Russ Roberts is the host of the podcast EconTalk (iTunes, RSS, and YouTube), 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 @econtalker.
00:00 - Intro
00:15 - What are his thoughts on “meaning, spirituality, or sense of belonging” in regards to creating your own company?
3:20 - Capitalism bearing the burden of human nature
3:50 - Why Russ started EconTalk
7:30 - Key economic concepts for founders after 700 EconTalk episodes
13:35 - Helpful methods for teaching economic concepts
17:55 - "Man naturally desires, not only to be loved, but to be lovely" - Adam Smith in The Theory of Moral Sentiments
24:00 - How EconTalk has changed since the beginning
26:00 - Steve Adema asks - Russ Roberts has emphasized the limits of "only looking where the light is" when it comes to studying well-being. How can economists incorporate the aspects of well-being that aren't easily quantified?
34:20 - Warren Buffett's gift to his son
35:55 - Founders and unintended consequences
39:30 - The emotional aspect of giving your company away
44:05 - Anthony Y. asks - Has a guest on his show ever made him change his mind on a topic?
50:40 - Has Nassim Taleb convinced him to deadlift?
52:45 - Russ often quotes David Foster Wallace's speech, “This is Water”. Specifically, he quotes the phrase, “everyone worships.” What does Russ worship?
Craig Cannon [00:00] - 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, @econtalker, and I've also linked up his podcast in the description if you want to subscribe. All right, here we go. To start off the podcast, I want to talk about one of your previous episodes, the one with Jonah Goldberg. 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 want to talk about it in the context of startups. What are your thoughts on this meaning, spirituality, and a sense of belonging in regards to creating your own company?
Russ Roberts [00:55] - 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. In the course of doing that I met with a lot of entrepreneurs because obviously we couldn't take everyone who was interested. 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. 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. 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 the, what I would call the spiritual part of it. I have a memory of an entrepreneur who started up a soft drink company. 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 didn't even like my dad." And I thought, "Wow, that's one of the deepest things
Russ Roberts [02:37] - 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 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.The money counts, but I think obviously starting a business, creating something that can sustain employees and pay them is denting the world in your own way, that's just, it's 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 and part of what makes America what it is.
Craig Cannon [03:28] - Was that your intention behind EconTalk, to make your own dent?
Russ Roberts [03:35] - Before I answer that, I want to go back to the Jonah Goldberg quote about upstream in capitalism. I just, I think it's bizarre how capitalism bears the burden of human nature. People say, I mean, capitalism, you mean that, the system that's based on greed? And this is a Milton Friedman thing, he said, 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, when I first started podcasting in 2006, 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, figuring it would be 80, 114, he said, "Oh, two or 3,000." I thought, "Whoa, if you told me that at two o'clock tomorrow afternoon we're going to 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 going to be interested in what you have to say." Now, some of them, of course, are going to leave before the.
Craig Cannon [04:43] - Oh yeah, 10% or 20% through.
Russ Roberts [04:45] - Yeah, because they're allowed to leave without you seeing them in the podcast world, but they're going to start, they're going to come and buy a ticket or reserve a space, which is what a download really is. I would've said, I did say, I said, "I'm in, okay, I'm coming, I'll be on your show." Then I realized, "Gee, maybe I could do this," and I didn't think I'd want to 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. I have 700 hours of material of which 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. Somebody who's been listening from the beginning, of which they're a non-trivial number, have hung out with me for 300 hours. That's a, one way to think about that is it's, let's see, it's, I don't know, 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. That's a strange, beautiful, poignant aspect of this business, but the bottom line,
Russ Roberts [06:32] - just 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.
Craig Cannon [06:41] - To go off on an aside 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. Before Demo Day we have this thing called Alumni Demo Day where people have gone through the program come and see the company's demo. 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, I really love the podcast." Maybe not right now.
Russ Roberts [07:13] - They feel like you're their buddy, they've been....
Craig Cannon [07:15] - Yeah, and it's cool, I'm very happy with it. Now you're seven, what episode did you just release?
Russ Roberts [07:24] - 690-something, we're close to 700.
