[Music]

William Green. So, I have a question for

you that uh so I understand that you've

described our mutual friend Brian as a

boy

scout. Do you want to elaborate?

Come up and elaborate. I'm agile enough

to get up on the stage from him. Um, no,

I I that

um Brian represents a lot of really

great qualities like this um he's, you

know, when I think of someone taking

really seriously um being a custodian of

other people's money and having a sense

of honor. And we we went a few years ago

to stay with Brian and Jillian in Fire

Island. And um it was really striking to

me Brian's relationship with the fire

department and like that he was part of

the volunteer fire department and um you

know it's like this sense of duty and I

think part of why it struck me as this

kind of great sort of um boy scout

characteristic of like you know mucking

in and helping and putting your life at

risk and making sure everyone was going

to be okay was that I was so not

inclined to do that sort of thing. the

idea of me running out and trying to put

out fires um was so far from um you know

uh what I wanted to do. I I like to sort

of sit quietly and read books and um

although he does that too. Um so yeah,

he's he's like he's a he's a good boy.

Like we saw him this morning and he gone

out running, you know, I'd come down at

like 5 something to get coffee and to

read. Um, so yeah, I I so Brian, yeah, I

just think you represent a lot of great

values, sort of traditional

um good citizen values and um so I'm

happy to have you as a as a friend. And

no, no, we're not going to do self-

congratulation, but he's also a geek and

so you're going to get geeked out now

for about uh 15 minutes. Brian thinks

it's going to be 18, but it's not. It's

going to be 15. So I give you Brian

Lawrence.

All right.

Um, so, uh, thank you,

Guy. Um, so the there going to be a lot

of numbers here. Uh, don't think you

have to read them. Just pay attention to

me. The the slides have been posted at

my feed on X, so you can get them later.

My objective is to give you some sort of

understanding what's happening in

American politics without being

political. uh and to call you guys to

action. Um and whatever you think of

today's politics, I think three things

are clear. Uh the first is that Donald

Trump, since he wrote down that

escalator 10 years ago, has dominated US

politics. He's won the presidential

election twice. Uh the second is that

the Democrats polling at 27% are at

their lowest approval rating ever. And

the third is that our politics are

filled with tweets and and bitterness.

So driving

our the bitterness of our politics, I

think, is the government's inability to

get stuff done. What I want to talk

about is something today uh that really

needs to get done. My day job is to

manage money. Uh but we also read annual

reports of the US government because the

government is a 21% partner in

everything that we do. And there's some

stuff going wrong that impacts all of

business. Uh reading these annual

reports, it's obvious that the US has a

big problem that could be easily fixed.

If fixed, would make our politics much

more healthy.

But it's intensely resisted by lobbyists

who are because we're indifferent. We're

an indifferent minor uh majority of

voters. They're winning in the dark. And

I want to talk about

that. First thing I want to talk about

is US healthcare which has become more

expensive and more ineffective than that

of any other developed country. The red

line shows uh is the right hand scale

showing life expectancy

uh since 1971 and the blue line is how

much US GDP US healthcare costs as a

percent of GDP relative to an average of

the OECD other developed countries. So

1971 we were one and a half percentage

points of GDP more expensive but we

lived 1.75 years longer. Now we're eight

percentage points of GDP more expensive

and we live four years less which is not

good. This is a chart you guys may be

familiar with. Uh it's sort of shocking.

Uh the people in this room I suspect are

in the 1%. We've done well since 1970.

The 62% of Americans who have a high

school education have seen virtually no

growth in real

income. We just saw what happened to

their healthcare. Another big component

of their expenses is housing. In 1970,

the median US home cost two and a half

times income, now costs seven times

income. We're told by the Federal

Reserve that 40% of Americans cannot

come up with $400 of emergency

savings. Housing and healthcare costs

have crushed the finances of

working-class Americans. This is the

math of what has happened. The real life

impact is that a high school degree no

longer is a guarantor of the American

dream. defined as owning your own home,

being able to save money, and being able

to retire with

dignity. This chart shocked me when I

first saw it. I first saw it two months

ago. I didn't believe it at first, but

go do your own research. The twothirds

of Americans with a high school degree

are represented by that red

line. Their life expectancy used to be

two years less than that of college

educated Americans just 30 years ago.

