In this episode, Justin and Jared discuss the connection between home size and happiness, including why bigger homes don’t always lead to better life satisfaction. They also break down California’s proposed billionaire wealth tax and the potential ripple effects it could have on residents, businesses, and long-term state revenue. Plus, they review energy company performance in 2025 and highlight why results can vary widely within the same sector. Throughout the conversation, they share practical takeaways for smarter financial planning and diversification for oil and gas professionals.

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Welcome to Financial Planning for Oil and Gas Professionals hosted by certified financial planners Justin Brownlee and Jared Machen of Brownlee Wealth Management, the only podcast dedicated to those of you in the oil and gas profession to help you optimize investments, lower future taxes and grow your wealth.

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Welcome back to another episode of FPO Financial Planner for Oil and Gas Professionals.

This week on the podcast we are going to do a lightning round.

We're going to cover the article about home sizes and happiness and are those things correlated.

Justin, you want to set the stage for the home and happiness article from the Washington Post?

Would love to thought it's it was an interesting piece from Washington Post.

The general idea is that small homes can lead to a happier life experience.

And Jared, I feel like both you and I have some experience in this and so I'd love to just first hear from you.

Do you agree with the premise?

I would say yes, but in the same way that I agree with the happiness research.

So if you inflation adjust that that's a very higher.

Yeah.

Okay so with that aside, but, but up to a certain amount it's basically correlated and then the correlation breaks down and that intuitively kind of makes sense as you have your basic needs met and you have financial security.

Right.

Albeit various definitions.

I'm not dealing with food insecurity, I'm not dealing with housing insecurity.

As those things rise, I should be happier.

But then once I have my basic needs met, there's a lot of rich people that are miserable and there's a lot of people not much that are pretty happy.

So I think the home math kind of also probably tracks if you have a family.

The people writing this, it's a family of four living in less than 1,000 square feet in New York City.

Hats off to you.

I don't think, I think if you had 500 square feet, I don't think your happiness would go down.

Yes, I would probably say like I agree with it directionally.

I don't think happiness matters as much as we think.

Like, like if you compare somebody with 2,000 square feet and 4,000 square feet.

I don't think there'd be a correlation, but I think, like, let's say family, we'll use family of four, zero to 2,000.

I think there's probably a positive correlation.

And then it breaks down.

What about you?

I love that.

I think this topic's really important because if you're talking about your personal financial plan, your house has the ability to make you happy and it has the ability to make you miserable.

Right.

And this is now amplified just because the price of housing has exploded and the price of interest or the level of interest rates has changed drastically in the last five years.

So we are now in a scenario.

And this is.

I mean, Jared, this has always been true.

There have always been people that have overbought.

They've stretched themselves too thin, and that has materially hurt their financial situation, and it's potentially blown up their marriage.

I believe that money problems is still the number one listed reason for divorce.

So it, in many ways, it has always had the ability to kind of mess up your life in a negative way.

But if we're just speaking on happiness, I completely agree with you.

I think that every bit that you get larger in your home, from zero to, I will go 2,500 square feet.

Maybe that's because I have three kids.

I think it is a massive happiness improvement.

Jared, I think you see a little bit of happiness jump from 2,500 square feet up to 4,000.

4,200.

The marginal utility curve of square footage.

Yes, that's right.

And I also think there's also a number.

I'm not totally sure what it is to where it absolutely removes happiness and it negatively impacts your life when you add more square footage.

Yeah.

I also think it's important we take a step back and say, like, how did we get here?

Like, I think it's interesting.

Right.

So, like, our.

Our house, our family units getting bigger aren't what's driving the houses.

Again, it gets back to this theory.

We talk about the private equitization of everything.

Right?

Like.

Like, if I'm a builder and I can build 20 small homes or 10 larger homes, I get the same amount of square footage, but it's also, that's fewer blueprints.

That's, you know, less infrastructure that has to be laid.

Right.

Like, there's more economic incentive to build bigger houses.

And that's exactly what we've done.

That's right.

I've seen this recently, too.

I had to go to an event in way north, North Texas.

