SPEAKER_00: Hey, how's it going? This is Craig Cannon, and you're listening to Y Combinator's podcast. Today's episode is with Russ Roberts. Russ is the host of the podcast EconTalk. He's also a research fellow at Stanford's Hoover Institution and the author of several books, including How Adam Smith Can Change Your Life. You can find Russ on Twitter at EconTalker, and I've also linked up his podcast in the description if you want to subscribe. All right, here we go. So to start off the podcast, I want to talk about one of your previous episodes, the one with Jonah Goldberg. So you pulled out a passage from his book, The Suicide of the West, where he wrote, capitalism cannot provide meaning, spirituality, or a sense of belonging. Those things are upstream of capitalism. I really enjoyed your conversation, and I kind of want to talk about it in the context of startups. So what are your thoughts on this meaning, spirituality, and a sense of belonging in regards to creating your own company?
SPEAKER_01: Well, in a previous life, I was at a business school, and one of the things I did there was to connect MBA students with entrepreneurs. We had something called the hatchery, and entrepreneurs would come in front of the students, present their ideas, and the job for the students was to write a business plan for that idea. And in the course of doing that, I met with a lot of entrepreneurs, because obviously we couldn't take everyone who was interested, and I got to find out what they were interested in, what they cared about. And one of the things that was very moving, and I actually stole this and fictionalized it and put it in one of my books, was the non-financial motivation that founders have. And obviously there's a financial motivation. If you're not going to make money, it's probably not going to get investors, and it may not keep your attention, and eventually you won't be able to pay your workers. So you do have to make money, and you have to make more than you spend to have a viable business. That's a beautiful thing. But I was struck by how much people care about what I would call the spiritual part of it. So I have a memory of an entrepreneur who started a software company. And I remember him, I don't know if he choked up or teared up, but he definitely had an emotional moment when he said to me, I wish my dad had seen my company, because his dad had passed away. He said, I wish my dad had seen what this product is. And then he stopped, and he was brought up short, and he said, I don't even like my dad. And I thought, well, that's one of the deepest things I've ever heard, right? This incredible primal desire to, first of all, please your father or make your father respect you, earn the respect of your father. But the role of a startup, or anything you create, it's not just a startup, right? Anything you create, the mark you make on the world that you want your parents to see is way beyond, I think, the monetary part of it. So the money counts, but I think obviously starting a business, creating something that can sustain employees and pay them is deadening the world in your own way. That's just the way we make our mark. And I think that's a really beautiful thing. I think it's a phenomenal thing that in America, it's relatively easy to do. And I think that's really important to part of what makes America what it is.
SPEAKER_00: And was that your intention behind EconTalk, to make your own dent?
SPEAKER_01: Before I answer that, I want to go back to the Jonah Goldberg quote about upstream of capitalism. I just think it's bizarre how capitalism bears the burden of human nature. Some people say, oh, capitalism, that, I mean, the system's based on greed. And this is a Milton Friedman thing, he'd say, oh, as opposed to what system doesn't have greed, greedy people in it? Every system, maybe not greedy, just at least self-interested. But to go back to your question, you know, when I first started podcasting in 2006,
SPEAKER_00:
SPEAKER_01: I was invited, before I started, the reason I got into it is somebody invited me to be on their podcast, and I asked them how many people would listen. I'm figuring it'd be 80, 114. He said, oh, two or 3,000. And I thought, whoa, if you told me that at two o'clock tomorrow afternoon, we're gonna be in a large theater, and there's two chairs on that stage, and you can sit in one and chat, and these 2,000 people, 2,500 people are gonna be interested in what you have to say. Now, some, of course, are gonna leave before the-
SPEAKER_00: Oh, yeah, 10%, 20% through. Yeah, because they're allowed to leave
SPEAKER_01: without you seeing them in the podcast world, but they're gonna start. They're gonna come and buy a ticket or reserve a space, which is what a download really is. I would have said, I did say, I said, I'm in. Okay, I'm coming, I'll be on your show. And then I realized, gee, maybe I can do this. And I didn't think I'd wanna do it every week. That seemed like a horrible job, but eventually I realized that if I didn't do it every week, I'd have trouble attracting listeners. And I didn't know if I could do it every week. And as the audience grows, basically you are hanging out in what started as a theater or auditorium, then became a basketball stadium. And right now for EconTalk, it's a football stadium of listeners every Monday morning. And that just blows me away. It's moving to me. I feel blessed and privileged and honored to be able to do it. And it has this strange piece to it, which is that my listeners know me pretty well.
SPEAKER_01: I have 700 hours of material of which, you know, I'm probably 300 of the 700 hours. There's a guest usually, almost always. And so I don't talk the whole time, but I talk maybe a little less than half the time. So somebody who's been listening from the beginning of which there are non-trivial number have hung out with me for 300 hours. That's a, you know, one way to think about that is it's, let's see, it's, I don't know.
SPEAKER_01: It's a lot of road trips of intimacy, but I don't know them. They've hung out with me, but I haven't hung out with them. So that's a strange, beautiful, poignant aspect of this business. But the bottom line is to answer your question, the chance to hang out with those people every week is exhilarating to me and it's wondrous, I love it.
SPEAKER_00: Yeah, to go off on a side for a moment, I have the same experience and it's often much more focused because at YC we have this thing called Demo Day, right? Because you did an episode with PG and Sam and they talked about it. And so before Demo Day, we have this thing called Alumni Demo Day, where people who've gone through the program come and see the company's demo. And invariably someone will come up to me in the bathroom while I'm at a urinal and pat me on the back and say, hey Craig, really love the podcast. And you're like, maybe not right now. That's what I say. But it's like, I mean, I appreciate it. And they feel like you're their buddy.
SPEAKER_01: They've been, yeah, exactly. Yeah, and it's cool.
SPEAKER_00: I'm very happy with it. Yeah, I know, that's. Yeah.
SPEAKER_00: And so, you know, now you're seven, what episode did you just release? 690 something, we're close to 700.
