world.

uh guys like Vlad who you know run Robin Hood who who understand you know how to build uh you know financial markets infrastructure isn't Joe in the mix over there too there there may be there may be generally which is amazing like legendary Silicon Valley design right and and I I will tell you that Joe is very excited about invest America and he'd be a logical person to lead like product direction on this right but there'll be a lot of those issues that have to get worked out our objective is that we put together a broad-based index basket that looks like the S&P, but we want no fees, zero fees for the life of the account, right?

And I think we can achieve that based on the conversations that we've had. Um, you know, and so, and we want to make it super easy for parents to be able to add money to the account. I'm talking $5, $10. Like, that's how you get um, uh, the snowball really working for a lot of families.

I want to see, uh, I want to see haptics. I want this to feel like candy. I want it to be I want kids to get addicted to investing. Totally. Long term though, right? Not not day trading, but like really really into it. Well, remember you can't day trade it. Yeah. No, that's what I'm saying.

I'm saying get getting addicted to long-term. That's the beautiful thing that what what they will get addicted to is understanding the power of compounding and they'll un understand it at an instinctual level. Y right. Not because they're looking at some math formula in a book. Right.

The problem is if 70% of people, if you're in inner city Trenton or rural Indiana or rural Texas or East LA and somebody says, "Okay, come into the classroom. Today we're going to learn Chinese. " And you say to yourself, "Man, I'm never going to China. " Like, why do I need to learn Chinese?

A lot of kids in America, in fact, 70% of kids, their parents don't own anything and they don't have a prospect of owning anything.

And so now you tell them we're going to learn about stocks or compounding or financial literacy and you can see why they check out because they don't have a frame of reference, right, to understand that. But now every kid in that class likely has a phone and the teacher says, "Open up your phone.

" Y we're going to talk about at in the seventh grade how you got $14,000 in this account. What it means to be a shareholder in Apple. What it means to own to own a stock.

what your voting privileges are, how that compounded to $14,000, what it will compound to over the next 10 years if you add 20 bucks a month, if you add 50 bucks a month, if you don't add anything, right? Like now you have their attention because they own something.

And you know, I think that this is going to unlock just a massive amount of human potential. Um, but you know, it's one of those things that that that on the left people get excited about it because you know, you closed the wealth gap.

On the right, people get excited about it because you defend capitalism and you build something that's aligned with capitalism. There is no government account. There is no government ownership. There is zero. Yeah. There are 3. 7 million private accounts where the families have title and ownership.

The government can't go usurp that no more than they can go take your house. That's amazing, right? It's a private It's a private account. So, we found this magical blend where I think we can land the plane. It's in the reconciliation bill. I expect that this is going to become law uh you know in the early part of July.

I think the president's goal is to sign it into law on July 4th. But it's pretty mind-boggling that this idea that really started in earnest with me.

You know, Chimamath and I were on CNBC at the end of 2021 and they and Scott Wapner was going wild about how the stock market was going up and I was feeling very uh uh very concerned about this issue and I said, Scott, you know, at this moment that the government stepped in and helped in COVID, it was all of us as taxpayer that put money in that caused the market to go up in 2021.

But too many people are left out of that benefit. Yeah. A lot of people lost their jobs in 20 and 21 and they weren't in the market. So, they didn't benefit from the market going up. So, that's when I first said to him, "What I would like to see is I would like to see President Biden pass a savings account.

" And at the time, I said $2,000 in it um for every for every kid in America. So, they benefited from the upside of the compounding of the markets. And it's pretty surreal to me that starting in the fall of 24 that went a little viral on Twitter and now we're really on the one yard line.

I would encourage everybody to follow it on on Twitter, investame24. We're going to be posting legislative updates, working group updates there. Um but uh I really appreciate you guys giving me the chance to talk about it a little bit today. Yeah. Yeah.

super interesting because the I mean last comment to me it's it's you know given everything that you do already it's it's it feels like the perfect way for you to serve the country and and in and in some way create you know incredible legacy and I I just love this so much more than the co stimulus because I remember watching that happen where people got checks and there were actually a series of kind of financial influencers who grew massive accounts around when when will the check when will the checks arrive?

How do you get your stimulus check? How what should you do with it? And then that quickly turned into essentially like day trading it. And obviously we know that statistically those people lost a lot of that money, kind of gambled it away.

And but if you had just taken that and bought and held and held, I mean those those stimulus checks that went out at the bottom of the market, they would be so much bigger now. So it makes so much more sense.

I could even imagine that you're you're still going to get kind of gamification like content, how to grow your Invest America account, but it's going to be like go out and cut lawns and then put $10 in every week and watch it happen.

And you're going to get kids that are like, "Yeah, I want the competitive the competitive nature of everybody starts on a level playing field, but at at certain point you can go start Yeah. mowing lawns, doing little odd jobs, putting it away, and making it a competitive fun process. " No, no doubt about it.

And imagine this, we're entering I've been investing now in Silicon Valley since 1999.

And you know, we had the internet, we had cloud, uh we had mobile, we had social and every time one of these waves came, I was like, it can't get any bigger than this, you know, but machines beginning to think on behalf of humans, right?

The age of AI is, I've been saying now for several years, is going to be the biggest super cycle of our lifetimes. I think I'll be investing against it for the the balance of my career. Um, it's making us all bionic at a rate that's really hard to understand, but it's going to lead to a lot of dislocation, right?

The idea that we're not going to have to renegotiate the social contract, right, as part of this transformation is just like that's head in the sand. There going to be a lot of people who lose their jobs, right? And they're going to I I I'm a positivist on this stuff. I think the world ends up in a better place.