So this is like within 20, 30 miles of the Oklahoma border, Jared.

And I was blown away because there was massive amounts of new development of tiny homes.

And so they're building these, like, tiny homes legitimately 70, 80 miles north of Dallas and anywhere closer to a major metro area.

The only new development is extraordinarily expensive.

And so, you know, there's just.

If you want to live, like I'm thinking about us here in Fort Worth, if you want to live within 10 miles and you talk about the new neighborhoods, well, they're neighborhoods that are building, you know, 5 to 10,000 square foot homes for multiple millions of dollars.

And so it just totally changes the dynamic of what's affordable.

Because any small home, there's really not.

No one's building those.

That's the thing is, like, it's really like, as simple as, like, why, right?

Like, if you have to get back to your reasons, like, why do you need the amount of square footage that you have?

And that's like a really interesting existential question to kind of ask yourself.

There was a quote I pulled out that I really love, and it says, does your home and neighborhood act as a center of gravity for your friends and family or.

Or does it isolate you in favor of status and storage?

Right.

And like, I actually think this, you know, kind of, kind of, you and I both agree, at some point it breaks down, and it's more about your motivation for that.

That's right.

Although here's.

I want to admit something, Jared.

So, you know, I am saying right now that I'm.

But, Jared, I'll admit we're thinking about just different additions, remodels, and it has entered the equation of, you know what?

Well, maybe we should do this plan that adds square feet because we're going to get our money back on it.

So, like, the market and the potential investment on additional square footage pays Off.

So it's interesting.

Yeah.

And I think like it's one piece of the equation.

Right.

That's kind of par for the course.

Right.

All these homes are wonky layouts.

Smaller builds, not much over 2,000 square feet, smaller lots, but it's walkable.

Right.

And like one of my favorite things about the place that I live is I'm one block from the playground that I take Ellis to.

I can walk to the office, restaurants, bars, coffee shops, all that stuff.

And so like, you know, that is really important in terms of my satisfaction with where I live.

But doesn't show up in the square footage number.

That's a great point.

Location is going to probably be way more important than size.

If you have even like remotely enough size.

Exactly, exactly.

Yeah.

So long as you're not at the front end of the curve.

I think one interesting application is for oil and gas retirees.

Before we pivot to the next topic, I think like a lot of people fall in, or retirees in general really fall into this trap of like, hey, I've, you know, I've changed homes.

I, I want to have a spot where I can host the family.

And then you end up with 4,500 square feet and the probability of the entirety of your family being in the same place, you know, once a year, tops.

Once a year, tops.

And it has never been easier to just basically buy that space for us for a finite period of time via Airbnb.

Yeah.

And right.

Like it's one thing if, like that's the, that's the home you and your family grew up in and there's a lot of memories attached to it, but it is just kind of an interesting exercise of like, do I really need this for that scenario when that scenario is such a minor portion of, of my existence?

Right.

We see retirees kind of on two different camps.

Some, some will kind of downsize and just kind of simplify or hey, I'm just going to rent a spot for my family, which is definitely the more cost effective way to do that and kind of make your day to day life easier.

Or, you know, if you kind of, you're in the house that everyone grew up in, you might just stay there.

So it's kind of interesting to see people take different approaches there.

Right.

All right, Justin, let's talk about the billionaire tax, which I know you're just gonna be a super big fan of.

I Don't know much, but I know that you're just gonna be geared and stoked to talk about it.

I'd love for you to just summarize it and then just give some general thoughts on it.

Absolutely.

So California on the brink of implementing a billionaire.

It's called the Billionaire Tax act and effectively they are wanting to tax total wealth of billionaires and they're wanting to tax 5% of it.

So now when we're recording this, it's now less than 12 months away.

And yep, Jared, as you can imagine, I am a huge fan of increased taxation.

To all of our listeners, we are joking, we are laughing as we say this.

You know, someone actually said this and this is like Silicon Valley social media saying this, that how absurd that this is dominating the California news on the same week as all of the Minnesota fraud is coming to light.

And Jared, you know, I'm sure you're laughing because you've heard me rant for years that before any official fraud hit the news, I firmly believe half of government spending is effectively fraud to begin with.