SPEAKER_00: Almost 700 episodes deep. I'm kind of curious if it's possible for you to summarize these key concepts that you've talked about. Because, I mean, I haven't gone back to episode one, so I don't know what it was in the beginning. But you have a pretty wide spectrum of guests. So all of our stuff, or in large part, is related to technology in some way. A lot of like startup founders, listen. Are there like two or three key economic concepts that you could kind of impart onto a startup founder after almost 700 episodes of EconTalk?
SPEAKER_01: Normally I'd say I have no idea. But I actually do have an idea. And the reason I have an idea is not from me, but from those founders that have talked to me and said, I love EconTalk, and I'd say thank you. And then they say, it's really helped me with my business. And I've never, I wouldn't have imagined that. Had no inkling, was shocked and surprised and taken aback and curious. And, you know, for me, almost everything I do is I try to have a mix of entertainment and education. There's a sweet spot between those of, you know, what works best or what works better than others. If it's too entertaining, you don't learn anything. If it's too educational, nobody listens sometimes. So the challenge is to find that sweet spot. But the idea that it would be useful to somebody running a business never crossed my mind. Literally would never have come to me until I hang out here at Stanford in the summers. And I interact with people with startups and VCs and others, and they tell me that they find EconTalk helpful. And so I ask why. And one of the answers that I hear, I think there are a couple of answers. Some are, there's some basic economics concepts that are useful. And I should say that, you know, when I started EconTalk, the idea was to interview economists about their research. That's not what it is anymore. It's every once in a while, blue moon. It's economists talking about their research, but now it's, I'm lucky. It's basically, the show is really should be called what Russ Roberts is interested in, which changes over time. I got tired of talking about Bitcoin and monetary theory and what caused the financial crisis of 2008. I did, I don't know, 25 or 30 episodes on that topic of the financial crisis. And I've learned what I think I can learn from it. And I don't care if there's a really great book on it now that summarizes a bunch of stuff. I'm probably not gonna talk to them because I kind of, it's not that it might not be a great book, we could even have a good conversation. I don't think I'm gonna learn enough from it to go through the effort of reading it. And the same is true with monetary theory and Bitcoin. I kind of have a rough idea of where we stand. And there's, it's the answer is, there's a lot we don't know. And when we get a little closer, I might do it again, but I'm not gonna do any for a while, even though everyone tells me I gotta interview so-and-so because he really understands something. I don't know how to doubt it, but okay, maybe. So, you know, in the early days, it was very economics focused. And there are some basic economic ideas. I think they're very useful in business. The idea of opportunity costs, the idea that when you do something, you can't do something else. That's a good thing for a person in business to know. It sounds trivial. It's not in practice. It's easy to forget that. And so when you hear that in a podcast, they're, oh yeah, that's a useful thing to remember. The idea of comparative advantage, the idea that there are things that are too expensive for you to do for yourself and you should pay someone else to do them for you. Every founder has to deal with that issue. When do you hire a director of marketing? When do you hire an accountant? When do you hire an HR director? When do you, et cetera, et cetera. So those are tough trade offs. And in thinking about that, I think is useful because I think I wouldn't be surprised if a lot of founders have what I would call a control problem. And so giving up control is very challenging for most, for a lot of people, especially founders. And so being forced to think about that is probably a good idea. But I think that the most interesting thing that people have told me they found useful is the idea of a merge and order, the idea that certain things can solve themselves under the radar and that there are forces that work to work on problems even when you don't explicitly try to control them and solve them. And that just is not a natural idea. It's not the way we're taught. It's good reasons not to teach it, right? Most things you want something done, you got to do it yourself. I always use the example of the dishes. The dishes won't do themselves. Someone's got to get into the kitchen and do the dishes. The garbage doesn't take itself out. You got to roll the garbage to the curb, et cetera, et cetera. But there are a lot of problems that get solved that you don't have to worry about. Like, oh, if a lot of Chinese kids move into cities and start using pencils in school, because they're not on a farm anymore. And now there's not enough pencils to go around. And how are we going to have pencils in America? Because the Chinese are going to have them all. And I'm going to show up at Staples and say, could I have a dozen pencils? They're going to say, what do you mean? Come back in a year. The Chinese got all of them this year. That doesn't happen and you don't lose sleep over it. And that's an amazing thing. I did a poem called, It's a Wonderful Loaf, and it's animated online. And it's about the phenomenon that in a major city, everybody goes to bed at night, not worrying that when they wake up, is there going to be food for everybody? I mean, who's in charge of that? Answer, nobody. Nobody's in charge. If you like whole wheat bagels, you don't have to send a letter to the city hall saying, I just felt we're not getting enough whole wheat bagels this year. Can you make sure that next year you plant more wheat? All these things, there's a lot of problems that solve themselves. And that's generally of interest in the world of public policy. But in a business, it's also useful because there are problems that your culture can solve. There are problems, there are things you can outsource. There are things you can, somebody told me, I was going to hire, I was going to expand my head count. And I realized I don't have to do that. I should go rent that. To me, that's an obvious idea. And it is obvious. And if everybody understands it, this economic concept of emergent order, the idea that there's certain things that are self-regulating or that control themselves, it's forced you to think about it in a different way. And so I think that's wonderful that anybody found that useful in a practical sense. But most of what I do is not useful. It's just interesting. That's what I try. I try to get smarter. In theory, being smarter is useful, but I wouldn't count on that. Right.
SPEAKER_00: And so when it comes to communicating these ideas, whether it's to your children or friends or listeners, what are effective methods for actually teaching it in such a way that someone intuits it and really understands it and can put it to use?