Craig Cannon [07:26] - 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. All of our stuff, or in large part, is related to technology in some way, a lot of like startup founders listen. Are there two or three key economic concepts that you could kind of impart onto a startup founder after almost 700 episodes of EconTalk?
Russ Roberts [07:59] - 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, wouldn't have imagined that, had no inkling, was shocked and surprised and taken aback and curious. 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 what works best or works better than others. If it's too entertaining, you don't learn anything. If it's too educational, nobody listens, sometimes. 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 in the, 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. One of the answers that I hear, I think there they're a couple of answers, some are there's some basic economics concepts that are useful, and I should say that 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, a blue moon, it's economists talking about their research, but now it's, I'm lucky, it's basically, the show really should be called What Russ Roberts is Interested In. Which changes over time, I got tired of talking about Bitcoin
Russ Roberts [09:41] - and monetary theory and what caused the financial crisis of 2008 and I did 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 going to 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 going to learn enough from it to go through the effort of reading it. The same is true with monetary theory of bitcoin, I kind of have a rough idea of where we stand, 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 going to do any for a while even though everyone tells me I got to interview so-and-so because he really understands something. I don't know, I doubt it, but okay, maybe. In the early days it was very economics focused and there are some basic economic ideas I think that are 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, you'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, that you should pay someone else to do them for you. Every founder has to deal with that issue,
Russ Roberts [10:52] - 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? 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've found useful is the idea of emergent order, the idea that certain things can solve themselves under the radar and that there are forces that work to work on problems 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. There'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 if I lot of Chinese kids move into cities and start using pencils at 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 may just show up at Staples
Russ Roberts [12:13] - and say, "Could I have a dozen pencils?" And they're going to say, "What do you mean? Come back in a year, the Chinese got all of them this year."s 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 everybody? Wsho'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 felt we're not getting enough whole wheat bagels this year, could 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 could 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 headcount and I realized I don't have to do that, just go rent that." To me that's an obvious idea, and it is obvious, everybody understands it, this economic concept of emergent order, the idea that there are certain things that are self-regulating or that control themselves. It just forces 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.
Russ Roberts [13:37] - It's what I try, I try to get smarter. In theory, being smarter is useful, but I wouldn't count on that.
Craig Cannon [13:44] - 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?
Russ Roberts [13:59] - 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, was very easy to teach a class, give an exam, and convince yourself that the students have learned something when, in fact, they've learned almost nothing. One of my favorite teacher evaluations I got was I got a one of five and a student said Professor Roberts is a horrible teacher, he expects us to apply things on the exam, 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 that I can explain to you work?
Craig Cannon [14:42] - Right, it's just memorization.
Russ Roberts [14:43] - 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 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 in economics that we talk about on EconTalk is the idea of and then what. So you can tell me what's going to 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 a subsidy or tariff? It's easy to see the first round direct effects, the harder thing to see is the indirect effects. 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.
Russ Roberts [16:14] - I try to do that through narrative, that'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 with John Papola, the filmmaker, we have the line, talking about capitalism, "Give us the 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 or there's all kinds of ugly versions of capitalism. I could defraud you, I could lie to you, I could deceive, it's hard to do, and if I have competition, it's going to be a lot harder. But when it works well, that's what it does, it gives you a chance to discover how we serve one another. That's pretty amazing. But that, as a pedagogical device, that rhyme, my kids know that by heart. That's useful. That doesn't mean you understand it just because you can spit it back to me, right, there's a lot there. There's a lot there.
Craig Cannon [17:45] - Sure.
Russ Roberts [17:46] - To 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 going to remember it, that people are going to have it in front of mind, not back of mind?
Craig Cannon [17:57] - 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 and into my brain.
Russ Roberts [18:10] - By the way, there's an EconTalk drinking game, which you can buy, I don't get any money from it, a fan created it, 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 know, 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. Of course, the guest has maybe never heard it before, so I also want the guest to hear it for the first time.
Craig Cannon [18:45] - Right.
Russ Roberts [18:46] - My other favorite quote is Hayek's, "The curious task of economics is to demonstrate to men 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 eloquent. I almost butchered it, and I've said 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.