And so I think it's absolutely comical.

It's totally insane.

They're saying that it's for healthcare.

There is truly, and I mean truly, absolutely no way that this solves any healthcare problem whatsoever.

And where should we go into the details here next?

There's a lot to unpack here.

Yeah, I mean, I think, right.

The problem with a lot of legislation is it's passed in isolation, right?

It says, hey, there are X number of billionaires.

If I charge this, then I'm going to get Y in revenue.

But every, every action has reactions, right?

So like the question is the break even math that probably wasn't done is how many of these people need to leave for this to be a net negative, right?

And which of these people need to leave?

Right?

Because there's a huge.

Right, right.

There's like, there was like a top line, hey, this is going to increase revenue analysis.

But there wasn't probably wasn't really a tax sensitivity analysis.

Right.

And I know there's already reports of people leaving and it's just, it's really, it's really sad quite frankly, right.

I think California's pressing its luck.

It's like a very naturally resource, resource rich place.

Incredible weather, can't, can't beat that.

But I mean they're just making it very prohibitive.

And I think, you know, a couple things like just these like, like a wealth tax violates, like just Financial planning law.

Right.

Like I, like if I have a, like we looked it up before, there are 400 unicorns in California, right?

Startups with value in excess of $1 billion.

The problem is, is okay, you know, and, and there are in the bill provisions for kind of illiquid assets and you could, you know, basically pay a loan and all that stuff.

And there's kind of workarounds for that.

But right, like all of that value is theoretical until I eat it, right?

Until it is in my pocket.

It's, it's a wazi, it's a woozy, right?

Like I like, like if, if I prepay the wealth tax and then I wake up five years later and my company went to zero, do I get a refund of what I paid?

Great question, right?

Like I know.

And the answer is no.

Yeah, and the answer is no.

So it's just really interesting this, this idea of taxation not at the point of value and discretion, but just at the point of California's interest.

It's, it's just a really tough pill to swallow and it just doesn't kind of acknowledge reality as it exists.

That's well put, Jared.

You know, a couple of things come to mind.

One could not agree with you more.

California.

California is the greatest place on earth.

There, there is absolutely nowhere on the entire earth that can rival California when it comes to beauty weather.

I was in California last week.

I am planning to be back in California potentially multiple times in the next six months.

If I could structure my life exactly as I want it, I would probably spend four or five months out of the year in California.

It is the greatest place on earth.

And so it's sad to see this happen.

It's sad because, you know, Jared, you mentioned the math behind it.

So what is the total, what is the net impact on taxation?

And I think there's two important calculations.

One is, hey, is this going to be tax positive or tax negative?

So California should be assessing, are we actually going to be able to get more revenue tax wise from this?

And there's a very, very good chance that it's an enormous net negative because everyone who would be affected by this tax should leave the state.

And then what does that do, Jared?

It means that they're no longer paying state income tax.

So you have an enormous exodus already.

Jared actually put this in our team chat that California again ranks number one on migration leaving the state out of 50 states.

So no state has seen more people leave than California, which again is truly insane because it is the greatest place on earth.

So one, you have a tax negative impact because people are going to leave if they're affected by this tax.

And that means when people leave, it's not just that you miss the billionaire tax, it's that you miss the next 40 years of their state income tax.

And so that's an enormous negative.

There is a second enormous negative.

And that goes to your point about unicorns.

Several of these unicorns may not even be at the billionaire level yet.

They know that they have a very strong chance to be.

So personally, the founder of the company may be worth a billion, but maybe the founder's not there yet, but he's on a path to be there.

It would obviously behoove that founder to leave right now.

So it's not just is this a tax positive or negative event.

It could legitimately be a negative event, probably will be.

But it's the economic factors that go with, hey, what does it do to your local economy when 200 really successful companies decide that they're going to leave their network effects?

They're probably net employers of people.

Yes, right.

Like all of these things are a huge deal.

Yeah, I mean, I think it's interesting too because like, if you, if you look at the bill, it's like worldwide assets, right?