SPEAKER_01: So I used to spend a lot more time thinking about some aspects of that, because it's very easy to teach a class and to give an exam when you're in the classroom, which I was for 30 years. It's very easy to teach a class, give an exam, and convince yourself that the students have learned something when in fact they've all learned almost nothing. One of my favorite teacher evaluations I got was, I got a one out of five, and the student said, "'Professor Roberts is a horrible teacher. He expects us to apply things on the exam that... He expects us to apply the material on the exam to things we've never seen before.'" Of course, that was the whole goal of the class. I mean, what's the point of learning to tell me things I can explain to you, work, that... Right. I mean... It's just memorization. Right. So that's not what we're trying to do here. What we're trying to do is teach you how to think. And economics, when it's well taught, should be about giving you a lens to understand the world. So the challenge is, how do you convey material in ways that are memorable
SPEAKER_01: and that you can internalize and then apply to things that aren't just the example you got? And one way you do that is through conversation. So I think a great podcast can do that. It can help you hear the back and forth of a conversation rather than a monologue, which is what a book is. A book is a lecture, is a monologue. A conversation replicates maybe your own thinking processes and makes it more likely that the lesson will go in. The other way you do it, of course, is just through trying to work out the implications of an idea that aren't so obvious what those implications are. What are the unintended consequences? One of the most important lessons of economics that we talk about on EconTalk is the idea of, and then what? So you can tell me what's gonna happen if you put this policy in place, but, and then what? What are the next set of consequences that come from changing incentives the way you've done them through, say, a price control or a tax or subsidy or tariff? It's easy to see the first round direct effects. The harder thing to see is the indirect effects. And that's what economics, when it's well-taught, should sensitize you that way. I mean, the other lesson is most things are just forgettable. So you've got to convey things in ways that are memorable. I try to do that through narrative. It's why three of my books are novels. It's why I wrote, co-wrote two rap videos and wrote that poem I mentioned. Because what I was trying to do there, among other things, was rhyme is much more easily memorized. And I was hoping to create ways for people to communicate using quotes from those efforts. I'll give you an example. At the end of the fight of the century, which is the second rap video I did which on Popola, the filmmaker, we have the line talking about capitalism, give us a chance so we can discover the most valuable ways to serve one another. And to me, that's a romantic, idealized version of what capitalism can be. There's crony versions of that, where instead of trying to figure out what makes value to you, my customer, I get the government to keep out a competitor or to get a special payment. It's all kinds of ugly versions of capitalism. I could defraud you, I could lie to you, I could deceive you, it's hard to do. If I have competition, it's gonna be a lot harder. But when it works well, that's what it does. It gives you a chance to discover how to serve, we serve one another. And that's pretty amazing. But that as a pedagogical device, that rhyme. My kids know that by heart. That's useful. Now it doesn't mean you understand it, just because you can spit it back to me. There's a lot there, there's a lot there. So fully understand that you'd have to think through what the consequences of that idea and concept are. But that's another piece of it. How do you convey it in a way that people are gonna remember it, that people are gonna have it in front of mind, not in back of mind?
SPEAKER_00: So much of it is also repetition. It has to be your most quoted Adam Smith line. Man desires not only to be loved, but to be lovely. And it's just like burned into my ears now. And by the way, there's an EconTAR drinking game
SPEAKER_01: which you can buy. I don't get any money from it. It's a fan created. It's very charming. It's things I say all the time. What makes me happy is it's a long list. That's one of them. If I say that, you drink or you sip, I can't remember. But those things, I deliberately say them a lot. And one of the reasons I do is that I'd like that to be burned into your mind as a listener. And of course, the guest has maybe never heard it before. So I also want the guest to hear it for the first time. My other favorite quote is Hayek's curious task of economics is to demonstrate to men how little they know about what they imagine, how little they really know about what they imagine they can design. That's a powerful idea. Most people, it never crosses their minds. So it's an awkward quote. It's not that, look what I almost butchered it. I've said it a thousand times. So it's not an ideal quote, but it's pretty good. And it gets at something and you're right, repetition's important.
SPEAKER_00: But then with your book, How Adam Smith Can Change Your Life, you basically, I mean, my intuiting of it was, here's this incredibly valuable text. It's not well known. And it's also not- I'm talking about Smith's theory of moral sentiments. Right. And it's also not necessarily incredibly easy to parse. Correct. And so you kind of took it upon yourself to redigest it and put it back out there to the world. And so what, I mean, obviously the title kind of alludes to it, but what was your main objective with the book? What were the ideas you wanted to communicate?
SPEAKER_01: So I had a few things. One is just to honor Smith, who wrote this book that nobody reads anymore. And I think it's full of insight. And that there's a certain tragedy there that people only think of The Wealth of Nations when they think of Adam Smith. And in particular, they have a caricatured version of The Wealth of Nations in their mind that greed is good. And that's not what that book's about. It's a total misunderstanding of it. The book's an exploration of the power of self-interest, not greed. You can be self-interested without being greedy and you can be charitable by when you're self-interested, but there's all kinds of obvious thoughts there. But his first book, The Theory of Moral Sentiments, which was written in 1759, is all about the virtue of not being greedy and why anybody's not greedy, why people aren't self-interested all the time. Why they ever do anything benevolent? Why do they ever take other people into, think about other people when they go through the world? And so that's really interesting. It turns out it's not obviously interesting. It's not, what do you mean? Who cares? People are nice. But I think Smith had about a zillion insights into how we interact with others. And as I read the book, I realized that there was a, there's a lot of wisdom here that people weren't grasping, that they'd missed a chance to know. And so that was, my main goal was to take Smith's ideas and apply them to modern examples from business, from family to family, and your daily interactions with the people in your circle of friends, associates, sentiments, colleagues. And in particular, I think if I had to say, well, you know, is there a central idea? That quote you gave, man naturally desires not only to be loved, but to be lovely. And by love, Smith didn't just mean romantic. He meant respect and honor, et cetera. And lovely, he meant worthy of honor, worthy of respect. Thinking about that as an aspect of a central part of human nature is incredibly powerful. It gives you insight into why people do some weird things in your life. You go like, why aren't they so? And the answer is, oh yeah, man actually desires not only to be loved, but to be lovely. So we care about our self-respect. We care about the respect of others. Remembering those two things doesn't come naturally to most economists. And I think so reminding people that probably the greatest economist who ever lived was really focused on not just money. And then the next part of that was, Smith says, well, how do you get to be loved? And the answer is, how do you get people to pay attention to you? How do you get to be honored? How do you get to be respected? And Smith said, well, there's two ways. One is fame, wealth, and glory. Fame, wealth, and power. Money, power, fame. Yeah, okay, we all know that. Those people, we pay attention to those people. You know, I think Donald Trump has all three. I'm not sure if he's really wealthy. We're not, there's some uncertainty about that. He's definitely famous. And he's definitely powerful. And he's probably wealthy. So if he stopped by today, I always use this example. When I'm giving a lecture, I always say, if Donald Trump walked in the room, you'd stop paying attention to me. I don't care whether you like him or not. I don't care whether you voted for him or not, whether you hate his guts or love him. He's famous, he's wealthy and powerful. And those kinds of people command a room, period. And a poor, forgotten, pitiful person is ignored. Not just, oh, it doesn't, it's not just, oh, he's not gonna get as much attention as Donald Trump. It's like that person doesn't exist. You see that, you know, we're in San Francisco, you see that with homeless people. It's all right when I give people money, I do try to look them in the eye. I do try to tell them I have a nice day. It's not much, but it's better than ignoring them. But the point is, that's the point is that we strive to be paid attention to. And the natural way we strive to do that is through fame, power and money. And Smith says, of all people, Adam Smith, the first economist says, that's a bad path. It's tempting. A lot of people follow it, don't. The better way to be loved, that is the better way to be respected and honored and praised is to be virtuous and wise. And that's a funky path. That's a hard path. It's not the glittering path is what he says. The glittering path is the fame, power and money thing. But he says, be careful. Go down that path, you're gonna do some things you're gonna regret, it's not gonna make you happy. And so I thought that insight coming from an economist was really important and really sad that people think economics is about making money and only making money. And that's just not true. Well, let alone Adam Smith's reputation.
