1 00:00:15,410 --> 00:00:22,770 Speaker 1: Pushkin. Hello listeners. Tim Harford here, as loyal listeners will know. 2 00:00:23,010 --> 00:00:26,250 Speaker 1: Cautionary Tales is a podcast about learning from the mistakes 3 00:00:26,290 --> 00:00:28,450 Speaker 1: of the past. But it also seems to me that 4 00:00:28,490 --> 00:00:30,370 Speaker 1: we can learn from things that have gone well in 5 00:00:30,410 --> 00:00:35,490 Speaker 1: the past, for example, getting Jacob Goldstein on the show 6 00:00:36,210 --> 00:00:40,410 Speaker 1: Jacob is Jacob is back for an episode of cautionary Questions. 7 00:00:40,450 --> 00:00:41,050 Speaker 1: Hello Jacob. 8 00:00:41,450 --> 00:00:43,810 Speaker 2: What's the opposite of a cautionary tale? 9 00:00:44,250 --> 00:00:44,370 Speaker 1: Uh? 10 00:00:44,610 --> 00:00:49,410 Speaker 2: A salutary tale, A salutary story. I guess we salute you, 11 00:00:49,490 --> 00:00:51,890 Speaker 2: jacare we can do better. Let's try and punch that up. 12 00:00:51,970 --> 00:00:53,690 Speaker 1: We'll work on it. For those of you who don't know, 13 00:00:53,770 --> 00:00:57,170 Speaker 1: Jacob is the host of Pushkin podcast What's Your Problem, 14 00:00:57,210 --> 00:00:59,610 Speaker 1: which is a brilliant show about people who are trying 15 00:00:59,610 --> 00:01:03,290 Speaker 1: to make technological progress. He's also the author of the 16 00:01:03,330 --> 00:01:06,530 Speaker 1: book Money, The True Story of a Made Up Thing, 17 00:01:07,130 --> 00:01:09,290 Speaker 1: and he's the perfect person to help me out. So 18 00:01:09,850 --> 00:01:12,970 Speaker 1: all of the questions that you lovely people have been 19 00:01:13,050 --> 00:01:16,450 Speaker 1: kind enough to send in, So Jacob, wonderful to have 20 00:01:16,490 --> 00:01:19,930 Speaker 1: you back. Of course, our virtual mail bag is bursting 21 00:01:19,970 --> 00:01:23,290 Speaker 1: with queries on topics as varied as climate investing and 22 00:01:23,370 --> 00:01:29,370 Speaker 1: careers advice. So Jacob Goldstein. Are you ready, Yes, let's 23 00:01:29,410 --> 00:01:29,690 Speaker 1: do it. 24 00:01:52,010 --> 00:01:53,250 Speaker 2: So, Tim, we're going to start with a couple of 25 00:01:53,330 --> 00:01:55,770 Speaker 2: emails that came in after the last time you and 26 00:01:55,810 --> 00:01:57,210 Speaker 2: I talked on the show, and one of the things 27 00:01:57,250 --> 00:02:01,330 Speaker 2: we talked about was what happens if AI and robots 28 00:02:01,450 --> 00:02:05,450 Speaker 2: take all of our jobs. So the first question about that, 29 00:02:05,610 --> 00:02:07,690 Speaker 2: which is frankly really more of a comment, but a 30 00:02:07,690 --> 00:02:12,130 Speaker 2: lovely comment, comes from Karen, who writes, Dear Tim Harford, 31 00:02:12,410 --> 00:02:15,170 Speaker 2: I was, as usual enjoying your recent Q and A 32 00:02:15,210 --> 00:02:16,530 Speaker 2: episode with Jacob Goldstein. 33 00:02:16,610 --> 00:02:18,770 Speaker 1: She's a woman of taste. I like how the thoughts. 34 00:02:18,930 --> 00:02:22,050 Speaker 2: I like her already and your lively discussion about what 35 00:02:22,210 --> 00:02:26,210 Speaker 2: happens when everyone loses their jobs to AI. At one 36 00:02:26,250 --> 00:02:31,250 Speaker 2: point you said, quote, how would we react if our 37 00:02:31,250 --> 00:02:34,690 Speaker 2: desire for mastery, or desire for meaning, or desire to 38 00:02:34,690 --> 00:02:38,090 Speaker 2: feel useful if all that had to be satisfied without 39 00:02:38,130 --> 00:02:40,650 Speaker 2: having a job, And what would we do? And could 40 00:02:40,650 --> 00:02:45,050 Speaker 2: we cope? And I don't know, well, said Tim Harford. 41 00:02:45,690 --> 00:02:50,450 Speaker 2: Karen writes, you could just have easily asked what do 42 00:02:50,530 --> 00:02:55,090 Speaker 2: people do after they've retired? Fah, She goes on, my 43 00:02:55,290 --> 00:02:58,410 Speaker 2: work was very meaningful to me too. I led policy 44 00:02:58,450 --> 00:03:02,130 Speaker 2: teams that advise government minister as it was fast paced, exciting, fun, challenging. 45 00:03:02,210 --> 00:03:05,130 Speaker 2: I loved my job, so when I retired I wondered 46 00:03:05,130 --> 00:03:08,290 Speaker 2: about all the things you expressed concerns about on your show. 47 00:03:08,730 --> 00:03:12,210 Speaker 2: Here what's the truth as I see it, Whatever you're 48 00:03:12,210 --> 00:03:14,290 Speaker 2: doing for a living, it's not all of you. It 49 00:03:14,450 --> 00:03:17,290 Speaker 2: just takes most of your time. All the other parts 50 00:03:17,290 --> 00:03:19,690 Speaker 2: of you, al those pushed down by the demands of 51 00:03:19,770 --> 00:03:24,250 Speaker 2: capitalist discipline, emerge. Once your time has been freed, then 52 00:03:24,290 --> 00:03:26,530 Speaker 2: you find out what else you are, what else makes 53 00:03:26,530 --> 00:03:29,690 Speaker 2: you happy, and what else gives you meaning and purpose. 54 00:03:29,970 --> 00:03:33,850 Speaker 2: So there is really nothing to fear from our robot overlords. 55 00:03:34,050 --> 00:03:36,610 Speaker 2: My very best regards, Karen. 56 00:03:36,370 --> 00:03:38,850 Speaker 1: Wow, way to start the show with our best question, 57 00:03:38,930 --> 00:03:40,970 Speaker 1: and the other questions can't possibly be as good as that. 58 00:03:41,290 --> 00:03:43,290 Speaker 2: It's really lovely, right, thoughts, It's. 59 00:03:43,210 --> 00:03:46,490 Speaker 1: Really lovely, and I agree with all of the stuff 60 00:03:46,530 --> 00:03:50,370 Speaker 1: about what we do for a living is not all 61 00:03:50,410 --> 00:03:53,930 Speaker 1: of us. It's a very interesting thought, though. Is retirement 62 00:03:54,210 --> 00:03:59,290 Speaker 1: the same as living your entire life not working because 63 00:03:59,290 --> 00:04:02,250 Speaker 1: a robot took your job? And we have some evidence 64 00:04:02,290 --> 00:04:03,290 Speaker 1: on this point. 65 00:04:03,250 --> 00:04:04,690 Speaker 2: Tell me what is the finding? 66 00:04:04,770 --> 00:04:08,290 Speaker 1: So these three German economists publish this research just over 67 00:04:08,330 --> 00:04:11,610 Speaker 1: a decade ago looking at people's life satisfaction. Turns out 68 00:04:11,610 --> 00:04:14,170 Speaker 1: people are quite happy being retired. And if you have 69 00:04:14,210 --> 00:04:17,370 Speaker 1: a job and then you retire, nothing happens to your 70 00:04:17,410 --> 00:04:20,730 Speaker 1: life satisfaction. You will find before you're fine after, But 71 00:04:21,010 --> 00:04:25,650 Speaker 1: if you're unemployed, you're miserable. And if you then retire 72 00:04:25,930 --> 00:04:30,370 Speaker 1: from a situation of unemployment, your life satisfaction goes up. 73 00:04:30,890 --> 00:04:32,930 Speaker 1: I mean it's the same thing, right, Like you go 74 00:04:33,010 --> 00:04:34,730 Speaker 1: from not having a job to not having a job, 75 00:04:34,770 --> 00:04:37,730 Speaker 1: But there's something about your identity as a retired person 76 00:04:38,410 --> 00:04:40,890 Speaker 1: versus a person who is looking for a job and 77 00:04:40,930 --> 00:04:43,250 Speaker 1: can't find a job. It makes a huge difference to 78 00:04:43,250 --> 00:04:44,410 Speaker 1: how people feel about themselves. 79 00:04:45,090 --> 00:04:48,290 Speaker 2: Unemployed in the data does not mean a person who 80 00:04:48,330 --> 00:04:50,850 Speaker 2: doesn't have a job, right, It means a person who 81 00:04:50,930 --> 00:04:53,650 Speaker 2: wants a job and doesn't have a job. And that's 82 00:04:53,690 --> 00:04:57,890 Speaker 2: an important difference. And so I wonder in that study 83 00:04:58,450 --> 00:05:02,410 Speaker 2: if that difference is actually quite significant, right, Like, if 84 00:05:02,450 --> 00:05:04,810 Speaker 2: you want a job and don't have a job, you're 85 00:05:04,850 --> 00:05:09,010 Speaker 2: going to be unsatisfied in that dimension, Whereas if you 86 00:05:09,090 --> 00:05:11,530 Speaker 2: who don't have a job and don't want a job, 87 00:05:12,370 --> 00:05:15,490 Speaker 2: it's fine. That sounds fine, Yeah, yeah, So I. 88 00:05:15,890 --> 00:05:17,290 Speaker 1: Think that's right, Jacob, And I think a lot of 89 00:05:17,290 --> 00:05:22,090 Speaker 1: this depends on what people's expectations are, their expectations of themselves, 90 00:05:22,130 --> 00:05:25,250 Speaker 1: what they think other people expect of them. But I 91 00:05:25,290 --> 00:05:27,810 Speaker 1: would guess there's a huge difference in the scenario where 92 00:05:28,250 --> 00:05:31,890 Speaker 1: the robots take everyone's job and we're all basically just 93 00:05:32,850 --> 00:05:36,490 Speaker 1: doing you know, hobbies, whatever we want, our living standards 94 00:05:36,530 --> 00:05:39,010 Speaker 1: are taken care of by the robots and everyone's in 95 00:05:39,050 --> 00:05:42,890 Speaker 1: the same boat, versus a situation where a lot of 96 00:05:42,930 --> 00:05:45,250 Speaker 1: people lose their jobs to the robots and a lot 97 00:05:45,250 --> 00:05:48,010 Speaker 1: of other people don't, which I think is more likely. 98 00:05:48,610 --> 00:05:53,250 Speaker 2: So traditionally we thought of technological unemployment as happening to 99 00:05:53,570 --> 00:05:58,730 Speaker 2: people with lower job skills, right, people with less education, 100 00:05:59,250 --> 00:06:04,090 Speaker 2: strong people who were getting replaced by machines. Plainly, the 101 00:06:04,170 --> 00:06:09,770 Speaker 2: new wave of generative AI threatens you and me, which 102 00:06:09,810 --> 00:06:10,210 Speaker 2: is what. 103 00:06:10,090 --> 00:06:12,370 Speaker 1: Makes it existentially threatening. 