Joel Greenblatt on understanding market factors, improving public education, reducing income inequality & more | E1159

Episode Summary

Executive Summary: Jason Calacanis interviews investor Joel Greenblatt about his book 'Common Sense,' focusing on applying market-style incentives to education, wages, immigration, and retirement. Greenblatt argues for school choice, alternative credentials, earned-income tax credits, skilled immigration, and expanded savings/401(k)-style compounding as practical reforms that improve outcomes and reduce inequality.

Main Topics: Public vs. private investing behavior: Greenblatt explains why managing outside money adds pressure, how daily public-market quotes distort judgment, and why concentrated investing can be hard for LPs to tolerate. Market structure and public-company decline: He argues that fewer public companies and high compliance costs reduce dynamism, especially for small firms, and that regulation has made going public too expensive. Education reform and school choice: The conversation centers on failing urban education systems, the success of charter networks like Success Academy, and Greenblatt's view that school choice and better incentives can dramatically improve outcomes. Alternative certification and income sharing agreements: Greenblatt proposes that major employers define skills-based standards instead of relying on degrees, creating pathways for workers via certificates, online learning, and ISAs. Minimum wage vs. Earned Income Tax Credit: He prefers wage supplements through the EITC over mandated wage floors, arguing it encourages work without pricing low-skill workers out of jobs. Immigration and skilled labor policy: Greenblatt advocates a more open skilled-immigration system tied to employer demand, framing immigrants as net economic contributors and job creators. Retirement savings and compounding: He contrasts Australia’s superannuation model with the U.S. system and proposes using tax-advantaged forced/expanded savings to help low-income workers benefit from compounding.

Key Arguments: Concentrated public-market investing is volatile, and daily price quotes can push investors toward emotional decisions rather than long-term thinking. The decline in public-company listings is partly caused by high costs and regulation, which especially hurts smaller businesses and reduces access to capital. Successful charter schools show that poor and minority students can outperform affluent districts when given strong support and leadership. Employers should set skill standards directly; degrees are an inefficient proxy for talent and create unnecessary barriers to mobility. Income sharing agreements and certificate programs can lower the risk of education/training and connect training more tightly to actual jobs. A higher minimum wage can destroy jobs or accelerate automation when workers are not producing enough value; the EITC is a better solution because it rewards work. Skilled immigration is a high-return policy because immigrants create companies, jobs, and productivity growth. Long-term financial security depends on compounding, so policies should help workers save earlier and more consistently rather than rely only on Social Security. Wealth taxes are impractical for illiquid assets and would discourage public-market participation and business formation.

Data Points: Podcast scale: 1,100+ episodes - Jason mentions the show's history at the top of the interview. Gotham Capital concentrated portfolio: 6 to 8 names - Greenblatt says 80% of the portfolio is concentrated in a few stocks. Public company compliance cost: $2 million to $4 million per year - Estimated annual cost to stay public for smaller companies. U.S. public companies: Over 3,000 - Greenblatt notes current U.S. public company count. S&P 500 share of market cap: About 90% - He says the S&P 500 represents roughly 90% of total U.S. market capitalization. College graduation odds for low-income/minority urban students: 1 out of 11 - He cites a very low completion rate in major urban districts. Success Academy scale: 20,000 kids across 47 schools - Used as evidence of charter-school success. Success Academy demographics: 87% minority; close to 80% free/reduced lunch - Describing the student population served by the network. Success Academy academic performance: Over 90% read and do math at grade level - Compared with regular schools. District school performance: 99% math pass rate; 94% English pass rate - A high-performing district school led by Jack Spatola. Students with disabilities in that district school: 99% passed math; 94% passed English - Greenblatt highlights outperformance even among students with disabilities. EITC spending: $68 billion - Annual U.S. spend cited for the Earned Income Tax Credit. EITC net cost estimate: About $9 billion - He cites University of Chicago studies after accounting for tax revenue and reduced welfare costs. Childhood poverty reduction via EITC: 6 million kids - He says EITC takes millions of children out of poverty. Childhood poverty cost: About $1 trillion per year - Washington University estimate cited to justify wage-supplement policy. Median retirement savings: $5,000 - For working-age families ages 32 to 61. Low-income Black/Hispanic/non-college retirement savings: $0 - He cites severe savings deficits among these groups. Working-age families with no retirement savings in bottom fifth: 9 in 10 - Illustrating the retirement gap. Skilled immigrant economic value: $500,000 to $1,000,000 per immigrant - Greenblatt says each skilled immigrant is net positive to the U.S. in current dollars. Immigrant-founded unicorn share: 51% - Immigrants founded more than half of U.S. startups valued above $1 billion. Fortune 500 immigrant/family-founder share: 216 of 500 - Immigrants or their children founded 216 Fortune 500 companies. H-1B cap: Filled in first five days; oversubscribed 3x - He says demand vastly exceeds the cap. Australian superannuation contribution: About 12% of earnings - Used to explain Australia’s retirement system. Social Security wage cap: $128,000 to $137,000 - Greenblatt discusses the taxable earnings cap for Social Security contributions. Example of compounding: $2,000 a year at 10% starting age 19 for 7 years can beat 40 years of later saving - Illustrates early compounding advantages. Market froth example: 261 companies over $1B market cap lost money last year - He says buying all such companies historically produced strong short-term returns, signaling froth.

Pivotal Quotes: "We're very concentrated investors, so it's quite volatile." — Joel Greenblatt: Explaining why outside investors faced large swings and why he returned external capital for a time. "We don't play Tiger Woods in golf." — Joel Greenblatt: His metaphor for avoiding direct fights with entrenched systems like public education and instead building alternative paths. "If you're willing to work, we'll pay you more." — Joel Greenblatt: Summarizing his preferred EITC-style wage supplement over a mandated high minimum wage.

Implications: The episode frames many social problems as incentive problems: improve standards, lower barriers, and let markets build better pathways. For founders and investors, it reinforces long-term thinking; for policymakers, it argues for practical, market-compatible reforms over symbolic regulation.