SPEAKER_00: Right, exactly. It's the opposite.
SPEAKER_01: Right, so those are my, those are really my goals. Yeah, and to me, it's also a kind of a pillar
SPEAKER_00: of at least what Econ Talk has become. There's a lot of that human element in relation to the economy.
SPEAKER_01: Yeah, I mean, I interview,
SPEAKER_01: people have interesting things to say that I think I can learn something from, but increasingly who have things to say about aspects of daily life that are not just financial, although financial is fine. And I like interviewing people in business who let me and let listeners get access to a world that they wouldn't see. So, I interviewed Lisa Turner is an organic farmer because I wonder what's that like? I interviewed Alex Warner Shelley, who's the on Chopped and runs a high end restaurant in New York City called Butter. What's it like to run a restaurant every night? And just one thing I remember from her is that when she told her dad that she wanted to be a chef, he said, okay, just remember, you'll never spend Christmas or Thanksgiving with your family. Like, oh yeah, I guess that's true. If you wanna be a chef, you gotta give that up. So that's cool. So those kinds of insights that, I love that. That's a small part of the program, but I love whenever I can do that, or the woman who cuts my wife's hair or the guy who sold my car, trying to pull back the curtain on things you might not normally have access to is really fun for me.
SPEAKER_01: But I'm also interested in people who have ideas about things that are outside what people would normally call economics. And so I thought about changing the name because it's not so much econ talk anymore. And there were a lot of people I think who go, oh, econ talk, I'm not gonna like that. I don't know, it's a tough one. Yeah, it's okay. I have to change my Twitter handle, I'm econ talker. I always found that an interesting choice.
SPEAKER_00: Like you didn't have your own econ talk handle and it's Russ Roberts handle and now it's too late. Yeah, exactly. All right, so you're obviously quite popular on Twitter, even if you're not Russ Roberts. You have a bunch of questions sent in, one related to this. Steve Adima asks, Russ Roberts has emphasized the limits of only looking where the light is when it comes to studying wellbeing. How can economists incorporate the aspects of wellbeing that aren't easily quantified? So this is a recent theme.
SPEAKER_01: It's interesting that he, that listener sees it as an ongoing thing. Lately, I've been thinking about the fact that we focus on things we can measure. So the metaphor he's talking about there is the idea of the drunk who's under the lamppost looking for his keys and the sober person comes along and says, let me help you. Lost your keys, yeah. And after a while they can't find him and the sober person says to the drunk, you sure you lost him here? Oh, I don't think I lost him here, but the lights, this is where the light's the best. So we tend to look where the light's the best, where we have data, what we have data on. But what I've started to realize lately, that's a cliche, it's true. But I think what I've started to worry about lately is that it's not just we look where the light is, the stuff that's not under the light, we forget about. It doesn't exist, it's not just like, oh, it's hard to see and I'm not sure what it is and how big it is and whether it's small or large. It's that I only look where the light is. And I just, so the metaphor I use for this now is if you have a hammer, everything looks like a nail. It's not just that, it's that you only see nails. It's not like you go, oh, that looks like a nail, I'll try to hammer it down. It's like everything's a nail. And a cloud, I don't know about clouds because they don't remind me about nails at all, so I don't think about clouds. So I think there's a challenge in economics that we focus on things that are measurable and forget, not just focus on them, forget about the non-measurable. And there's a lot of examples. When I start talking about this, an example would be, say, in medicine.
SPEAKER_00:
SPEAKER_01: In medicine, people are kind of focused on a one-zero. Live, die, live, die. How about quality of life? Oh, well, that matters, of course that matters. Sure, of course that matters. But when it comes down to it, curing the disease or putting the cancer in remission, even if it means you have a horrible life while you're under the treatment and you die pretty soon after that, people call that a victory. That's not a victory to me. Probably a mistake. But we get very focused on that outcome, alive or not alive. And so in economics, we focus on things that can be quantified with dollars, things that can't be like dignity, which we've been talking about lately on the program, it's not like, oh, I understand I can't measure dignity, so I have to kind of weigh that in in a qualitative way. It's that dignity is forgotten. The only thing that matters right now in America is inequality or how much income you have. And if it's too low, we worry about that. The idea that it's high, but you don't have any dignity, or we give you a check to replace lost income because you've been displaced, say, by technology, that that's just as good is probably not true, probably not just as good. Even though, I mean, if you ask somebody, okay, you're making $45,000 a year now, and this technology is gonna come along, it's gonna take you out of your job, you're not gonna be able to do it anymore, but I'm gonna give you a check for $45,000, which according to a really bad economic theory says you'll be just as happy because you can buy just as much as you did before. And of course, we all understand that those aren't the same, that I might lose my dignity, the inability to support my family is changed. You could say I'm still supporting them through the check that I'm receiving, but most people would say that's not the same. If given a choice, they'd prefer to work, even though work is unpleasant often. So how do you remember to keep that in mind?