104 00:06:12,890 --> 00:06:17,250 Speaker 2: It does people losing their jobs to technology are more 105 00:06:17,570 --> 00:06:22,090 Speaker 2: broadly drawn from across the income spectrum and the education spectrum. 106 00:06:22,370 --> 00:06:24,730 Speaker 2: How does it change the sort of social implications, Because 107 00:06:24,770 --> 00:06:27,850 Speaker 2: on a fundamental level, what we're really talking about is 108 00:06:28,490 --> 00:06:30,570 Speaker 2: whether you have a job or not, and how you 109 00:06:30,570 --> 00:06:34,090 Speaker 2: feel about that is largely determined by social norms, right. 110 00:06:34,130 --> 00:06:36,850 Speaker 2: That's actually what's going on here. It's a status game 111 00:06:36,890 --> 00:06:39,530 Speaker 2: to some significant degree, and it's uncomfortable to call it that. 112 00:06:39,690 --> 00:06:41,810 Speaker 2: I don't think I like my job because it gives 113 00:06:41,850 --> 00:06:43,730 Speaker 2: me status. I think I like my job because it's 114 00:06:43,730 --> 00:06:46,850 Speaker 2: fun and I'm contributing something to the world. But obviously 115 00:06:46,890 --> 00:06:48,410 Speaker 2: we all care about status, and. 116 00:06:48,410 --> 00:06:49,970 Speaker 1: It does give you status. You have one of the 117 00:06:50,010 --> 00:06:51,530 Speaker 1: best jobs in the world. You're a podcast. 118 00:06:51,530 --> 00:06:54,490 Speaker 2: To listen, we're walking right up to the next question 119 00:06:54,570 --> 00:06:58,370 Speaker 2: in a very elegant way from Neil. Hello Tim. During 120 00:06:58,450 --> 00:07:03,210 Speaker 2: your recent Cautionary Questions episode, Jacob Goldstein jokes that if 121 00:07:03,250 --> 00:07:06,890 Speaker 2: AI takes everyone's jobs, the two of you will still 122 00:07:06,890 --> 00:07:11,170 Speaker 2: do a free podcast together. I understand the jest, but 123 00:07:11,250 --> 00:07:14,170 Speaker 2: it begs the question. By the time AI is good 124 00:07:14,250 --> 00:07:16,970 Speaker 2: enough to take over most jobs, won't it also be 125 00:07:16,970 --> 00:07:20,530 Speaker 2: better than us at creating entertainment and art. I think 126 00:07:20,570 --> 00:07:23,050 Speaker 2: we as humans don't want to admit that as possible, 127 00:07:23,050 --> 00:07:25,890 Speaker 2: but it's definitely the goal of AI developers all over 128 00:07:25,890 --> 00:07:29,010 Speaker 2: the world at this very moment. I'm curious what that 129 00:07:29,130 --> 00:07:32,010 Speaker 2: possibility could mean for humanity and what we might do 130 00:07:32,130 --> 00:07:34,890 Speaker 2: to avoid or prepare for it. Thank you for all 131 00:07:34,930 --> 00:07:38,490 Speaker 2: your excellent content. The robots have nothing on you. 132 00:07:39,850 --> 00:07:44,810 Speaker 1: Yet. Yes, Jacob, have you heard the podcasting software that 133 00:07:45,210 --> 00:07:49,650 Speaker 1: notebook LM have just released? This is a Google product, Tim. 134 00:07:49,770 --> 00:07:52,730 Speaker 2: Not only have I heard it, I uploaded a chapter 135 00:07:52,890 --> 00:07:56,570 Speaker 2: of my book about paper money in China and queued 136 00:07:56,650 --> 00:07:59,290 Speaker 2: up a moment of it to play for you right now. 137 00:08:00,290 --> 00:08:02,490 Speaker 2: You know how we always hear about Marco Polo bringing 138 00:08:02,490 --> 00:08:06,330 Speaker 2: back these crazy stories from China, right well, get ready 139 00:08:06,370 --> 00:08:09,170 Speaker 2: for this trying out. China was light years ahead of 140 00:08:09,210 --> 00:08:12,730 Speaker 2: Europe when it came to money, centuries ahead, to be exact. 141 00:08:12,850 --> 00:08:16,330 Speaker 2: We're talking paper money, folks, Yes, centuries before it ever 142 00:08:16,370 --> 00:08:19,010 Speaker 2: showed up in Europe. It's wild. It really flips the 143 00:08:19,050 --> 00:08:24,170 Speaker 2: script on how we usually think about financial history. Absolutely so, 144 00:08:24,530 --> 00:08:27,170 Speaker 2: just to be clear, I just uploaded a chapter of 145 00:08:27,210 --> 00:08:31,970 Speaker 2: the book clicked whatever make a podcast, didn't make any choices, 146 00:08:32,210 --> 00:08:34,570 Speaker 2: didn't tell it to do anything but that, and that's 147 00:08:34,610 --> 00:08:35,250 Speaker 2: what came out. 148 00:08:35,410 --> 00:08:40,450 Speaker 1: And these are two synthetic voices reading a script that 149 00:08:40,890 --> 00:08:44,610 Speaker 1: was created by a genitive AI in response to your 150 00:08:44,890 --> 00:08:47,650 Speaker 1: wonderful book Money The True story of a made up thing. 151 00:08:47,930 --> 00:08:51,090 Speaker 1: And it's pretty good. It's pretty good. 152 00:08:51,290 --> 00:08:54,410 Speaker 2: It's definitely good enough to be very scary. 153 00:08:55,210 --> 00:08:59,090 Speaker 1: I've had worse human podcasters, for sure. So I mean, 154 00:08:59,170 --> 00:09:02,290 Speaker 1: maybe this is all happening sooner than we think. But 155 00:09:02,850 --> 00:09:06,010 Speaker 1: what Neil is basically driving at is, by the time 156 00:09:06,410 --> 00:09:10,410 Speaker 1: the robots take our jobs, won't they also be better 157 00:09:10,450 --> 00:09:13,650 Speaker 1: than us? So they will make a better podcast than 158 00:09:13,690 --> 00:09:16,570 Speaker 1: we will. They will draw better pictures than we will, 159 00:09:16,570 --> 00:09:18,530 Speaker 1: they will write better pros than we will, they will 160 00:09:18,530 --> 00:09:21,090 Speaker 1: compose better music than we will, and so on. And 161 00:09:21,210 --> 00:09:24,930 Speaker 1: is that a problem. I'm not sure that's the problem. 162 00:09:25,010 --> 00:09:28,010 Speaker 1: I'm worried about. The computer already draws better than I do, 163 00:09:29,010 --> 00:09:34,090 Speaker 1: and lowbar, respectral, very lowbar. And it's great. I'm like, wow, 164 00:09:34,170 --> 00:09:37,570 Speaker 1: I can create art for my hobby projects. That's great. 165 00:09:37,570 --> 00:09:39,850 Speaker 1: I'm not doing anybody out of a job, But now 166 00:09:39,890 --> 00:09:43,730 Speaker 1: my own creativity is unlocked by the computer. Of course, 167 00:09:44,130 --> 00:09:46,050 Speaker 1: maybe there comes a time where I don't need to 168 00:09:46,050 --> 00:09:47,730 Speaker 1: do any of that. I just press the button and 169 00:09:47,770 --> 00:09:51,010 Speaker 1: the computer just produces everything, and it's better than what 170 00:09:51,090 --> 00:09:54,530 Speaker 1: I could produce. Does that matter? I want to add 171 00:09:54,570 --> 00:09:56,170 Speaker 1: a wrinkle rinkle away. 172 00:09:56,890 --> 00:09:59,170 Speaker 2: When I was talking about making a podcast with you 173 00:09:59,330 --> 00:10:02,850 Speaker 2: after the robots take our jobs, part of what I 174 00:10:02,890 --> 00:10:06,810 Speaker 2: was imagining was that somebody would listen, right, Like, not 175 00:10:06,930 --> 00:10:09,290 Speaker 2: that we could make a living out of it, We 176 00:10:09,330 --> 00:10:14,050 Speaker 2: would be doing it for some audience, right. My hope, 177 00:10:14,090 --> 00:10:17,250 Speaker 2: although I really don't know, is that even if AI 178 00:10:17,410 --> 00:10:20,770 Speaker 2: makes a better podcast than us, people will listen just 179 00:10:20,850 --> 00:10:25,290 Speaker 2: because people like people. And one interesting case to consider 180 00:10:26,010 --> 00:10:31,490 Speaker 2: is chess. Right. Chess has this history where first people 181 00:10:31,530 --> 00:10:35,770 Speaker 2: were better than machines, and then for a long time 182 00:10:35,810 --> 00:10:39,810 Speaker 2: computers could beat people, but a person working with a 183 00:10:39,810 --> 00:10:42,170 Speaker 2: computer was better than just a computer, and then a 184 00:10:42,170 --> 00:10:44,010 Speaker 2: few years ago that ceased to be the case. And 185 00:10:44,050 --> 00:10:47,690 Speaker 2: obviously many many computers can beat every single human being 186 00:10:47,730 --> 00:10:55,010 Speaker 2: on earth. But chess players still like are famous among nerds. 187 00:10:55,050 --> 00:10:55,250 Speaker 1: Right. 188 00:10:55,330 --> 00:10:58,810 Speaker 2: Magnus Carlson is like a rich guy, he's a superstar, 189 00:10:58,970 --> 00:11:01,730 Speaker 2: and people pay lots of money to watch him play 190 00:11:01,730 --> 00:11:05,370 Speaker 2: worse chess than a computer. So my hope is we 191 00:11:05,410 --> 00:11:09,770 Speaker 2: can be if not the Magnus Carlson's of podcasts, the 192 00:11:09,970 --> 00:11:13,330 Speaker 2: whoever is like, you know, way worse than Magnus Carlson, 193 00:11:13,410 --> 00:11:14,810 Speaker 2: but still a pretty good chess player. 194 00:11:14,850 --> 00:11:18,250 Speaker 1: Sure, and you may be right, but I think my 195 00:11:18,410 --> 00:11:22,410 Speaker 1: point is it's worth playing chess even if nobody watches 196 00:11:22,450 --> 00:11:24,530 Speaker 1: you even if it's just you and a friend. 197 00:11:24,890 --> 00:11:27,850 Speaker 2: Yeah, but is it worth making a podcast if nobody 198 00:11:27,890 --> 00:11:30,810 Speaker 2: listens that, what are we bothering with the microphones for? 199 00:11:30,890 --> 00:11:32,130 Speaker 2: Then you could just call me? Yeah? 200 00:11:32,290 --> 00:11:34,570 Speaker 1: Yeah, Okay, we could have to think it's a podcast 201 00:11:34,610 --> 00:11:36,610 Speaker 1: that nobody listens is a fun conversation. 