Jeff Standridge (Intro):
Welcome to season five of the Innovation Junkies Podcast. In this season, you’ll learn from successful innovators who have influential stories, practices, and strategies that will have your gears turning. Prepare to be inspired, challenged, and empowered. This is the Innovation Junkies Podcast.
Jeff Standridge:
Hey guys, welcome to another episode of the Innovation Junkies Podcast. I’m Jeff Standridge.
Jeff Amerine:
Hey, it’s Jeff Amerine here. How you doing, Jeff?
Jeff Standridge:
Hey, I’m great, man. I’m great. So most recently we talked about how to finish the year strong things that you need to be looking at. We’ve had a lot of big news over the course of the last month or so, obviously big election that came on strong and now the naming of cabinet members and a preparing for a changeover in administration. And what do you think about talking about that today in terms of things that we see on the horizon and maybe things that some of our listeners ought to be thinking about in that regard?
Jeff Amerine:
Yeah, I think it’s a good idea. I mean, the impact on business, what I like to think about in terms of a framework is good business leaders are constantly figuring out how to manage changing conditions and how to manage risk. And oftentimes, when we think about risk, we think about team, financial product or technology market or customer, but there’s also this area of risk, which is government, legal, regulatory, et cetera. And I think in that context, it’s important for business leaders to pay attention to what is going on in a macro sense and with geopolitics and with what administrations are inbound. And so my take so far on this one is the markets have responded well to the news in that there’s an anticipation that the regulatory environment might be more favorable to businesses of all sizes. I think with this creation of and kind, not completely serious name, but the Department of Government Efficiency, doge, which interestingly enough has the same name of the cryptocurrency. That was also something Elon Musk was a fan of. But I think their idea that we’ve got 35 trillion in terms of national debt and that we run a large deficit, if that group is specifically going to look at ways that they can impose externally, some fiscal restraint by cutting unnecessary programs, consolidating departments, you would hear from the Fed who’s supposed to be independent, that fiscal spending has been unsustainable at the current level. And I think the interest payments are now higher on an annual basis than what we pay for national defense.
So if there can be a consensus around that, I think there would be, for the most part, some fairly significant bipartisan support for it. That could be a good thing from the business environment because ultimately better fiscal restraints should help keep inflation lower. It should help keep the interest rates, the cost of money lower because you’re not competing with government dollars that are out there. So I would say overall, it seems like from a bit of a business standpoint and an innovation standpoint as well, it’s going to be favorable. Now that said, there may be reductions to some of the things that we’re in green energy spending. There may be reductions to some of the subsidies that are used for early stage businesses, things like National Science Foundation or NIH or others, but we don’t know that yet. There’s still a little bit of uncertainty, but I say overall, I think the business climate should be favorable, more favorable at all levels based on what we’re seeing so far.
Jeff Standridge:
It’s interesting. I’m hoping the DOGE Group goes after the two-thirds of federal spending. That is what’s called autopilot or mandatory spending, meaning doesn’t require a budget, doesn’t require an act of Congress. There’s really no checks and balances on it from one year to the next, and nobody ever approves it. And that’s Medicare, Medicaid, social security interest on the national debt prior to the 13 or the $31 trillion or whatever the number is prior to that. So a year ago, it was always described as two-thirds of federal spending. So it’s probably approaching three quarter, I would suspect by now. Think about that for a moment. If we could get a handle on that, the impact that that would have on inflation and a variety of other financial measures.
Jeff Amerine:
Well, and they haven’t talked about it yet, but it is kind of a hopeful thing. One of the things that all small businesses, emerging businesses growing business have to deal with is the complexity of the tax code. If there was a way to simplify that, I think about the amount of administrative overhead and expense that goes into compliance, and a lot of that is related to the tax code. If we could simplify that in a way. No, I don’t think anybody’s saying there should be a zero-tax rate. We know we got to pay for the shared services we have, but if there was a way to simplify that to where we didn’t have to expend so much money on compliance and on those sort of accounting and finance related services, I think that’s another thing that could be very positive. That’s an area that I would still hold as a question mark. I’m hoping they get there. I think they’ve got some other big things that they’re going to try to do in advance of that.
Jeff Standridge:
Yeah, we’ll give you an idea of the complexity of the tax code, right? So it’s always been complex, at least in our lifetime, our business lifetime. It’s always been complex and was it three years ago, the announcement of 80,000 new IRS agents? So imagine the complexity increasing the enforcement, increasing the complexity of enforcement, increasing the point that we need an entire Razorback stadium of IRS agents, new IRS agents in order to make sure that compliance with the tax code is consistent.
Jeff Amerine:
And I think what you’ll get from the outside view there, I don’t want to give Elon Musk and the vague Ram too much credit, but they are technologists. I think they would look at that and say, if we really is an opportunity to harvest more money from people that are supposed to pay that aren’t, then we ought to be able to use IML-related tools and not double the number of bodies that are currently, I mean, right now that’s 80 plus thousand that are in the IRS. They’re doubling the size of that agency was the plan. It just doesn’t make sense. I mean, it’s antithetical to what they could do with technology. So I would say I’m hopeful that there might be some more rational approaches taken there. Certainly there seems to be an inclination to do so.