SPEAKER_01: And I think what happens is, is that we don't. So the question, which is a fantastic question, which read the last part again, what did Steve ask?
SPEAKER_00: So Steve asks, how can economists incorporate the aspects of wellbeing that aren't easily quantified? So what we tend to do is say,
SPEAKER_01: okay, we're not measuring dignity, we need a variable for dignity. So let's go out and ask people how much dignity they have. And we'll put it on a scale of one to five. I got a big argument on Twitter a few months back on happiness from having children. And there's a lot of surveys about whether people who have children are happy or not, married people happy or not, single people happy or not. And I said that most of that is meaningless. And why I said that's not so interesting right now, talk about if you want, but somebody said meaningless, there's a lot of patterns in that literature that are useful to look at, how happiness varies with income, how happiness varies with marital state, whatever. And I said, you know what those are really, there is some meaning there. What they tell you is how people respond to surveys about happiness, those are not the same thing. They might be the same, they might be similar. They might be identical even, but I wouldn't assume that as my starting point. It's a different thing. So the temptation, first of all, to ignore things that aren't quantified and then to say, okay, now I've got to quantify some unquantifiable things is very natural. And it's probably a mistake. Of course, now what? When somebody said to me, well, I suggested that a survey about parents' feelings of satisfaction about having children versus parents who married couples or couples or single people who don't have children and their level of happiness, say on a scale to one to five, it's not so meaningful. In fact, could fool you into thinking you understand something you don't. So one of the responses I got was, well, more information is always better. And my view is, no, it's not. It often is, I'm very pro-information. I like data, I like evidence, but there is evidence that's not data that's very hard for people in 2019 to remember. There are things we understand about the world that don't come from a survey, that don't come from some quantified thing. So in the case of children, if you said to me, my wife and I are trying to decide if we have children, where's the best data on that? I'd say, well, I'm not sure there's any good data on that, but there's evidence on it, just not data. Well, what do you mean? So the answer would be, well, I'd read some books, read some novels. That's what fiction is about. Fiction isn't just to pass the time or distract you. So if you understand something about the world that a great thinker put in the form of a narrative, I'd talk to people, I'd have conversations, people who have kids that don't have kids, ask them what their satisfactions are. Now, somebody's satisfaction from children or somebody's satisfaction from being single may not apply to you. You understand that. The data often struggle to make that distinction. They assume, oh, it's gonna apply to everybody. Probably won't. So you've got to make some non-quantifiable assessment of how meaningful that information that you've gathered is for you. That includes almost every decision you can make in your life, right? Whether to go to college, what to major in, who to date, who to marry, who not to, et cetera, et cetera. What to have for dinner tonight. Oh, yup, gave it a 4.5. Oh, I forgot, I'm a vegetarian. This barbecue restaurant is not for me. Those are the easy ones. The hard ones is most of life. Well, that's... But it's the current paradigm, right?
SPEAKER_00: So you look online, like I wanna find this metric, but for almost all of time before, it was, my neighbor has two kids, let me ask him. Right.
SPEAKER_01: What do you think? Actually, you know what it was through most of the time? Having kids is what people do. So I'm gonna get married and I'm gonna have kids. Now everything's up for grabs. You don't have to get married. You can be totally, you're not gonna be stigmatized. You can have kids in marriage or not marriage. You can have kids through a test tube or through a human being.
SPEAKER_01: There's so many choices, right? And a lot of the traditions about how to deal with that uncertainty are out the window, which is a really interesting part about being alive right now, right? Lot more freedom, lot less guidance. But in the old days, you didn't look it up. You didn't try to figure it out. It was what you did. It came in the air you breathe. It was just considered normal. Now it's not normal. It's whatever, it's up to you, which is very cool and challenging.
SPEAKER_00: I have a couple of thoughts related to this. So first of all, just to touch on that, you use the example of Warren Buffett's son in your book. And I know that was a great one. Peter. Yeah, so I forget the exact, $80,000, $90,000 in Berkshire stock, which would have sum to 100 million, I guess, at the time of writing. Some absurd, he was given the stock and he had a choice.
SPEAKER_01: His dad said, you probably read it more recently than I did, but the dad, Warren says something like, this is your gift. You're not getting anything else from me. It's a fabulous gift. It's very generous, $100,000, 80, whatever it was. You can keep it, hold onto it and let it grow. It may not, we may fail or you can cash it out. He cashed it out, lost the chance to let it sit and accumulate to whatever millions and millions of millions of dollars. Which wasn't guaranteed. Right, wasn't guaranteed. Instead he sold it, financed going, I think, into the music business and set a successful career as a musician. He's not, many people have never heard of him. But he's had a very meaningful and satisfying life. And then you got asked the question, did he make a mistake, right? No, I mean, he wouldn't say so. I don't think he would, but he could be lying to himself. But again, you have to ask yourself, there are people who would call that a mistake. And for them, they should have held it, done something else and cashed out the money 20 years later and ridden the wave. And that would have been fine for them. There are others who would have sold it and going to music school would have been the, or going to the music business would be the last thing they do. Yeah. Everybody has to do what's best for themselves.
SPEAKER_00: But now, in the context of someone starting a company, obviously, companies like Facebook are in the news around unintended consequences. You, having talked to so many people over the course of EconTalk, what would you advise to a founder in terms of thinking about these unintended consequences of their product? Like basically looking where the light is not into the future? That's a great question.