202 00:11:37,130 --> 00:11:39,850 Speaker 2: Welcome to the podcast for no one. I'm Jacob goldstud. 203 00:11:41,370 --> 00:11:43,370 Speaker 1: If people weren't listening, it would be different. But I 204 00:11:43,370 --> 00:11:46,290 Speaker 1: think people would still be creating stuff. People would still 205 00:11:46,290 --> 00:11:48,690 Speaker 1: be making art, and that will be fine. So that's 206 00:11:48,690 --> 00:11:49,490 Speaker 1: my answer to Neil. 207 00:11:50,770 --> 00:11:54,450 Speaker 2: Okay, Tim, We're gonna go from the robot apocalypse to 208 00:11:55,210 --> 00:11:58,850 Speaker 2: the climate apocalypse with our next question from Julian, who 209 00:11:58,850 --> 00:12:03,890 Speaker 2: writes Dear Tim. Lately, more and more news breaks of 210 00:12:04,090 --> 00:12:08,170 Speaker 2: climate change harming the economy. For example, I remember a 211 00:12:08,210 --> 00:12:12,410 Speaker 2: recent story about home insurance premiums rising steeply in hazard 212 00:12:12,450 --> 00:12:16,250 Speaker 2: zones for flooding storms or landslides. That made me wonder, 213 00:12:16,730 --> 00:12:19,770 Speaker 2: isn't there a way to profit from climate change too 214 00:12:19,890 --> 00:12:22,930 Speaker 2: that would allow us to hedge against these economic risks? 215 00:12:23,450 --> 00:12:25,450 Speaker 2: Could you set up a fund that would act, in 216 00:12:25,490 --> 00:12:29,490 Speaker 2: effect like a climate change insurance policy. Excellent show, By 217 00:12:29,490 --> 00:12:33,250 Speaker 2: the way, Deep insights told via gripping stories. All the 218 00:12:33,290 --> 00:12:35,410 Speaker 2: best from Vienna Julian. 219 00:12:36,690 --> 00:12:40,090 Speaker 1: It's a very interesting question. The thing that immediately springs 220 00:12:40,090 --> 00:12:42,250 Speaker 1: to my mind is I once saw one of the 221 00:12:42,290 --> 00:12:47,490 Speaker 1: most amazingly persuasive pieces of rhetoric ever that was not 222 00:12:47,530 --> 00:12:51,530 Speaker 1: intended to be persuasive, and it was at a commodities conference. 223 00:12:51,650 --> 00:12:55,570 Speaker 1: It was a bunch of guys who trade agricultural commodities 224 00:12:56,530 --> 00:13:00,370 Speaker 1: and therefore have a big interest in climate variability. But 225 00:13:00,410 --> 00:13:05,130 Speaker 1: at the same time, we're culturally Midwestern and therefore climate skeptic. 226 00:13:05,650 --> 00:13:08,490 Speaker 1: And the guy giving a talk at this conference was 227 00:13:09,290 --> 00:13:12,770 Speaker 1: rather professorial Germanic character. I can't remember if he was 228 00:13:12,850 --> 00:13:17,410 Speaker 1: German or Austrian or Swiss. And he was from one 229 00:13:17,450 --> 00:13:20,930 Speaker 1: of those big reinsurance companies. He just gave a talk 230 00:13:21,130 --> 00:13:24,730 Speaker 1: explaining how they were raising all of their insurance premiums 231 00:13:25,090 --> 00:13:27,370 Speaker 1: because of climate change, and showed loads and loads of 232 00:13:27,410 --> 00:13:31,490 Speaker 1: data about climate change and how they were changing their 233 00:13:31,570 --> 00:13:34,770 Speaker 1: pricing model. And there's a bunch of people who I 234 00:13:34,810 --> 00:13:40,850 Speaker 1: think were politically predisposed to be climate skeptics were like, huh, 235 00:13:41,370 --> 00:13:44,530 Speaker 1: this guy is not Hillary Clinton and the Dems coming 236 00:13:44,570 --> 00:13:46,570 Speaker 1: to take away our freedoms. This guy doesn't want to 237 00:13:46,610 --> 00:13:48,970 Speaker 1: persuade us of anything. He's just telling us that the 238 00:13:49,010 --> 00:13:52,090 Speaker 1: price of insurance is going up, and here's why. And 239 00:13:52,330 --> 00:13:55,010 Speaker 1: I really felt the mood in the room change because 240 00:13:55,010 --> 00:13:57,970 Speaker 1: of that talk was fascinating, And what that gets at 241 00:13:58,130 --> 00:14:01,210 Speaker 1: is that insurance gives us a kind of truth about 242 00:14:01,210 --> 00:14:03,890 Speaker 1: the risks that we face. Because insurance companies operate in 243 00:14:03,890 --> 00:14:06,570 Speaker 1: a competitive market, they want to offer the most expensive 244 00:14:06,570 --> 00:14:08,610 Speaker 1: premiums they can get away with, but they're forced by 245 00:14:08,610 --> 00:14:11,650 Speaker 1: competition to keep the premiums low, and so as the 246 00:14:11,650 --> 00:14:14,610 Speaker 1: premiums rise and rise and rise, that generally indicates that 247 00:14:14,610 --> 00:14:17,090 Speaker 1: the risk is rising and rising and rising too. So, 248 00:14:17,130 --> 00:14:19,890 Speaker 1: to return to Julian's question, is their way to profit 249 00:14:19,930 --> 00:14:22,690 Speaker 1: from climate change? I mean your podcast What's your Problem, Jacob, 250 00:14:22,690 --> 00:14:25,490 Speaker 1: You've talked to many entrepreneurs who are hoping to make 251 00:14:25,530 --> 00:14:27,450 Speaker 1: money while also saving the planet. 252 00:14:27,650 --> 00:14:32,210 Speaker 2: I was thinking about that. It is encouraging to talk 253 00:14:32,250 --> 00:14:35,930 Speaker 2: to these people who are very smart and I think 254 00:14:36,050 --> 00:14:40,250 Speaker 2: truly believe that the work they're doing will mitigate the 255 00:14:40,330 --> 00:14:45,250 Speaker 2: damage from climate change. And the progress has been extraordinary, 256 00:14:45,410 --> 00:14:47,930 Speaker 2: right like the fall in the price of solar power 257 00:14:48,090 --> 00:14:52,530 Speaker 2: in particular, it's staggering, you know, people are making batteries better, 258 00:14:52,570 --> 00:14:54,570 Speaker 2: and there are really hard parts of the problem like 259 00:14:54,650 --> 00:14:58,330 Speaker 2: cement and planes, and people are working on that. And 260 00:14:58,770 --> 00:15:01,730 Speaker 2: you know, Bill Gates started a venture capital fund called 261 00:15:01,850 --> 00:15:05,850 Speaker 2: Breakthrough Energy Ventures that is exactly what Julian is asking about, right, Like, 262 00:15:05,930 --> 00:15:09,490 Speaker 2: the point of this fund is to profit from climate 263 00:15:09,570 --> 00:15:13,370 Speaker 2: change by helping to solve or mitigate climate change. 264 00:15:13,450 --> 00:15:15,890 Speaker 1: So I think that there are all these hopeful stories 265 00:15:15,890 --> 00:15:18,810 Speaker 1: and it is very encouraging, but fundamentally to come back 266 00:15:19,330 --> 00:15:22,610 Speaker 1: to this idea of our kind of inverse insurance policy, 267 00:15:23,490 --> 00:15:29,010 Speaker 1: I think that the answer is no. Fundamentally, insurance moves 268 00:15:29,210 --> 00:15:33,130 Speaker 1: the cost around, so the person whose house got burned 269 00:15:33,170 --> 00:15:36,250 Speaker 1: down or the person whose home was destroyed in a hurricane, 270 00:15:36,730 --> 00:15:38,930 Speaker 1: they don't have to pay for rebuilding it. Instead, the 271 00:15:38,930 --> 00:15:41,930 Speaker 1: insurance company pays, but somebody still has to pay. And 272 00:15:42,050 --> 00:15:45,610 Speaker 1: insurance moves that risk around and that's very valuable, but 273 00:15:45,690 --> 00:15:49,010 Speaker 1: it doesn't make the cost go away. And climate change 274 00:15:49,170 --> 00:15:52,210 Speaker 1: increases these costs and all the insurance in the world 275 00:15:52,450 --> 00:15:55,010 Speaker 1: is not going to reduce them in aggregate. It'll shift 276 00:15:55,010 --> 00:15:57,250 Speaker 1: them to different people, but it's not going to reduce them. 277 00:15:57,530 --> 00:15:59,490 Speaker 1: For that, we need you, We need your sellar panels. 278 00:15:59,570 --> 00:16:02,010 Speaker 2: Jacob, you know, when you put it that way, like 279 00:16:02,050 --> 00:16:07,050 Speaker 2: what we really want in terms of moving the economics 280 00:16:07,170 --> 00:16:10,490 Speaker 2: is you want the people who are consuming the fossil fuel, 281 00:16:10,490 --> 00:16:12,810 Speaker 2: who are flying on the plane, who are eating the 282 00:16:12,850 --> 00:16:16,130 Speaker 2: hamburger to pay the full cost of that. Right, you 283 00:16:16,210 --> 00:16:20,490 Speaker 2: want to internalize that cost which is now not in 284 00:16:20,530 --> 00:16:24,090 Speaker 2: that transaction. And you can do that with a carbon tax. Like, 285 00:16:24,250 --> 00:16:26,170 Speaker 2: it's a great idea. You can even have a carbon 286 00:16:26,210 --> 00:16:29,010 Speaker 2: tax and then just give everybody the money back. Right, 287 00:16:29,050 --> 00:16:33,210 Speaker 2: the government collects money from people for consuming carbon essentially 288 00:16:33,290 --> 00:16:35,450 Speaker 2: and then sends a check to everybody in the country 289 00:16:35,450 --> 00:16:37,210 Speaker 2: at the end of the year, so the government doesn't 290 00:16:37,210 --> 00:16:39,330 Speaker 2: even have to take more money in the aggregate. And 291 00:16:39,450 --> 00:16:43,170 Speaker 2: like it's super elegant and it's just politically doesn't really 292 00:16:43,210 --> 00:16:45,330 Speaker 2: seem to be happening, but it is in a way 293 00:16:45,370 --> 00:16:46,930 Speaker 2: solving the problem fundamentally. 294 00:16:47,330 --> 00:16:47,890 Speaker 1: Absolutely. 295 00:16:48,330 --> 00:16:51,730 Speaker 2: All right, that's enough about that. We'll be back in 296 00:16:51,890 --> 00:16:56,130 Speaker 2: just a minute. 