Craig Cannon [19:13] - But then with your book, How Adam Smith Can Change Your Life, you basically... My intuiting of it was here's this incredibly valuable text, it's not well-known, and it also not--
Russ Roberts [19:25] - And that's Smith's Theory of Moral Sentiments.
Craig Cannon [19:27] - Right. And this is also not necessarily incredibly easy to parse.
Russ Roberts [19:30] - Correct.
Craig Cannon [19:31] - And so you kind of took it upon yourself to redigest it and put it back out there
Russ Roberts [19:35] - Correct.
Craig Cannon [19:35] - 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?
Russ Roberts [19:43] - Sort of a few things, one is just to honor Smith who wrote this book that nobody reads anymore and I think's full of insight and I think 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 when you're self-interested and 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, on why anybody's not greedy, why people aren't self-interested all the time, why they ever do anything do anything benevolent, why do they ever take other people into, think about other people when they go through the world? That's really interesting, it turns out it's not obviously interesting. What do you mean, who cares, people are nice. 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, that there's a lot of wisdom here that people weren't grasping, that they missed a chance to know. That was, my main goal was to take some missed ideas and apply them to modern examples from business to family and your daily interactions with the people in your circle
Russ Roberts [21:06] - of friends, associates, intimates, colleagues. In particular I think if I had to say is there a central idea, that quote you gave, "Man naturally deserves not only to be loved, but to be lovely." And by love, Smith didn't just mean romantic, he meant respected, honored, 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 are they so..." And the answer's, oh yeah, man naturally 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 reminding me 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 power, money, power, fame. Yeah, okay, we all know that. Those people, we pay attention to those people. I think Donald Trump has all three. I'm not sure if he's really wealthy, there's some uncertainty there, but 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,
Russ Roberts [22:40] - 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 this guts or love him, he's famous, he's wealthy and powerful, and those kind of people command a room, period. And a poor, forgotten, pitiful person is ignored. It's not just, oh, he's not going to get as much attention as Donald Trump, it's like that person doesn't exist. You see that, we're in San Francisco, you see that with homeless people. It's why when I give people money I do try to look 'em in the eye, I do try to tell 'em have a nice day. It's not much, but it's better than ignoring them. But the point is, Smith's 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 that's, be careful, you go down that path, you're going to do some things you're going to regret, it's not going to make you happy. I thought that insight, coming from an economist, was really important and really sad that people think economics is about making money and about only making money and that's just not true.
Craig Cannon [24:05] - Well, let alone Adam Smith's reputation.
Russ Roberts [24:07] - Right, exactly.
Craig Cannon [24:07] - It's the opposite.
Russ Roberts [24:09] - Right, so those are really my goals.
Craig Cannon [24:11] - To me it's also kind of a pillar of at least what EconTalk has become. There's a lot of that human element in relation to the economy.
Russ Roberts [24:22] - I interview people who have interesting things to say that I think I could learn something from, but increasingly who have things to say about aspects of daily life that are not just financial, although financial's fine and I like interviewing people in business who let me and let listeners get access to a world that they wouldn't see. I interviewed Lisa Turner who's an organic farmer, because I wondered, what's that like? I interviewed Alex Guarnaschelli 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 want to be a chef, you got to give that up. So that's cool. So those kind of insights that, I love that, that's a small part of the program, but I love whenever I can do that, or woman who cuts my wife's hair or the guy's helping my car, trying to pull back the curtain on things you might not normally have access to is really fun for me. But I'm also interested in people who have ideas about things that are outside of what people would normally call economics. I've thought about changing the name, because it's not so much econ talk anymore and there are a lot of people I think would go, oh, EconTalk, I'm not,
Craig Cannon [25:52] - I think you're right.
Russ Roberts [25:54] - I'm not going to like that. I don't know, it's a tough one.
Craig Cannon [25:57] - It's okay.
Russ Roberts [25:59] - I have to change my Twitter handle, I'm @econtalker.
Craig Cannon [26:02] - I always found that an interesting choice, like you didn't have your own EconTalk handle and it's Russ Roberts handle and now it's too late.