Um but it doesn't mean that everybody ends up in a better place. Right. The industrial revolution caused a lot of pain. Yeah. On the way to net gain for society. Yeah.

And so we need to figure out a way that we and this is just one of a lot of different ways we're going to have to come up with right around retraining re-educating like changing the way in which we educate people. You guys are going to talk about the teal fellows today.

I mean, that is a way to deconstruct education that could potentially be a model for for further transformations. But they're going to have to be the best and brightest among all of us to rethink the social contract in a way that holds this fragile experiment together.

This is the greatest country in the history of the world, right? But it doesn't happen. You know, we can't take for granted that we can go through this magnitude of change that AI is going to bring, right? And that nothing will break you. we've already seen, right, us feeling a little uneasy with things breaking, right?

Some of the populism we're seeing, you know, the 90% against the 10%. It's our job to, you know, to attack that, but to do it in a way that's aligned with the basic principles on which the country was founded, right?

And that and that's to align us all with the incentives that if you work hard, get into the game, you know, you can you you have economic mo mobility. I mean, I'm I'm a living example of that. I mean we started with nothing and you know and and I we ended up in a very very different place.

There are very few countries on the face of the planet where that type of economic mobility exists and I think this is going to put us in a much better position in that regard. Yeah. We can't lose it. It's too important. Yep. Well, thank you so much for Thank you so much for doing this guys. Great to be here.

Next time we get to tell you let's talk and investing and markets and all the other good stuff. I I I have one question before you jump off. Do you feel I know you're heavily invested in AI. Do you still feel underexposed to AI given given how sort of bullish you are in the in the fullness of time?

You know, if you look at a chart that plots OpenAI's revenue growth against Google and Meta, it's growing um you know, it's achieved the same level of revenue in a fraction of the time. It's already multiples bigger than Google was at the time of its IPO. So, you know, we own a lot of Open AI. I wish we owned more.

The reality was the the winners of this moment in time, and there's going to be a whole bunch of agent agentic application. You know, we haven't even really begun in the application universe. There going to be tons of these, but the winners of this super cycle are all going to be winners of the previous super cycle.

Um, so I would say we're all in. Um, you know, we're all in it around it in the public markets. We're all in it in late stage venture where we just participated again in the round of of Open AI would be an example of that. Um, and we're doing some of the most interesting early stage stuff of my career.

Companies that are scaling at rates I've never seen with small teams, very efficient, very low burn ratios. Um, so I I couldn't be more excited because I think this really is the type of innovation that pushes humanity forward, right?

Consumers have more opportunity to learn and their health care gets better and all the things we know that comes from this because you have a bionic coach in your pocket at all times for all things. And enterprises are going to get transformed as well. We're in the golden age of margin expansion for enterprises.

And if you're not breaking your company today and figuring out how to make it AI native, AI first, right, you're just going to lose your market share and you won't be there to to to compete in a few years. You know, it with the internet itself, the diffusion was a lot slower. You had time.

You had 5 to 10 years to get on board. The diffusion is way faster and way more impactful uh this go around. Great to see you guys. Keep up the the great work. Did you coordinate the uh Blazers today? The market's out. Whenever the market is is up in a meaningful way, well, we wear white suits.

So, u we'll try to coordinate your next guest appearance for up day and we'll get you in a white suit. Awesome. Take it easy. Have a good one. Take it easy. Byebye. I have a I have a hilarious story about my own kind of DIY Invest America account.

I don't know if I've ever told you this, but when I got my first job, I was starting to make like around five grand a month we were paying ourselves. Let's go. Uh, and I and I wanted to save money.

And what I noticed was that you you'd have like typical like Bank of America app with a checking account and a savings account. But because of the app, you could move money from the savings account to the checking account whenever you want.

So you go out with your friends and they'd be like, "Uh, oh, like do you want to buy this thing? Do you want to, you know, go out tonight? " And I'd be like, "No, I don't have any money. " And they'd be like, "But you have money in your savings account. You can just transfer it over. You can spend it tonight.

" And so I was just not saving any money.

And so, and so what I wound up doing was I went to a bank and I got a safety deposit box and every time I got paid, I would go and take $1,000 in physical cash and put it in the safety deposit box and then I would lock it and I couldn't access the the safety deposit box on the weekend.

So, if I'm traveling or anything, I would just be like, "Look, I actually have access to no money. " Like, I might have more money, but like it's not as easy as just like Venmoing you right now. Somebody could probably productize that and actually do very well. Yeah.

I mean, and psych the psychology of money is like well under like way underrated. Like if you have a $100 bill, you're less likely to spend it than than a bunch of fives because you you don't want psychologically you don't want to break the hundred.

And so I always noticed that when I would get paid, I would go in and I would count the money and and I would watch the stack physically grow instead of just like, oh, like the number got Yeah. Instead of just the number getting bigger in your bank account, it would be like physically this box is filling up with cash.

And then I would count it all every so I would count it up and be like, "Okay, I have 6,000. Okay, now I have 7,000. " And I would count it up and the feel of counting money. Oh, it was it was addictive and it worked really well. I saved a ton of money. That's great. Great. It was fantastic.

Somebody productized that for sure. Our kids on it. Well, we have Oh, that was great. I mean, honestly, I truly think that once Invest America passes, we'll all collectively think, how did this not exist before, right? It just feels so natural.

And I think if you join the team and you're going to be designing the app for the Invest America