297 00:17:02,570 --> 00:17:05,410 Speaker 1: We are back. I'm Tim Harford. I am talking to 298 00:17:05,490 --> 00:17:09,090 Speaker 1: the amazing Jacob Goldstein. And this is another of our 299 00:17:09,170 --> 00:17:12,610 Speaker 1: Portionary Questions episodes where you have been sending in your 300 00:17:12,690 --> 00:17:15,090 Speaker 1: questions and Jacob and I are going to try and 301 00:17:15,130 --> 00:17:16,890 Speaker 1: answer them, Jacob, what have you got for me? 302 00:17:17,130 --> 00:17:23,130 Speaker 2: Tim? This is a throwback. It's from Robert who writes, Hi, Tim, 303 00:17:24,170 --> 00:17:26,450 Speaker 2: why did no one go to jail after the two 304 00:17:26,490 --> 00:17:29,770 Speaker 2: thousand and eight financial crisis? I remember the savings and 305 00:17:29,850 --> 00:17:33,450 Speaker 2: loans financial crisis during the Reagan presidency when Charles Keating 306 00:17:33,610 --> 00:17:37,850 Speaker 2: was jailed. Love your show, Robert from Illinois. 307 00:17:38,530 --> 00:17:41,890 Speaker 1: Yeah, and a throwback because we first met each other 308 00:17:42,130 --> 00:17:43,930 Speaker 1: shortly after the financial crisis. 309 00:17:43,610 --> 00:17:46,570 Speaker 2: In twenty ten, when in the question on everybody's lips 310 00:17:47,050 --> 00:17:48,570 Speaker 2: was who's going to jail? 311 00:17:49,050 --> 00:17:51,810 Speaker 1: Yeah, I mean it's not literally true that nobody went 312 00:17:51,850 --> 00:17:54,090 Speaker 1: to jail. Bern he made off went to jail, for example. 313 00:17:54,330 --> 00:17:56,890 Speaker 1: I mean, I think the short answer is, if you 314 00:17:56,930 --> 00:17:58,890 Speaker 1: want people to go to jail, then first they have 315 00:17:58,930 --> 00:18:01,450 Speaker 1: to commit a crime. And the weird thing about the 316 00:18:01,490 --> 00:18:05,610 Speaker 1: financial crisis is, I don't think many people did commit crimes. 317 00:18:05,810 --> 00:18:07,810 Speaker 1: All of this crazy stuff that happened, and all the 318 00:18:07,850 --> 00:18:12,090 Speaker 1: outrageous things that people were I think mostly legal, which 319 00:18:12,130 --> 00:18:13,570 Speaker 1: is of course the real scandal. 320 00:18:14,570 --> 00:18:19,370 Speaker 2: Yeah, you know, everybody talked about housing and crazy sliced 321 00:18:19,450 --> 00:18:22,890 Speaker 2: up bonds built on mortgages, right, that was the sort 322 00:18:22,930 --> 00:18:26,890 Speaker 2: of part of the story that everybody heard and told, 323 00:18:26,930 --> 00:18:29,210 Speaker 2: and that part of the story is true. But there 324 00:18:29,290 --> 00:18:31,770 Speaker 2: is another piece of the story that I actually think 325 00:18:32,210 --> 00:18:35,970 Speaker 2: is a really fundamental driver of the crisis that you 326 00:18:36,050 --> 00:18:39,650 Speaker 2: didn't hear as much because it's a little more abstract 327 00:18:39,650 --> 00:18:44,610 Speaker 2: and a little nerdier. And that is basically that starting 328 00:18:44,650 --> 00:18:47,210 Speaker 2: a long time before the crisis, starting in like the 329 00:18:47,290 --> 00:18:52,010 Speaker 2: nineteen seventies, there arose in the United States what came 330 00:18:52,050 --> 00:18:55,530 Speaker 2: to be called a shadow banking system, where because of 331 00:18:55,850 --> 00:18:58,570 Speaker 2: regulations on banks in the US that were set up 332 00:18:58,650 --> 00:19:01,370 Speaker 2: after the depression, when there was a giant banking crisis, 333 00:19:02,170 --> 00:19:06,650 Speaker 2: clever finance people came up with financial structures that looked 334 00:19:06,730 --> 00:19:09,770 Speaker 2: like banks but weren't regulated like banks, And in particular 335 00:19:09,850 --> 00:19:12,730 Speaker 2: they look like bank deposits. Right, So a bank deposit 336 00:19:12,930 --> 00:19:16,130 Speaker 2: is a weird thing where you put your dollar in 337 00:19:16,210 --> 00:19:20,050 Speaker 2: the bank, and you have your deposit and it's worth 338 00:19:20,050 --> 00:19:22,290 Speaker 2: a dollar, and then the bank takes your dollar and 339 00:19:22,450 --> 00:19:25,090 Speaker 2: lends it out to somebody else, or your thousand dollars 340 00:19:25,130 --> 00:19:27,090 Speaker 2: and lends it out to somebody else for a mortgage 341 00:19:27,090 --> 00:19:29,330 Speaker 2: that doesn't have to be paid back for thirty years, 342 00:19:30,090 --> 00:19:33,890 Speaker 2: and so then there is this inherent fragility in that system, right, 343 00:19:33,930 --> 00:19:36,650 Speaker 2: because if we all come back and ask for our money, 344 00:19:36,890 --> 00:19:38,730 Speaker 2: the bank won't have it. And it's not because the 345 00:19:38,770 --> 00:19:43,130 Speaker 2: bank is greedy or evil or incompetent. It's because of 346 00:19:43,170 --> 00:19:46,330 Speaker 2: the fundamental structure of banking. That fragility is inherent in 347 00:19:46,330 --> 00:19:49,050 Speaker 2: the fundamental structure of banking. And what happened in the 348 00:19:49,050 --> 00:19:53,410 Speaker 2: financial crisis is that there were billions of dollars that 349 00:19:53,450 --> 00:19:56,770 Speaker 2: were deposit like they weren't exactly deposits. They weren't insured 350 00:19:56,810 --> 00:19:59,570 Speaker 2: by the federal government, but they were in money market 351 00:19:59,650 --> 00:20:02,490 Speaker 2: mutual funds, which people may be familiar with and were 352 00:20:02,530 --> 00:20:05,890 Speaker 2: explicitly set up to be like a bank deposit, but 353 00:20:05,890 --> 00:20:08,250 Speaker 2: could pay higher interests and weren't regulated, And in the 354 00:20:08,330 --> 00:20:11,090 Speaker 2: repo market, which is like a weirder version of the 355 00:20:11,130 --> 00:20:15,170 Speaker 2: same thing. Let's say, and everybody came and asked for 356 00:20:15,210 --> 00:20:17,490 Speaker 2: their money back in two thousand and eight, and of 357 00:20:17,570 --> 00:20:20,930 Speaker 2: course the shadow banks, which were not called banks or 358 00:20:20,930 --> 00:20:23,530 Speaker 2: shadow banks didn't have it, and that was a core 359 00:20:23,650 --> 00:20:26,530 Speaker 2: driver of the crisis. And it wasn't illegal, as you said, 360 00:20:27,010 --> 00:20:30,210 Speaker 2: But it's like that is what all financial crises are. 361 00:20:30,290 --> 00:20:33,170 Speaker 2: They just have like different flavors, different skins. 362 00:20:33,410 --> 00:20:35,690 Speaker 1: I mean, you say it wasn't because the shadow banks 363 00:20:36,010 --> 00:20:38,770 Speaker 1: were lazier, incompetent or greedy. I mean I think they 364 00:20:38,770 --> 00:20:40,730 Speaker 1: probably were incompetent and greedy as well. 365 00:20:40,890 --> 00:20:43,570 Speaker 2: Fair well, greed. I shouldn't have brought greed into it. 366 00:20:43,610 --> 00:20:45,490 Speaker 2: Greed should be fun greed, right. 367 00:20:45,410 --> 00:20:47,850 Speaker 1: Like incompetence is not illegal, and neither is greed. 368 00:20:48,130 --> 00:20:52,050 Speaker 2: Yeah, they certainly didn't break the rules, right. And in fact, 369 00:20:53,090 --> 00:20:57,130 Speaker 2: one of the key under the radar failures that week 370 00:20:57,610 --> 00:21:01,090 Speaker 2: in September in two thousand and eight when Lehman Brothers 371 00:21:01,330 --> 00:21:03,690 Speaker 2: the investment bank failed, and then everybody else failed and 372 00:21:03,730 --> 00:21:06,650 Speaker 2: the government bailed everybody out, was the very first money 373 00:21:06,690 --> 00:21:09,490 Speaker 2: market neutral fund that had been created forty years or 374 00:21:10,170 --> 00:21:14,010 Speaker 2: and was very much like a bank and suddenly couldn't 375 00:21:14,010 --> 00:21:16,690 Speaker 2: give everybody their money back now. And so it's totally 376 00:21:16,810 --> 00:21:20,530 Speaker 2: understandable that everybody is angry when one industry blows up 377 00:21:20,530 --> 00:21:22,010 Speaker 2: the economy. And by the way, all the people in 378 00:21:22,010 --> 00:21:24,130 Speaker 2: that industry are getting rich, and it's not obvious what 379 00:21:24,130 --> 00:21:26,570 Speaker 2: they're providing to us. But it is in fact a 380 00:21:26,610 --> 00:21:30,610 Speaker 2: really hard problem to solve, Like banks are inherently unstable, 381 00:21:30,650 --> 00:21:33,970 Speaker 2: and people love making things that look like banks and 382 00:21:34,050 --> 00:21:35,170 Speaker 2: are inherently unstable. 383 00:21:35,610 --> 00:21:38,610 Speaker 1: Thank you Jacob for reminding me of the concept of 384 00:21:38,650 --> 00:21:41,570 Speaker 1: shadow banking. It's like it's like real banking, but their 385 00:21:41,610 --> 00:21:46,090 Speaker 1: headquarters are in mortal That's such a greatat Yes, oh, 386 00:21:46,130 --> 00:21:50,370 Speaker 1: good times, Good times, Jacob. There are more questions in 387 00:21:50,450 --> 00:21:52,930 Speaker 1: the mail bag. Would you mind if I were to 388 00:21:53,010 --> 00:21:55,450 Speaker 1: read the next question to you because I want to 389 00:21:55,490 --> 00:21:59,170 Speaker 1: hear your answer because you are the author of money, 390 00:21:59,250 --> 00:22:00,810 Speaker 1: the true story of a made up thing, and I 391 00:22:00,810 --> 00:22:03,450 Speaker 1: feel like this question is made for you. One of 392 00:22:03,490 --> 00:22:06,530 Speaker 1: my friends posted this on Facebook, but is it true? 393 00:22:07,370 --> 00:22:10,130 Speaker 1: This is the Facebook post. This is why I keep 394 00:22:10,170 --> 00:22:13,850 Speaker 1: telling the younger generation to stop avoiding cash. I have 395 00:22:13,890 --> 00:22:16,410 Speaker 1: a fifty pound banknote in my pocket. I go to 396 00:22:16,450 --> 00:22:19,170 Speaker 1: a restaurant and pay for dinner with it. The restaurant 397 00:22:19,210 --> 00:22:21,250 Speaker 1: owner then uses the note to pay for the laundry. 