1 00:00:15,356 --> 00:00:21,676 Speaker 1: Pushkin. Hey, it's Jacob. 2 00:00:22,476 --> 00:00:27,156 Speaker 2: Recently I co hosted an episode of another Pushkin podcast, 3 00:00:27,236 --> 00:00:31,516 Speaker 2: a show called Cautionary Tales, hosted by Tim Harford and 4 00:00:31,796 --> 00:00:34,716 Speaker 2: Tim and I on that show answered a bunch of 5 00:00:34,756 --> 00:00:39,076 Speaker 2: listener questions, and as it happens, those questions were largely 6 00:00:39,076 --> 00:00:41,196 Speaker 2: about themes that we talk about a lot on what's 7 00:00:41,196 --> 00:00:46,836 Speaker 2: your problem, technological innovation, climate change, etc. So I thought 8 00:00:47,196 --> 00:00:50,396 Speaker 2: that show would be interesting to people who listen to 9 00:00:50,436 --> 00:00:54,476 Speaker 2: this show would be interesting to you. So here's the episode. 10 00:00:55,036 --> 00:00:55,836 Speaker 2: I hope you like it. 11 00:00:56,996 --> 00:01:00,556 Speaker 3: Hello listeners, Tim Harford here, as loyal listeners will know, 12 00:01:00,836 --> 00:01:03,476 Speaker 3: caution Me Tales is a podcast about learning from the 13 00:01:03,516 --> 00:01:06,156 Speaker 3: mistakes of the past. But it also seems to me 14 00:01:06,196 --> 00:01:08,076 Speaker 3: that we can learn from things that have gone well 15 00:01:08,076 --> 00:01:13,276 Speaker 3: in the past. Example, getting Jacob Goldstein on the show. 16 00:01:13,996 --> 00:01:18,236 Speaker 3: Jacob is Jacob is back for an episode of Cautionary Questions. 17 00:01:18,236 --> 00:01:18,876 Speaker 1: Hello Jacob. 18 00:01:19,236 --> 00:01:23,476 Speaker 2: What's the opposite of a cautionary tale, A salutary tale, 19 00:01:23,596 --> 00:01:25,596 Speaker 2: a salutary story? 20 00:01:25,996 --> 00:01:27,556 Speaker 1: I guess we salute you, Jacob. 21 00:01:27,756 --> 00:01:28,436 Speaker 2: We can do better. 22 00:01:28,516 --> 00:01:30,476 Speaker 3: Let's try and punch that up. We'll work on it. 23 00:01:30,516 --> 00:01:32,236 Speaker 3: For those of you who don't know. Jacob is the 24 00:01:32,236 --> 00:01:35,356 Speaker 3: host of pushkin podcast What's Your Problem, which is a 25 00:01:35,396 --> 00:01:38,836 Speaker 3: brilliant show about people who are trying to make technological progress. 26 00:01:39,276 --> 00:01:42,596 Speaker 3: He is also the author of the book Money, The 27 00:01:42,676 --> 00:01:45,556 Speaker 3: True Story of a Made Up Thing, and he's the 28 00:01:45,556 --> 00:01:48,796 Speaker 3: perfect person to help me answer all of the questions 29 00:01:49,036 --> 00:01:52,756 Speaker 3: that you lovely people have been kind enough to send in. 30 00:01:53,076 --> 00:01:55,676 Speaker 3: So Jacob, wonderful to have you back. Of course, our 31 00:01:55,796 --> 00:01:59,436 Speaker 3: virtual mail bag is bursting with queries on topics as 32 00:01:59,516 --> 00:02:04,276 Speaker 3: varied as climate investing and careers advice. So Jacob Goldstein, 33 00:02:04,476 --> 00:02:09,876 Speaker 3: are you ready? Yes, let's do it. 34 00:02:29,836 --> 00:02:31,116 Speaker 2: So, Tim, We're going to start with a couple of 35 00:02:31,116 --> 00:02:33,556 Speaker 2: emails that came in after the last time you and 36 00:02:33,636 --> 00:02:35,036 Speaker 2: I talked on the show, and one of the things 37 00:02:35,076 --> 00:02:39,156 Speaker 2: we talked about was what happens if AI and robots 38 00:02:39,236 --> 00:02:43,196 Speaker 2: take all of our jobs. So the first question about that, 39 00:02:43,396 --> 00:02:45,476 Speaker 2: which is frankly really more of a comment, but a 40 00:02:45,516 --> 00:02:49,956 Speaker 2: lovely comment, comes from Karen, who writes, Dear Tim Harford, 41 00:02:50,236 --> 00:02:52,956 Speaker 2: I was, as usual enjoying your recent Q and A 42 00:02:52,996 --> 00:02:54,356 Speaker 2: episode with Jacob Goldstein. 43 00:02:54,396 --> 00:02:56,596 Speaker 1: She's a woman of taste. I like how this thoughts. 44 00:02:56,756 --> 00:02:59,836 Speaker 2: I like her already, and your lively discussion about what 45 00:02:59,996 --> 00:03:03,996 Speaker 2: happens when everyone loses their jobs. To AI, at one 46 00:03:04,036 --> 00:03:08,916 Speaker 2: point you said, quote, how would we react if our 47 00:03:08,956 --> 00:03:12,476 Speaker 2: desire for mastery, or desire for meaning, or desire to 48 00:03:12,516 --> 00:03:15,916 Speaker 2: feel useful if all that had to be satisfied without 49 00:03:15,916 --> 00:03:18,396 Speaker 2: having a job, And what would we do? And could 50 00:03:18,436 --> 00:03:22,836 Speaker 2: we cope? And I don't know well, said Tim Harford. 51 00:03:23,476 --> 00:03:28,236 Speaker 2: Karen writes, you could just have easily asked what do 52 00:03:28,316 --> 00:03:33,356 Speaker 2: people do after they've retired? She goes on, My work 53 00:03:33,436 --> 00:03:36,516 Speaker 2: was very meaningful to me too. I led policy teams 54 00:03:36,556 --> 00:03:39,956 Speaker 2: that advise government minister as it was fast paced, exciting, fun, challenging. 55 00:03:39,996 --> 00:03:42,916 Speaker 2: I loved my job. So when I retired I wondered 56 00:03:42,916 --> 00:03:46,116 Speaker 2: about all the things you expressed concerns about on your show. 57 00:03:46,556 --> 00:03:49,996 Speaker 2: Here is the truth as I see it. Whatever you're 58 00:03:50,036 --> 00:03:52,076 Speaker 2: doing for a living, it's not all of you. It 59 00:03:52,276 --> 00:03:55,076 Speaker 2: just takes most of your time. All the other parts 60 00:03:55,116 --> 00:03:57,476 Speaker 2: of you, all those pushed down by the demands of 61 00:03:57,556 --> 00:04:02,036 Speaker 2: capitalist discipline, emerge once your time has been freed. Then 62 00:04:02,076 --> 00:04:04,316 Speaker 2: you find out what else you are, what else makes 63 00:04:04,356 --> 00:04:07,516 Speaker 2: you happy, and what else gives you meaning and purpose. 64 00:04:07,756 --> 00:04:10,956 Speaker 2: So there is really nothing to fear from our robot 65 00:04:10,996 --> 00:04:15,116 Speaker 2: over Lord's my very best regards Karen, Wow, way to 66 00:04:15,196 --> 00:04:16,996 Speaker 2: start the show with our best question, and the other 67 00:04:17,076 --> 00:04:20,996 Speaker 2: questions can't possibly be as good as that. It's really lovely, rights, it's. 68 00:04:20,996 --> 00:04:24,276 Speaker 3: Really lovely, And I agree with all of the stuff 69 00:04:24,316 --> 00:04:28,156 Speaker 3: about what we do for a living is not all 70 00:04:28,236 --> 00:04:31,716 Speaker 3: of us. It's a very interesting thought, though. Is retirement 71 00:04:31,996 --> 00:04:37,116 Speaker 3: the same as living your entire life not working because 72 00:04:37,116 --> 00:04:40,036 Speaker 3: a robot took your job? And we have some evidence 73 00:04:40,076 --> 00:04:42,476 Speaker 3: on this point, tell me where is the finding? 74 00:04:42,556 --> 00:04:43,276 Speaker 1: So these three. 75 00:04:43,116 --> 00:04:46,876 Speaker 3: German economists published this research just over a decade ago 76 00:04:47,276 --> 00:04:49,956 Speaker 3: looking at people's life satisfaction. Turns out people are quite 77 00:04:49,996 --> 00:04:52,596 Speaker 3: happy being retired. And if you have a job and 78 00:04:52,636 --> 00:04:56,036 Speaker 3: then you retire, nothing happens to your life satisfaction. You 79 00:04:56,036 --> 00:04:59,996 Speaker 3: will fine before, you're fine after. But if you're unemployed, 80 00:05:01,276 --> 00:05:05,076 Speaker 3: you're miserable. And if you then retire from a situation 81 00:05:05,196 --> 00:05:09,236 Speaker 3: of unemployment, your life satisfaction goes up. I mean it's 82 00:05:09,276 --> 00:05:11,356 Speaker 3: the same thing, right, Like you go from not having 83 00:05:11,396 --> 00:05:13,236 Speaker 3: a job to not having a job. But there's something 84 00:05:13,276 --> 00:05:17,036 Speaker 3: about your identity as a retired person versus a person 85 00:05:17,196 --> 00:05:19,596 Speaker 3: who is looking for a job and can't find a job. 86 00:05:20,036 --> 00:05:22,196 Speaker 3: It makes a huge difference to how people feel about themselves. 87 00:05:22,876 --> 00:05:26,116 Speaker 2: Unemployed in the data does not mean a person who 88 00:05:26,116 --> 00:05:28,636 Speaker 2: doesn't have a job, right, It means a person who 89 00:05:28,716 --> 00:05:31,436 Speaker 2: wants a job and doesn't have a job, And that's 90 00:05:31,476 --> 00:05:35,676 Speaker 2: an important difference. And so I wonder in that study 91 00:05:36,236 --> 00:05:40,236 Speaker 2: if that difference is actually quite significant, right, Like, if 92 00:05:40,236 --> 00:05:42,596 Speaker 2: you want a job and don't have a job, you're 93 00:05:42,636 --> 00:05:46,956 Speaker 2: going to be unsatisfied in that dimension, Whereas if you 94 00:05:47,036 --> 00:05:50,636 Speaker 2: don't have a job and don't want a job, it's fine, 95 00:05:50,756 --> 00:05:51,716 Speaker 2: that sounds fine. 96 00:05:51,956 --> 00:05:54,596 Speaker 3: Yeah, yeah, So I think that's right, Jacob, And I 97 00:05:54,636 --> 00:05:58,476 Speaker 3: think a lot of this depends on what people's expectations are. 98 00:05:58,596 --> 00:06:01,596 Speaker 3: They're expectations of themselves, what they think other people expect 99 00:06:01,756 --> 00:06:04,516 Speaker 3: of them. But I would guess there's a huge difference 100 00:06:04,516 --> 00:06:08,356 Speaker 3: in the scenario where the robots take everyone's job and 101 00:06:08,396 --> 00:06:12,836 Speaker 3: where all they just doing, you know, hobbies, whatever we want, 102 00:06:13,076 --> 00:06:15,836 Speaker 3: our living standards are taken care of by the robots 103 00:06:16,116 --> 00:06:19,596 Speaker 3: and everyone's in the same boat, versus a situation where 104 00:06:20,236 --> 00:06:22,636 Speaker 3: a lot of people lose their jobs to the robots 105 00:06:22,676 --> 00:06:24,796 Speaker 3: and a lot of other people don't, which I think 106 00:06:24,876 --> 00:06:25,836 Speaker 3: is more likely. 