Like everything is fair game.

And it's like, great point, talk about that.

And it's like, here's, here's the thing.

If, like, hey, I want, I like the idea.

The way it's being pushed is I, I want a piece of the, of what I helped create.

I would argue you created nothing.

Right.

Like the built, like, like Brownlee Wealth Management is, isn't successful because the building made us do what we did.

No, we got in and we got clients.

But even if you say, okay, hey, I, I, I want, I want a percentage of, of the pie of, of the, of what I've contributed.

No, no, it's worldwide income.

And it's like, okay, so if I'm a founder who set up a company in New Jersey, an industrial company a hundred years ago, but I've choose to establish my residence in California, but I'm a billionaire because I own a bunch of assets that aren't in America or aren't in California, I still get taxed on those.

That's crazy.

It's kind of wild.

Right?

But like, I would also use this as a chance to call out the weird fact that America is only one of two countries in the world that has citizenship based taxation.

Right.

Like a lot of other countries, they tax based on, you know, based on where the income is sourced from and where you are a resident.

Right.

US tax is based on citizenship.

And the only other country to do that is Eritrea, which is a northeastern African country that has a GDP of I think $2 billion.

Same size as, so 1/7 the size of the minimum company in the S&P 500.

So it's funny because federally it is interesting with this idea of like, hey, I'm going to grab everything in the universe, regardless of even if I can make a logical case that I had some amount of contribution to that, it's kind of interesting that America does that.

But also California has just really taken that bad idea that pretty much every other country has rejected and amplifying it even higher.

Right.

I did think it was really interesting some of the responses here and some I saw some Silicon Valley post about this and they brought up PayPal.

And you know, the PayPal mafia is kind of famous in Silicon Valley.

Quick 10 second overview.

Everyone's familiar with PayPal, but the kind of core 10 employees at PayPal who all held stock, they went on to be billionaires, but then they then went on to found a million different companies under the sun.

What's crazy is they've also like funded every campaign and this is like across both political parties.

So LinkedIn, YouTube, Tesla, SpaceX, basically half of the enormous, incredible tech companies that we have today.

Trillions in market cap.

Yes, just trillions in market cap.

So you think about that.

And what if a billionaire tax act was able to kind of break up and actually New York State, California state, really kind of went after PayPal back decades ago.

What if they were successful, Jared?

And yes, you know Reid Hoffman, I think, isn't he the founder of LinkedIn?

Multi, multibillionaire.

And then, you know, obviously Elon Musk is at Tesla and stuff.

And then you have, you have several other tech companies that are included as well.

So you have like the whole spectrum.

But Jared, how many mom and pop millionaires have those, those companies created just because they were employees at the company and slowly got equity compensation over 30 years?

Yeah, yeah, right.

I mean, it's literally millions of people in America came from nothing.

And those families are now multimillionaires because they worked at those companies.

Now you want a crazy, even crazier example.

How many people who started from nothing were able to grow their business because of YouTube or LinkedIn?

How much does that help Brownlee Wealth Management?

Huge.

Huge.

I don't know where we'd be without those two things.

Yeah, that's the thing.

I think a misunderstanding of the second order effects really matter.

Right.

And like, I think the interesting thing about states rights is, you know, you can, you can vote with your dollars and you can vote with your residency.

And I think, you know, what you're seeing is even, you know, even a lot of there's bipartisan opposition to this in California.

Right.

Like, it's not like somebody introduced this bill, but it's not universally adopted by the Democratic Party.

That's absolutely in control.

Right.

Like, I think people are voting and it's becoming abundantly clear, like even putting this idea out there is just opening Pandora's box and it is being universally rejected.

Yeah.

So it'll be interesting to see how that unfolds.

So Jeff Kramel, who runs Cramell Strategy Group, he was on the podcast.

We'll link to it.

He's brilliant guy, talks about the industry and the profession.

And again, this list is not exhausted, but it looks at some of the biggest players in each of the different parts of the energy supply chain.

So, so we will link to this in the show notes.

And I'm not going to go over every single company and tell you its performance, but it looks at a bunch of EMP companies.