Jeff Standridge:
And if we look at the import tariffs, so thinking about if you and your business, if you currently do manufacturing in China or you do manufacturing offshore, particularly in questionable geographies relative to national security and economic security and what have you, or you have components supplied from those geographies, there’ve already been a number of companies beginning to look at how they start bringing that stuff back onshore, how they start bringing that stuff back into the United States for obvious reasons.
Jeff Amerine:
And I actually think the threat of the tariffs is more of a bargaining chip to provide a disincentive for businesses from working in areas that are adversarial, antithetical to representative democracy. I think that the winners in all that is the aligned democracies of the world that are kind of on the same page with our point of view are going to be big winners. So you’ll see strengthening of ties with places like South Korea, Singapore, and other, the Philippines and Asia, those sorts of places. And you’ll see pretty strong disincentives for going towards places where the rule of law is kind of in the eyes of the beholder. Things can be nationalized and in general, they’re adversarial to our values.
Jeff Standridge:
Exactly. But beginning to watch those chess pieces playing out is interesting to see. And as someone, both of us have worked internationally, we know where the good geographies are and where they’re not in terms of doing some of that kind of work. So the opportunity to move it to more friendly allies or back to the United States is welcome.
Jeff Amerine:
I would agree.
Jeff Standridge:
What else?
Jeff Amerine:
Well, so I would say these are question marks, but they’re things that should be closely paid attention to. I think there was a bipartisan and pretty meritorious view that the CHIPS Act was going to do some things to reshore and strengthen critical minerals, semiconductor production, et cetera, those things that were in the national interest. I’m not sure that those dollars have been manifestly have delivered the ROI yet on what they hope for, but there are some kind of positive signs in that regard. It’ll be interesting to see if the incoming administration shares the same view. I think they have a general disdain for government larges where they believe private sector of the markets can do these sorts of things, but sometimes it’s not the government spending so much as it is providing incentives. As an example, I’ve heard that there will be incentives for manufacturing in the states and disincentives for not manufacturing. There will be some tax breaks for manufacturing in the states, and there’ll be penalties for not manufacturing. So I think some of those sorts of things can be done short of actually writing checks from the government. I really think that might be what their footing is in the current administration versus the last, but we’ll see. Still unknown.
Jeff Standridge:
And in a recent episode, we talked about Corporate Transparency Act reporting and what have you. It’d be interesting to see if that requirement remains with the new administration. We were giving listeners tips on how to file and making sure they file that Corporate Transparency Act beneficial ownership information by the end of the year. But it’ll be interesting to see if that’s a legacy requirement that’ll continue.
Jeff Amerine:
Absolutely. That would be one of those. Sometimes when these new requirements come down as a small business or an emerging business, you wonder what problem are they trying to solve and is it a generalizable problem or is it an isolated problem? And this was the hammer that they had available to hammer that particular nail. If they look at this in terms of the problem they’re really trying to solve versus the amount of energy and effort that’s been required nationally to go through it, I don’t know. I mean, I don’t know how it would sort out. I suspect they didn’t just arbitrarily come up with this rule. It was based on some things they were saying, but I would be hopeful that they scrutinize all this kind of burden that they put, particularly on small and emerging businesses, and ask the question, is it really worth it?
I’ve heard, I’ve heard statements made that they’re going to use the sort of zero-based set of assumptions, not just on budgeting, but when they go in and look at a particular agency or regulation, they’re going to ask the question, what problem are we solving? And who does this help by having this in there? And if they don’t have clarity in that, sometimes systems perpetuate the system, and they forget what they’re there to do. So we’ll see if we actually get true change in some of that.
Jeff Standridge:
I’m a huge fan of periodic zero-based budgeting of coming in and saying, all right, look, we’re not starting with run rates. We’re going to start with what you think you need to deliver what you’re required to deliver. And so we have a university president here that transformed the financial picture of a university-based upon that mindset. So good stuff. Good stuff. We’re talking about the change in the presidential administration and some of the ramifications that come with that, specifically as it relates to businesses and things that listeners, you ought to be thinking about that we’re certainly thinking about question marks that we have, et cetera. Anything else as a parting shot today, Jeff?
Jeff Amerine:
No. I would just say it’s beneficial as a business owner to pay attention to these details because if you can get ahead of it, or at least pay attention to thought leaders that have an idea of what the next three months, or six months or the first year of the administration will be, you’re wise to kind of stay ahead of it. You don’t want to get bit by something you didn’t anticipate just because you weren’t paying attention.
Jeff Standridge:
Agreed, agreed. Appreciate that. This has been another episode of the Innovation Junkies Podcast. Thank you for joining.
Jeff Amerine (Outro):
See you next time. Thanks for tuning into another episode of the Innovation Junkies Podcast. We hope you gain some valuable insights and inspiration from today’s conversation. Be sure to subscribe for more episodes featuring leaders in the forefront of innovation. And don’t forget to connect with us on social media to continue the conversation. See you next time.