WEBVTT - This Is How Prejudice Can Hinder the Economy 0:00:10.960 --> 0:00:14.360 Hello, and welcome to another episode of the Odd Thoughts podcast. 0:00:14.480 --> 0:00:19.560 I'm Tracy Alloway and I'm Joe. Wisn't so, Joe? I 0:00:19.600 --> 0:00:22.040 think at this point one of the themes that has 0:00:22.120 --> 0:00:26.160 been emerging from is the idea that we are seeing 0:00:26.160 --> 0:00:34.040 a number of trends that we're already underway really accelerate. Yeah. 0:00:34.560 --> 0:00:38.839 And one of those trends is something that again we 0:00:38.920 --> 0:00:41.239 saw even before this year, and I would say we 0:00:41.280 --> 0:00:44.519 really saw it come into play after the Financial crisis. 0:00:44.880 --> 0:00:50.040 It's the idea that the economics profession, or the study 0:00:50.080 --> 0:00:54.760 of economics, the field of economics is missing something fundamental 0:00:55.080 --> 0:00:59.240 or perhaps could be applied in a different way to, 0:00:59.720 --> 0:01:05.440 I guess, achieve a better outcome for human well being. 0:01:05.560 --> 0:01:08.320 Is that a good way of putting it? Go further? 0:01:08.840 --> 0:01:13.399 I mean, yes, but go further? Um. Well, so, I 0:01:13.440 --> 0:01:15.640 think in the aftermath of the financial crisis, there was 0:01:15.680 --> 0:01:18.800 a lot of criticism trained on economists that not only 0:01:18.959 --> 0:01:22.760 had they missed this massive imbalance that ended up nearly 0:01:23.000 --> 0:01:27.000 taking down the financial system, but also that economics had 0:01:27.080 --> 0:01:31.080 somehow lost its way in its actual purpose. If you 0:01:31.080 --> 0:01:34.880 think about economics as the sort of studies of resource 0:01:34.920 --> 0:01:38.679 allocation and the decisions that go into making them. The 0:01:38.840 --> 0:01:43.120 ultimate goal should probably be making people better off than 0:01:43.160 --> 0:01:45.880 they would be otherwise. And I think there was a 0:01:45.880 --> 0:01:49.160 sense that economists and their sort of white tower in 0:01:49.240 --> 0:01:54.480 their academic bubble had forgotten that aspect of it, or 0:01:54.520 --> 0:01:57.280 at least had hadn't paid as much attention to it 0:01:57.440 --> 0:01:59.800 um as they should have. I think it's right. I mean, 0:01:59.840 --> 0:02:03.000 I think like if you look at now, especially with 0:02:03.080 --> 0:02:06.120 this crisis, first ten years ago, there's a lot more 0:02:06.160 --> 0:02:08.560 focus on like exactly what you say, what is the 0:02:08.639 --> 0:02:12.720 purpose of economics, and what problems are people really trying 0:02:12.760 --> 0:02:15.600 to solve? And I think that like before the Great 0:02:15.600 --> 0:02:18.840 Financial Crisis and the aftermath of the Great Financial Crisis, 0:02:19.040 --> 0:02:21.240 there was a lot of focus on the beautiful, the 0:02:21.240 --> 0:02:25.920 beauty of models and getting everything into bulibrium and optimal 0:02:26.040 --> 0:02:28.680 balance and all this stuff, and I don't know, but 0:02:29.480 --> 0:02:32.200 sort of forgetting it's like, no, the point is human 0:02:32.200 --> 0:02:36.280 well being and improving the sort of situation for humans. 0:02:36.600 --> 0:02:38.680 And I think, I don't know, I feel like probably 0:02:38.720 --> 0:02:41.840 always economists would recognize that that was the goal, but 0:02:41.919 --> 0:02:45.080 it got obscured. And I think like that you see 0:02:45.200 --> 0:02:47.560 the difference now and this sort of more clear focus 0:02:47.600 --> 0:02:50.880 on that when people say no, just just giving people money, 0:02:50.960 --> 0:02:53.520 And I think that like, that's part of this idea, 0:02:53.639 --> 0:02:55.840 Like it a lot of the solutions that get bandied 0:02:55.840 --> 0:02:59.040 about now in post COVID times or in the middle 0:02:59.040 --> 0:03:02.120 of COVID is like just give out more money. And 0:03:02.200 --> 0:03:04.480 I think part of the reason that some of these 0:03:04.520 --> 0:03:08.080 ideas have become more game, more currency is because of 0:03:08.160 --> 0:03:13.680 this increased clarity of what other problems we're trying to solve. Yeah. Absolutely, 0:03:13.720 --> 0:03:16.360 and I think your mention of the models there is 0:03:16.440 --> 0:03:20.320 absolutely correct. There was this idea that an economic or 0:03:20.360 --> 0:03:23.720 an economy imbalance was a goal in and of itself, 0:03:23.720 --> 0:03:26.639 but people kind of forgot the reason they were targeting that, 0:03:26.720 --> 0:03:32.760 which was eventually to um create better conditions for their citizens. 