107 00:06:26,396 --> 00:06:31,036 Speaker 2: So traditionally we thought of technological unemployment as happening to 108 00:06:31,356 --> 00:06:37,516 Speaker 2: people with lower job skills, right, people with less education, strong, 109 00:06:37,676 --> 00:06:42,116 Speaker 2: people who were getting replaced by machines. Plainly, the new 110 00:06:42,196 --> 00:06:47,756 Speaker 2: wave of generative AI threatens you and me, which is. 111 00:06:47,676 --> 00:06:50,156 Speaker 1: What makes it existentially threatening. 112 00:06:50,676 --> 00:06:55,036 Speaker 2: It does people losing their jobs to technology are more 113 00:06:55,356 --> 00:06:59,956 Speaker 2: broadly drawn from across the income spectrum and the education spectrum. 114 00:07:00,156 --> 00:07:02,516 Speaker 2: How does it change the sort of social implications because 115 00:07:02,556 --> 00:07:05,676 Speaker 2: on a fundamental level, what we're really talking about is 116 00:07:06,316 --> 00:07:08,356 Speaker 2: whether you have a job or not, and how you 117 00:07:08,396 --> 00:07:11,876 Speaker 2: feel about that is largely determined by social norms. Right, 118 00:07:11,916 --> 00:07:14,676 Speaker 2: That's actually what's going on here. It's a status game 119 00:07:14,716 --> 00:07:17,356 Speaker 2: to some significant degree, and it's uncomfortable to call it that. 120 00:07:17,476 --> 00:07:19,596 Speaker 2: I don't think I like my job because it gives 121 00:07:19,636 --> 00:07:21,516 Speaker 2: me status. I think I like my job because it's 122 00:07:21,516 --> 00:07:24,676 Speaker 2: fun and I'm contributing something to the world. But obviously 123 00:07:24,716 --> 00:07:26,436 Speaker 2: we all care about status. 124 00:07:26,036 --> 00:07:27,716 Speaker 3: And it does give you status. You have one of 125 00:07:27,716 --> 00:07:30,436 Speaker 3: the best jobs in the world. You're a podcasta. 126 00:07:30,076 --> 00:07:32,436 Speaker 2: Listen, we're walking right up to the next question in 127 00:07:32,436 --> 00:07:34,116 Speaker 2: a very elegant way from Neil. 128 00:07:34,676 --> 00:07:35,436 Speaker 1: Hello, Tim. 129 00:07:35,876 --> 00:07:40,796 Speaker 2: During your recent Cautionary Questions episode, Jacob Goldstein jokes that 130 00:07:40,836 --> 00:07:44,356 Speaker 2: if AI takes everyone's jobs, the two of you will 131 00:07:44,396 --> 00:07:47,956 Speaker 2: still do a free podcast together. I understand the jest, 132 00:07:48,876 --> 00:07:51,716 Speaker 2: but it begs the question, By the time AI is 133 00:07:51,756 --> 00:07:54,476 Speaker 2: good enough to take over most jobs, won't it also 134 00:07:54,556 --> 00:07:58,076 Speaker 2: be better than us at creating entertainment and art. I 135 00:07:58,116 --> 00:08:00,836 Speaker 2: think we as humans don't want to admit that as possible, 136 00:08:00,836 --> 00:08:03,676 Speaker 2: but it's definitely the goal of AI developers all over 137 00:08:03,716 --> 00:08:06,796 Speaker 2: the world At this very moment. I'm curious what that 138 00:08:06,916 --> 00:08:09,836 Speaker 2: possibility could mean for humanity and what we might do 139 00:08:09,956 --> 00:08:12,676 Speaker 2: to avoid or prepare for it. Thank you for all 140 00:08:12,756 --> 00:08:17,876 Speaker 2: your excellent content. The robots have nothing on you yet. 141 00:08:18,876 --> 00:08:23,516 Speaker 3: Yes, Jacob, have you heard the podcasting software that notebook 142 00:08:23,796 --> 00:08:24,956 Speaker 3: LM have just released? 143 00:08:24,996 --> 00:08:27,436 Speaker 1: This is a Google product, Tim. 144 00:08:27,556 --> 00:08:30,556 Speaker 2: Not only have I heard it, I uploaded a chapter 145 00:08:30,716 --> 00:08:34,356 Speaker 2: of my book about paper money in China and queued 146 00:08:34,436 --> 00:08:37,076 Speaker 2: up a moment of it to play for you right now. 147 00:08:38,076 --> 00:08:40,276 Speaker 4: You know how we always hear about Marco Polo bringing 148 00:08:40,316 --> 00:08:44,156 Speaker 4: back these crazy stories from China, right well, get ready 149 00:08:44,156 --> 00:08:46,956 Speaker 4: for this trying out. China was light years ahead of 150 00:08:46,996 --> 00:08:48,116 Speaker 4: Europe when it came to. 151 00:08:48,116 --> 00:08:50,596 Speaker 2: Money, centuries ahead to be exact. 152 00:08:50,636 --> 00:08:54,116 Speaker 4: We're talking paper money, folks, Yes, centuries before it ever 153 00:08:54,156 --> 00:08:55,116 Speaker 4: showed up in Europe. 154 00:08:55,236 --> 00:08:57,716 Speaker 2: It's wild. It really flips the script on how we 155 00:08:57,836 --> 00:09:03,076 Speaker 2: usually think about financial history. Absolutely, So, just to be clear, 156 00:09:03,396 --> 00:09:06,796 Speaker 2: I just uploaded a chapter of the book clicked whatever 157 00:09:07,076 --> 00:09:10,516 Speaker 2: make a podcast, didn't make any choices, didn't tell it 158 00:09:10,556 --> 00:09:13,076 Speaker 2: to do anything but that, and that's what came out. 159 00:09:13,196 --> 00:09:18,236 Speaker 3: And these are two synthetic voices reading a script that 160 00:09:18,676 --> 00:09:22,396 Speaker 3: was created by a genitive AI in response to your 161 00:09:22,676 --> 00:09:25,436 Speaker 3: wonderful book Money the True Story of a made up thing. 162 00:09:25,756 --> 00:09:28,916 Speaker 3: And it's pretty good. It's pretty good. 163 00:09:29,076 --> 00:09:32,196 Speaker 2: It's definitely good enough to be very scary. 164 00:09:32,996 --> 00:09:36,876 Speaker 3: I've heard worse human podcasters, for sure, So I mean, 165 00:09:36,956 --> 00:09:40,076 Speaker 3: maybe this is all happening sooner than we think. But 166 00:09:40,636 --> 00:09:43,796 Speaker 3: what Neil is basically driving at is, by the time 167 00:09:44,196 --> 00:09:48,196 Speaker 3: the robots take our jobs, won't they also be better 168 00:09:48,236 --> 00:09:51,476 Speaker 3: than us? So they will make a better podcast than 169 00:09:51,516 --> 00:09:54,356 Speaker 3: we will. They will draw better pictures than we will, 170 00:09:54,356 --> 00:09:56,316 Speaker 3: they will write better pros than we will, they will 171 00:09:56,356 --> 00:09:58,876 Speaker 3: compose better music than we will, and so on. And 172 00:09:58,996 --> 00:10:02,716 Speaker 3: is that a problem. I'm not sure that's the problem. 173 00:10:02,796 --> 00:10:05,836 Speaker 3: I'm worried about. The computer already draws better than I do. 174 00:10:06,796 --> 00:10:11,876 Speaker 3: And Lobar respect y Loba, and it's great. I'm like, wow, 175 00:10:11,996 --> 00:10:14,676 Speaker 3: I can create art for my hobby projects. 176 00:10:14,916 --> 00:10:15,356 Speaker 1: That's great. 177 00:10:15,356 --> 00:10:17,636 Speaker 3: I'm not doing anybody out of a job, But now 178 00:10:17,676 --> 00:10:21,556 Speaker 3: my own creativity is unlocked by the computer. Of course, 179 00:10:21,956 --> 00:10:23,836 Speaker 3: maybe there comes a time where I don't need to 180 00:10:23,836 --> 00:10:25,516 Speaker 3: do any of that. I just press the button and 181 00:10:25,556 --> 00:10:28,836 Speaker 3: the computer just produces everything, and it's better than what 182 00:10:28,876 --> 00:10:29,516 Speaker 3: I could produce. 183 00:10:30,556 --> 00:10:33,876 Speaker 1: Does that matter? I want to add a wrinkle rinkle away. 184 00:10:34,676 --> 00:10:36,956 Speaker 2: When I was talking about making a podcast with you 185 00:10:37,116 --> 00:10:40,636 Speaker 2: after the robots take our jobs, part of what I 186 00:10:40,676 --> 00:10:44,636 Speaker 2: was imagining was that somebody would listen, right, Like, not 187 00:10:44,756 --> 00:10:46,716 Speaker 2: that we could make a living out of it, but 188 00:10:46,756 --> 00:10:49,556 Speaker 2: that we would be doing it for some audience. 189 00:10:49,996 --> 00:10:50,196 Speaker 4: Right. 190 00:10:51,236 --> 00:10:54,476 Speaker 2: My hope, although I really don't know, is that even 191 00:10:54,516 --> 00:10:57,796 Speaker 2: if AI makes a better podcast than us, people will 192 00:10:57,876 --> 00:11:02,316 Speaker 2: listen just because people like people. And one interesting case 193 00:11:02,396 --> 00:11:04,916 Speaker 2: to consider is chess. 194 00:11:05,356 --> 00:11:05,556 Speaker 3: Right. 195 00:11:05,716 --> 00:11:11,116 Speaker 2: Chess has this history where first people were better than machines, 196 00:11:11,756 --> 00:11:14,916 Speaker 2: and then for a long time computers could beat people, 197 00:11:15,036 --> 00:11:18,636 Speaker 2: but a person working with a computer was better than 198 00:11:18,676 --> 00:11:20,596 Speaker 2: just a computer. Yeah, and then a few years ago 199 00:11:20,636 --> 00:11:23,436 Speaker 2: that ceased to be the case. And obviously many many 200 00:11:23,476 --> 00:11:26,556 Speaker 2: computers can beat every single human being on earth, but 201 00:11:28,196 --> 00:11:33,596 Speaker 2: chess players still like are famous among nerds, right, Magnus 202 00:11:33,636 --> 00:11:37,236 Speaker 2: Carlson is like a rich guy, yes, superstar, and people 203 00:11:37,676 --> 00:11:40,196 Speaker 2: pay lots of money to watch him play worse chess 204 00:11:40,236 --> 00:11:43,676 Speaker 2: than a computer. So my hope is we can be 205 00:11:44,116 --> 00:11:48,676 Speaker 2: if not the Magnus Carlson's of podcasting, the whoever is like, 206 00:11:49,316 --> 00:11:51,636 Speaker 2: you know, way worse than Magnus Carlson, but still a 207 00:11:51,636 --> 00:11:52,596 Speaker 2: pretty good chess player. 