It's now eight years less. And it's

shown an absolute decline. absolute

declines in life expectancy. I'm aware

of only one other one in the history of

developed nations. It's Russians after

the fall of the Soviet

Union. All Americans should look at this

chart and think carefully about what are

the causes of it? What do we owe each

other as Americans? How do we fix it?

This chart is why our politics are so

bitter. There's a big debate over what's

caused all of this to happen.

You can go back and read these books. Uh

the 2013 Charles Murray, it's lifestyle

choices of the working class. 2022 Scott

Galloway, it's tax policy that favors

the rich and the elderly at the expense

of young and workingclass. 2024, there

began to be another thread in the

national dialogue. Uh it's the fault of

free trade and of immigrants. And in

November 2024, a paper was released. It

became the talk of Wall Street by a guy

named Steven Meiran who is now the head

of Trump's Council of Economic Advisors.

It blames the reserve currency, a 10%

overvalued reserve currency in Myan's

telling says if you've got a widget

factory in Ohio with a 10% margin and

another widget factory in Dusseldorf

with a 10% margin and you allow a

reserve currency to play out over

decades, the Ohio factory will close.

Dusseldorf's margins will double in

Ohio. A bunch of uh workers get laid off

in a town. the town collapses opioids

and

immigrants. It's a debate. It's very

unclear what the real causes are, but we

now have tariffs. Tariffs are a

reflection of this big debate about free

trade underway. This is calling into

question everything that I learned and

most of you learned in college

undergraduate

economics. There is no debate though

about the anger of the working class.

working-class vote to uh elect Donald

Trump for the second time is basically a

questioning of elite establishment. It's

a questioning of the entire

system. Our taxes will not be raised,

they say, and you will not cut our

entitlements. You will not cut Medicare.

You will not cut Social Security. And

that's what Donald Trump has told

them. There's also no debate that we

have a deficit

issue. Interest expense now exceeds

defense spending. And we all are

familiar with that line going up and to

the right. We're now at levels last seen

after the the victory in World War II,

but the the the debt as a percent of GDP

is meant to go up and to the right.

That's commonly known. What's less

commonly known is if you read the annual

report of the US government, you look at

the assumptions that are being used to

get to that projection. They're

laughable. If an analyst presented me

with these projections, and these

assumptions, I would tell them to go

back to the drawing board. How likely is

it that over the next 30 years, there'll

be no recessions or wars or pandemics?

How likely is it that we're going to be

able to spend just 3% of GDP on defense

with a with a navy that's now smaller

than the Chinese Navy? How likely is it

that interest rates on treasuries will

stay at 4% even as this debt rate uh

relative to the economy goes up and

treasuries are now at 4 and a.5%. How

likely is it that women will have 1.9

babies when the the birth rate has

fallen to 1.6? How are we feeling about

immigration? The only two things on this

chart in these in these uh assumptions

that are sort of opportunities, one is

real GDP growth of 2%. Maybe AI bails us

out, not in our control. And the other

is they're assuming that health care

costs per capita will grow at 2% a year.

They've grown 2.4% a year real over the

last 20 years. They're assuming 2%. That

is within our

control. There is a massive opportunity

to reduce US healthcare prices. Again,

this chart stunned me. I encourage you

to do your own research. Humira and

Ozmpic are two of the largest most

important drugs sold in the United

States. Medicare with its buying powers,

the largest purchaser of prescription

drugs in the world is paying eight times

for Ozmpic what the Swiss and the

Germans are paying. And if you go and

you study what is being paid by

insurance, the Germans and the Swiss

have insurance systems too, but by US

insurance for angoplasties,

appendecttomies, hip replacements, you

find a constant pattern. We're paying

two to four times what other countries

are paying. Insurance has a fundamental

problem. It it protects you from

adversity, but also camouflages cost.