0:03:32.800 --> 0:03:37.040 So all right, so today we're going to be talking about, 0:03:37.680 --> 0:03:42.040 I guess, the more lofty ideals of the economic profession, 0:03:42.560 --> 0:03:44.600 but we're going to be doing it with someone who 0:03:44.680 --> 0:03:48.320 was actually writing and thinking about this again even before 0:03:48.800 --> 0:03:51.760 twenty way back in two thousand eleven. We're going to 0:03:51.840 --> 0:03:55.760 be talking to Paul Donovan. He's the chief economist at 0:03:55.840 --> 0:03:59.800 UBS Global Wealth Management, and he wrote a book that 0:04:00.040 --> 0:04:04.200 came out in November called Profit and Prejudice The luod 0:04:04.240 --> 0:04:08.280 out of the Fourth Industrial Revolution. And I should just 0:04:08.320 --> 0:04:11.920 mention that this book was written in a personal capacity 0:04:11.920 --> 0:04:16.960 by Paul, but with the full support of his employer UBS. 0:04:17.040 --> 0:04:20.800 It's a really interesting read and it gets to some 0:04:20.920 --> 0:04:23.440 of the topics we just mentioned in the intro. So, 0:04:23.760 --> 0:04:26.559 without further ado, why don't we bring on Paul. Paul, 0:04:26.720 --> 0:04:28.840 it's great to have you, thanks for a hart for 0:04:28.839 --> 0:04:32.320 having me on. So I guess the clue is in 0:04:32.360 --> 0:04:36.040 the title here, right, But Profit and Prejudice there's an 0:04:36.040 --> 0:04:41.880 intimation there that prejudice has some sort of impact on profits. 0:04:42.000 --> 0:04:45.280 Why don't you go ahead and tell us your your 0:04:45.400 --> 0:04:48.960 thesis on on what that actually is. Well, I'd love 0:04:48.960 --> 0:04:50.840 to say credit for the thesis, but I mean this, 0:04:50.839 --> 0:04:53.839 this comes out of Gary Becker's work in the fifties 0:04:53.960 --> 0:04:58.960 and countless economists since then. Basically, prejudice is bad for 0:04:59.120 --> 0:05:01.440 profit at a at the corporate sense, and it's bad 0:05:01.560 --> 0:05:06.919 for economic well being in a in a macro economic sense. Essentially, 0:05:07.440 --> 0:05:11.880 the whole point about allocating your resources efficiently and getting 0:05:11.880 --> 0:05:14.599 everything working is you need the right person in the 0:05:14.720 --> 0:05:18.880 right job at the right time. That's it. Now, prejudice 0:05:19.880 --> 0:05:26.320 is irrational discrimination where you are rejecting a person not 0:05:26.400 --> 0:05:29.680 on rational grounds, not on reasonable grounds, but because you 0:05:29.720 --> 0:05:32.600 don't like their race, or their sexuality, or their gender, 0:05:32.800 --> 0:05:35.479 or their hair color or whatever it is, doesn't matter 0:05:35.880 --> 0:05:41.159 if it's irrational, you're rejecting somebody from the possibility that 0:05:41.240 --> 0:05:43.440 they could work for you, and that then gives you 0:05:43.480 --> 0:05:46.080 a situation where you're not employing the right person in 0:05:46.120 --> 0:05:51.160 the right job, and that is enormously destructive, particularly so 0:05:52.040 --> 0:05:55.480 as we are going through the upheaval and the changes 0:05:55.560 --> 0:05:59.360 of the Fourth Industrial Revolution, because it becomes even more 0:05:59.480 --> 0:06:03.159 important to get the right people in place in order 0:06:03.200 --> 0:06:08.440 to maximize profits and gains at the moment. Still explain 0:06:08.560 --> 0:06:12.240 that last part. What is the connection between the sort 0:06:12.240 --> 0:06:17.520 of economically corrosive aspect of prejudice and why it's particularly 0:06:17.520 --> 0:06:21.520 pronounced after in the week of the Fourth Industrial Revolution? 