208 00:11:52,676 --> 00:11:56,076 Speaker 3: Sure, and you may be right, but I think my 209 00:11:56,196 --> 00:12:00,356 Speaker 3: point is it's worth playing chess even if nobody watches you, 210 00:12:00,676 --> 00:12:02,316 Speaker 3: even if it's just you and a friend. 211 00:12:02,716 --> 00:12:05,636 Speaker 2: Yeah, but is it worth making a podcast if nobody 212 00:12:05,676 --> 00:12:08,596 Speaker 2: listens that, what are we bothering with the microphones for? 213 00:12:08,636 --> 00:12:09,716 Speaker 2: Then you could just call me. 214 00:12:09,756 --> 00:12:12,036 Speaker 3: Yeah, yeah, Okay, we could have to think it's the 215 00:12:12,076 --> 00:12:14,396 Speaker 3: pocast that nobody listens is a fun conversation. 216 00:12:14,916 --> 00:12:17,636 Speaker 2: Welcome to the podcast for Noah, I'm Jacob Waldstein. 217 00:12:19,156 --> 00:12:21,156 Speaker 3: If people weren't listening, it would be different. But I 218 00:12:21,156 --> 00:12:24,076 Speaker 3: think people would still be creating stuff. People would still 219 00:12:24,076 --> 00:12:26,556 Speaker 3: be making apt and that will be fine. That's my 220 00:12:26,636 --> 00:12:27,276 Speaker 3: answer to Neil. 221 00:12:28,556 --> 00:12:32,116 Speaker 2: Okay, Tim, We're going to go from the robot apocalypse 222 00:12:32,196 --> 00:12:35,996 Speaker 2: to the climate apocalypse with our next question from Julian, 223 00:12:36,436 --> 00:12:41,476 Speaker 2: who writes Dear Tim. Lately, more and more news breaks 224 00:12:41,556 --> 00:12:45,836 Speaker 2: of climate change harming the economy. For example, I remember 225 00:12:45,876 --> 00:12:49,716 Speaker 2: a recent story about home insurance premiums rising steeply and 226 00:12:49,796 --> 00:12:54,076 Speaker 2: hazard zones for flooding storms or landslides. That made me wonder, 227 00:12:54,516 --> 00:12:57,196 Speaker 2: isn't there a way to profit from climate change too 228 00:12:57,676 --> 00:13:00,716 Speaker 2: that would allow us to hedge against these economic risks. 229 00:13:01,236 --> 00:13:02,156 Speaker 1: Could you set up a. 230 00:13:02,116 --> 00:13:05,116 Speaker 2: Fund that would act, in effect, like a climate change 231 00:13:05,156 --> 00:13:09,036 Speaker 2: insurance policy. Excellent show, by the way, Deep insights told 232 00:13:09,236 --> 00:13:13,236 Speaker 2: via gripping stories. All the best from Vienna Julian. 233 00:13:14,476 --> 00:13:17,876 Speaker 3: It's a very interesting question. The thing that immediately springs 234 00:13:17,916 --> 00:13:20,076 Speaker 3: to my mind is I once saw one of the 235 00:13:20,076 --> 00:13:25,316 Speaker 3: most amazingly persuasive pieces of rhetoric ever that was not 236 00:13:25,356 --> 00:13:29,316 Speaker 3: intended to be persuasive, and it was at a commodities conference. 237 00:13:29,436 --> 00:13:33,356 Speaker 3: There was a bunch of guys who trade agricultural commodities 238 00:13:34,316 --> 00:13:38,156 Speaker 3: and therefore have a big interest in climate variability, but 239 00:13:38,196 --> 00:13:42,916 Speaker 3: at the same time were culturally Midwestern and therefore climate skeptic, 240 00:13:43,436 --> 00:13:46,276 Speaker 3: And the guy giving a talk at this conference was 241 00:13:47,036 --> 00:13:50,556 Speaker 3: rather professorial Germanic character. I can't remember if he was 242 00:13:50,636 --> 00:13:55,196 Speaker 3: German or Austrian or Swiss and he was from one 243 00:13:55,236 --> 00:13:58,756 Speaker 3: of those big reinsurance companies. He just gave a talk 244 00:13:58,916 --> 00:14:02,516 Speaker 3: explaining how they were raising all of their insurance premiums 245 00:14:02,876 --> 00:14:05,156 Speaker 3: because of climate change, and showed loads and loads of 246 00:14:05,236 --> 00:14:09,036 Speaker 3: data about climate change and how they were changing their 247 00:14:09,356 --> 00:14:12,556 Speaker 3: pricing model. And there's a bunch of people who I 248 00:14:12,596 --> 00:14:18,636 Speaker 3: think were politically predisposed to be climate skeptics were like, huh, 249 00:14:19,196 --> 00:14:22,316 Speaker 3: this guy is not Hillary Clinton and the Dems coming 250 00:14:22,356 --> 00:14:24,396 Speaker 3: to take away our freedoms. This guy doesn't want to 251 00:14:24,396 --> 00:14:26,756 Speaker 3: persuade us of anything. He's just telling us that the 252 00:14:26,796 --> 00:14:29,876 Speaker 3: price of insurance is going up and here's why. And 253 00:14:30,116 --> 00:14:32,796 Speaker 3: I really felt the mood in the room change because 254 00:14:32,796 --> 00:14:35,796 Speaker 3: of that talk was fascinating. And what that gets at 255 00:14:35,916 --> 00:14:38,996 Speaker 3: is that insurance gives us a kind of truth about 256 00:14:38,996 --> 00:14:41,676 Speaker 3: the risks that we face. Because insurance companies operate in 257 00:14:41,716 --> 00:14:44,396 Speaker 3: a competitive market, they want to offer the most expensive 258 00:14:44,396 --> 00:14:46,476 Speaker 3: premiums they can get away with, but they're forced by 259 00:14:46,476 --> 00:14:49,436 Speaker 3: competition to keep the premiums low, and so as the 260 00:14:49,436 --> 00:14:52,396 Speaker 3: premiums rise and rise and rise, that generally indicates that 261 00:14:52,396 --> 00:14:54,916 Speaker 3: the risk is rising and rising and rising too. So, 262 00:14:54,956 --> 00:14:57,356 Speaker 3: to return to Julian's question, is there a way to 263 00:14:57,396 --> 00:15:00,436 Speaker 3: profit from climate change. I mean your podcast What's Your Problem, Jacob, 264 00:15:00,476 --> 00:15:03,276 Speaker 3: You've talked to many entrepreneurs who are hoping to make 265 00:15:03,316 --> 00:15:05,276 Speaker 3: money while also saving the planet. 266 00:15:05,436 --> 00:15:09,996 Speaker 2: I was thinking about that. It is encouraging to talk 267 00:15:10,036 --> 00:15:13,756 Speaker 2: to these people who are very smart and I think 268 00:15:13,836 --> 00:15:18,036 Speaker 2: truly believe that the work they're doing will mitigate the 269 00:15:18,116 --> 00:15:23,036 Speaker 2: damage from climate change. And the progress has been extraordinary, 270 00:15:23,196 --> 00:15:25,716 Speaker 2: right like the fall in the price of solar power 271 00:15:25,876 --> 00:15:30,316 Speaker 2: in particular, it's staggering. You know, people are making batteries better, 272 00:15:30,356 --> 00:15:32,396 Speaker 2: and there are really hard parts of the problem like 273 00:15:32,476 --> 00:15:36,116 Speaker 2: cement and planes, and people are working on that. And 274 00:15:36,556 --> 00:15:39,516 Speaker 2: you know, Bill Gates started a venture capital fund called 275 00:15:39,636 --> 00:15:43,676 Speaker 2: Breakthrough Energy Ventures. That is exactly what Julian is asking about, right, Like, 276 00:15:43,716 --> 00:15:47,236 Speaker 2: the point of this fund is to profit from climate 277 00:15:47,356 --> 00:15:51,156 Speaker 2: change by helping to solve or mitigate climate change. 278 00:15:51,276 --> 00:15:53,756 Speaker 3: So I think there are all these hopeful stories and 279 00:15:53,796 --> 00:15:57,196 Speaker 3: it is very encouraging. But fundamentally to come back to 280 00:15:57,396 --> 00:16:01,396 Speaker 3: this idea of our kind of inverse insurance policy, I 281 00:16:01,516 --> 00:16:03,316 Speaker 3: think that the answer is no. 282 00:16:03,636 --> 00:16:03,876 Speaker 1: Yeah. 283 00:16:04,276 --> 00:16:10,396 Speaker 3: Fundamentally, insurance moves the cost around the person whose house 284 00:16:10,436 --> 00:16:13,356 Speaker 3: got burned down or the person whose home was destroyed 285 00:16:13,356 --> 00:16:16,596 Speaker 3: in a hurricane, they don't have to pay for rebuilding it. Instead, 286 00:16:16,636 --> 00:16:19,516 Speaker 3: the insurance company pays, but somebody still has to pay. 287 00:16:19,636 --> 00:16:22,676 Speaker 3: And insurance moves that risk around and that's very valuable, 288 00:16:23,356 --> 00:16:26,436 Speaker 3: but it doesn't make the cost go away. And climate 289 00:16:26,516 --> 00:16:29,676 Speaker 3: change increases these costs, and all the insurance in the 290 00:16:29,676 --> 00:16:32,516 Speaker 3: world is not going to reduce them in aggregate. It'll 291 00:16:32,516 --> 00:16:34,516 Speaker 3: shift them to different people, but it's not going to 292 00:16:34,516 --> 00:16:37,676 Speaker 3: reduce them. For that we need you sell the panels, Jacob. 293 00:16:38,236 --> 00:16:39,996 Speaker 2: You know, when you put it that way, like, what 294 00:16:40,076 --> 00:16:45,036 Speaker 2: we really want in terms of moving the economics is 295 00:16:45,076 --> 00:16:48,276 Speaker 2: you want the people who are consuming the fossil fuel, 296 00:16:48,316 --> 00:16:50,596 Speaker 2: who are flying on the plane, who are eating the 297 00:16:50,636 --> 00:16:53,956 Speaker 2: hamburger to pay the full cost of that. Right, you 298 00:16:53,996 --> 00:16:58,276 Speaker 2: want to internalize that cost which is now not in 299 00:16:58,316 --> 00:17:01,716 Speaker 2: that transaction. And you can do that with a carbon tax, 300 00:17:01,796 --> 00:17:03,636 Speaker 2: Like it's a great idea. You can even have a 301 00:17:03,676 --> 00:17:06,796 Speaker 2: carbon tax and then just give everybody the money back. Right, 302 00:17:06,836 --> 00:17:11,036 Speaker 2: the government collects money from people for consuming carbon essentially, 303 00:17:11,076 --> 00:17:13,236 Speaker 2: and then sends a check to everybody in the country 304 00:17:13,236 --> 00:17:13,916 Speaker 2: at the end of the year. 305 00:17:13,956 --> 00:17:15,316 Speaker 1: So the government doesn't. 306 00:17:14,996 --> 00:17:17,156 Speaker 2: Even have to take more money in the aggregate and 307 00:17:17,236 --> 00:17:20,996 Speaker 2: like it's super elegant, and it's just politically doesn't really 308 00:17:20,996 --> 00:17:23,116 Speaker 2: seem to be happening, but it is in a way 309 00:17:23,156 --> 00:17:24,756 Speaker 2: solving the problem fundamentally. 