The Swiss and the German systems are

designed intelligently to avoid the

danger of of of insurance used for

healthcare. Our healthare system is

basically like using auto insurance to

pay for gasoline. If you pulled up to

gas stations and the prices were

invisible and you got like some sort of

aggregated bill for the gasoline

expenditures of the entire United

States, who here doubts that gasoline

prices would

increase? So to keep that line from

going up and to the right, there's this

concept called the fiscal gap. It's the

immediate and permanent either increase

in taxes and/or reduction in spending

expressed as a percentage point of GDP

to flatten the line at about 100% of

GDP. The US Treasury estimates 4.3%. But

we just saw how silly the assumptions

are. Stanley Ducken Miller, the world's

greatest macro investor, does the same

math and comes up with close to 8%. I

think the answer is somewhere in

between. I think we need like a six

percentage point uh adjustment. If you

look at these same numbers for Europe,

by the way, Europe has problems, but

they need a two percentage point

adjustment. Six is a lot more than two.

If you look at the menu of

choices, they do not add up to six very

easily, which is why we keep hitting the

debt ceiling. Elon has talked about a

trillion of Doge savings, he's down to

150 billion. That's 5% of of GDP. If you

actually managed to get the working

class to agree to a 2-year increase in

retirement ages, that's 6% of GDP. If

you took the top 1% of Americans who

already pay 40% of taxes and you took

their uh share of taxes up, if you

increased it uh 50%, that's 1.7% of GDP.

These are all painful choices. The

choice that stands out from the

government's own annual reports is if

you just took that two percentage point

growth in real health care expenditure

per capita and you made it one

percentage point, it's three percentage

points of GDP. It's compound math at

work. There's so much healthcare

spending for flowing through the

government, Medicare, Medicaid, and it

and subsidies for uh private insurance

and tax uh breaks for private insurance

that it would have this extraordinary

impact. So, how do you bend it down?

Hey, use Medicare's buying power.

Shouldn't be that hard. Biden had in the

inflation reduction act three years ago,

10 drugs out of the thousand drugs.

Prices are going to be negotiated. They

represent 8% of spending. Three years

later, nothing has happened. Okay.

Require hospitals and insurers to make

their prices transparent. Who American

here has ever gotten a bill from a

hospital that made any intelligible

sense whatsoever? And the stuff that you

get from your health insurance, does any

of that make any sense? Make this stuff

transparent so that CFOs of companies

can negotiate with Signary United Health

to bend the cost of an appendecttomy for

their employees in Cleveland down. Use

the power of Medicare to uh drop the

cost of uh of drugs by 90%.

Why has it happened? The dirty secret of

American politics. And this data is

coming from a very cool source called

opensecs.org. It's work I did 12 years

ago. If you take a CEO who's operating a

business in a in in an industry that

touches the government and you ask that

CEO possibly after some martinis what

the highest return on his spending there

is, he will say lobbying. So, I

encourage you to go find the Amgen CEO's

uh transcript from 2013 where he talked

about $5 million of lobbying expense

securing a $500 million increase in

payments for his drugs for Medicare.

It's a 100 to1 return. If you compare it

to what the American Medical Association

did in uh 2013, they spent $21 million a

year to avoid a reduction in Medicare

spending for doctors of $30 billion.

That's 1,500 to1 which is pretty fancy

in one year given that it took Warren

Buffett 37 years to go a th00and

to1. Our system is a glory of democracy

but it's also an outlier in terms of how

we fund elections. US elections and I'm

talking here federal elections. This is

the

president 33 or 34 senators and 435

representatives. This last one cost $16

billion and it took two years. If you

run into an elected official, they're

always raising money for these 30

secondond TV ads. Has anyone in this

room ever learned anything substantive

from a 30 secondond TV ad? But it

consumes our politicians. Germany and

Switzerland with those more rational

healthcare prices, five to six week

campaigns, total election costs, not $50

per person like we have in the US, but

like $2 to $6 a person, like an order of

magnitude less. Political ads on TV and

radio are illegal in those countries.