0:06:21.560 --> 0:06:23.240 And while we're talking about that, what is the Fourth 0:06:23.279 --> 0:06:28.520 Industrial Revolution? So the Fourth Industry Revolution is the latest 0:06:28.560 --> 0:06:34.440 period of economic upheaval. So this is about artificial intelligence, robotics, automation, 0:06:34.560 --> 0:06:38.680 the Internet of things, changes in communication, all of that. Now, 0:06:38.720 --> 0:06:41.640 the point about a revolution, not to state the blindingly obvious, 0:06:41.760 --> 0:06:46.719 is its revolutionary. So actually it's not the technology that matters. 0:06:46.520 --> 0:06:49.920 It's it's how we use the technology, and that has 0:06:50.000 --> 0:06:54.920 the power to change society, to change how we work, 0:06:54.960 --> 0:06:57.719 where we work, how we live, what we consume. All 0:06:57.760 --> 0:07:02.039 of these things change through application of technology. That's the 0:07:02.040 --> 0:07:08.840 critical thing, the application. So it becomes critically important in 0:07:08.880 --> 0:07:11.400 this period of upheaval and success that you apply the 0:07:11.480 --> 0:07:15.760 technology appropriately and how do you apply technology appropriately? Or 0:07:15.800 --> 0:07:18.360 that's coming down to good old people because they're the 0:07:18.400 --> 0:07:21.480 ones who are using the thing. And so that's why 0:07:21.560 --> 0:07:23.800 the getting the right person the right job is so 0:07:23.800 --> 0:07:28.840 so absolutely critical. But there's a fatal flaw in any 0:07:28.920 --> 0:07:34.280 period of structural upheaval is that the uncertainty, the shifting 0:07:34.880 --> 0:07:40.520 social positions that an industrial revolution creates also tend to 0:07:40.640 --> 0:07:44.920 encourage more prejudice. So the Fourth Industrial Revolution as the 0:07:44.960 --> 0:07:49.880 seeds of its own destruction within the changes that it's bringing. 0:07:50.760 --> 0:07:55.800 M Are there previous Well, obviously there are previous industrial revolutions, 0:07:55.800 --> 0:08:00.000 But are there any that engendered the type of prejudice 0:08:00.160 --> 0:08:04.160 or you know, parallel prejudices to what we might be 0:08:04.240 --> 0:08:08.760 seeing now that that we can kind of learn from. Yes, 0:08:08.840 --> 0:08:12.320 So I mean basically all three previous industrial revolutions went 0:08:12.360 --> 0:08:17.120 through periods of prejudice. So the First Industrial Revolution you 0:08:17.240 --> 0:08:23.480 saw the introduction of factory systems mechanization in the UK 0:08:23.880 --> 0:08:27.800 in the mid and late eighteenth century, and that led 0:08:27.840 --> 0:08:29.640 to the Luddites who were who were going around and 0:08:29.840 --> 0:08:32.760 smashing up the equipment because the equipment was destroying their jobs. 0:08:33.080 --> 0:08:36.439 But it wasn't just equipment that was being destroyed. You 0:08:36.920 --> 0:08:42.080 were attacking Catholics. You were attacking Methodists because they were different. 0:08:42.640 --> 0:08:44.360 And if you've lost your job, and if you've lost 0:08:44.400 --> 0:08:48.280 your social status, you couldn't really understand why you've lost 0:08:48.280 --> 0:08:50.559 your job in social status, because it was the complex 0:08:50.559 --> 0:08:53.119 forces of the universe that had led to this situation 0:08:53.240 --> 0:08:55.120 as not as you were concerned. You were doing your 0:08:55.200 --> 0:08:57.280 job as well as you've always done it, and you 0:08:57.280 --> 0:08:59.200 know as efficient these have always done it, So why 0:08:59.280 --> 0:09:02.080 were you losing it? And so you you search around 0:09:02.120 --> 0:09:05.800 for this simple solution the scapegoat economics and it's well, 0:09:05.800 --> 0:09:08.080 there's a group and they seem to be doing quite well. 0:09:08.160 --> 0:09:09.680 It must be their fault. So it's all the fault 0:09:09.679 --> 0:09:11.600 of the Methodist. It's it's all the fault of the Catholics. 