310 00:17:25,116 --> 00:17:25,676 Speaker 1: Absolutely. 311 00:17:26,116 --> 00:17:29,516 Speaker 2: All Right, that's enough about that. We'll be back in 312 00:17:29,676 --> 00:17:33,956 Speaker 2: just a minute. 313 00:17:40,356 --> 00:17:43,196 Speaker 3: We are back. I'm Tim Harford. I am talking to 314 00:17:43,316 --> 00:17:46,756 Speaker 3: the amazing Jacob Goldstein. And this is another of our 315 00:17:46,916 --> 00:17:50,436 Speaker 3: Cautionary Questions episodes where you have been sending in your 316 00:17:50,476 --> 00:17:52,916 Speaker 3: questions and Jacob and I are going to try and 317 00:17:52,916 --> 00:17:54,676 Speaker 3: answer them. Jacob, what have you got for me? 318 00:17:54,956 --> 00:17:55,196 Speaker 1: Tim? 319 00:17:55,236 --> 00:18:00,876 Speaker 2: This is a throwback. It's from Robert who writes, Hi, Tim, 320 00:18:01,956 --> 00:18:04,276 Speaker 2: why did no one go to jail after the two 321 00:18:04,276 --> 00:18:07,556 Speaker 2: thousand and eight financial crisis? I remember the savings and 322 00:18:07,636 --> 00:18:11,276 Speaker 2: loans financial crisis during the Reagan presidency when Charles Keating 323 00:18:11,436 --> 00:18:15,636 Speaker 2: was jailled love your show, Robert from Illinois. 324 00:18:16,356 --> 00:18:19,716 Speaker 3: Yeah, and a throwback because we first met each other 325 00:18:19,956 --> 00:18:21,716 Speaker 3: shortly after the financial crisis. 326 00:18:21,396 --> 00:18:24,916 Speaker 2: In twenty ten, when the question on everybody's lips was 327 00:18:25,276 --> 00:18:26,356 Speaker 2: Who's going to jail? 328 00:18:26,876 --> 00:18:29,636 Speaker 3: Yeah, I mean it's not literally true that nobody went 329 00:18:29,636 --> 00:18:31,876 Speaker 3: to jail, but he madeoff went to jail for example. 330 00:18:32,156 --> 00:18:34,676 Speaker 3: I mean, I think the short answer is if you 331 00:18:34,716 --> 00:18:36,676 Speaker 3: want people to go to jail, then first they have 332 00:18:36,716 --> 00:18:39,276 Speaker 3: to commit a crime. And the weird thing about the 333 00:18:39,276 --> 00:18:43,396 Speaker 3: financial crisis is I don't think many people did commit crimes. 334 00:18:43,596 --> 00:18:45,596 Speaker 3: All of this crazy stuff that happened, and all the 335 00:18:45,636 --> 00:18:49,556 Speaker 3: outrageous things that people did were I think mostly legal, 336 00:18:49,636 --> 00:18:51,356 Speaker 3: which is of course the real scandal. 337 00:18:52,356 --> 00:18:57,156 Speaker 2: Yeah, you know, everybody talked about housing and crazy sliced 338 00:18:57,236 --> 00:19:00,716 Speaker 2: up bonds built on mortgages, right, that was the sort 339 00:19:00,716 --> 00:19:04,676 Speaker 2: of part of the story that everybody heard and told, 340 00:19:04,716 --> 00:19:06,996 Speaker 2: And that part of the story is true. But there 341 00:19:07,076 --> 00:19:09,596 Speaker 2: is another piece of the story that I actually think 342 00:19:09,996 --> 00:19:13,796 Speaker 2: is a really fundamental driver of the crisis that you 343 00:19:13,836 --> 00:19:17,436 Speaker 2: didn't hear as much because it's a little more abstract 344 00:19:17,476 --> 00:19:22,436 Speaker 2: and a little nerdier. And that is basically that starting 345 00:19:22,436 --> 00:19:25,036 Speaker 2: a long time before the crisis, starting in like the 346 00:19:25,116 --> 00:19:29,796 Speaker 2: nineteen seventies, there arose in the United States what came 347 00:19:29,836 --> 00:19:33,316 Speaker 2: to be called a shadow banking system, where because of 348 00:19:33,636 --> 00:19:36,396 Speaker 2: regulations on banks in the US that were set up 349 00:19:36,436 --> 00:19:39,156 Speaker 2: after the depression, when there was a giant banking crisis, 350 00:19:39,956 --> 00:19:44,476 Speaker 2: clever finance people came up with financial structures that looked 351 00:19:44,556 --> 00:19:47,556 Speaker 2: like banks but weren't regulated like banks, and in particular, 352 00:19:47,636 --> 00:19:50,516 Speaker 2: they looked like bank deposits. Right, So a bank deposit 353 00:19:50,716 --> 00:19:53,956 Speaker 2: is a weird thing where you put your dollar in 354 00:19:53,996 --> 00:19:57,836 Speaker 2: the bank and you have your deposit and it's worth 355 00:19:57,836 --> 00:20:00,076 Speaker 2: a dollar, and then the bank takes your dollar and 356 00:20:00,276 --> 00:20:02,556 Speaker 2: lends it out to somebody else, or your one thousand 357 00:20:02,596 --> 00:20:04,396 Speaker 2: dollars and lends it out to somebody else for a 358 00:20:04,436 --> 00:20:07,116 Speaker 2: mortgage that doesn't have to be paid back for thirty years. 359 00:20:07,876 --> 00:20:11,676 Speaker 2: And so then there is this inherent fragility in that system, right, 360 00:20:11,716 --> 00:20:14,436 Speaker 2: because if we all come back and ask for our money, 361 00:20:14,676 --> 00:20:16,516 Speaker 2: the bank won't have it. And it's not because the 362 00:20:16,556 --> 00:20:20,956 Speaker 2: bank is greedy or evil or incompetent. It's because of 363 00:20:20,956 --> 00:20:24,116 Speaker 2: the fundamental structure of banking. That fragility is inherent in 364 00:20:24,156 --> 00:20:26,836 Speaker 2: the fundamental structure of banking. And what happened in the 365 00:20:26,876 --> 00:20:31,196 Speaker 2: financial crisis is that there were billions of dollars that 366 00:20:31,236 --> 00:20:34,596 Speaker 2: were deposit like. They weren't exactly deposits. They weren't insured 367 00:20:34,596 --> 00:20:37,316 Speaker 2: by the federal government, but they were in money market 368 00:20:37,436 --> 00:20:40,316 Speaker 2: mutual funds, which people may be familiar with, and were 369 00:20:40,316 --> 00:20:43,676 Speaker 2: explicitly set up to be like a bank deposit, but 370 00:20:43,716 --> 00:20:46,076 Speaker 2: could pay higher interests and weren't regulated and in the 371 00:20:46,156 --> 00:20:48,876 Speaker 2: repo market, which is like a weirder version of the 372 00:20:48,916 --> 00:20:52,956 Speaker 2: same thing, let's say, and everybody came and asked for 373 00:20:52,996 --> 00:20:55,276 Speaker 2: their money back in two thousand and eight, and of 374 00:20:55,356 --> 00:20:58,716 Speaker 2: course the shadow banks which were not called banks or 375 00:20:58,716 --> 00:21:01,316 Speaker 2: shadow banks didn't have it, and that was a core 376 00:21:01,436 --> 00:21:04,316 Speaker 2: driver of the crisis. And it wasn't illegal, as you said. 377 00:21:04,796 --> 00:21:07,996 Speaker 2: But it's like that is what all financial crises are. 378 00:21:08,116 --> 00:21:10,996 Speaker 2: They just have like different flavors, different skins. 379 00:21:11,236 --> 00:21:13,516 Speaker 3: I mean you say it wasn't because the shadow banks 380 00:21:13,796 --> 00:21:16,556 Speaker 3: were lazy or incompetential greedy. I mean I think they 381 00:21:16,596 --> 00:21:18,516 Speaker 3: probably were incompetent and greedy as well. 382 00:21:18,676 --> 00:21:21,356 Speaker 2: Fair well, greed. I shouldn't have brought greed into it. 383 00:21:21,396 --> 00:21:24,116 Speaker 3: Greed should be fun, but greed, right, like incompetence is 384 00:21:24,156 --> 00:21:25,676 Speaker 3: not illegal, and neither is greed. 385 00:21:25,916 --> 00:21:29,156 Speaker 2: Yeah, they certainly didn't break the rules, ye, right. And 386 00:21:29,236 --> 00:21:34,116 Speaker 2: in fact, one of the key under the radar failures 387 00:21:34,236 --> 00:21:37,516 Speaker 2: that week in September in two thousand and eight, when 388 00:21:38,076 --> 00:21:41,116 Speaker 2: Lehman Brothers the investment bank failed and then everybody else 389 00:21:41,116 --> 00:21:43,796 Speaker 2: failed and the government bailed everybody out, was the very 390 00:21:43,836 --> 00:21:46,556 Speaker 2: first money market neutral fund that had been created forty 391 00:21:46,596 --> 00:21:50,276 Speaker 2: years earlier, and was very much like a bank and 392 00:21:50,396 --> 00:21:54,076 Speaker 2: suddenly couldn't give everybody their money back. And so it's 393 00:21:54,156 --> 00:21:58,156 Speaker 2: totally understandable that everybody is angry when one industry blows 394 00:21:58,196 --> 00:21:59,716 Speaker 2: up the economy. And by the way, all the people 395 00:21:59,716 --> 00:22:01,796 Speaker 2: in that industry are getting rich and it's not obvious 396 00:22:01,836 --> 00:22:04,156 Speaker 2: what they're providing to us. But it is in fact 397 00:22:04,236 --> 00:22:08,396 Speaker 2: a really hard problem to solve, like banks are inherently unstable, 398 00:22:08,436 --> 00:22:11,316 Speaker 2: and people love of making things that look like banks 399 00:22:11,676 --> 00:22:12,996 Speaker 2: and are inherently unstable. 