SPEAKER_01: I think what's interesting, and I don't know if this is fair, I've started thinking about this in the last year, just because of the nature of the conversation around these companies. It's like, you wanna take Mark Zuckerberg aside and say, you know, Mark, you had a really good run, fantastic run. You've created a product that is really, in many ways, magnificent. And you can see that, by the way, when Facebook took a hit from the, what was it called? Cambridge Analytica. Scandal, they put out a series of ads on TV and wherever else they did that basically said, we're gonna remember how Facebook used to be. And they're very romantic ads, they're very idealistic, they're very beautiful, they're set to the right music, and they're very moving. I enjoyed watching the ad just for the emotional kick. But you wanna say, you wanna play that for Mark and say, Mark, that was then, this is now, you've lost that.
SPEAKER_01: But why, why have you lost it? Why can't you be content with what Facebook is now? Or even what it was three years ago, which was fabulously productive and profitable. And the answer, of course, is that the stock market doesn't feel that way. The stock market includes many people who bought it recently who didn't get to enjoy those romantic idealistic times. They expect future growth. And that's a treadmill, that's the hamster wheel that, I think many founders get stuck on. And by the way, it's not just founders. The human challenge of more is so hard. I see it in the opposite world, in the nonprofit world, where a mission-driven organization that wants to save people's lives or make them more meaningful or feed the homeless loses its focus because they get interested in collecting more money, even though- Fundraising, yeah. Yeah, in fundraising where a donor will make a gift for some funky piece of the business that they care about that is really off mission. But the CEO of the nonprofit goes, money. And it's a nonprofit, remember? It's not a profitable, not just the fact that it's called nonprofit. It has a mission that is very distinctive, that's not bottom line. And they can't help themselves. They go off mission. So I think that's, it's a human problem. It's not just a founder's problem, but it is interesting that, you know,
SPEAKER_01: it comes up in a number of ways. The way we're talking about now is through the way the stock market and our investors have expectations that may be different from yours, the founder. And then the founder starts, easily convinces themselves that, oh, those are my expectations too, because they want to take the money. And they want to be successful as seen in the eyes of others. And that's very human. But the other part is the transition from your company to somebody else's company. And I think when you start a company, there are three things that to me have very similar emotional payoffs. Starting a company, writing a book and having a child, right? They're all something you did that you feel was part of the creative process. And you have an immense irrational amount of pride in. The idea that someone would say at the age of six, say, you know, I think I could do a better job raising your kid. It would be okay if I, I'll pay a lot of money. Never. Well, not never. Every once in a while, people do give up their children for adoption, obviously, but they tend not to do it for a large payoff. They might do it because they can't afford it. They take care of the child. We understand that. But in general, people don't go, I think my kid could do better with another parent. I'm gonna ship him out. Doesn't happen. The idea of saying, I wrote the first half of the book, but you know, I think I'm not good at ending. So.
SPEAKER_00: Yeah, you're like a closing pitcher. Yeah, I'm gonna bring in Mariano Rivera
SPEAKER_01: and let him finish it off. Never, not, well, almost never.
SPEAKER_00: People punch up scripts. Not totally true. Movies are different.
SPEAKER_01: Movies are really interesting example of this, right? And they don't like it, by the way. One of my favorite, favorite, favorite books of all time is Adventures in the Screen Trade, which is by William Goldman, the script writer who wrote Butch Cassidy and the Sundance Kid and more effectively, The Princess Bride. He's a wonderful, wonderful writer. And he talks in that book, one of my favorites. He tells a million, a million phenomenal stories in there. It's a great read. He just passed away in the last year. I recommend the book tremendously. We talked about it going to like the debut for like a famous movie. Now I don't remember which one. So he shows up for the screening. Yeah. And he gets to the party or the premiere and the guy says, who are you? He says, you're not on the list. I'm William Goldman. I don't see you on the list, sir. He says, I'm the screenwriter. He goes, I don't see you on the list because they have no prestige. So they are treated really poorly. The idea that you would take somebody who has created something, finished it and now we're gonna say, I'm sorry, we're gonna have to throw it out or throw out the last half or we're gonna change the ending. So they have very, it's fascinating. They have very limited creative control. They're paid an enormous amount of money for that, for the right to take away their control. So we get it, we understand it, sort of. So no one would turn over their kid, almost no one.
SPEAKER_01: No one would let their book be finished by a different author after they died sometimes. But a lot of authors even will say, this unfinished manuscript, burn it. Because God forbid someone else should finish it or someone else should even see it in this form. But a founder often has to turn over their baby to a stranger who they may have even had interaction with as the investor or the coworker, I mean the co-founder, whatever. That doesn't go so well, we know that. It's a classic problem in entrepreneurship and in investing in business. So that's just brutal. And we have, there's no rationality there, right? You can't say, boy, they have different skills than I do. I bet they do a lot better. I was really good at this first part, but this next part's way out of my comfort zone. I can't handle it well. Let's let somebody else do it. You saw it happen with Apple.
SPEAKER_00: I mean, Tim Cook is still criticized for not being creative, right? He's like, oh, he's the operator. And then the, I forget the name of the next guy that people are saying like, oh, this guy might be the heir apparent for Apple. But he's also not creative. And now Johnny Ives is out and you're like, yeah. Yeah, it's over. It might be actually.
SPEAKER_01: But I think this idea, very few people have the self-awareness to say, I'm not the right person for the job at this point. And the reason, what I'm suggesting here is this long rambling set of thoughts on startups, children and writing is the emotional part of that ownership is so far beyond, goes back to your first question. It's not about the money. But I can convince you rationally that this next person is gonna take it to a whole new level. And one of the answers is, I don't need a whole new level, right? If you said to me, I could take your daughter and turn her into the greatest tennis player of all time. It's like, that's not my goal. That's your goal. So I think the other issue, of course, for founders is growth. And the idea that, I'm kind of content with what I have. This is pretty great. I love the hamburgers that this restaurant produces. But if you wanna be Ray Kroc, you got about, got to dream a little bigger than that. And we understand that. When you take on investors, you get expectations about that. And that's part of the game.
SPEAKER_00: Well, it depends on your investors. Yeah, that's true too.