0:09:11.640 --> 0:09:14.600 They're the ones who've cost me my job. Um. And 0:09:14.640 --> 0:09:18.360 then in the Second Industrial Revolution we see exactly the 0:09:18.400 --> 0:09:21.080 same thing. And I talked in the book about my 0:09:21.080 --> 0:09:24.959 own family history. My family were dock workers in East 0:09:25.000 --> 0:09:28.640 London in the nineteen twenties and nineteen thirties, and of 0:09:28.679 --> 0:09:34.239 course the chaos and disruption of the Second Industrial Revolution 0:09:34.960 --> 0:09:37.640 cause them to lose their jobs of cause to be 0:09:37.679 --> 0:09:41.160 part of the mass unemployment, and some of my family 0:09:41.240 --> 0:09:45.600 appeared to turn to fascism because they were being told no, no, no, 0:09:45.679 --> 0:09:47.960 it's not your fault. Everything is the fault of the 0:09:48.040 --> 0:09:51.000 of the Jewish immigrants. And you know, they are the 0:09:51.000 --> 0:09:53.360 ones that have cost you your job. You're great, They're 0:09:53.360 --> 0:09:55.000 the ones that have taken your double away from you. 0:09:55.360 --> 0:09:58.679 This is the black shirt movement in the UK. Is 0:09:58.720 --> 0:10:01.559 that right? It is? Which you know a lot of 0:10:01.640 --> 0:10:04.200 people tend to see the black shirt movements as being 0:10:04.600 --> 0:10:07.440 you know, some some middle class movement. It wasn't. It 0:10:07.480 --> 0:10:10.120 was working class and it was deeply rooted in the 0:10:10.160 --> 0:10:12.800 East End of London because this was the area where 0:10:12.840 --> 0:10:16.240 people were losing their jobs and couldn't understand why it 0:10:16.280 --> 0:10:20.880 was happening. And it was very reassuring to be told no, no, no, 0:10:21.160 --> 0:10:24.040 you're better than they are, and they've somehow stolen your 0:10:24.080 --> 0:10:27.600 job from you. It's not just the the the desired 0:10:27.600 --> 0:10:29.360 to have a skategoat's also the desire to be told 0:10:29.360 --> 0:10:33.400 you're better. And and we've got a simple solution which 0:10:33.440 --> 0:10:36.160 if we follow, if we ban immigration or whatever it is, 0:10:36.360 --> 0:10:41.079 we will go back to this wonderful golden era where 0:10:41.080 --> 0:10:43.760 everyone is happy. It's all complete nonsense, of course, but 0:10:44.080 --> 0:10:46.480 you can see why. It's a compelling story in the 0:10:46.559 --> 0:10:50.600 chaos of change, and as recently as the nine seventies, 0:10:50.600 --> 0:10:53.640 the til end of the Third Industrial Revolution, which is 0:10:53.640 --> 0:10:56.679 all about computers and technology. I mean, if you go 0:10:56.800 --> 0:11:02.680 back and look at advertise newspapers from that time, Yeah, 0:11:03.400 --> 0:11:05.960 a lot of the blame them was on women. Women 0:11:06.000 --> 0:11:08.960 are daring to work and they're costing men jobs, and 0:11:09.040 --> 0:11:11.720 therefore we just need to stop women working and everything 0:11:11.720 --> 0:11:15.679 will be wonderful again. And I mean, it's just this remarkable, bizarre, 0:11:16.240 --> 0:11:20.040 but obviously very simple narrative. And it's that simplicity which 0:11:20.080 --> 0:11:40.760 is so appealing and so dangerous. So this gets too 0:11:40.960 --> 0:11:43.880 I think a question about you know you mentioned in 0:11:43.920 --> 0:11:46.480 the beginning of this idea of irrationality, and in the 0:11:46.600 --> 0:11:53.559 current age, prejudice, racism, other forms of discrimination extremely costly 0:11:53.600 --> 0:11:57.000 from an economic standpoint, extreme cost of this sort of 0:11:57.240 --> 0:12:02.200 irrational choices. Where does the rationality lie, however, I mean 0:12:02.280 --> 0:12:05.400 you talk about these sort of past periods like say 0:12:05.640 --> 0:12:10.760 the light out opposing increased mechanization and so forth. Were 0:12:10.840 --> 0:12:16.839 they being irrational given the information at hand, or does 0:12:16.880 --> 0:12:21.760 the irrationality precede them in some other sort of meta matter. 0:12:21.960 --> 0:12:25.360 I mean, they can't see the big picture. So I 0:12:25.360 --> 0:12:27.840 think it's definitely the letter that you you're you're getting 0:12:27.920 --> 0:12:32.160 fake news. And this was I mean a whole lot 0:12:32.240 --> 0:12:35.680 like movement, um. I mean, the UK had had plenty 0:12:35.720 --> 0:12:39.880 of uprisings and revolts in the past. Well made the 0:12:39.920 --> 0:12:43.200 situation in the late eighteenth century so unusual was that 0:12:43.280 --> 0:12:47.559 it was branded. There was a common brand, there was 0:12:47.600 --> 0:12:50.679 a common theme, and there was this pamphleteering, and you 0:12:50.800 --> 0:12:54.040 got to a stage where quite a large part of 0:12:54.080 --> 0:12:57.440 the population could read. And so they were reading