400 00:22:13,396 --> 00:22:16,436 Speaker 3: Thank you, Jacob for reminding me of the concept of 401 00:22:16,476 --> 00:22:19,916 Speaker 3: shadow banking. It's it's like real banking, but their headquarters 402 00:22:19,956 --> 00:22:24,436 Speaker 3: are in Mordal. That's such a greatat Yes, oh, good times, 403 00:22:24,476 --> 00:22:28,876 Speaker 3: Good times, Jacob. There are more questions in the mail bag. 404 00:22:29,436 --> 00:22:31,436 Speaker 3: Would you mind if I were to read the next 405 00:22:31,476 --> 00:22:34,076 Speaker 3: question to you because I want to hear your answer 406 00:22:34,196 --> 00:22:37,636 Speaker 3: because you are the author of money, the true story 407 00:22:37,676 --> 00:22:39,116 Speaker 3: of a made up thing, and I feel like this 408 00:22:39,196 --> 00:22:42,396 Speaker 3: question is made for you. One of my friends posted 409 00:22:42,396 --> 00:22:45,476 Speaker 3: this on Facebook, but is it true? This is the 410 00:22:45,556 --> 00:22:48,756 Speaker 3: Facebook post. This is why I keep telling the younger 411 00:22:48,796 --> 00:22:52,396 Speaker 3: generation to stop avoiding cash. I have a fifty pound 412 00:22:52,436 --> 00:22:55,076 Speaker 3: banknote in my pocket. I go to a restaurant and 413 00:22:55,116 --> 00:22:57,836 Speaker 3: pay for dinner with it. The restaurant owner then uses 414 00:22:57,836 --> 00:23:00,276 Speaker 3: the note to pay for the laundry. The laundry owner 415 00:23:00,436 --> 00:23:03,076 Speaker 3: then uses the note to pay the barber. The barber 416 00:23:03,116 --> 00:23:05,516 Speaker 3: will then use the note to pay for shopping. After 417 00:23:05,596 --> 00:23:08,156 Speaker 3: an unlimited number of payments, it will still remain a 418 00:23:08,196 --> 00:23:11,276 Speaker 3: fifty pound value, which has fulfilled its purpose to everyone 419 00:23:11,276 --> 00:23:14,676 Speaker 3: who used it for payment. But if I go to 420 00:23:14,756 --> 00:23:18,836 Speaker 3: a restaurant and pay digitally via card, the bank fees 421 00:23:18,876 --> 00:23:22,036 Speaker 3: for my payment transaction charged to the seller are three percent, 422 00:23:22,596 --> 00:23:25,676 Speaker 3: so around one pound fifty for the fifty pound payment. 423 00:23:26,036 --> 00:23:28,596 Speaker 3: This will also be the case for laundry payment, payment 424 00:23:28,596 --> 00:23:31,956 Speaker 3: to the barber, and so on. Therefore, after thirty transactions, 425 00:23:32,316 --> 00:23:35,916 Speaker 3: the initial fifty pounds will exist at only five pounds, 426 00:23:36,116 --> 00:23:39,276 Speaker 3: and the remaining forty five pounds has become the property 427 00:23:39,316 --> 00:23:41,196 Speaker 3: of the bank. That's not actually how percentages work. But 428 00:23:41,236 --> 00:23:45,156 Speaker 3: that's fine thanks to all the digital transactions and fees. 429 00:23:45,676 --> 00:23:48,716 Speaker 3: Use it or lose it, folks. Once it's gone, we 430 00:23:48,756 --> 00:23:52,236 Speaker 3: won't get it back. Cash is king. Okay, So the 431 00:23:52,236 --> 00:23:54,276 Speaker 3: arithmetic on this is wrong. We don't need to bother 432 00:23:54,316 --> 00:23:56,676 Speaker 3: with that. But Jacob, what about the economics what's your 433 00:23:56,716 --> 00:23:57,316 Speaker 3: reaction to this? 434 00:23:57,836 --> 00:24:01,316 Speaker 2: So that was from Windy a rate and she says, 435 00:24:01,796 --> 00:24:04,996 Speaker 2: if you pay with a fifty pound banknote at the restaurant, 436 00:24:05,276 --> 00:24:07,836 Speaker 2: the restaurant owner then uses the note to pay for 437 00:24:07,876 --> 00:24:08,956 Speaker 2: the laundry and so on. 438 00:24:09,596 --> 00:24:11,796 Speaker 1: Yeah, and the note never gets used up. It just 439 00:24:11,836 --> 00:24:12,756 Speaker 1: goes around and around. 440 00:24:12,916 --> 00:24:15,676 Speaker 2: Right, So, at the risk of being pedantic, I think 441 00:24:15,716 --> 00:24:18,276 Speaker 2: it is relevant to say that is not in fact 442 00:24:18,396 --> 00:24:21,756 Speaker 2: what happens. There is a cost born by the restaurant 443 00:24:21,756 --> 00:24:24,116 Speaker 2: of dealing with cash, right, They pay somebody to account it, 444 00:24:24,116 --> 00:24:25,796 Speaker 2: they pay somebody to take it to the bank, and 445 00:24:25,876 --> 00:24:29,036 Speaker 2: so there is a cost to cash. So the relevant 446 00:24:29,116 --> 00:24:32,756 Speaker 2: question is how does the cost of cash compare to 447 00:24:32,796 --> 00:24:35,436 Speaker 2: the cost of a credit card and also to the 448 00:24:35,476 --> 00:24:37,956 Speaker 2: cost of a debit card. Those two things feel the 449 00:24:37,996 --> 00:24:41,116 Speaker 2: same to us as customers, but as it happens, they're 450 00:24:41,156 --> 00:24:44,236 Speaker 2: not the same to merchants. And for the most part, 451 00:24:44,476 --> 00:24:47,996 Speaker 2: and it varies from country to country, debit cards are 452 00:24:48,076 --> 00:24:51,916 Speaker 2: the cheapest for merchants, then cash is in the middle, 453 00:24:52,276 --> 00:24:55,556 Speaker 2: and credit cards are the most expensive. So like the 454 00:24:55,556 --> 00:24:58,796 Speaker 2: most efficient mode of transaction for the merchant in most 455 00:24:58,876 --> 00:25:02,316 Speaker 2: countries is the debit card, basically because you compare the 456 00:25:02,356 --> 00:25:05,156 Speaker 2: cost of dealing with the cash, of paying people to 457 00:25:05,196 --> 00:25:06,916 Speaker 2: count the money, to take it to the bank, et cetera, 458 00:25:07,436 --> 00:25:09,876 Speaker 2: to the fees they have to pay to use credit 459 00:25:09,876 --> 00:25:13,196 Speaker 2: cards and debit cards. And you know, from a sort 460 00:25:13,236 --> 00:25:16,596 Speaker 2: of first principles perspective, if you just step back and 461 00:25:16,596 --> 00:25:19,996 Speaker 2: think what is most efficient, it should be that a 462 00:25:20,036 --> 00:25:23,556 Speaker 2: card is cheaper. Right, Like, it's obviously costly to deal 463 00:25:23,636 --> 00:25:26,316 Speaker 2: with cash. It's a security risk, you have to actually 464 00:25:26,356 --> 00:25:30,196 Speaker 2: physically move it around, and so on one level we 465 00:25:30,236 --> 00:25:32,876 Speaker 2: should ask, well, why is a card ever more expensive? 466 00:25:33,156 --> 00:25:33,356 Speaker 1: Right? 467 00:25:33,556 --> 00:25:36,556 Speaker 2: And they're paying some amount for credit, right because a 468 00:25:36,556 --> 00:25:38,436 Speaker 2: credit card there's a risk that the bank won't get 469 00:25:38,476 --> 00:25:40,476 Speaker 2: paid back because it is in fact credit. There's a 470 00:25:40,556 --> 00:25:44,156 Speaker 2: risk of fraud, and so that cost is born. Debit 471 00:25:44,476 --> 00:25:47,116 Speaker 2: should be really cheap because you can just have the 472 00:25:47,156 --> 00:25:50,396 Speaker 2: computer at the restaurant ask the computer at the bank, hey, 473 00:25:50,436 --> 00:25:52,316 Speaker 2: does this person have the money in their account? And 474 00:25:52,356 --> 00:25:55,516 Speaker 2: the bank says yes, and the payment goes through and 475 00:25:55,556 --> 00:25:58,356 Speaker 2: it should be very cheap. So there is a question 476 00:25:58,676 --> 00:26:01,596 Speaker 2: why does it cost anything for debit. One answer to 477 00:26:01,636 --> 00:26:07,636 Speaker 2: why is because Visa controls a huge percentage of the 478 00:26:07,756 --> 00:26:10,596 Speaker 2: debit card payment system in the US, and in fact, 479 00:26:10,636 --> 00:26:14,116 Speaker 2: the US Department of Justice, the federal government, is suing 480 00:26:14,196 --> 00:26:18,956 Speaker 2: Visa for basically monopolistic practices in the debit card business. 481 00:26:19,596 --> 00:26:21,556 Speaker 3: I mean, there's a lot wrong with this Facebook post, 482 00:26:21,636 --> 00:26:23,036 Speaker 3: but there is a grain of truth in that there 483 00:26:23,076 --> 00:26:27,596 Speaker 3: is a monopolistic provider, or allegedly monopolistic provider, of these 484 00:26:27,636 --> 00:26:31,236 Speaker 3: payment services and they're raking off a disproportionate fee. On 485 00:26:31,276 --> 00:26:34,556 Speaker 3: the other hand, I mean, Visa, just like the barber, 486 00:26:34,596 --> 00:26:37,156 Speaker 3: and just like the laundromat owner, and just like the 487 00:26:37,156 --> 00:26:39,556 Speaker 3: restaurant owner, Visa is also a business. So if they 488 00:26:39,556 --> 00:26:41,756 Speaker 3: take the money, well, they can also spend the money 489 00:26:41,756 --> 00:26:43,396 Speaker 3: back into the economy. I mean it may feel a 490 00:26:43,396 --> 00:26:46,556 Speaker 3: bit unfair, but I mean the money is still goes around. 491 00:26:46,876 --> 00:26:49,916 Speaker 3: I mean this Facebook post is acting like the thing 492 00:26:49,956 --> 00:26:52,836 Speaker 3: that's scarce is the money, Like the fifty pound note 493 00:26:53,276 --> 00:26:56,036 Speaker 3: is the thing that's potentially scarce, but actually you can 494 00:26:56,116 --> 00:26:58,116 Speaker 3: always make more fifty pound notes if you are the 495 00:26:58,156 --> 00:27:00,676 Speaker 3: central bank. So money is in fact not the thing 496 00:27:00,716 --> 00:27:04,596 Speaker 3: that is scarce. What is scarce is laundromats and restaurants 497 00:27:04,956 --> 00:27:07,596 Speaker 3: and chefs and all of these real resources in the economy, 498 00:27:07,596 --> 00:27:10,756 Speaker 3: and the money, whether it's digital money or whether it's 499 00:27:10,876 --> 00:27:12,956 Speaker 3: paper money is just a way of kind of keeping 500 00:27:12,956 --> 00:27:14,916 Speaker 3: track of things. And then which gets back to your question, 501 00:27:14,956 --> 00:27:18,076 Speaker 3: which is which is the most efficient way of keeping 502 00:27:18,116 --> 00:27:20,716 Speaker 3: track of things? And that's an open question, I think, I. 503 00:27:20,676 --> 00:27:24,236 Speaker 2: Mean efficiency gains are good, right, Like the question does 504 00:27:24,356 --> 00:27:27,076 Speaker 2: matter on the sense that we want to spend as 505 00:27:27,116 --> 00:27:31,356 Speaker 2: little as possible on payment rails. That's fundamentally what this 506 00:27:31,476 --> 00:27:33,596 Speaker 2: is about. We can all get more stuff we like, 507 00:27:33,796 --> 00:27:37,636 Speaker 2: more restaurant meals and nice haircuts if we're spending as 508 00:27:37,636 --> 00:27:40,556 Speaker 2: little as possible moving the money around, right, And so 509 00:27:40,596 --> 00:27:43,916 Speaker 2: we want technology to make it cheaper to move money around. 