The stations have to make time available

for

free. Our founders had a fancy word for

lobbyists. They called them factions.

They wrote in the Federalist Papers

about the danger of faction. A faction,

a a group of of uh a highly organized

group of uh people in a democracy who

really want something and a

disinterested majority who does not pay

attention. And they they thought and

thought and thought about ways to

suppress faction. In Federalist 10,

James Madison tells us that liberty is

to faction what air is to fire. You

can't suppress faction without taking

away political speech. And it's been

it's been re-emphasized in Citizens

United that a a campaign contribution is

an expression of free

speech. But I just submit to you if if

you look it's too hard for you to say,

but you can see it on the on the slides

on X.

The top the things that have exploded in

the last 25 years are are things that

touched the government. Hospital

services and housing with all of its

permitting requirements um and uh uh

medicines they've all gone up by these

crazy numbers. Things that are not

subject to the power of lobbyists have

come down like software and televisions.

I submit that Michael Porter's five

forces should be amended to include a

sixth force which is the power of

lobbyists.

This problem is too big for businesses

to fix. Jaimeie Diamond, Warren Buffett,

and Jeff Bezos. Can anyone think of

three more talented CEOs leading

organizations larger than and more

effective than the ones that they lead?

They formed a joint venture in 2018

called Haven to address this. They got

Atal Gawanda to run it. It closed three

years later having had no impact. This

this problem, it's like it's like that

line from Jaws. We're going to need a

bigger boat. like it's beyond the size

of business to

fix. So what can you do? Okay, Madison's

answer to this was shine a light on it.

Okay, everyone in this room, I think

many of the people in this room have

have politicians who come and ask for a

donation. Do not let them leave that

conversation without asking them why are

you allowing Medicare to pay eight times

for OEM, what every other country pays.

It is it should be embarrassing for you

to be you. Why is that? And of course,

the answer is because the pharmaceutical

lobby is a big part of the $50 million

that that senator needs to raise every

six years to stay elected. But just

press them. Second thing is there is a

bill in the

Senate, Senate

3548. Believe it or not, it has been

co-sponsored by two

Republicans, two Democrats, and a

socialist. Okay? and it's asking that

hospitals and insurers be required to

provide transparent pricing. Okay, 90%

of Americans would would support this.

But if you talk to the senators about

why it is stuck in committee, it's

because of special interests, right?

Please don't let the lobbyists win in

the dark. Um I think if we fix

this, I'm such a believer in this

country. Like there's no better place to

start a business. There's no better

place. the rule of law, uh, democracy.

We've been an example to the world 80

years since World War II. If we fix

this, our de fixing our deficit gets

much easier. Fixing our our our broken

politics gets much easier. The stress on

the working class gets much better. I

would not trade our next century for any

other century. But this is just hanging

there. And I would really like uh you

guys to think about this as you come

into contact with the journalists and

politicians you talk to. Thank you.

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You know, I've

That was an amazing

speech. That really was. I've never seen

you I've heard you talk that way and

it's it's inspiring. Actually, it's

different than what you said last night.

Um I don't know like who wants to react

to this because it's really inspiring.

Go ahead.

Yeah, really. And I'm going to do

something else which is really fun.

We're going to have Chris Bloomstrand

later, but he's a very verbal person. I

want your reaction to this. Do you

mind some some reaction for the for for

what we've just heard because I know you

have extremely important thoughts on it.

You've thought about it. You've written

about it. I was going to introduce you

later, but

uh I I I've been saying for my 35 year

career that certainly healthcare costs

and education costs can't rise faster

than GDP forever, and they have for 35

years. This is in the too hard pile.

Doge can't cut a trillion dollars. The

vast majority of our $6 trillion budget

is non-discretionary. Even half of

defense uh is is non-discretionary. half

is discretionary. There's very little

fat to cut. Um it's just it's a tough

problem and it's a tax on the

economy tax on us in perpetuity. I don't

know how you fix it. Zero insight there.