I think, well, good, 0:12:57.440 --> 0:12:59.760 they're better informed. Well only if they're reading well in 0:12:59.840 --> 0:13:03.800 for documents preferably written by economists, of course, but they weren't. 0:13:03.840 --> 0:13:06.520 They were reading propaganda. They were reading pamphlets which we 0:13:07.000 --> 0:13:11.600 were lying and you know, you get the Gordon riots 0:13:11.640 --> 0:13:14.640 in in the UK, which is the anti Catholic riots 0:13:15.000 --> 0:13:18.720 in the late seventeen hundreds coming out of complete nonsense 0:13:18.800 --> 0:13:23.080 being spread around, and then exactly the same thing with fascism, 0:13:23.559 --> 0:13:27.160 the National Socialism, the Britis Union and fascists, etcetera. In 0:13:27.200 --> 0:13:30.280 the nineties and of course in the United States, and 0:13:30.679 --> 0:13:36.280 very often what we find is that irrationality exploits new 0:13:36.360 --> 0:13:41.199 means of communication. So back in in the First Industrial Revolution, 0:13:41.640 --> 0:13:45.319 the irrationality wars through pamphleting and printing and the fact 0:13:45.360 --> 0:13:51.000 that you've got a literate artisan class and pamphlets were suddenly, 0:13:51.640 --> 0:13:55.360 you know, the Twitter of their day. In the nineteen thirties, 0:13:55.480 --> 0:13:58.680 there was a Catholic priest who was preaching over the 0:13:58.800 --> 0:14:02.720 radio in America who was more popular than the president was, 0:14:03.520 --> 0:14:08.240 and he was viewing at this this extreme racist, anti 0:14:08.320 --> 0:14:12.760 Semitic view of the world to an enormous audience. But 0:14:12.960 --> 0:14:15.199 because he was very good at adapting the new media, 0:14:15.240 --> 0:14:18.679 and of course we see this today the technology and 0:14:18.720 --> 0:14:21.920 the communications that we have now also of how fate 0:14:22.040 --> 0:14:27.760 news and the dissemination of prejudice. Technology is very very 0:14:27.840 --> 0:14:30.160 much a double edged sword in this this whole fight 0:14:30.160 --> 0:14:34.920 against prejudice. So the suggestion, as you mentioned previously, is 0:14:34.960 --> 0:14:40.440 that prejudice ultimately cost the economy and cost people in 0:14:40.920 --> 0:14:45.960 various ways. Could you maybe explain how we actually judge 0:14:46.160 --> 0:14:51.760 the opportunity cost of irrational decisions? I understand you know, maybe, um, 0:14:51.800 --> 0:14:54.520 maybe in the first Industrial Revolution, if the Luddites were 0:14:54.720 --> 0:14:57.880 smashing equipment, you could go around and taught up the 0:14:57.920 --> 0:15:01.400 cost of all these destroyed machine and maybe you could 0:15:01.520 --> 0:15:05.160 try to estimate a lost productivity for the economy. But 0:15:05.360 --> 0:15:08.600 as economies grow more complex, and as we enter this 0:15:08.680 --> 0:15:12.920 Fourth Industrial Revolution, how do you actually go about estimating 0:15:13.240 --> 0:15:17.080 that opportunity cost? So this is where things become very 0:15:17.160 --> 0:15:21.160 very difficult to put a precise figure on it. We can, 0:15:21.200 --> 0:15:24.760 we can construct the narrative which explains clearly where the 0:15:24.800 --> 0:15:28.840 costs come through. And essentially the costs come in two ways. Firstly, 0:15:28.880 --> 0:15:32.320 if you've got prejudice, you're not employing the right person, 0:15:32.400 --> 0:15:35.480 the right job at the right time. You're not maximizing productivity. 0:15:35.840 --> 0:15:40.000 But secondly, also your decision making is flawed because if 0:15:40.040 --> 0:15:43.040 you've got a monoculture sitting around a table and making decisions. 