510 00:27:44,436 --> 00:27:46,876 Speaker 2: Ideally there should be a cheaper way to do it 511 00:27:46,916 --> 00:27:48,716 Speaker 2: than cash, and we're getting there. 512 00:27:48,996 --> 00:27:52,356 Speaker 3: So don't get your economics from Facebook posts. Get your 513 00:27:52,436 --> 00:27:56,396 Speaker 3: economics from Jacob Goldstein. Thank you, Jacob, cautioning tales will 514 00:27:56,436 --> 00:27:58,316 Speaker 3: be back off to this break. 515 00:28:06,476 --> 00:28:12,036 Speaker 2: Tim, let's talk about housing, sure, Fred rights Hi, Tim, 516 00:28:12,236 --> 00:28:16,236 Speaker 2: I absolutely love your podcast. It scratches the itch of 517 00:28:16,316 --> 00:28:19,276 Speaker 2: economics in society and every episode is a great lesson. 518 00:28:19,756 --> 00:28:23,196 Speaker 2: My question is about housing, Nimbi's and the impact on 519 00:28:23,276 --> 00:28:26,236 Speaker 2: the economy. I've long been a believer in the housing 520 00:28:26,276 --> 00:28:30,156 Speaker 2: theory of everything, and find it appalling that as nearly 521 00:28:30,236 --> 00:28:33,476 Speaker 2: everything has gotten more affordable in real terms, housing has 522 00:28:33,516 --> 00:28:36,636 Speaker 2: become completely out of reach for younger people, particularly in 523 00:28:36,676 --> 00:28:40,516 Speaker 2: the UK. Quite beyond the ethical implications, I'm interested in 524 00:28:40,556 --> 00:28:44,316 Speaker 2: your view of its impact from a macroeconomic angle. How 525 00:28:44,396 --> 00:28:47,156 Speaker 2: impactful do you think housing reform would be on the 526 00:28:47,236 --> 00:28:50,076 Speaker 2: UK economy? How would you deal with Nimbi's from a 527 00:28:50,116 --> 00:28:55,236 Speaker 2: behavioral economics slash policy perspective? Thanks Fred. 528 00:28:56,116 --> 00:28:58,996 Speaker 3: I think Fred is completely right. I think the UK 529 00:28:59,076 --> 00:29:02,756 Speaker 3: economy desperately needs housing reform. Fundamentally, we've just made it 530 00:29:02,916 --> 00:29:05,076 Speaker 3: very very difficult to build houses. And if you make 531 00:29:05,116 --> 00:29:07,636 Speaker 3: it very very difficult to build houses, that makes houses 532 00:29:07,716 --> 00:29:11,556 Speaker 3: very expensive, and that's problem in its own right because 533 00:29:11,756 --> 00:29:13,996 Speaker 3: people need somewhere to live. But it also damages the 534 00:29:14,036 --> 00:29:17,236 Speaker 3: economy because people don't get to move around to where 535 00:29:17,236 --> 00:29:21,356 Speaker 3: the jobs are. And it's also inequitable, so it means 536 00:29:21,396 --> 00:29:23,356 Speaker 3: that people who are older have a lot more money 537 00:29:23,396 --> 00:29:26,396 Speaker 3: than people who are younger, disproportionately because they've just sat 538 00:29:26,436 --> 00:29:28,596 Speaker 3: in houses that they bought when they were cheap, and 539 00:29:28,596 --> 00:29:31,116 Speaker 3: those houses have got more and more expensive. And it's 540 00:29:31,156 --> 00:29:35,076 Speaker 3: also inequitable within generations because not to put too fine 541 00:29:35,116 --> 00:29:37,196 Speaker 3: a point on it. If you are the only child 542 00:29:37,476 --> 00:29:40,316 Speaker 3: of parents with a house, you're going to inherit the house, 543 00:29:40,516 --> 00:29:43,716 Speaker 3: which is hugely valuable. If you're one of three or 544 00:29:43,716 --> 00:29:46,236 Speaker 3: four children, or if your parents never had a house 545 00:29:46,236 --> 00:29:48,316 Speaker 3: in the first place, you're not going to inherit and 546 00:29:48,356 --> 00:29:51,476 Speaker 3: it becomes incredibly difficult to afford a house. And so 547 00:29:51,516 --> 00:29:54,836 Speaker 3: there a huge number of different economic problems being caused 548 00:29:54,836 --> 00:29:57,476 Speaker 3: by the fact that we're just not willing to let 549 00:29:57,516 --> 00:30:01,076 Speaker 3: people build more houses. And in a nutshell, I mean 550 00:30:01,156 --> 00:30:04,276 Speaker 3: houses are incredibly expensive in the UK. Fundamentally, if you 551 00:30:04,396 --> 00:30:06,876 Speaker 3: let people build houses, the cost of a house is 552 00:30:06,916 --> 00:30:10,436 Speaker 3: going to fall to the cost of building a house. 553 00:30:10,636 --> 00:30:12,036 Speaker 3: That's how much is going to cost you to buy 554 00:30:12,076 --> 00:30:14,036 Speaker 3: a house. It's like whatever it costs to build a house, 555 00:30:14,236 --> 00:30:17,156 Speaker 3: which is a lot less than the market price of 556 00:30:17,156 --> 00:30:18,276 Speaker 3: a house in the UK at the moment. 557 00:30:18,716 --> 00:30:22,716 Speaker 2: As you may know, houses are also really expensive in 558 00:30:22,796 --> 00:30:25,556 Speaker 2: many parts of the United States and for similar reasons. 559 00:30:26,036 --> 00:30:30,316 Speaker 2: But one really interesting and encouraging and surprising thing to 560 00:30:30,436 --> 00:30:33,836 Speaker 2: me is that there has actually been some progress on 561 00:30:33,876 --> 00:30:37,156 Speaker 2: this in the United States. Not enough to solve the problem, 562 00:30:37,196 --> 00:30:40,156 Speaker 2: but enough to suggest that the problem is at least 563 00:30:40,196 --> 00:30:44,516 Speaker 2: somewhat solvable. Fred reference Nimby's, which means not in my backyard, 564 00:30:44,516 --> 00:30:47,196 Speaker 2: which is people who say, don't build apartment buildings on 565 00:30:47,236 --> 00:30:50,036 Speaker 2: my block or whatever, better than bananas, right, you know 566 00:30:50,076 --> 00:30:53,316 Speaker 2: what banana stands for, build absolutely nothing anywhere to anybody. 567 00:30:54,996 --> 00:30:55,596 Speaker 1: I like that. 568 00:30:56,236 --> 00:30:59,356 Speaker 2: In the US, and starting in the Bay Area as 569 00:30:59,356 --> 00:31:01,156 Speaker 2: far as I know, you know, in the San Francisco 570 00:31:01,156 --> 00:31:04,956 Speaker 2: bar area, where houses are extraordinarily expensive, we have had 571 00:31:05,156 --> 00:31:08,916 Speaker 2: the Yimbi movement, the yes in my backyard movement, which 572 00:31:08,916 --> 00:31:11,596 Speaker 2: has in the past decade or so scored some real 573 00:31:11,796 --> 00:31:15,836 Speaker 2: victories in California. And one of the really interesting things 574 00:31:15,876 --> 00:31:17,796 Speaker 2: to me, you know, Fred says, how would you deal 575 00:31:17,796 --> 00:31:21,196 Speaker 2: with nimbi's from a behavioral economic slash policy perspective? We 576 00:31:21,276 --> 00:31:23,916 Speaker 2: haven't heard that much about the ymbi's and I have 577 00:31:23,996 --> 00:31:27,836 Speaker 2: a theory for why, and that is, as you may 578 00:31:27,876 --> 00:31:31,836 Speaker 2: have heard, America is a rather politically polarized place these days, 579 00:31:32,516 --> 00:31:37,676 Speaker 2: but the YMBI Nimbi fight is not particularly polarized. It 580 00:31:37,796 --> 00:31:42,356 Speaker 2: is not left coded right coded the way immigration or 581 00:31:42,596 --> 00:31:46,756 Speaker 2: capital gains, tax rates or many other things are, which 582 00:31:46,756 --> 00:31:49,596 Speaker 2: I think is actually great. It means you can have 583 00:31:49,796 --> 00:31:53,116 Speaker 2: a rational as opposed to tribal discussion about it. So 584 00:31:53,196 --> 00:31:55,156 Speaker 2: that's one piece of it, and the other piece of 585 00:31:55,196 --> 00:31:58,836 Speaker 2: it is somewhat wonkier, but it is this. At least 586 00:31:58,836 --> 00:32:02,236 Speaker 2: in the US, the rules about housing, we call it zoning, 587 00:32:02,636 --> 00:32:06,396 Speaker 2: are typically locally imposed. They're imposed basically at the city level. 588 00:32:06,876 --> 00:32:09,476 Speaker 2: And there's a sort of political economy reason for that, 589 00:32:09,556 --> 00:32:12,676 Speaker 2: which is homeowners care a lot and they show up 590 00:32:12,716 --> 00:32:15,596 Speaker 2: at the city council meeting and they say, don't let 591 00:32:15,636 --> 00:32:19,076 Speaker 2: anybody build apartments in my neighborhood because that'll lower the 592 00:32:19,156 --> 00:32:19,956 Speaker 2: value of my house. 593 00:32:20,036 --> 00:32:21,876 Speaker 1: Right, homeowners don't want the valid point. 594 00:32:22,316 --> 00:32:24,796 Speaker 2: It's the whole point. Right, there's this weird thing where like, yes, 595 00:32:24,836 --> 00:32:27,156 Speaker 2: houses are too expensive, we need to lower the value 596 00:32:27,156 --> 00:32:30,436 Speaker 2: of your house. So instead of dealing with it at 597 00:32:30,476 --> 00:32:33,356 Speaker 2: the city level, the ymbies went to the state and 598 00:32:33,436 --> 00:32:37,556 Speaker 2: god California to pass laws overriding cities that said to cities, 599 00:32:37,876 --> 00:32:41,916 Speaker 2: you basically can't do exclusionary zoning anymore. You can't say 600 00:32:42,196 --> 00:32:44,996 Speaker 2: there can only be single family homes. But in most 601 00:32:45,036 --> 00:32:47,916 Speaker 2: of California now you can build what are called ADUs, 602 00:32:47,956 --> 00:32:50,436 Speaker 2: additional dwelling units. You can build a little apartment over 603 00:32:50,476 --> 00:32:53,716 Speaker 2: the garage or in your backyard, for example, and other 604 00:32:53,836 --> 00:32:56,396 Speaker 2: rules like that have passed the state. So there is 605 00:32:56,556 --> 00:32:59,516 Speaker 2: encouraging progress. Though houses are still too expensive. 