SPEAKER_00: Okay, so we still have more questions. I wanna get to as many as we can. Anthony Y asks a question about the show. He says, has a guest on Econ Talk ever, like basically encouraged him or made you change your mind on a topic?
SPEAKER_01: The answer is yes. I think that's a very interesting question because I used to talk a lot on the program, not quite as much as I do now. I don't talk about it quite as much now as I used to, but I used to talk a lot about the fact that there's very little academic research that changes people's minds, right? People don't go, oh, oh, you did a study of the minimum wage. I've always been against it, but now I guess I'm for it. Or vice versa. Yeah. I've always loved the minimum wage. I guess that's an awful thing. No one study does that. There's a lot of reasons for that. Some of which are studies are hard. They're all flawed. They're all imperfect. And you can always find something to dismiss about a study. But that's interesting, right? They're not decisive. So I think what that question's getting at is, is there ever an hour in your life where you went, oh my gosh, I've looked at this wrong the whole time. And the answer is occasionally. I think more interesting for me, I'm gonna ask a variation on that question. Are there things you learned from EconTalk that were radically different than what you knew about before? It's not so much a change my mind. I have feelings about and ideas about uncertainty and randomness and probability that I've learned from interviewing Nassim Taleb and reading his books. Eight times or something? Yeah, seven times I think. Seven times.
SPEAKER_01: People complain that he's rude on Twitter and I try to be civil and what the heck am I doing talking to him? Why am I giving him a platform? The answer is I learned a lot from him. He's not evil. He's just a little rude sometimes maybe or tough. If he was evil, I wouldn't interview him, I don't think. But he's not evil at all. And he's a nice guy actually in many ways. And he's really smart and different. And more importantly, got me to see things that, even some things I already understood that, but I internalized them in ways I hadn't before. So that would be one example where, did I know that there's uncertainty in the world? Yes, I did. Did I know that it's hard to think about probability? Yes, I knew that too. Is randomness tricky? Uh-huh. But he gave me a whole framework for seeing those issues I didn't have before. I think it's a little bit of inside baseball, but I had a guest on Paul Flaterer, who is in the business school at Stanford. He wrote a little paper that actually, it's gonna come out, I think he wrote to publish it. I think he just wrote to start conversation. Where he said, you know, when you build a model, and then you go out and it has implications, and you go out and test the implications, we call that science, that's part of science. In economics, a lot of people do that, and they decide that if the implications turned out to be true, that means that the assumptions of the model captured reality. That's not true. So for example, let's say it's a rainy night, truck driver in the mountains has to go around some dangerous curves. I'm gonna assume that the truck driver is solving a set of differential equations related to friction and speed and acceleration to decide how fast to drive and where to turn. And the answer is that's a pretty good model. Most truck drivers would capture what they do. It's not what actual truck drivers do. You wouldn't be that stupid to think that because you've assumed that, that the truck drivers are really good at math. You understand that that's a model. I don't think plants yearn for sunlight. I don't think they yearn for, but they do act as if they do. They turn toward the sun.
SPEAKER_00: Another example of this is robots don't know how hard to squeeze something. Humans are amazing. Yeah. I've never crushed a coffee cup in my life. Correct. Robots can't figure it out. Correct. Same thing. Why do you mention that? Because it's on my mind in terms of artificial intelligence. People are often talking about, you know, training robots to do certain tasks, no problem. So the implication that robots,
SPEAKER_01: when they don't crush the cup, oh, they understand it. Or they're like people. No, no, no, no, they're not like people. They're not doing what people do. We see this with autonomous cars. Most people think autonomous cars drive the way humans do. They don't, evidently, so far. Mainly, they are like more like a train on a set of rails than the way I interact in an intersection. Okay, we get that. Everybody knows that. What's the inside of that? The inside of that is that in economics, a lot of people leap to the conclusion that they've captured something about the real world. So I would give you just an example. There are actually people who think that because the minimum wage does not always lead in measurement to people losing their jobs, that fell in the blank. That businesses aren't competitive when they're dealing with low skilled labor. They can exploit them and pay them whatever they want. That does not follow. The example I used on Twitter that nobody responded to, which is why you might want to cut this, Craig, but it was one of my favorite things in the last few months, is that somebody on Twitter speculated, kind of as a joke,
SPEAKER_01: it was Noah Smith who I follow, who's a very interesting economist. He said, I wonder if, he said, do you wonder if dating apps give you a bad match? Because that way you won't get married and you'll keep using their app. That was his poll, he had a poll. And a surprising large number of people, either for fun or actually believe that that's what they do. They give you a bad match. Okay, so I said, I raised the following speculation. Suppose you believe that's true. Your model of the world is that dating apps are deliberately designed to do a bad job so that you will not get married and that way you will keep using their app. Okay, let's say, now you start using this dating app. How are your dates? Yeah, they're not that good. I'm really not that happy with who they've set me up with. Oh, that's evidence that my model of their behavior is correct. That would be a kind of a strange thing to do because you don't really have a, first of all, you don't have a baseline. It's really hard to match people up. So you don't have a baseline to figure out whether that's what's going on. But secondly, to really confirm that, you want to know somebody, you'd want to find a memo, right? You'd want to find code, right? But to just assume that you'd learned something about their behavior because of your measured, crude measure of how the outcomes would be, would be a weird thing. Economists do it all the time. And I realized I did that. So when I had Paul on to talk about that, I realized, oh my gosh, I've thought that, I've kind of had a, I kind of assumed that's correct in a certain way for a long time. And so that, of course, been changing my mind. Not a very interesting thing, maybe. No, I think that's a great takeaway.
SPEAKER_00: Hasn't seemed to have convinced you to deadlift. That's like you've done for a while. He did for a while.