0:15:43.040 --> 0:15:46.920 If if all of your decision makers are white, middle 0:15:46.960 --> 0:15:51.160 aged bald Anglo Saxon men. Not that I've going against 0:15:51.160 --> 0:15:53.640 the middle aged bald Anglo Saxon men, being one myself, 0:15:53.760 --> 0:15:56.280 but if they're all the same, you're not going to 0:15:56.400 --> 0:15:58.440 get a well rounded view of the world. You're gonna 0:15:58.600 --> 0:16:01.480 miss things you've and miss opportunities, and worse, you're going 0:16:01.520 --> 0:16:04.120 to miss risks. So those are your two costs, wrong 0:16:04.160 --> 0:16:08.040 people in the job and bad decision making, particularly when 0:16:08.080 --> 0:16:11.280 you're turning the world upside down. So how can we 0:16:11.400 --> 0:16:15.160 quantify this? Well, the problem we run into is that 0:16:15.320 --> 0:16:19.080 people don't admit to being prejudiced. They lie about it. 0:16:19.680 --> 0:16:23.840 It's it's owns the Bradley effect after a political candidate 0:16:23.960 --> 0:16:26.840 in the United States who was African American, who always 0:16:26.960 --> 0:16:30.600 was pulling far higher in opinion polls than the votes 0:16:30.640 --> 0:16:33.440 he actually received when he ran for office. Um, And 0:16:33.480 --> 0:16:35.640 it's because people don't want to admit to other people 0:16:35.720 --> 0:16:38.360 that they are racist. But in the privacy of a 0:16:38.480 --> 0:16:42.000 voting booth they are happy to act on their their 0:16:42.000 --> 0:16:44.560 principles as it were. What you get is and under 0:16:44.600 --> 0:16:47.720 reporting of the level of prejudice. And of course you 0:16:47.840 --> 0:16:51.920 also have difficulties in that some forms of prejudice can 0:16:51.960 --> 0:16:54.840 be invisible. So, for example, sexuality is a very good 0:16:54.880 --> 0:16:57.800 case where people may not be out at work, they 0:16:57.840 --> 0:17:00.400 may hide who they are at work and said, well, 0:17:00.400 --> 0:17:02.440 that's fine, they're not subject to prejudice. But they are 0:17:03.200 --> 0:17:07.040 because if they're hearing homophobic jokes or slurs around them, 0:17:07.119 --> 0:17:11.080 or if they're having to think twice before they speak 0:17:11.560 --> 0:17:14.200 in any kind of social occasion, if they're constantly having 0:17:14.200 --> 0:17:16.560 to edit themselves, that was an enormous strain on them 0:17:16.560 --> 0:17:20.760 and it is clearly damaging for productivity. But trying to 0:17:20.840 --> 0:17:23.879 identify that, you can't go around with a clipboard and say, okay, 0:17:23.920 --> 0:17:26.560 which category do you fall into and how does that 0:17:26.600 --> 0:17:30.080 affect your productivity? So very very goodle to quantify. What 0:17:30.119 --> 0:17:32.640 we can do is we can look at some markers 0:17:32.680 --> 0:17:37.560 like race, which give us some hints. These are obviously 0:17:37.680 --> 0:17:39.600 race tends to be a more visible form of prejudice, 0:17:39.640 --> 0:17:42.399 as does gender. Not always, but they are generally more 0:17:42.480 --> 0:17:45.119 visible forms of prejudice, and we can look at the 0:17:45.160 --> 0:17:49.120 costs that have come through from that, or we can 0:17:49.160 --> 0:17:53.160 look at times when we've seen changing behavior and see 0:17:53.160 --> 0:17:55.800 what's what's come about as a result of that to 0:17:55.800 --> 0:17:58.800 get a sense of the economic cost of prejudice, So 0:17:58.880 --> 0:18:01.479 to give two quick egg armples. In the United States, 0:18:01.520 --> 0:18:07.879 you can compare racial diversity in different states by different professions. 0:18:07.880 --> 0:18:10.000 And there's been some work done on this by academics, 0:18:10.640 --> 0:18:13.480 and what they've shown is that there is a significant 0:18:14.160 --> 0:18:20.320 increase in productivity in more creative roles that are more diverse. 0:18:20.920 --> 0:18:23.920 So by creative I mean things like financial services, where 0:18:23.920 --> 0:18:27.439 you need people who are thinking around problems in complex ways. 0:18:28.280 --> 0:18:30.199 If you've got a diverse firm, if you're in a 0:18:30.240 --> 0:18:35.800 diverse state, the productivity of financial service employees in that 0:18:35.920 --> 0:18:38.520 area is significantly higher than in a state which is 0:18:38.520 --> 0:18:43.600 relatively monoculture. Another study that I looked at is in 0:18:43.680 --> 0:18:49.280 Saudi Arabia. So Saudi Arabia has recently lifted some of 0:18:49.280 --> 0:18:53.560 the restrictions on women being entrepreneurs, made it easier for 0:18:53.600 --> 0:18:55.320 women to set up their own businesses. They don't need 0:18:55.320 --> 0:18:57.359 on male guardian to to support them, and so on 0:18:57.359 --> 0:18:59.879 and so forth. And what you have seen there is 0:19:00.000 --> 0:19:02.840 