398 00:22:21,650 --> 00:22:24,210 Speaker 1: The laundry owner then uses the note to pay the barber. 399 00:22:24,770 --> 00:22:26,890 Speaker 1: The barber will then use the note to pay for shopping. 400 00:22:27,490 --> 00:22:30,250 Speaker 1: After an unlimited number of payments, it will still remain 401 00:22:30,290 --> 00:22:32,970 Speaker 1: a fifty pound value, which has fulfilled its purpose to 402 00:22:33,050 --> 00:22:36,770 Speaker 1: everyone who used it for payment. But if I go 403 00:22:36,850 --> 00:22:40,730 Speaker 1: to a restaurant and pay digitally via card, the bank 404 00:22:40,770 --> 00:22:43,490 Speaker 1: fees for my payment transaction charged to the seller are 405 00:22:43,570 --> 00:22:46,930 Speaker 1: three percent, so around one pound fifty for the fifty 406 00:22:47,090 --> 00:22:50,370 Speaker 1: pound payment. This will also be the case for laundry payment, 407 00:22:50,450 --> 00:22:54,170 Speaker 1: payment to the barber and so on. Therefore, after thirty transactions, 408 00:22:54,530 --> 00:22:58,130 Speaker 1: the initial fifty pounds will exist at only five pounds, 409 00:22:58,330 --> 00:23:01,490 Speaker 1: and the remaining forty five pounds has become the property 410 00:23:01,490 --> 00:23:03,410 Speaker 1: of the bank. That's not actually how percentages work. But 411 00:23:03,450 --> 00:23:07,370 Speaker 1: that's fine thanks to all the digital transactions and fees, 412 00:23:07,890 --> 00:23:10,610 Speaker 1: use it or lose it for ax. Once it's gone, 413 00:23:10,770 --> 00:23:14,290 Speaker 1: we won't get it back. Cash is king. Okay, So 414 00:23:14,330 --> 00:23:16,250 Speaker 1: the arithmetic on this is wrong. We don't need to 415 00:23:16,250 --> 00:23:18,610 Speaker 1: bother with that. But Jacob, what about the economics. Well, 416 00:23:18,610 --> 00:23:19,530 Speaker 1: it's your reaction to this. 417 00:23:20,050 --> 00:23:24,170 Speaker 2: So that was from Windy, right, and she says if 418 00:23:24,210 --> 00:23:27,210 Speaker 2: you pay with a fifty pound bank note at the restaurant, 419 00:23:27,490 --> 00:23:30,050 Speaker 2: the restaurant owner then uses the note to pay for 420 00:23:30,090 --> 00:23:31,130 Speaker 2: the laundry and so on. 421 00:23:31,810 --> 00:23:34,050 Speaker 1: Yeah, and the note never gets used up. It just 422 00:23:34,050 --> 00:23:35,330 Speaker 1: goes around and around. Right. 423 00:23:35,530 --> 00:23:38,010 Speaker 2: So, at the risk of being pedantic, I think it 424 00:23:38,050 --> 00:23:41,250 Speaker 2: is relevant to say that is not in fact what happens. 425 00:23:41,410 --> 00:23:44,490 Speaker 2: There is a cost born by the restaurant of dealing 426 00:23:44,530 --> 00:23:46,450 Speaker 2: with cash, right, they pay somebody to account it, they 427 00:23:46,490 --> 00:23:48,170 Speaker 2: pay somebody to take it to the bank, and so 428 00:23:48,690 --> 00:23:51,690 Speaker 2: there is a cost to cash. So the relevant question 429 00:23:51,890 --> 00:23:55,090 Speaker 2: is how does the cost of cash compare to the 430 00:23:55,130 --> 00:23:57,890 Speaker 2: cost of a credit card and also to the cost 431 00:23:57,970 --> 00:24:00,410 Speaker 2: of a debit card. Those two things feel the same 432 00:24:00,450 --> 00:24:03,410 Speaker 2: to us as customers, but as it happens, they're not 433 00:24:03,530 --> 00:24:06,770 Speaker 2: the same to merchants. And for the most part, and 434 00:24:07,010 --> 00:24:10,370 Speaker 2: it varies from country to country, debit cards are the 435 00:24:10,490 --> 00:24:14,610 Speaker 2: cheapest for merchants, then cash is in the middle, and 436 00:24:14,730 --> 00:24:18,050 Speaker 2: credit cards are the most expensive. So like, the most 437 00:24:18,050 --> 00:24:21,530 Speaker 2: efficient mode of transaction for the merchant in most countries 438 00:24:21,730 --> 00:24:24,930 Speaker 2: is the debit card, basically because you compare the cost 439 00:24:25,050 --> 00:24:27,610 Speaker 2: of dealing with the cash, of paying people to count 440 00:24:27,610 --> 00:24:29,130 Speaker 2: the money, to take it to the bank, et cetera, 441 00:24:29,650 --> 00:24:32,090 Speaker 2: to the fees they have to pay to use credit 442 00:24:32,090 --> 00:24:35,370 Speaker 2: cards and debit cards. And you know, from a sort 443 00:24:35,410 --> 00:24:38,770 Speaker 2: of first principles perspective, if you just step back and 444 00:24:38,810 --> 00:24:42,210 Speaker 2: think what is most efficient, it should be that a 445 00:24:42,250 --> 00:24:45,810 Speaker 2: card is cheaper. Right, Like, it's obviously costly to deal 446 00:24:45,850 --> 00:24:48,530 Speaker 2: with cash. It's a security risk. You have to actually 447 00:24:48,570 --> 00:24:52,410 Speaker 2: physically move it around, and so On one level, we 448 00:24:52,410 --> 00:24:55,090 Speaker 2: should ask, well, why is a card ever more expensive? 449 00:24:55,370 --> 00:24:55,570 Speaker 1: Right? 450 00:24:55,770 --> 00:24:58,730 Speaker 2: And they're paying some amount for credit, right because a 451 00:24:58,770 --> 00:25:00,650 Speaker 2: credit card there's a risk that the bank won't get 452 00:25:00,650 --> 00:25:02,650 Speaker 2: paid back because it is in fact credit, there's a 453 00:25:02,730 --> 00:25:06,370 Speaker 2: risk of fraud, and so that cost is born. Debit 454 00:25:06,690 --> 00:25:09,250 Speaker 2: should be really cheap because you can just I have 455 00:25:09,290 --> 00:25:12,610 Speaker 2: the computer at the restaurant ask the computer at the bank, Hey, 456 00:25:12,650 --> 00:25:14,530 Speaker 2: does this person have the money in their account? And 457 00:25:14,530 --> 00:25:17,690 Speaker 2: the bank says yes, and the payment goes through, and 458 00:25:17,730 --> 00:25:20,570 Speaker 2: it should be very cheap. So there is a question 459 00:25:20,850 --> 00:25:23,810 Speaker 2: why does it cost anything for debit. One answer to 460 00:25:23,850 --> 00:25:29,850 Speaker 2: why is because Visa controls a huge percentage of the 461 00:25:29,970 --> 00:25:32,850 Speaker 2: debit card payment system in the US, and in fact, 462 00:25:32,850 --> 00:25:36,290 Speaker 2: the US Department of Justice, the federal government is suing 463 00:25:36,410 --> 00:25:41,130 Speaker 2: Visa for basically monopolistic practices in the debit card business. 464 00:25:41,770 --> 00:25:43,810 Speaker 1: I mean, there's a lot wrong with this Facebook post, 465 00:25:43,810 --> 00:25:45,250 Speaker 1: but there is a grain of truth in that there 466 00:25:45,290 --> 00:25:49,810 Speaker 1: is a monopolistic provider, or allegedly monopolistic provider, of these 467 00:25:49,850 --> 00:25:53,330 Speaker 1: payment services and they're raking off a disproportionate fee. Yes. 468 00:25:53,370 --> 00:25:56,770 Speaker 1: On the other hand, I mean Visa just like the barber, 469 00:25:56,810 --> 00:25:59,370 Speaker 1: and just like the laundromat owner, and just like the 470 00:25:59,370 --> 00:26:01,690 Speaker 1: restaurant owner, visa is also a business. So if they 471 00:26:01,770 --> 00:26:03,970 Speaker 1: take the money, well, they can also spend the money 472 00:26:03,970 --> 00:26:05,610 Speaker 1: back into the economy. I mean it may feel a 473 00:26:05,610 --> 00:26:08,770 Speaker 1: bit unfair, but yes, I mean the money still goes around. 474 00:26:09,130 --> 00:26:12,090 Speaker 1: I mean this Facebook post is acting like the thing 475 00:26:12,170 --> 00:26:15,050 Speaker 1: that's scarce is the money, Like the fifty pound note 476 00:26:15,450 --> 00:26:18,250 Speaker 1: is the thing that's potentially scarce, but actually you can 477 00:26:18,290 --> 00:26:20,290 Speaker 1: always make more fifty pound notes if you are the 478 00:26:20,370 --> 00:26:22,890 Speaker 1: central bank. So money is in fact not the thing 479 00:26:22,930 --> 00:26:27,090 Speaker 1: that is scarce. What is scarce is laundromats and restaurants 480 00:26:26,890 --> 00:26:29,810 Speaker 1: and chefs and all of these real resources in the economy. 481 00:26:29,810 --> 00:26:32,930 Speaker 1: And the money, whether it's digital money or whether it's 482 00:26:33,090 --> 00:26:35,130 Speaker 1: paper money, is just a way of kind of keeping 483 00:26:35,170 --> 00:26:37,130 Speaker 1: track of things. And then which gets back to your question, 484 00:26:37,170 --> 00:26:40,290 Speaker 1: which is which is the most efficient way of keeping 485 00:26:40,290 --> 00:26:42,490 Speaker 1: track of things? And that's an open question, I think. 486 00:26:42,770 --> 00:26:46,010 Speaker 2: I mean, efficiency gains are good, right, Like the question 487 00:26:46,210 --> 00:26:49,090 Speaker 2: does matter on the sense that we want to spend 488 00:26:49,130 --> 00:26:53,450 Speaker 2: as little as possible on payment rails. That's fundamentally what 489 00:26:53,490 --> 00:26:55,770 Speaker 2: this is about. We can all get more stuff we like, 490 00:26:55,970 --> 00:26:59,850 Speaker 2: more restaurant meals and nice haircuts if we're spending as 491 00:26:59,850 --> 00:27:02,770 Speaker 2: little as possible moving the money around, right, and so 492 00:27:02,810 --> 00:27:06,130 Speaker 2: we want technology to make it cheaper to move money around. 