606 00:33:00,076 --> 00:33:01,356 Speaker 1: It's a problem that can be solved. 607 00:33:02,196 --> 00:33:04,836 Speaker 2: Okay, Tim, this one is for you. It's from Benji 608 00:33:04,836 --> 00:33:08,756 Speaker 2: from Brisbane. He writes, Hi, Tim, and all appreciate you 609 00:33:08,796 --> 00:33:12,556 Speaker 2: taking time to read my question. What happened to Mohammad 610 00:33:12,636 --> 00:33:15,716 Speaker 2: Yunis and Gramin Bank. There was so much promise with 611 00:33:15,836 --> 00:33:19,276 Speaker 2: microfinance as a tool for good in helping the underbanked 612 00:33:19,316 --> 00:33:22,756 Speaker 2: in developing economies. Kind regards Benji. 613 00:33:24,276 --> 00:33:26,756 Speaker 3: So the short answer is Mohammed Unis is now a 614 00:33:26,876 --> 00:33:29,716 Speaker 3: senior advisor to the Government of Bangladesh and won a 615 00:33:29,756 --> 00:33:32,836 Speaker 3: Nobel Prize not for economics but for peace. So he's 616 00:33:32,836 --> 00:33:38,076 Speaker 3: doing fine. So microfinance is basically the idea that you 617 00:33:38,436 --> 00:33:46,076 Speaker 3: give very small loans to entrepreneurs in very poor communities 618 00:33:46,636 --> 00:33:49,716 Speaker 3: at low interest rates and they can use that to 619 00:33:49,716 --> 00:33:52,476 Speaker 3: build their business. So Unus was famous for saying all 620 00:33:52,596 --> 00:33:57,436 Speaker 3: people are entrepreneurs. And the founding story of Gramine Bank, 621 00:33:57,476 --> 00:34:00,876 Speaker 3: which is the microfinance outfit that he started. He was 622 00:34:00,916 --> 00:34:03,796 Speaker 3: an economist. He went to a village near the university 623 00:34:03,836 --> 00:34:06,676 Speaker 3: in Bangladesh where he worked and he found that these 624 00:34:06,716 --> 00:34:09,716 Speaker 3: local women were weaving baskets and selling the baskets and 625 00:34:09,796 --> 00:34:12,356 Speaker 3: that's how they made their money. But they had to 626 00:34:12,396 --> 00:34:15,876 Speaker 3: borrow money from the village money lender to pay for 627 00:34:16,156 --> 00:34:20,036 Speaker 3: the materials to make the baskets, and the village money 628 00:34:20,076 --> 00:34:23,916 Speaker 3: lender was charging them ten percent a day, just an 629 00:34:23,996 --> 00:34:27,796 Speaker 3: astonishingly high interest rate. I did the maths moths that 630 00:34:27,836 --> 00:34:30,956 Speaker 3: interest rate would turn one cent into larger than the 631 00:34:31,116 --> 00:34:33,716 Speaker 3: entire US government debt over the course of a year, 632 00:34:34,356 --> 00:34:36,596 Speaker 3: so it's a very high interest rate. And UNUS came 633 00:34:36,636 --> 00:34:38,836 Speaker 3: in and said, I'll lend you money. I won't charge 634 00:34:38,876 --> 00:34:41,276 Speaker 3: you much interest. These women borrowed money off him and 635 00:34:41,276 --> 00:34:44,076 Speaker 3: they paid it back and it was fine. And suddenly, 636 00:34:44,356 --> 00:34:46,316 Speaker 3: not having to pay ten percent on top of your 637 00:34:46,316 --> 00:34:50,636 Speaker 3: cost every single day was the difference between grinding inescapable 638 00:34:50,676 --> 00:34:53,196 Speaker 3: poverty and the chance to build your own small business. 639 00:34:53,396 --> 00:34:54,956 Speaker 1: So it's a lovely idea. 640 00:34:55,876 --> 00:34:59,156 Speaker 3: The development economists came in and said, well, this sounds great, 641 00:34:59,996 --> 00:35:04,596 Speaker 3: but does it actually work? And they found mixed pictures. 642 00:35:04,956 --> 00:35:07,596 Speaker 3: So it was a really interesting study in South Africa 643 00:35:07,636 --> 00:35:10,436 Speaker 3: which was conducted by Dean car and Jonathan Zinman to 644 00:35:10,596 --> 00:35:14,716 Speaker 3: development economists and they found that people borrowing money from 645 00:35:15,076 --> 00:35:18,076 Speaker 3: what seemed pretty much like a payday loan company at 646 00:35:18,236 --> 00:35:20,276 Speaker 3: very high interest rates. I think it was two hundred 647 00:35:20,316 --> 00:35:23,996 Speaker 3: percent annual percentage interest rate. They randomized it so that 648 00:35:24,036 --> 00:35:26,636 Speaker 3: some people who this company were going to turn down 649 00:35:26,676 --> 00:35:30,076 Speaker 3: for loans at random, some of them were offered loans anyway, 650 00:35:30,796 --> 00:35:33,836 Speaker 3: and the people who at random were offered the loans 651 00:35:33,916 --> 00:35:36,596 Speaker 3: versus at random were not offered the loans. The ones 652 00:35:36,596 --> 00:35:39,156 Speaker 3: who got the loans were doing much better six months later, 653 00:35:39,476 --> 00:35:41,716 Speaker 3: so really interesting RANDOMI as well, So even this very 654 00:35:41,716 --> 00:35:44,476 Speaker 3: expensive credit was was great because what they were doing 655 00:35:44,556 --> 00:35:45,996 Speaker 3: was they were using the loan to I don't know, 656 00:35:45,996 --> 00:35:48,036 Speaker 3: buy a suit, to go to a job interview, or 657 00:35:48,036 --> 00:35:50,636 Speaker 3: to fix their bike in order to stay in employment. 658 00:35:51,356 --> 00:35:55,036 Speaker 3: But other research was more mixed, and I think the 659 00:35:55,076 --> 00:35:58,036 Speaker 3: fundamental idea that the reason why people are poor in 660 00:35:58,116 --> 00:36:01,196 Speaker 3: poor countries is because they don't have access to cheap loans. 661 00:36:02,156 --> 00:36:04,236 Speaker 3: I mean, there's so much else going on, so it's 662 00:36:04,276 --> 00:36:05,956 Speaker 3: only ever going to be a part of the story. 663 00:36:06,636 --> 00:36:10,436 Speaker 3: The other really interesting thing is the commercial companies came in. 664 00:36:10,956 --> 00:36:14,556 Speaker 3: So there was a one called Compatamos in Mexico, which 665 00:36:14,636 --> 00:36:18,996 Speaker 3: was just a huge business that was lending money at 666 00:36:19,196 --> 00:36:21,516 Speaker 3: pretty high rates and making a lot of money, and 667 00:36:21,556 --> 00:36:23,556 Speaker 3: it was just about to do an IPO, I think. 668 00:36:23,636 --> 00:36:25,396 Speaker 3: And it was that made all the founders of this 669 00:36:25,476 --> 00:36:28,756 Speaker 3: organization very rich, and Unice was like, this is outrageous. 670 00:36:28,756 --> 00:36:32,476 Speaker 3: He was trying to excommunicate them from the microfinance movement 671 00:36:32,876 --> 00:36:34,116 Speaker 3: because they were too commercial. 672 00:36:34,676 --> 00:36:36,236 Speaker 1: But the problem is there. 673 00:36:36,156 --> 00:36:40,596 Speaker 3: Was always shades of gray between kind of nonprofit microfinance 674 00:36:41,196 --> 00:36:45,716 Speaker 3: and the money lender who Unice was originally worried about. 675 00:36:46,316 --> 00:36:52,556 Speaker 3: Even nonprofit microfinance, they're not lending people loans at zero interest. 676 00:36:53,276 --> 00:36:56,116 Speaker 3: Even the nonprofits are often lending at fifty, sixty, seventy 677 00:36:56,156 --> 00:36:59,236 Speaker 3: percent a year. And the reason is you're making such 678 00:36:59,276 --> 00:37:01,756 Speaker 3: small loans for such a short period of time, like 679 00:37:01,796 --> 00:37:04,756 Speaker 3: maybe you're lending somebody like fifty dollars for three months. 680 00:37:05,276 --> 00:37:07,996 Speaker 3: Unless you charge a big interest rate, your fee on 681 00:37:08,036 --> 00:37:11,076 Speaker 3: that is like fifty yeah, and it's just not enough 682 00:37:11,076 --> 00:37:11,956 Speaker 3: to cover your costs. 683 00:37:12,356 --> 00:37:13,156 Speaker 1: Yeah. 684 00:37:13,196 --> 00:37:16,076 Speaker 3: And so it's this fine line between what is abusive 685 00:37:16,116 --> 00:37:20,956 Speaker 3: money lending and what is nonprofit microfinance. It's harder to 686 00:37:21,076 --> 00:37:24,756 Speaker 3: draw that line than you think. So it's a fascinating area, 687 00:37:25,116 --> 00:37:26,876 Speaker 3: but that is what happened to Mohammed Unis and the 688 00:37:26,876 --> 00:37:27,436 Speaker 3: Grami Bank. 689 00:37:28,116 --> 00:37:33,876 Speaker 2: Clearly, people are deeply, deeply uncomfortable fundamentally with the idea 690 00:37:33,916 --> 00:37:36,876 Speaker 2: of lending money at interest, right, Like we've gotten used 691 00:37:36,916 --> 00:37:39,356 Speaker 2: to it in the developed world with a mortgage or 692 00:37:39,396 --> 00:37:42,876 Speaker 2: a car loan. But if you look historically, lots of 693 00:37:42,916 --> 00:37:45,876 Speaker 2: places there were rules for thousands of years that said 694 00:37:45,916 --> 00:37:49,876 Speaker 2: nobody's allowed to lend money at interest because it's fundamentally bad. 695 00:37:49,956 --> 00:37:53,236 Speaker 2: It's unnatural, right, and you don't have that with most 696 00:37:53,276 --> 00:37:55,156 Speaker 2: other businesses. And I think that's part of what is 697 00:37:55,196 --> 00:37:57,916 Speaker 2: going on here, Like lending money at interest makes people 698 00:37:58,036 --> 00:38:00,676 Speaker 2: morally uncomfortable, and so when you have someone riding in 699 00:38:00,836 --> 00:38:03,516 Speaker 2: and being morally righteous by lending money at interest, it's 700 00:38:03,516 --> 00:38:04,596 Speaker 2: going to get complicated. 