an explosion in the number of women setting up businesses 0:19:03.000 --> 0:19:05.880 and contributing positively to the economy. I mean, it's sound 0:19:05.880 --> 0:19:09.040 irregular is leading the world in female business creation at 0:19:09.080 --> 0:19:12.000 the moment because these restrictions have been lifted. But what 0:19:12.160 --> 0:19:15.320 that's telling you is just how much economic activity was 0:19:15.359 --> 0:19:20.160 being lost when they had these restrictions in place in 0:19:20.200 --> 0:19:24.919 the previous years. Let me ask you a question about 0:19:24.960 --> 0:19:28.159 the sort of upshot of your work or the consequences, 0:19:28.240 --> 0:19:34.320 because it's all well and good to say things like um, prejudice, 0:19:34.560 --> 0:19:38.520 discrimination are costly that firms that don't make an effort 0:19:38.600 --> 0:19:42.840 to change their ways and suffering. But you know, to me, 0:19:43.000 --> 0:19:45.439 this sounds or this could sound a little bit like 0:19:45.480 --> 0:19:48.199 a sort of I don't I don't know exactly the 0:19:48.320 --> 0:19:51.000 term a little bit. Uh. You know, I remember this 0:19:51.119 --> 0:19:54.360 sort of like heavy optimism of the late nineties where 0:19:54.359 --> 0:19:57.000 we thought that like free markets and if we reduced 0:19:57.040 --> 0:20:00.439 barriers to trade and deregulate and everything, could help all 0:20:00.480 --> 0:20:02.879 this world peace and stuff because people would find that 0:20:03.280 --> 0:20:06.280 it was you know, the incentive was to trade instead 0:20:06.320 --> 0:20:09.000 of go to war. And then they didn't really pan 0:20:09.080 --> 0:20:14.960 out like people expected. Other policy upshots that followed them 0:20:15.040 --> 0:20:18.320 from your work in terms of the government or regulators 0:20:18.320 --> 0:20:21.880 stepping into correctness imbalance, or is it in your view 0:20:21.920 --> 0:20:24.880 that of firms were more aware of the profit potential 0:20:24.880 --> 0:20:28.280 of making better decisions or having better decision makers would 0:20:28.280 --> 0:20:32.560 get better out. So um, I think the issue here 0:20:33.080 --> 0:20:37.000 is that there is a split. I believe that large 0:20:37.240 --> 0:20:42.240 global businesses get this. They understand the issues around prejudice, 0:20:42.280 --> 0:20:46.480 they understand the damage that it does, and as a result, 0:20:46.920 --> 0:20:50.680 they are playing a more active role in fighting prejudice. 0:20:51.040 --> 0:20:55.240 For example, so fairly early on in my Welcome Prejudice, 0:20:55.280 --> 0:20:58.479 I was writing on the economics of marriage equality because 0:20:58.760 --> 0:21:02.560 UDS was filing amarcust briefs before the U. S. Supreme Court, 0:21:02.640 --> 0:21:05.720 saying yes, we want marriage equality because you know it 0:21:05.800 --> 0:21:08.120 will mean that we will be a better business. Plus 0:21:08.160 --> 0:21:10.800 you know obviously it's morally the right thing to do. 0:21:11.200 --> 0:21:13.359 But the point was we were taking a clear stance 0:21:13.520 --> 0:21:17.439 on this. And so I think global firms understand this 0:21:17.560 --> 0:21:22.680 because they're dealing with multicultural employees, because they are looking 0:21:22.680 --> 0:21:25.960 to profit maximize, because they're always looking at ways to 0:21:26.040 --> 0:21:31.000 make the employees more productive. Where I think the real 0:21:31.160 --> 0:21:35.320 danger is is that with smaller firms this is not 0:21:35.400 --> 0:21:38.760 necessarily always so obvious. That you may be in a 0:21:38.800 --> 0:21:42.320 relatively homogenized community, or you think the relatively comodernized community, 0:21:42.320 --> 0:21:46.119 and you may miss out on the upside. You may 0:21:46.119 --> 0:21:50.840 not realize that this upside exists. And if there isn't 0:21:51.640 --> 0:21:54.480 an imperative to sort of push you in this direction, 0:21:55.080 --> 0:21:59.760 then you may continue to make bad business decisions which 0:21:59.800 --> 0:22:02.200 have managing to the economy, which are managing to your 0:22:02.240 --> 0:22:07.840 business damaging to society at large. So the US actually 0:22:07.880 --> 0:22:12.560 has a very good example of