493 00:27:06,610 --> 00:27:09,010 Speaker 2: Ideally there should be a cheaper way to do it 494 00:27:09,170 --> 00:27:10,930 Speaker 2: in cash, and we're getting there. 495 00:27:11,210 --> 00:27:14,530 Speaker 1: So don't get your economics from Facebook posts. Get your 496 00:27:14,650 --> 00:27:18,610 Speaker 1: economics from Jacob Goldstein. Thank you, Jacob. Caution tales will 497 00:27:18,610 --> 00:27:20,170 Speaker 1: be back off to this break. 498 00:27:28,650 --> 00:27:34,210 Speaker 2: Tim, let's talk about housing, sure, Fred Wrights. Hi, Tim, 499 00:27:34,410 --> 00:27:38,450 Speaker 2: I absolutely love your podcast. It scratches the itch of 500 00:27:38,530 --> 00:27:41,450 Speaker 2: economics in society and every episode is a great lesson. 501 00:27:41,970 --> 00:27:45,410 Speaker 2: My question is about housing, Nimbi's and the impact on 502 00:27:45,450 --> 00:27:48,450 Speaker 2: the economy. I've long been a believer in the housing 503 00:27:48,490 --> 00:27:52,370 Speaker 2: theory of everything and find it appalling that as nearly 504 00:27:52,410 --> 00:27:55,690 Speaker 2: everything has gotten more affordable in real terms, housing has 505 00:27:55,730 --> 00:27:58,850 Speaker 2: become completely out of reach for younger people, particularly in 506 00:27:58,890 --> 00:28:02,690 Speaker 2: the UK. Quite beyond the ethical implications, I'm interested in 507 00:28:02,730 --> 00:28:06,530 Speaker 2: your view of its impact from a macroeconomic angle. How 508 00:28:06,610 --> 00:28:09,370 Speaker 2: impactful do you think housing reform would be on the 509 00:28:09,450 --> 00:28:12,250 Speaker 2: UK economy? How would you deal with Nimbi's from a 510 00:28:12,290 --> 00:28:17,130 Speaker 2: behavioral economics slash policy perspective? Thanks Fred. 511 00:28:18,290 --> 00:28:21,170 Speaker 1: I think Fred is completely right. I think the UK 512 00:28:21,290 --> 00:28:24,970 Speaker 1: economy desperately needs housing reform. Fundamentally, we've just made it 513 00:28:25,130 --> 00:28:27,290 Speaker 1: very very difficult to build houses. And if you make 514 00:28:27,330 --> 00:28:29,810 Speaker 1: it very very difficult to build houses, that makes houses 515 00:28:29,890 --> 00:28:32,890 Speaker 1: very expensive, and that's a problem in its own right 516 00:28:33,290 --> 00:28:36,050 Speaker 1: because people need somewhere to live, but it also damages 517 00:28:36,090 --> 00:28:39,210 Speaker 1: the economy because people don't get to move around to 518 00:28:39,250 --> 00:28:43,170 Speaker 1: where the jobs are. And it's also inequitable, so it 519 00:28:43,290 --> 00:28:45,330 Speaker 1: means that people who are older have a lot more 520 00:28:45,330 --> 00:28:48,290 Speaker 1: money than people who are younger, disproportionately because they've just 521 00:28:48,370 --> 00:28:50,690 Speaker 1: sat in houses that they bought when they were cheap, 522 00:28:50,730 --> 00:28:53,090 Speaker 1: and those houses have got more and more expensive. And 523 00:28:53,170 --> 00:28:57,130 Speaker 1: it's also inequitable within generations because, not to put too 524 00:28:57,130 --> 00:28:58,890 Speaker 1: fine a point on it, if you are the only 525 00:28:59,010 --> 00:29:02,090 Speaker 1: child of parents with a house, you're going to inherit 526 00:29:02,130 --> 00:29:05,570 Speaker 1: the house, which is hugely valuable. If you're one of 527 00:29:05,610 --> 00:29:08,130 Speaker 1: three or four children, or if your parents never had 528 00:29:08,130 --> 00:29:09,890 Speaker 1: a house in the first place, you're not going to 529 00:29:09,890 --> 00:29:12,570 Speaker 1: inherit and it becomes incredibly difficult to afford a house. 530 00:29:13,250 --> 00:29:15,810 Speaker 1: And so there are a huge number of different economic 531 00:29:15,850 --> 00:29:18,050 Speaker 1: problems being caused by the fact that we're just not 532 00:29:18,210 --> 00:29:22,410 Speaker 1: willing to let people build more houses. And in a nutshell, 533 00:29:23,130 --> 00:29:26,170 Speaker 1: I mean, houses are incredibly expensive in the UK. Fundamentally, 534 00:29:26,250 --> 00:29:28,570 Speaker 1: if you let people build houses, the cost of a 535 00:29:28,610 --> 00:29:32,250 Speaker 1: house is going to fall to the cost of building 536 00:29:32,290 --> 00:29:34,010 Speaker 1: a house. That's how much is going to cost you 537 00:29:34,050 --> 00:29:35,650 Speaker 1: to buy a house. It's like whatever it costs to 538 00:29:35,690 --> 00:29:38,770 Speaker 1: build a house, which is a lot less than the 539 00:29:38,810 --> 00:29:40,490 Speaker 1: market price of a house in the UK at the moment. 540 00:29:40,890 --> 00:29:44,930 Speaker 2: As you may know, houses are also really expensive in 541 00:29:45,010 --> 00:29:47,770 Speaker 2: many parts of the United States, and for similar reasons. 542 00:29:48,250 --> 00:29:52,530 Speaker 2: But one really interesting and encouraging and surprising thing to 543 00:29:52,610 --> 00:29:56,010 Speaker 2: me is that there has actually been some progress on 544 00:29:56,090 --> 00:29:59,370 Speaker 2: this in the United States. Not enough to solve the problem, 545 00:29:59,410 --> 00:30:02,330 Speaker 2: but enough to suggest that the problem is at least 546 00:30:02,370 --> 00:30:06,690 Speaker 2: somewhat solvable. Fred reference Nimby's which means not in my backyard, 547 00:30:06,730 --> 00:30:09,290 Speaker 2: which is people who say don't build apartment building was 548 00:30:09,330 --> 00:30:10,330 Speaker 2: on my block or whatever. 549 00:30:10,410 --> 00:30:12,770 Speaker 1: That is better than bananas, right, you know what? Banana's 550 00:30:12,770 --> 00:30:17,770 Speaker 1: time school build absolutely nothing any anybody I like that. 551 00:30:18,450 --> 00:30:21,570 Speaker 2: In the US, and starting in the Bay Area as 552 00:30:21,570 --> 00:30:23,330 Speaker 2: far as I know, you know, in the San Francisco 553 00:30:23,370 --> 00:30:27,170 Speaker 2: b area, where houses are extraordinarily expensive, we have had 554 00:30:27,370 --> 00:30:31,170 Speaker 2: the Yimbi movement, the Yes in my backyard movement, which 555 00:30:31,210 --> 00:30:33,770 Speaker 2: has in the past decade or so scored some real 556 00:30:34,010 --> 00:30:38,050 Speaker 2: victories in California. And one of the really interesting things 557 00:30:38,050 --> 00:30:39,970 Speaker 2: to me, you know, Fred says, how would you deal 558 00:30:40,010 --> 00:30:43,410 Speaker 2: with nimbi's from a behavioral economic slash policy perspective? We 559 00:30:43,450 --> 00:30:46,130 Speaker 2: haven't heard that much about the ymbi's, and I have 560 00:30:46,170 --> 00:30:50,050 Speaker 2: a theory for why, and that is, as you may 561 00:30:50,050 --> 00:30:54,050 Speaker 2: have heard, America is a rather politically polarized place these days, 562 00:30:54,730 --> 00:30:59,890 Speaker 2: but the yimby nimbi fight is not particularly polarized. It 563 00:31:00,010 --> 00:31:04,610 Speaker 2: is not left coded right coded the way immigration or 564 00:31:04,810 --> 00:31:08,890 Speaker 2: capital gains, tax rates or many other things are, which 565 00:31:08,890 --> 00:31:11,530 Speaker 2: I I think it's actually great. It means you can 566 00:31:11,610 --> 00:31:14,930 Speaker 2: have a rational, as opposed to tribal discussion about it. 567 00:31:15,250 --> 00:31:17,210 Speaker 2: So that's one piece of it, and the other piece 568 00:31:17,250 --> 00:31:20,690 Speaker 2: of it is somewhat wonkier, but it is this. At 569 00:31:20,770 --> 00:31:23,770 Speaker 2: least in the US, the rules about housing we call 570 00:31:23,810 --> 00:31:27,770 Speaker 2: it zoning, are typically locally imposed. They're imposed basically at 571 00:31:27,810 --> 00:31:31,090 Speaker 2: the city level, and there's a sort of political economy 572 00:31:31,130 --> 00:31:34,290 Speaker 2: reason for that, which is homeowners care a lot, and 573 00:31:34,330 --> 00:31:37,130 Speaker 2: they show up at the city council meeting and they say, 574 00:31:37,410 --> 00:31:40,850 Speaker 2: don't let anybody build apartments in my neighborhood because that'll 575 00:31:40,850 --> 00:31:43,370 Speaker 2: lower the value of my house. Right, homeowners don't want 576 00:31:43,410 --> 00:31:46,010 Speaker 2: the valid point. It's the whole point. Right, there's this 577 00:31:46,050 --> 00:31:48,250 Speaker 2: weird thing where like, yes, houses are too expensive, we 578 00:31:48,330 --> 00:31:51,730 Speaker 2: need to lower the value of your house. So instead 579 00:31:51,770 --> 00:31:54,170 Speaker 2: of dealing with it at the city level, the yymbies 580 00:31:54,250 --> 00:31:57,290 Speaker 2: went to the state and god California to pass laws 581 00:31:57,690 --> 00:32:01,650 Speaker 2: overriding cities that said to cities, you basically can't do 582 00:32:01,850 --> 00:32:05,210 Speaker 2: exclusionary zoning anymore. You can't say there can only be 583 00:32:05,290 --> 00:32:08,450 Speaker 2: single family homes. But in most of California now you 584 00:32:08,490 --> 00:32:11,290 Speaker 2: can build what are called adu's additional dwelling units. You 585 00:32:11,290 --> 00:32:13,450 Speaker 2: can build a little apartment over the garage or in 586 00:32:13,490 --> 00:32:16,690 Speaker 2: your backyard, for example. And other rules like that have 587 00:32:16,810 --> 00:32:20,770 Speaker 2: passed the state, so there is encouraging progress. Though houses 588 00:32:20,770 --> 00:32:21,730 Speaker 2: are still too expensive. 