Russ Roberts [26:08] - Exactly.
Craig Cannon [26:09] - 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 Adema asks, "Russ Roberts has emphasized the limits of only looking where the light when it comes to studying well-being, how can economists incorporate the aspects of well-being that aren't easily quantified?"
Russ Roberts [26:30] - This is a recent theme, it's interesting that he, that listener sees it as an ongoing theme. Lately I've been thinking about the fact that we focus on things we can measure. 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 he can't find them, and the sober person says to the drunk, "You sure you lost them here?" "Oh, I don't think I lost 'em here, but 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, only look where the light is. 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 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.
Russ Roberts [28:01] - And there's a lot of examples, when I started talking about this, an example would be, say, a medicine. 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 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. The things that can't be, like dignity, which we've been talking about lately on the program, again essentially 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 quality or how much income you have and if it's 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. It's probably not just as good. I mean if you ask somebody, "Okay, you're making $45,000 a year now and this technology's going to come along, it's going to take you out of your job or you're not going to be able to do it anymore, but I'm going to give you a check for $45,000," which according to a really bad economic theory
Russ Roberts [29:32] - 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? 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?
Craig Cannon [30:06] - Steve asks, "How can economists incorporate the aspects of well-being that aren't easily quantified?"
Russ Roberts [30:11] - What we tend to do is say, "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 into 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. Why I said that's not so interesting right now, we'll talk about if 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 were 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,
Russ Roberts [31:31] - I suggested that a survey about parents' feelings of satisfaction about having children versus parents, married couples or couples or single people who don't have their 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. One of the responses I got was, "Well, more information's 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 to have children, where's the best data on that? And I'd said, well, you know, I'm not sure there's any, any, any good data on that, but there's evidence on it, just not data. Well, what do you mean? The answer would be, well, I'd read some books. I'd read some novels, that's what fiction is about. Fiction isn't just to pass the time or distract you, it's to help 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 with 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 you. You understand that.
Russ Roberts [32:52] - The data often struggle to make that distinction. They assume, oh, it's going to apply to everybody.
Craig Cannon [32:56] - Right.
Russ Roberts [32:57] - Probably won't. 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, Yelp 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.
Craig Cannon [33:25] - But it's the current paradigm, right? You look online like I want to find this metric, but for almost all of time before it was, "My neighbor has two kids, let me ask him, what do you think?"
Russ Roberts [33:36] - Actually, you know what it was through most of time? Having kids is what people do. I'm going to get married and I'm going to have kids. Now everything's up for grabs. You don't have to get married, you're not going to be stigmatized. You can have kids in marriage or not in marriage. You could kids through a test tube or through a human being. 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 was a, it came in the air you breathed, it was just considered normal. Now it's not normal, it's up to you, which is very cool and challenging.
Craig Cannon [34:29] - I have a couple thoughts related to this. First of all, just to touch on that you used the example of Warren Buffet's son in your book, and I know that was a great one.
Russ Roberts [34:37] - Peter.
Craig Cannon [34:37] - Yeah. I forget the exact, 80,000, $90,000 in Berkshire Stock, which would've summed to $100 million I guess at the time of writing.
Russ Roberts [34:46] - Something absurd, that he was given the stock and he had a choice, his dad said, you probably read it more recently than I did, but Warren said 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 and millions of dollars.
Craig Cannon [35:15] - Which wasn't guaranteed.
Russ Roberts [35:17] - Right, wasn't guaranteed. Instead, he sold it, financed going, I think, into the music business, and has had 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?"s
Craig Cannon [35:37] - No, I mean he wouldn't say so.
Russ Roberts [35:39] - 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've held it, done something else, and cashed out the money 20 years later and ridden the wave and that would've been fine for them. There are others who would've sold it and going into the music business would be the last thing they'd do. And everybody has to do what's best for themselves.
Craig Cannon [36:01] - 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.
Russ Roberts [36:23] - That's a great question. I think what's interesting, 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 want to 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?
Craig Cannon [36:56] - Cambridge Analytica.