701 00:38:04,996 --> 00:38:07,436 Speaker 1: Have we got time for one more question, Jacob? We do? 702 00:38:08,116 --> 00:38:12,956 Speaker 2: Our last question too, comes from Ella, who writes, Hi, Tim, 703 00:38:13,276 --> 00:38:15,436 Speaker 2: I've been listening to your podcast for a while now. 704 00:38:15,636 --> 00:38:18,636 Speaker 2: I'm a big fan, and you seem very insightful across 705 00:38:18,636 --> 00:38:21,116 Speaker 2: a range of topics. So I was wondering if you 706 00:38:21,116 --> 00:38:23,356 Speaker 2: could help me out with the problem I've run into recently. 707 00:38:24,076 --> 00:38:26,916 Speaker 2: I'm in my second year of UNI studies physics. If 708 00:38:26,956 --> 00:38:29,596 Speaker 2: you're curious, and I keep getting asked what I want 709 00:38:29,596 --> 00:38:32,756 Speaker 2: to do for a career path aside from further academics. 710 00:38:32,796 --> 00:38:35,156 Speaker 2: I'm not really sure what there is that I like 711 00:38:35,236 --> 00:38:37,796 Speaker 2: the sound of, and I know eventually I will have 712 00:38:37,836 --> 00:38:40,516 Speaker 2: to finish my education. I do know that I'm in 713 00:38:40,556 --> 00:38:42,956 Speaker 2: the right field. I just don't know what jobs are 714 00:38:42,996 --> 00:38:45,036 Speaker 2: waiting for me on the other side of my studies. 715 00:38:45,436 --> 00:38:47,156 Speaker 2: Do you think I should be worrying about where I'm 716 00:38:47,196 --> 00:38:49,156 Speaker 2: going to end up? Or is a more go with 717 00:38:49,196 --> 00:38:52,796 Speaker 2: the flow attitude fine for something this serious. Thanks for 718 00:38:52,836 --> 00:38:54,036 Speaker 2: the help, Ella. 719 00:38:54,996 --> 00:38:57,476 Speaker 3: So this is where I hope that Ella's parents aren't 720 00:38:57,476 --> 00:39:00,396 Speaker 3: listening to this podcast, because I'm going to tell Ellen 721 00:39:00,516 --> 00:39:02,916 Speaker 3: not to worry. I think go with the flow is fine. 722 00:39:03,756 --> 00:39:08,236 Speaker 3: I mean, physics is such a desirable degree. I'm sure 723 00:39:08,316 --> 00:39:10,796 Speaker 3: you'll have no trouble finding somebody to give you a 724 00:39:10,876 --> 00:39:14,476 Speaker 3: job in the end. So Jacob and I are collectively 725 00:39:14,556 --> 00:39:17,836 Speaker 3: over one hundred so we're basically two old geezers. We're 726 00:39:17,836 --> 00:39:20,236 Speaker 3: probably not really very well qualified to give you advice. 727 00:39:20,476 --> 00:39:23,596 Speaker 3: But when I look back at my career, I didn't 728 00:39:23,596 --> 00:39:26,036 Speaker 3: know what I wanted to do when I went to university. 729 00:39:26,476 --> 00:39:28,436 Speaker 3: I didn't know what I wanted to do. When I 730 00:39:28,516 --> 00:39:32,236 Speaker 3: left university, I didn't have any particular plans to become 731 00:39:32,236 --> 00:39:35,276 Speaker 3: a journalist or a writer, and in fact, I didn't 732 00:39:35,316 --> 00:39:39,236 Speaker 3: become a journalist or a writer until I was nearly thirty. 733 00:39:39,676 --> 00:39:41,596 Speaker 3: And I think all of the things that I did 734 00:39:41,916 --> 00:39:44,756 Speaker 3: in my twenties, some of them were mistakes, some of 735 00:39:44,756 --> 00:39:47,516 Speaker 3: them were not, but they all kind of contributed to 736 00:39:47,756 --> 00:39:50,356 Speaker 3: who I am now. If there's something that you're really 737 00:39:50,436 --> 00:39:52,516 Speaker 3: passionate about, and you've got this vision you want to 738 00:39:52,556 --> 00:39:54,796 Speaker 3: chase it, that's fine. But I think it is also 739 00:39:54,916 --> 00:39:57,796 Speaker 3: fine to experiment and to try different things and to 740 00:39:57,796 --> 00:39:59,596 Speaker 3: see if you like them. What do you think, Jacob? 741 00:40:00,396 --> 00:40:02,716 Speaker 2: Certainly I agree. I mean I majored in English, which, 742 00:40:02,876 --> 00:40:07,556 Speaker 2: unlike physics, gave me no fundamentally useful skills except for 743 00:40:07,596 --> 00:40:09,756 Speaker 2: a living right like, I still think all the time 744 00:40:09,796 --> 00:40:11,796 Speaker 2: of stuff that I read in college, and I'm certainly 745 00:40:11,796 --> 00:40:15,116 Speaker 2: glad that I studied English. But I think this, when 746 00:40:15,116 --> 00:40:17,276 Speaker 2: you're in college, people say, oh, what are you studying? 747 00:40:17,356 --> 00:40:19,356 Speaker 2: And then you say what you're studying, and then the 748 00:40:19,436 --> 00:40:23,116 Speaker 2: next question, in a sort of robotic way, is what 749 00:40:23,156 --> 00:40:24,916 Speaker 2: do you want to do with that? The thing I 750 00:40:24,956 --> 00:40:27,316 Speaker 2: wish I had known when I was in college is 751 00:40:27,356 --> 00:40:30,956 Speaker 2: the people asking don't actually care. Right, Like I felt 752 00:40:30,956 --> 00:40:33,236 Speaker 2: all this pressure of like, oh my god, everybody wants 753 00:40:33,236 --> 00:40:33,676 Speaker 2: to know what. 754 00:40:33,596 --> 00:40:34,476 Speaker 1: I am going to do. 755 00:40:34,596 --> 00:40:37,436 Speaker 2: They don't actually want to know. They're not really thinking 756 00:40:37,436 --> 00:40:41,236 Speaker 2: that much about you. They're just making conversation. They're just 757 00:40:41,396 --> 00:40:43,876 Speaker 2: talking about the weather, right. I mean it in a 758 00:40:43,916 --> 00:40:46,236 Speaker 2: good way. When I say other people don't care, everybody 759 00:40:46,276 --> 00:40:47,716 Speaker 2: is mostly thinking about themselves. 760 00:40:48,276 --> 00:40:50,196 Speaker 3: I would phrase it slightly differently. I would say there's 761 00:40:50,196 --> 00:40:52,876 Speaker 3: no pressure, there's just curiosity. They're just interested. 762 00:40:53,196 --> 00:40:56,156 Speaker 2: They're not even that interested, is my take. They're just 763 00:40:56,276 --> 00:40:59,396 Speaker 2: making small talk. And like recognizing small talk as small 764 00:40:59,436 --> 00:41:02,076 Speaker 2: talk is a hugely empowering thing, and it's fine, Like 765 00:41:02,356 --> 00:41:06,156 Speaker 2: we're just social animals following norms and asking a college 766 00:41:06,156 --> 00:41:08,276 Speaker 2: student what they want to do is just what people do. 767 00:41:08,556 --> 00:41:10,676 Speaker 2: So I would say to Ella, just make up an 768 00:41:10,716 --> 00:41:13,076 Speaker 2: answer and know in your heart that you're going to 769 00:41:13,116 --> 00:41:16,036 Speaker 2: figure it out. And people love hiring physicists. Wall Street 770 00:41:16,076 --> 00:41:18,916 Speaker 2: is full of physicists, and consulting firms are full of physicists. 771 00:41:19,236 --> 00:41:22,356 Speaker 2: Anybody who can think hard about the most difficult problems 772 00:41:22,356 --> 00:41:24,316 Speaker 2: in the world in a quantitative way is going to 773 00:41:24,316 --> 00:41:25,916 Speaker 2: be eminently employable. 774 00:41:26,196 --> 00:41:28,316 Speaker 3: And you know another thing you can do with an 775 00:41:28,356 --> 00:41:36,076 Speaker 3: undergraduate degree in physics is a postgraduate degree in economics. Twist, Jacob, 776 00:41:36,156 --> 00:41:37,636 Speaker 3: Thank you so much for joining me. 777 00:41:37,916 --> 00:41:41,076 Speaker 2: Tim, It's so fun. I truly would do it for free, 778 00:41:41,356 --> 00:41:42,476 Speaker 2: even if nobody listened. 779 00:41:42,956 --> 00:41:45,236 Speaker 3: Thank you so much, Jacob, and thanks to all of 780 00:41:45,236 --> 00:41:47,716 Speaker 3: you for sending in your questions. We will be back 781 00:41:47,756 --> 00:41:51,196 Speaker 3: again on our regular schedule with another classic episode of 782 00:41:51,316 --> 00:41:54,796 Speaker 3: Cautionary Tales, but in the meantime, happy Thanksgiving to our 783 00:41:54,876 --> 00:41:57,116 Speaker 3: us listeners, and if you have a question for us, 784 00:41:57,356 --> 00:42:02,316 Speaker 3: please send it in to Tales at Pushkin dot fm. 785 00:42:02,356 --> 00:42:03,836 Speaker 1: That's t a l e. S. 786 00:42:03,956 --> 00:42:08,756 Speaker 3: Tales at Pushkin dot fm. Thank you, We love hearing 787 00:42:08,756 --> 00:42:14,996 Speaker 3: from you. Cautionary Tales is written by me Tim Harford 788 00:42:15,196 --> 00:42:18,156 Speaker 3: with Andrew Wright. For a full list of our sources, 789 00:42:18,316 --> 00:42:22,036 Speaker 3: see the show notes at Timharford dot com. The show 790 00:42:22,076 --> 00:42:25,516 Speaker 3: is produced by Alice Fines, with Marilyn Rust. The sound 791 00:42:25,516 --> 00:42:28,596 Speaker 3: design and original music for the work of Pascal Wise. 792 00:42:29,236 --> 00:42:33,716 Speaker 3: Sarah Nix edited the script. Cautionary Tales features the voice 793 00:42:33,716 --> 00:42:38,436 Speaker 3: talents of Ben Crowe, Melanie Guttridge, Stella Harford, Jemma Saunders, 794 00:42:38,476 --> 00:42:42,516 Speaker 3: and rufus Wright. The show wouldn't have been possible without 795 00:42:42,556 --> 00:42:47,356 Speaker 3: the work of Jacob Weisberg, Ryan Dilly, Greta Cohen, Eric Sandler, 796 00:42:47,636 --> 00:42:53,356 Speaker 3: Carrie Brody, Christina Sullivan, Kira Posey and Owen Miller. Cautionary 797 00:42:53,396 --> 00:42:57,316 Speaker 3: Tales is a production of Pushkin Industries. It's recorded at 798 00:42:57,356 --> 00:42:58,836 Speaker 3: ward Or Studios. 799 00:42:58,316 --> 00:43:01,876 Speaker 1: In London by Tom Barry. If you like the show, 800 00:43:02,076 --> 00:43:04,996 Speaker 1: please remember to share, grate and review. 801 00:43:05,076 --> 00:43:08,156 Speaker 3: It doesn't really make a difference to us and if 802 00:43:08,196 --> 00:43:10,916 Speaker 3: you want to hear the show, add free sign up 803 00:43:10,956 --> 00:43:14,556 Speaker 3: to Pushkin Plus on the show page on Apple Podcasts 804 00:43:14,676 --> 00:43:18,356 Speaker 3: or at pushkin dot Fm, slash plus