589 00:32:22,290 --> 00:32:23,570 Speaker 1: It's a problem that can be solved. 590 00:32:24,410 --> 00:32:27,010 Speaker 2: Okay, Tim, this one is for you. It's from Benji 591 00:32:27,050 --> 00:32:30,970 Speaker 2: from Brisbane. He writes, Hi, Tim, and all appreciate you 592 00:32:31,010 --> 00:32:34,210 Speaker 2: taking the time to read my question. What happened to 593 00:32:34,290 --> 00:32:37,810 Speaker 2: Mohammad Yunis and Gramine Bank. There was so much promise 594 00:32:37,850 --> 00:32:40,770 Speaker 2: with microfinance as a tool for good in helping the 595 00:32:40,890 --> 00:32:44,970 Speaker 2: underbanked in developing economies. Kind regards Benji. 596 00:32:46,490 --> 00:32:48,970 Speaker 1: So the short answer is Mohammed Unis is now a 597 00:32:49,090 --> 00:32:51,930 Speaker 1: senior advisor to the Government of Bangladesh and won a 598 00:32:51,930 --> 00:32:55,010 Speaker 1: Nobel Prize not for economics but for peace. So he's 599 00:32:55,050 --> 00:33:00,250 Speaker 1: doing fine. So microfinance is basically the idea that you 600 00:33:00,610 --> 00:33:08,290 Speaker 1: give very small loans to entrepreneurs in very poor communities, 601 00:33:09,450 --> 00:33:12,170 Speaker 1: low interest rates, and they can use that to build 602 00:33:12,170 --> 00:33:15,170 Speaker 1: their business. So Unus was famous for saying, all people 603 00:33:15,330 --> 00:33:19,890 Speaker 1: are entrepreneurs. And the founding story of Gramine Bank, which 604 00:33:19,890 --> 00:33:23,730 Speaker 1: is the microfinance outfit that he started. He was an economist. 605 00:33:23,810 --> 00:33:26,610 Speaker 1: He went to a village near the university in Bangladesh 606 00:33:26,650 --> 00:33:29,530 Speaker 1: where he worked, and he found that these local women 607 00:33:29,890 --> 00:33:32,290 Speaker 1: were weaving baskets and selling these baskets and that's how 608 00:33:32,290 --> 00:33:35,250 Speaker 1: they made their money. But they had to borrow money 609 00:33:35,250 --> 00:33:39,210 Speaker 1: from the village money lender to pay for the materials 610 00:33:39,290 --> 00:33:42,650 Speaker 1: to make the baskets, and the village money lender was 611 00:33:42,730 --> 00:33:47,490 Speaker 1: charging them ten percent a day, just an astonishingly high 612 00:33:47,610 --> 00:33:50,570 Speaker 1: interest rate. I did the maths. Once that interest rate 613 00:33:50,610 --> 00:33:53,850 Speaker 1: would turn one cent into larger than the entire US 614 00:33:53,930 --> 00:33:56,850 Speaker 1: government debt over the course of a year, so it's 615 00:33:56,850 --> 00:33:59,250 Speaker 1: a very high interest rate. And UNUS came in and said, 616 00:33:59,290 --> 00:34:01,730 Speaker 1: I'll lend you money. I won't charge you much interest. 617 00:34:02,210 --> 00:34:04,050 Speaker 1: These women borrowed money off him and they paid it 618 00:34:04,090 --> 00:34:07,130 Speaker 1: back and it was fine. And suddenly not having to 619 00:34:07,130 --> 00:34:09,610 Speaker 1: pay ten percent on top of your cost every day 620 00:34:09,690 --> 00:34:13,970 Speaker 1: was the difference between grinding inescapable poverty and the chance 621 00:34:14,010 --> 00:34:17,170 Speaker 1: to build your own small business. So it's a lovely idea. 622 00:34:18,090 --> 00:34:21,370 Speaker 1: The development economists came in and said, well, this sounds great, 623 00:34:22,210 --> 00:34:26,770 Speaker 1: but does it actually work? And they found mixed pictures. 624 00:34:27,170 --> 00:34:29,810 Speaker 1: So it was a really interesting study in South Africa 625 00:34:29,850 --> 00:34:32,650 Speaker 1: which was conducted by Dean Carlon and Jonathan Zinman to 626 00:34:32,810 --> 00:34:36,810 Speaker 1: development economists, and they found that people borrowing money from 627 00:34:37,250 --> 00:34:40,250 Speaker 1: what seemed pretty much like a payday loan company at 628 00:34:40,450 --> 00:34:42,490 Speaker 1: very high interest rates. I think it was two hundred 629 00:34:42,530 --> 00:34:46,210 Speaker 1: percent annual percentage interest rate. They randomized it so that 630 00:34:46,250 --> 00:34:48,850 Speaker 1: some people who this company were going to turn down 631 00:34:48,850 --> 00:34:52,290 Speaker 1: for loans at random, some of them were offered loans anyway, 632 00:34:53,010 --> 00:34:56,050 Speaker 1: and the people who at random were offered the loans 633 00:34:56,130 --> 00:34:58,770 Speaker 1: versus at random were not offered the loans. The ones 634 00:34:58,810 --> 00:35:01,370 Speaker 1: who got the loans were doing much better six months later, 635 00:35:01,690 --> 00:35:03,930 Speaker 1: so really interesting RANDOMI as well, So even this very 636 00:35:03,930 --> 00:35:06,810 Speaker 1: expensive credit was great because what they were doing was 637 00:35:06,850 --> 00:35:08,370 Speaker 1: they were using the loan to I don't know, buia 638 00:35:08,450 --> 00:35:10,610 Speaker 1: suit to go to a job interview or to fix 639 00:35:10,650 --> 00:35:14,410 Speaker 1: their bike in order to stay in employment. But other 640 00:35:14,770 --> 00:35:18,210 Speaker 1: research was more mixed, and I think the fundamental idea 641 00:35:18,250 --> 00:35:21,050 Speaker 1: that the reason why people are poor in poor countries 642 00:35:21,530 --> 00:35:24,650 Speaker 1: is because they don't have access to cheap loans. I mean, 643 00:35:24,730 --> 00:35:26,890 Speaker 1: there's so much else going on, so it's only ever 644 00:35:26,930 --> 00:35:29,090 Speaker 1: going to be a part of the story. The other 645 00:35:29,130 --> 00:35:33,250 Speaker 1: really interesting thing is the commercial companies came in. So 646 00:35:33,330 --> 00:35:36,930 Speaker 1: there was a one called Compatamos in Mexico, which was 647 00:35:37,490 --> 00:35:41,730 Speaker 1: just a huge business that was lending money at pretty 648 00:35:41,770 --> 00:35:43,850 Speaker 1: high rates and making a lot of money, and it 649 00:35:43,890 --> 00:35:46,410 Speaker 1: was just about to do an IPO, I think, and 650 00:35:46,450 --> 00:35:48,730 Speaker 1: that made all the founders of this organization very rich, 651 00:35:48,770 --> 00:35:51,370 Speaker 1: and Unice was like, this is outrageous. He was trying 652 00:35:51,370 --> 00:35:55,610 Speaker 1: to excommunicate them from the microfinance movement because they were 653 00:35:55,610 --> 00:35:59,410 Speaker 1: too commercial. But the problem is there was always shades 654 00:35:59,410 --> 00:36:04,370 Speaker 1: of gray between kind of nonprofit microfinance and the money 655 00:36:04,410 --> 00:36:10,530 Speaker 1: lender who Unice was originally worried about even nonprofit microfinance. 656 00:36:10,970 --> 00:36:15,810 Speaker 1: They're not lending people loans at zero interest. Even the 657 00:36:15,810 --> 00:36:19,010 Speaker 1: nonprofits are often lending at fifty sixty seventy percent a year. 658 00:36:19,650 --> 00:36:22,210 Speaker 1: And the reason is you're making such small loans for 659 00:36:22,290 --> 00:36:24,890 Speaker 1: such a short period of time, like maybe you're lending 660 00:36:24,890 --> 00:36:28,330 Speaker 1: somebody like fifty dollars for three months. Unless you charge 661 00:36:28,370 --> 00:36:30,730 Speaker 1: a big interest rate, you'll feel on that is like 662 00:36:30,970 --> 00:36:33,570 Speaker 1: fifty cents, yeah, and it's just not enough to cover 663 00:36:33,610 --> 00:36:37,290 Speaker 1: your costs. And so it's this fine line between what 664 00:36:37,450 --> 00:36:42,730 Speaker 1: is abusive money lending and what is nonprofit microfinance. It's 665 00:36:42,770 --> 00:36:45,890 Speaker 1: harder to draw that line than you think. So it's 666 00:36:45,930 --> 00:36:48,650 Speaker 1: a fascinating area. But that is what happened to Mohammed 667 00:36:48,730 --> 00:36:49,650 Speaker 1: Unis and the Gramming Bank. 668 00:36:50,330 --> 00:36:56,090 Speaker 2: Clearly, people are deeply, deeply uncomfortable fundamentally with the idea 669 00:36:56,130 --> 00:36:59,090 Speaker 2: of lending money at interest, right, Like we've gotten used 670 00:36:59,130 --> 00:37:01,570 Speaker 2: to it in the developed world with a mortgage or 671 00:37:01,610 --> 00:37:05,090 Speaker 2: a car loan. But if you look historically, lots of 672 00:37:05,130 --> 00:37:08,090 Speaker 2: places there were rules for thousands of years that said 673 00:37:08,090 --> 00:37:12,090 Speaker 2: nobody's allowed to lend money at interest because it's fundamentally bad. 674 00:37:12,170 --> 00:37:15,450 Speaker 2: It's unnatural, right, and you don't have that with most 675 00:37:15,490 --> 00:37:17,370 Speaker 2: other businesses, and I think that's part of what is 676 00:37:17,410 --> 00:37:20,130 Speaker 2: going on here, Like lending money at interest makes people 677 00:37:20,210 --> 00:37:22,890 Speaker 2: morally uncomfortable, and so when you have someone riding in 678 00:37:23,010 --> 00:37:25,690 Speaker 2: and being morally righteous by lending money at interest, it's 679 00:37:25,730 --> 00:37:26,810 Speaker 2: going to get complicated. 