this from from baseball, which, 0:22:12.560 --> 0:22:14.960 as I understand it is a sort of inferior form 0:22:14.960 --> 0:22:18.520 of cricket that's quite popular in the United States, and 0:22:18.760 --> 0:22:22.480 I knew that was coming. What what happened is in 0:22:22.520 --> 0:22:27.480 the Nies, baseball was segregated. Teams were segregated on racial lines, 0:22:27.520 --> 0:22:31.760 which is just insane. And then it desegregated and a 0:22:31.920 --> 0:22:38.040 relatively small number of teams became integrated racially, and over 0:22:38.080 --> 0:22:42.680 the next decade those teams outperformed in every possible way. 0:22:43.040 --> 0:22:46.760 They played better, they won more games, they have more spectators, 0:22:46.800 --> 0:22:50.240 and consequently they made more money. But it still took 0:22:50.480 --> 0:22:55.879 over a decade after you could voluntarily desegregate for the 0:22:56.000 --> 0:23:01.439 racist teams to start to become actually integrated teams. They 0:23:01.800 --> 0:23:06.840 continued with racist recruitment policies for years even it was 0:23:06.840 --> 0:23:09.520 blinding the obvious that it was doing damage to their business. 0:23:09.560 --> 0:23:11.720 So I think that there is there's a there's a 0:23:11.800 --> 0:23:14.280 mix here that you've got the profit motive and the 0:23:14.280 --> 0:23:17.760 profit incentive and so on, and that's clearly going to 0:23:17.800 --> 0:23:20.440 be very useful, but then there is also a need, 0:23:20.480 --> 0:23:23.520 I think, for government to take action. And after all, 0:23:24.240 --> 0:23:26.480 when we're talking about government taking action, what we're talking 0:23:26.480 --> 0:23:30.880 about here is treating everybody the same, saying no one 0:23:30.920 --> 0:23:33.919 group in society is less than another group. That's all 0:23:33.960 --> 0:23:38.520 we're talking about. It's not a huge ask, frankly overall, 0:23:38.840 --> 0:23:41.040 and if you've act, you're guiding principle, and I think 0:23:41.080 --> 0:23:43.359 that there is a need for government to nudge in 0:23:43.400 --> 0:23:47.440 that direction. So there's a broader economic implication here as well, 0:23:47.480 --> 0:23:50.880 which is that if you think about the past ten 0:23:50.960 --> 0:23:54.520 years or so, the global economy has really been marked 0:23:54.600 --> 0:23:59.800 by this sluggish productivity, which has in turn fed into 0:24:00.320 --> 0:24:06.080 low inflation and relatively low GDP growth. The implication is, 0:24:06.119 --> 0:24:09.880 I understand it, is that if you do away with prejudice, 0:24:10.280 --> 0:24:15.800 then you might end up boosting productivity and generating economic 0:24:15.880 --> 0:24:19.120 growth in one of the few ways that are sort 0:24:19.160 --> 0:24:22.800 of left to us, Is that right? I think so. 0:24:22.880 --> 0:24:25.879 I mean, there's there's actually two possibilities here. One is 0:24:25.920 --> 0:24:29.560 that as we become more efficient, we create more growth. 0:24:30.400 --> 0:24:34.400 The alternative is that as we become more efficient, we 0:24:34.760 --> 0:24:40.280 stop using environmental credit environmental resources in an unsustainable way. 0:24:40.520 --> 0:24:42.560 Um And I think we'll probably end up with a 0:24:42.640 --> 0:24:46.120 mix of the two. That we will end up becoming 0:24:46.160 --> 0:24:50.439 more environmentally efficient, which doesn't necessarily mean more growth, but 0:24:50.480 --> 0:24:54.760 it means we maintain our existing standard of living without 0:24:55.359 --> 0:24:59.560 doing so much environmental damage, or alternatively, we we create 0:24:59.760 --> 0:25:03.920 a amount more growth in terms of living standards. Now, 0:25:04.040 --> 0:25:05.920 I think it's certainly the case that that g d P, 0:25:06.160 --> 0:25:08.760 which is widely regarded in the economics profession as are 0:25:08.800 --> 0:25:12.359 rather outdated statistic, may not capture everything that we're talking 0:25:12.400 --> 0:25:15.400 about here in terms of the efficiency and the changes. 0:25:15.800 --> 0:25:17.840 And this is something that we've known about for some time, 0:25:17.880 --> 0:25:22.679 that your GDP is not well suited to the century. 0:25:22.680 --> 0:25:25.880