Russ Roberts [36:57] - Cambridge Analytica scandal, they put out a series of ads on TV and wherever else they did that basically said, we're going to remember how Facebook used to be, and it's their very romantic ad, it's a 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 want to say, you want to play that for Mark and say, "Mark, that was then, this is now. You've lost that," 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. 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. That's a treadmill, that's the hamster wheel that I think many founders get stuck on. 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--
Craig Cannon [38:19] - Or do fundraising.
Russ Roberts [38:20] - 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. I think that's, it's a human problem, it's not just a founder's problem, but it is interesting that, it comes up in a number of ways, the way we're talking about now is through the way the stock market or 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 paths: 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, would it 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,
Russ Roberts [39:59] - but they tend not to do it for a large payoff. They might do it because they can't afford it, to take care of the child, we understand that, but in general people don't go, "Yeah, I think my kid could do better with another parent, I'm going to just ship them out," doesn't happen. The idea of saying, I wrote the first half of the book, but I think, I'm not good at endings so.
Craig Cannon [40:15] - Yeah, you're like a closing pitcher.
Russ Roberts [40:16] - Yeah, I'm going to bring in Mariano Rivera and let him finish it off. Never, well, almost never.
Craig Cannon [40:22] - People punch up scripts, not totally true.
Russ Roberts [40:24] - Movies are different, right, 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 even 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 passed away in the last year, I recommend the book tremendously. He talks about going to like the debut for a famous movie. Now, I don't remember which one, so he shows up for the screening, 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. They are treated really poorly, the idea that you would take somebody who has created something, finished it, and now we're going to say, I'm sorry, we're going to have to throw it out or throw out the last half, or we're going to change the ending. It's fascinating, they have very limited creative control. They are paid an enormous amount of money for that, for the right to take away their control, so we get it, so we understand it, sort of. But so no one would turn over their kid, almost no one. No one would let their book be finished by a different author.
Russ Roberts [41:52] - After they die, 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 or whatever, that doesn't go so well, we know that, it's a classic problem in entrepreneurship and in investing and in business. That's just brutal. And we have, there's no rationality there, right? You can't say, "Boy, well 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."
Craig Cannon [42:44] - You saw it happen with Apple. 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 Jony Ive's out," and you're like...
Russ Roberts [42:59] - Yeah, it's over.
Craig Cannon [43:00] - It's over.
Russ Roberts [43:01] - It might be actually, 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 in 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. In fact, I could convince you rationally that this next person's going to 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, you know, I'm kind of content with what I have, this is pretty great, I love the hamburgers that this restaurant produces, but you want to be Ray Kroc, you 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.
Craig Cannon [44:10] - Well, it depends on your investors.
Russ Roberts [44:11] - That's true too.
Craig Cannon [44:13] - Okay, so we still have more questions, I want to get to as many as we can. Anthony Wy asks a question about the show, he says, "Has a guest on EconTalk ever like basically encouraged him or made you change your mind on a topic?"
Russ Roberts [44:30] - The answer is yes. That's a very interesting question because I used to talk a lot on the program, not quite as much as I do, 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, you did this study of the minimum, I've always been against it, but now I guess I'm for it," or vice versa. "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 going to ask a variation on that question, are there things you learned from EconTalk that were radically different that what you knew about before? It's not so much I changed 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.
Craig Cannon [45:45] - Eight times or something.
Russ Roberts [45:47] - Yeah, seven times I think.
Craig Cannon [45:48] - Seven times.
Russ Roberts [45:49] - 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? And the answer is I learn a lot from him. He's not evil, he's just a little rude sometimes maybe or tough or, 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 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 random just tricky? Uh-huh, but he gave me a whole framework for seeing those issues I didn't have before. It's a little bit of inside baseball, but I had a guest on, Paul Pfleiderer, who is in the Business School at Stanford and he said, he wrote a little paper that actually, it's going to come out, I don't think he wrote it to publish it, I think he just wrote it to start conversation, where he said 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. For example, let's say it's a rainy night, a truck driver in the mountains has
Russ Roberts [47:20] - to go around some dangerous curves, I'm going to 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 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 it, but they do act as if they do. They turn toward the sun.