680 00:37:27,210 --> 00:37:29,650 Speaker 1: Have we got time for one more question, Jacob? We do? 681 00:37:30,290 --> 00:37:35,170 Speaker 2: Our last question, Tim comes from Ella, who writes, Hi, Tim, 682 00:37:35,490 --> 00:37:37,650 Speaker 2: I've been listening to your podcast for a while now. 683 00:37:37,810 --> 00:37:40,810 Speaker 2: I'm a big fan, and you seem very insightful across 684 00:37:40,850 --> 00:37:43,290 Speaker 2: a range of topics. So I was wondering if you 685 00:37:43,290 --> 00:37:45,570 Speaker 2: could help me out with the problem I've run into recently. 686 00:37:46,290 --> 00:37:49,170 Speaker 2: I'm in my second year of UNI studies physics. If 687 00:37:49,170 --> 00:37:51,810 Speaker 2: you're curious, and I keep getting asked what I want 688 00:37:51,810 --> 00:37:54,970 Speaker 2: to do for a career path aside from further academics, 689 00:37:55,010 --> 00:37:57,330 Speaker 2: I'm not really sure what there is that I like 690 00:37:57,410 --> 00:38:00,010 Speaker 2: the sound of, and I know eventually I will have 691 00:38:00,050 --> 00:38:02,730 Speaker 2: to finish my education. I do know that I'm in 692 00:38:02,730 --> 00:38:05,170 Speaker 2: the right field. I just don't know what jobs are 693 00:38:05,170 --> 00:38:07,250 Speaker 2: waiting for me on the other side of my studies. 694 00:38:07,650 --> 00:38:09,410 Speaker 2: Do you think I should be worrying about where I'm 695 00:38:09,410 --> 00:38:11,370 Speaker 2: going to end up or as a more go with 696 00:38:11,410 --> 00:38:14,970 Speaker 2: the flow attitude fine for something this serious. Thanks for 697 00:38:15,010 --> 00:38:16,210 Speaker 2: the help, Ella. 698 00:38:17,210 --> 00:38:19,650 Speaker 1: So this is where I hope that Ella's parents aren't 699 00:38:19,690 --> 00:38:22,610 Speaker 1: listening to this podcast, because I'm going to tell Ellen 700 00:38:22,690 --> 00:38:25,130 Speaker 1: not to worry. I think go with the flow is fine. 701 00:38:25,970 --> 00:38:30,450 Speaker 1: I mean, physics is such a desirable degree. I'm sure 702 00:38:30,570 --> 00:38:33,010 Speaker 1: you'll have no trouble finding somebody to give you a 703 00:38:33,090 --> 00:38:36,690 Speaker 1: job in the end. So Jacob and I are collectively 704 00:38:36,770 --> 00:38:40,010 Speaker 1: over one hundred, so we're basically two old geezers. We're 705 00:38:40,050 --> 00:38:42,450 Speaker 1: probably not really very well qualified to give you advice. 706 00:38:42,690 --> 00:38:45,770 Speaker 1: But when I look back at my career, I didn't 707 00:38:45,810 --> 00:38:48,210 Speaker 1: know what I wanted to do when I went to university. 708 00:38:48,690 --> 00:38:50,650 Speaker 1: I didn't know what I wanted to do when I 709 00:38:50,730 --> 00:38:54,410 Speaker 1: left university. I didn't have any particular plans to become 710 00:38:54,450 --> 00:38:57,490 Speaker 1: a journalist or a writer. And in fact, I didn't 711 00:38:57,490 --> 00:39:01,450 Speaker 1: become a journalist or a writer until I was nearly thirty. 712 00:39:01,890 --> 00:39:03,810 Speaker 1: And I think all of the things that I did 713 00:39:04,130 --> 00:39:06,970 Speaker 1: in my twenties, some of them were mistakes, some of 714 00:39:06,970 --> 00:39:09,210 Speaker 1: them were not, but they all kind of contribute to 715 00:39:09,930 --> 00:39:12,570 Speaker 1: who I am now. If there's something that you're really 716 00:39:12,610 --> 00:39:14,730 Speaker 1: passionate about and you've got this vision, you want to 717 00:39:14,770 --> 00:39:17,010 Speaker 1: chase it. That's fine. But I think it is also 718 00:39:17,130 --> 00:39:20,010 Speaker 1: fine to experiment and to try different things and to 719 00:39:20,010 --> 00:39:21,810 Speaker 1: see if you like them. What do you think, Jacob? 720 00:39:22,610 --> 00:39:24,890 Speaker 2: Certainly I agree. I mean I majored in English, which, 721 00:39:25,090 --> 00:39:29,770 Speaker 2: unlike physics, gave me no fundamentally useful skills except for 722 00:39:29,810 --> 00:39:31,970 Speaker 2: a living right Like. I still think all the time 723 00:39:32,010 --> 00:39:34,010 Speaker 2: of stuff that I read in college, and I'm certainly 724 00:39:34,010 --> 00:39:37,290 Speaker 2: glad that I studied English. But I think this, when 725 00:39:37,330 --> 00:39:39,530 Speaker 2: you're in college, people say, oh, what are you studying? 726 00:39:39,570 --> 00:39:41,570 Speaker 2: And then you say what you're studying? And then the 727 00:39:41,610 --> 00:39:45,330 Speaker 2: next question, in a sort of robotic way, is what 728 00:39:45,370 --> 00:39:46,170 Speaker 2: do you want to do with that? 729 00:39:46,650 --> 00:39:47,210 Speaker 1: The thing I. 730 00:39:47,130 --> 00:39:49,530 Speaker 2: Wish I had known when I was in college is 731 00:39:49,570 --> 00:39:53,170 Speaker 2: the people asking don't actually care, right Like I felt 732 00:39:53,170 --> 00:39:55,410 Speaker 2: all this pressure of like, oh my god, everybody wants 733 00:39:55,450 --> 00:39:57,250 Speaker 2: to know what I am going to do. They don't 734 00:39:57,290 --> 00:40:00,010 Speaker 2: actually want to know. They're not really thinking that much 735 00:40:00,090 --> 00:40:04,210 Speaker 2: about you. They're just making conversation, They're just talking about 736 00:40:04,210 --> 00:40:06,530 Speaker 2: the weather, right. I mean it in a good way 737 00:40:06,570 --> 00:40:08,810 Speaker 2: when I say other people don't care. Everybody is mostly 738 00:40:08,810 --> 00:40:09,930 Speaker 2: thinking about themselves. 739 00:40:10,490 --> 00:40:12,410 Speaker 1: I would praise it slightly differently. I would say, there's 740 00:40:12,410 --> 00:40:15,090 Speaker 1: no pressure, there's just curiosity. They're just interested. 741 00:40:15,410 --> 00:40:18,330 Speaker 2: They're not even that interested, is my take. They're just 742 00:40:18,490 --> 00:40:21,570 Speaker 2: making small talk. And like recognizing small talk as small 743 00:40:21,650 --> 00:40:24,290 Speaker 2: talk is a hugely empowering thing, and it's fine, Like 744 00:40:24,570 --> 00:40:28,370 Speaker 2: we're just social animals following norms and asking a college 745 00:40:28,370 --> 00:40:30,490 Speaker 2: student what they want to do is just what people do. 746 00:40:30,770 --> 00:40:32,850 Speaker 2: So I would say to Ella, just make up an 747 00:40:32,890 --> 00:40:35,290 Speaker 2: answer and know in your heart that you're going to 748 00:40:35,330 --> 00:40:38,250 Speaker 2: figure it out. And people love hiring physicists. Wall Street 749 00:40:38,290 --> 00:40:41,130 Speaker 2: is full of physicists, and consulting firms are full of physicists. 750 00:40:41,450 --> 00:40:44,530 Speaker 2: Anybody who can think hard about the most difficult problems 751 00:40:44,530 --> 00:40:46,490 Speaker 2: in the world in a quantitative way is going to 752 00:40:46,530 --> 00:40:48,130 Speaker 2: be eminently employable. 753 00:40:48,410 --> 00:40:50,490 Speaker 1: And you know, another thing you can do with an 754 00:40:50,570 --> 00:40:58,290 Speaker 1: undergraduate degree in physics is a postgraduate degree in economics. Twist, Jacob, 755 00:40:58,330 --> 00:40:59,850 Speaker 1: Thank you so much for joining me. 756 00:41:00,130 --> 00:41:02,970 Speaker 2: Tim, It's so fun. I truly would do it for 757 00:41:03,010 --> 00:41:04,690 Speaker 2: free even if nobody listened. 758 00:41:05,130 --> 00:41:07,410 Speaker 1: Thank you so much, Jacob, and thanks to all of 759 00:41:07,450 --> 00:41:09,930 Speaker 1: you for sending in your questions. We will be back 760 00:41:09,930 --> 00:41:13,410 Speaker 1: again on our regular schedule with another classic episode of 761 00:41:13,490 --> 00:41:16,970 Speaker 1: Cautionary Tales but in the meantime, happy Thanksgiving to our 762 00:41:17,090 --> 00:41:19,330 Speaker 1: us listeners and if you have a question for us, 763 00:41:19,570 --> 00:41:24,450 Speaker 1: please send it in to Tales at Pushkin dot fm. 764 00:41:24,530 --> 00:41:29,450 Speaker 1: That's t a l e. S. Tales at Pushkin dot fm. 765 00:41:29,530 --> 00:41:35,410 Speaker 1: Thank you, We love hearing from you. Cautionary Tales is 766 00:41:35,450 --> 00:41:39,130 Speaker 1: written by me Tim Harford with Andrew Wright. For a 767 00:41:39,170 --> 00:41:41,570 Speaker 1: full list of our sources, see the show notes at 768 00:41:41,650 --> 00:41:45,810 Speaker 1: Timharford dot com. The show is produced by Alice Fines 769 00:41:45,930 --> 00:41:49,250 Speaker 1: with Marilyn Rust. The sound design and original music of 770 00:41:49,330 --> 00:41:53,290 Speaker 1: the work of Pascal Wise. Sarah Nix edited the script. 771 00:41:54,290 --> 00:41:58,450 Speaker 1: Cautionary Tales features the voice talents of Ben Crow, Melanie Guttridge, 772 00:41:58,570 --> 00:42:03,730 Speaker 1: Stella Harford, Gemma Saunders and Rufus Wright. The show wouldn't 773 00:42:03,730 --> 00:42:07,330 Speaker 1: have been possible without the work of Jacob Weisberg, Ryan Dilly, 774 00:42:07,570 --> 00:42:12,850 Speaker 1: Greta Cohne, Eric Handler, Carrie Brody, Christina Sullivan, Kira Posey 775 00:42:13,330 --> 00:42:18,170 Speaker 1: and Owen Miller. Cautionary Tales is a production of Pushkin Industries. 776 00:42:18,690 --> 00:42:22,450 Speaker 1: It's recorded at ward Or Studios in London by Tom Garry. 777 00:42:23,210 --> 00:42:26,450 Speaker 1: If you like the show, please remember to share, rate 778 00:42:26,690 --> 00:42:29,050 Speaker 1: and review. It doesn't really make a difference to us 779 00:42:29,530 --> 00:42:32,370 Speaker 1: and if you want to hear the show, add free 780 00:42:32,690 --> 00:42:35,410 Speaker 1: sign up to Pushkin Plus on the show page on 781 00:42:35,450 --> 00:42:46,130 Speaker 1: Apple Podcasts, or at pushkin dot fm, slash plus