So this is so much fun. Chris, you and I

have the mic. Brian doesn't.

Okay. I I'm just going to say that, you

know, at the heart of our politics is uh

whatever the reason for it is, twothirds

of Americans are feeling pretty upset

about the system. and you you damn well

better keep your promise to me. But you

can keep the promise to them, but pay

1/8 for the drugs, pay one half for the

hip replacement. And that's what's

insane. Like, it's not about the

promise. It's about the ridiculous

inefficiency.

You you brought this up with Ted Wexler

yesterday. Can you give his response?

Um, thanks to Jillian, I've I've gotten

to know uh Ted and uh the first time I

talked to Ted was uh I think two years

ago and I walked up to him. One minute.

So, sorry. This is so much fun for me.

Thanks for Julian, my love, ever loving

wife that I love so much. Call her out

and say her book is in the or on a I'm

not supposed to plug thing at a value,

but she has an amazing book. You can see

it on

Amazon. Oh. Oh, wait. Oh, it's okay.

Never mind. Um, so I got introduced to

TED and within 45 seconds I had said to

him, have you read the annual report of

the US government and what I find is

it's published by the Treasury

Secretary. It's audited by the General

Government Accountability Office. Like

the number of people who actually read

it is basically zero among journalists

and politicians. And Ted immediately

said, "I have read it. It's terrifying.

I don't know what we should do. We've

got to do something about healthcare."

Like, so Ted is on this.

Forgive me because this is fun. So, you

had a conversation about Epic Systems.

Can you can you relate that a little bit

as well? So, we we were sitting at a

dinner last night and it was amazing. We

had I I just listened to Brian and Ted

talk for about 15 minutes. I learned

more on that 15 minutes than I had the

previous three days. So, talk about Epic

Systems. Yeah. Who Who can I see a show

of hands? Who here listens to the

Acquired podcast? Yeah, I'm not

surprised that Ben and and David are

amazing. Their latest dropped last week.

It's on Epic Systems. a company you may

not have heard of, but for about 60% of

American hospitals, they're the health

information system. And they went from

like 50 million of revenues to 6 billion

because the government spent $ 36

billion requiring that everyone use

their stuff. And yet what it's for is

upcoding. Like if if someone comes in to

an emergency room and the doctors have

to very quickly do stuff, they're typing

things into the Epic system. Later, the

accounts receivable department turns

what happened medically into the

idealized most efficient way to extract

money from either Medicare or Medicaid

or the private insurer. And they're at

the heart of this. And so what Ted and I

were talking about like it's the quality

of earnings. Like it's a glorious

business. Its proprietor has made $50

billion of personal wealth. It's a

Berkshire Hathaway business. Except that

it's killing us.

Last question from me. You had Chris

Davis here and you clearly talk about

this to Chris and he's very optimistic

at the end of the day.

So, how do the conversations end up with

you and him? Who wins? The optimism or

the pessimism?

I think the reason that I'm so upset

about this is that all of this began

because there are two senators who are

friends of mine

like

drinking having fun kind of friends. Um

it'd be like as if you were a senator

and uh I would write memos to them after

reading the annual report and they'd say

that can't possibly be true. So I'd send

it to the Washington Post to be fact

check and they publish it as an op-ed.

And now one of them has decided the

Senate is so frustrating that he's going

to run for governor of this state. He's

just done. And the other one is the

co-sponsor, Hickin Looper, Colorado,

right there. And he told me last week, I

can't get it out of committee. So like

it's it's

like I see it happening. Like I'm not in

the room where it happens, but I'm in

right outside talking to the people in

it. And it's just deeply frustrating

because what eventually will force them

to act is a Treasury bond auction

failure. That's what will force them.

But it could have been fixed so much

earlier.

Continue. But thank you so much and

thanks for sharing.

I just Yeah, I I I I've never Brian is

obviously extremely smart and is a

policy geek, but you you've never spoken

with such gravitas about the subject.

And uh I don't know, maybe that will go

out somewhere because you and I are

often talking about things that are not

gravitas. Should we go there?

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