The best performance is EQT, up 18%.

The worst performer is Oxy.

Oxy down 18%.

From just an integrated company.

It's got ExxonMobil and Chevron.

Exxon is up 12% or 12%.

25%.

Chevron is up 4%, 25.

Midstream, you have Enbridge up leading the charge, up 12% and then Energy Transfer down 17%.

Oilfield Services, Baker Hughes up 11%.

Schlumberger down 1%.

Refineries, refiners.

Valero up 35% and Phillips 66, up 13.

So really the only spot within energy that had positive returns universally as refinery and midstream.

Justin.

And there's other companies that kind of fill out.

I just listed the best and worst performing across each of the different categories.

But Justin, as I read that out to you, what do you think?

Any thoughts you have about that?

I think a couple of things.

It's always incredibly fascinating, Jared, to look at a specific sector and industry and see an enormous delta between the best and the worst.

And so there truly is not an ability to just invest in a few companies and use that as a proxy for an entire industry unless you have A very specific tax constraint that would force you to do that, but you really can't do that.

There really is an enormous delta between the winners and the losers.

Also, just interesting, as we all know, and, you know, I talked about this in an interview a couple of weeks ago.

It's really just another tough market for oil and gas stocks.

So we're seeing 21 lagged.

The S&P.

Only two outperformed, seven lost money.

So all in all, a relatively difficult year compared to the overall market as a whole.

Yeah.

So S and P returns 17% over that time.

So if you think about the probabilities, looks like 90% chance you lagged.

Yeah.

Less than 10% you outperformed.

And then some of these companies, I think five of them actually, actually lost money.

Right.

But.

But I don't think it's interesting.

Cause, like, that is the stock market in a nutshell, right?

Everybody thinks the stock market goes up 8%.

Every position's up 8%.

No, no, no.

The.

The attribution is wide.

Like, a few companies do really well.

Some are meh.

And then a lot lose money, right?

And, like, you win.

Cause you.

You don't pick the winners.

Cause, you know, the winners are in there, right?

And so I think it's like a.

Just a great reminder of kind of being diversified.

It's also interesting for our oil and gas listeners, right?

Like, we.

We deal with people with a lot of what I would call systematic overweights, right?

Like, hey, I'm sitting on a bunch of ExxonMobil stock.

What do I do?

And so this is like a great testament.

It's not just as simple as, hey, I'm gonna.

I'm gonna buy, you know, the s and P500 and exclude energy.

Because, like, the performance attribution energy is composed of all these different categories, and all these different categories have different performance, right?

Like refiners.

The average one was up, you know, probably more.

More than the market in EMP companies.

There's a 50% chance that you're down or flat, right?

So, like.

So, like, if I own, you know, if.

If I own Oxy versus Devon, my return differential is 30%, right?

And if I would have just excluded S and P X energy, I would've missed out on all that and owned the worst.

The worst of the few, right?

So it's an interesting thought of, like, if I have a systematic overweight and some.

In terms of my equity holdings, do I exclude.

Right.

Like.

Like, if I own Oxy stock, do I exclude energy altogether?

Do I just Exclude emp.

Do I just exclude oxy?

Right again.

And it's probably a function of, hey, how much do you have?

What's your situation?

What other strategies do we have to diversify the stock?

But you know, as you kind of have this reality, it's important to remember, okay, what risk do I actually have and how do I structure my other assets in light of that risk?

I think that's well put, Jared.

It's also interesting.

This is a super first grade observation, but it is really critical when you look at investing in companies.

A 20 or 30% up year is normal and a 20 or 30% down year is also normal.

And you have to be able to weather that.

That's just wildly different than fixed income, than cash or bonds.

You have to be able to navigate that.

And, you know, I'll be brief on this, but if we go back to the California point, this is why it's so devastating and why every company that has that type of market cap has to leave the state.

Because you could easily find yourself in a year where, hey, we're down 20% this year.

And, well, if the snapshot for the tax was done before that happened, you're in a completely world of hurt.

And for a ton of founders, it would, it would literally bury them.