Craig Cannon [47:56] - Another example of this is robots don't know how hard to squeeze something. Humans, we're amazing. I've never crushed a coffee cup in my life.
Russ Roberts [48:03] - Correct.
Craig Cannon [48:04] - Robots can't figure it out.
Russ Roberts [48:03] - Correct. Why do you mention that?
Craig Cannon [48:07] - Because it's on my mind in terms of artificial intelligence, people are often talking about training robots to do certain tasks, no problem, other things--
Russ Roberts [48:17] - The implication that robots, when they don't crush the cup, oh, they understand it, or they're like people. No, no, no, they're not like people, they're not doing what people do. We see this with autonomous cars. Most people thing autonomous cars drive the way humans do, they don't, evidently, so far, mainly they are 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 insight of that? The insight 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, fill 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 was a job, it was Noah Smith, who I follow, who's a very interesting economist. 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 surprisingly large number of people, either for fun or actually believed that that's what they do, they give you a bad match. Okay, so I said, I raised the following speculation,
Russ Roberts [49:46] - "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'll keep using their app." Okay, let's say now you start using this data 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, firstly, 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'd want to find a memo.
Craig Cannon [50:23] - Right.
Russ Roberts [50:23] - Right? You'd want to find code, right? But to just assume that you'd learn 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 kind of had, I've kind of assumed that's correct in a certain way for a long time," and so that part's been changed in my mind. Not a very thing, maybe.
Craig Cannon [50:50] - No, I think that's a great takeaway. Has Nassim Taleb convinced you to deadlift?
Russ Roberts [50:55] - I did for a while. I did for a while, 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.
Craig Cannon [51:05] - There you go.
Russ Roberts [51:07] - And I said, "Are you still lifting and is it a good thing?" And he said, yeah, so I thought, okay, by the way, this is a very interesting human problem, in a world of uncertainty where you know that data's 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 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 going to try that. I've done some weightlifting, I wouldn't call it deadlifting, but I did some interval training with weights that it did almost nothing for me except improve my ability to do certain weightlifting at the gym. It was very dispiriting. What I really wanted to do was 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 whatever the rep thing was. Now, what Nassim would say is that you shouldn't have been using those machines, you should've been deadlifting, literally deadlifting, you know, barbells. I didn't do barbells, I didn't do Nautilus, I was doing 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 with black ink,
Russ Roberts [52:43] - which is his favorite.
Craig Cannon [52:43] - Yeah, what is the deal with that?
Russ Roberts [52:44] - I don't know.
Craig Cannon [52:44] - We don't need to have a talk, but it's more fun.
Russ Roberts [52:46] - I don't know. He's into Hebrew too. I am into Hebrew.
Craig Cannon [52:48] - It's like his Twitter feed is so weird. Yeah, all right, okay, so I have like one final question related to EconTalk bingo. 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?
Russ Roberts [53:20] - I'm going to 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 related to 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, says pick a good, pick a religion. It's a statement that we all have religions, it's 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 be in a particular political party, and those are a mixed bag in my experience, because we tend to have trouble
Russ Roberts [55:00] - accepting the beliefs and tastes of people outside our religion. 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 worship, well, I'm a religious Jew, which is on the EconTalk 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. 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 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 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,
Russ Roberts [56:37] - 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. That's religion. But your question's 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'd say the other thing I worship is probably human creativity, which is ironic since I think a religious life is about getting outside yourself and away 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 to the moon. 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 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 really showing it.
Russ Roberts [58:18] - It's just an incredible human achievement. To me, it's 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 probably just misquoted it and we're not pausing here, I'm not going to Google it, but doesn't matter, those kind of human discoveries just, they make me, they move me incredibly and a great piece of art, I love, and so sports, art, human creativity generally. The other thing I'm just going to say 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 in our pitiful human way, it kind of pulls together both my interest in religion and my honoring of human action. There's something about being alive that's, appreciating that great drama is a beautiful thing.
Craig Cannon [59:28] - Wow, that's great. Well, I think that's a great place to stop. Thank you so much for coming in.
Russ Roberts [59:32] - Thanks for having me, Craig.