SPEAKER_01: At one point in my life, I was, I think he was starting to go to a gym. And I wrote him, because he does answer my emails, which is fun. There you go. And I said, are you still lifting? And is it a good thing? And he said, yeah. So I thought, okay, I, by the way, it's a very interesting human problem. In a world of uncertainty, where you know that data is imperfect, one way we respond to that is we look for authority, right? And he's an honest man, in my view, maybe a frighteningly honest man to some. Unnecessarily honest. And I thought, you know, he would not lie to me that deadlifting is still working for him. Now, it may not be good for me. It may only work for him, but I'm gonna try that. So I've done some weightlifting, I wouldn't call it deadlifting, but I did some interval training with weights that did almost nothing for me, except improve my ability to do certain weightlifting at the gym. Right. Just dispiriting. I didn't, what I really wanted to do is get better, bringing in the water jugs from the curb, the heavy big gallony, I don't know how many gallons it is, things for my water cooler at home, and then getting my suitcase into the upper, you know, dragging it or wearing it and then putting it into the bin. That didn't change at all. I got really good at say, curling weights at the gym or, you know, whatever the rep thing was. And what now, Sim would say is that you shouldn't have been using those machines. You should have been deadlifting, literally deadlifting. Yeah, barbells. Yeah, yeah. I didn't do barbells. I didn't do Nautilus. I was doing, you know, things that simulate, I forget what it's called now. And maybe it was Nautilus, can't remember. Anyway, but I don't eat squid, but with black ink.
SPEAKER_01: Yeah, what is the deal with that? I don't know. We don't need to have talk, we're fine.
SPEAKER_01: He's into Hebrew too, I am into Hebrew. It's like his Twitter feed is so weird.
SPEAKER_00: Yeah, all right. Okay, so I have like one final question related to econ talk bingo. So you often quote one of my favorite talks ever, which is This is Water by David Foster Wallace. So this was like 2006, 2007, Kenyon College commencement. And you quote one line in particular, which is everyone worships, which I love this talk so much. My question to you is what do you worship?
SPEAKER_01: So I'm gonna digress for a second and just talk a little bit about that quote, because what does he mean by that? What he means is I think is that the reason I love it so much is that I think we all have a desire to be part of something larger than ourselves, something that's transcendent. In history, that's typically been religion, but it's not the only thing, it's not even close. For some people, it's their sports team, for other people, it's their political party. And I think understanding that that is a very powerful human urge of related tribalism and this transcendence urge that I think people have is very cool and very insightful and helps me think about things a lot. The next part of it, he talks very powerfully about, he says, a lot of people mistakenly worship, this comes back to our Adam Smith conversation earlier, they mistakenly worship beauty and your beauty will fade. They mistakenly worship money and their money does not give you true satisfaction. He suggests worshiping one of the things that are tried and true, one of the religious, he says, pick a good religion. So it's a statement that we all have religions, is what it really is about. For some, it's something called religion that people have called religion for a long time, Christianity, Judaism, Islam, but for others, it's the New England Patriots religion or it's NASCAR religion or it's yoga religion or it's vegetarianism or it's being a particular political party and those are a mixed bag in my experience because we tend to have trouble accepting the beliefs and tastes of people outside of religion. It tends, it's hard not to have it promote self-righteousness so the challenge is to worship something and still be respectful of what other people worship, which I just failed right now because I just said there's some things people worship that aren't good. Anyway, you asked what do I worship? I think I worship, I'm a religious Jew, which is on the Econ Talk drinking game because I do mention that occasionally. It's why I don't eat the squid. I ate it when I was younger before I was religious. It's delicious. I'd be a huge black ink squid guy in a different version of me, different path.
SPEAKER_01: And I find for me, religious worship is deeply meaningful and I mention it partly because I think people who are not religious have a, I would say, a strange misconception about what a religious life is like, that it's about certainty and then once you have religion, you don't have to doubt anything. You have all your questions answered and you could just go about your business and do what God wants you to do. And it doesn't work that way for me. Maybe it works for some religious people. I'm open to the possibility, but for me, my interest and practice of Judaism is a way that I cope with the mystery of life, the awe of life, the wonder of life, the things we don't understand, why the salmon comes back to the same place it was born, why the human heartbeat starts in the womb, why we love one another, why we hurt people we love. These are all things that I think are unanswerable or at least mostly unanswerable so far. And religion helps me experience that, not just how to think about it, but experience it in a different way. So that's religion. But your question is a great question because it forced me to think about the other things I worship that aren't religion. I really like human striving. I really like, one of the reasons I think I'm a sports fan and I like almost every sport at some level of seriousness is the drama of human effort and failure. And the poetry of that is a very beautiful thing. I say the other thing I worship is probably human creativity, which is ironic since I think a religious life is about getting outside yourself in a way from putting human beings at the center of the universe and putting something larger. But I still think that the human enterprise is deeply moving and I recently saw Apollo 11, the documentary on the mission of the moon. And I had goosebumps like through the whole thing. It's not a particularly dramatic or well done in my view. It's not particularly the narration and the arc of the narrative is slow at times. It's not what you'd think. It's not what I expected. And I found myself though still with like goosebumps through the whole thing, because it's a ridiculous thing that we put three people inside a little tiny thing and shot them 240,000 miles away. That would be an amazing thing just to land on the moon, but that we thought we'd get them back and that we did and that they stoically were pretty cool about it the whole time, instead of being like terrified and showing it. It's just an incredible human achievement. It's, you know, to me, it's, you know, is that there's, I think E to the I pi is minus one or plus one. It's like, what? That's true and people figured it out and I just probably misquoted it and we're not pausing here. I'm not gonna Google it, but sure. Doesn't matter. Those kinds of human discoveries, just they make me, they make me, they move me incredibly and a great piece of art I, you know, I love and so sports art, human creativity generally. And, you know, the other thing I'm just gonna say, it's even though it's, I don't know, it's a weird thing, but human dignity in the face of suffering and death, our desire to confront that in our pitiful human way, it kind of pulls together both my interest in religion and my, you know, honoring of human action. It's just, there's something about being alive that's, you know, appreciating that great drama
SPEAKER_01: is a beautiful thing.
SPEAKER_00: That's great. Well, I think that's a great place to stop. So thank you so much for coming in. Thanks for having me, Craig. All right, thanks for listening. So as always, you can find the transcript and the video at blog.ycombinator.com and if you have a second, it would be awesome to give us a rating and review wherever you find your podcast. See you next time.