Yeah, there is, there is one beneficiary of the California wealth tax is all the people that are going to be required to get approved valuations.

Yeah, like, like if, like if, like if, if there's one person that's going to win from that or one group of people, it's probably the lobby of private appraisers.

Yes, the valuation.

But I mean, you know, it just gets back to this idea of like, hey, most stocks underperform the aggregate market.

Right.

And it's just, it's power loss, you know, 80% of the results are driven by 20% of the stocks, the best performing stocks.

Right.

And so, like, it's just a great reminder to diversify, diversify, diversify.

And again, right.

Like if oil had a better year, all of these numbers would look better.

But the attribution is still wide between the best and worst performer.

And so, love Jeff's research.

We'll also link to it in the episode we had with him.

Justin, I think the most important piece of economic news, final one we should wrap up on is the recession.

The slop bowl recession that nobody's talking about.

That's just catastrophic.

Tell us what, what is, what is a slop bowl?

So slop bowl has become kind of the funny wall street term for Chipotle Kava sweet greens.

So you get the idea.

You go to lunch and you just get a bowl of something from those places.

What are we seeing there, Jared?

We're seeing some really bad stock performance recently.

And what's going on with the sloppies?

Yeah, I mean it's just, it's, it's a recession, right.

So like this chart is a couple of months old, but Cava was down 57% from all time highs.

Sweetgreen was down 82%.

Chipotle is not on here, but I think Chipotle was also down probably close to 50%.

These companies are just struggling, right.

Despite like it's interesting because like you, you see and it's again, it's just such a testament to the disconnect between stock price in economic conditions.

Right.

It's all about what's happened relative to expectations.

All of these things are proliferating like wildfire, right.

Like they're everywhere, Everywhere I go it's like there's another one being open.

They're expanding their footprint massively, but.

Right.

Like.

And again, I don't know why it's happening to each of these, but they're all sucking wind, right?

Because probably not because they're doing bad and not because they're not growing, but just because the expectations about their future growth were so high.

That's a really good point, Jared.

We talked about this idea with real estate and it's true.

In a lot of industries, whenever you see a certain asset class explode in value in a very short period of time, it is possible that you were seeing their next seven years of returns all being gained in the first year.

Right.

So there's some of that dynamic as well.

And you just alluded to this.

They maybe saw so much growth in a short period of time that they were pricing in future growth.

And sometimes when that future growth can't quite happen at the, at the rate that they expect, well then it's going to, you know, set up for an enormous downfall.

Yeah.

And it's just a function of capex, Right.

Like the only way that these companies grow their top line is expanded number of units, so stores or expanded sales.

And like those are much harder levers to pull than like a software business.

Right.

So naturally you're just gonna.

You're gonna get punished.

And like, to be clear, I like.

I like split green.

I like kava.

I think they.

They provide a valuable service, especially as a family with children under five.

You know, the fast, casual, healthier experience is, like, awesome.

But the thing is, it's like Sweetgreen, for example.

I don't know if they've turned revenue neutral, but.

Or profit neutral or.

Yeah, but, like, for a long.

They've been in business a long time, and they've just lost money.

Yes.

And the goal has been to scale up to a certain size.

And that's when it.

When.

When it's really easy to lose.

Lose any sort of momentum is when your ability to actually make profit is predicated on aggressive growth.

And if you.

If that aggressive growth can't materialize, oh, the entire business plan just went out the window.

That's a great point.

So, as someone who goes to the sweetgreen with quite regularity, I'm rooting for a rebound.

Slot bowl rebound.

Can I admit something?

Yeah.

I've never been to Sweetgreen.

I've been to Cava, and obviously I've been to Chipotle a bunch.

I think Sweetgreen is the best of the three.

Okay, I need to check it.

Do we have one here near the office?

You live so close to one man.

It's on University.

Really?

Yeah.

Wow.

So I have one right by my house.

I need to check this out.

Yeah, you live closer to that sweetgreen than I do.

Okay.

We will keep our listeners posted on my personal, personal thoughts on sweetgreen over the next month or so and look forward to reporting back on that.

Yeah, well, that's all we got.

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