0:00:10 Hey there. It’s Steven Dubner. The 2024 Summer Olympics in Paris are ending, and if you’re
0:00:16 like me, you have not been competing in them. Watching, maybe, but not competing, because
0:00:24 most of us are normal people, and world-class athletes are different. We made an episode
0:00:27 about this difference some years ago, and I thought it might be a good time to hear it
0:00:35 again as a bonus episode. We’ve updated facts and figures as necessary. As always, thanks for listening.
0:00:46 You cannot be afraid to fail. I had never been in an environment that was so emotionally charged.
0:00:50 That could be the reason you’re telling your second grade daughter that she’s moving next week.
0:00:54 The fight started, and I hit her as hard as I could, and she actually fell down.
0:00:57 I have an eight-year-old son. There’s no way I’d let him play tackle football.
0:00:59 I want to leave this sport being known as a bad mother.
0:01:14 Maybe you are an obsessive sports fan, or maybe a more casual fan, and you follow
0:01:19 just a couple sports or teams. Or maybe you pay no attention to sports, and you only see it when
0:01:25 the Olympics are on somebody else’s TV. Whichever the case, when you do see those athletes,
0:01:32 it’s easy to think of them as existing solely in that context. As a full-grown adult, wearing a
0:01:39 uniform, performing under extraordinary pressure, focused on a highly specialized task that has
0:01:46 zero to do with daily life, or at least your daily life. But is that who those people really are,
0:01:52 and how they get so good at this thing they do? When you see them on TV, all you’re seeing
0:01:59 is the outcome. But what are the inputs? We understand that elite athletes represent some
0:02:04 magical combination of talent and determination. But what about, say, luck?
0:02:10 Oh my gosh. Yes, absolutely. I think a ton of luck is involved.
0:02:16 That’s Sean Johnson, an American gymnast who’s won an Olympic gold medal and many other top honors.
0:02:22 It’s kind of like this miracle math kind of equation that has to equal the perfect answer.
0:02:27 I mean, you can’t get hurt, you have to be healthy, you can’t have the flu on the wrong day,
0:02:31 you have to find the right coach in the right city, you have to be a little afforded.
0:02:36 It’s all these random things. And when you get all the people who fit that equation,
0:02:42 you’re not left with many people. So I guess I was just the best of the very few who fit that
0:02:50 equation. Today on Freakonomics Radio, becoming an athlete. Time to step back and try to understand
0:02:55 how these people rose to such heights. How scientific is the process? How predictable?
0:03:00 We’ll look at a number of factors, including, of course, raw talent.
0:03:04 My parents are both super-study athletes. Yep, I think the gift is number one.
0:03:11 We’ll look at will and determination. I did a bunch of push-ups and sit-ups that night until
0:03:17 I was throwing up. And the mental aspect of this most physical pursuit.
0:03:25 I think the mind is as big of a separator for professional athletes as any physical tools.
0:03:29 We’ll hear stories of opportunities gained and lost.
0:03:38 In 1981, there was 18.7% African-American players in the major leagues. As of 2018, 7.8%.
0:03:42 And we’ll hear one story that’s almost too good to be true.
0:03:46 They said, “Hey, you are blowing up on Twitter. You’re blowing up on Instagram.
0:03:49 You’re everywhere and you just have no idea.”
0:04:10 This is Freakonomics Radio, the podcast that explores the hidden side of everything
0:04:12 with your host Stephen Dubner.
0:04:27 When you see an elite performer in any field, sports or music or surgery, whatever,
0:04:31 it’s natural to ask yourself a question. How would they get so good?
0:04:33 How much of that ability were they born with?
0:04:36 How much is attributable to hard work and practice?
0:04:40 This is a debate that has been going on probably forever.
0:04:45 Nature versus nurture, raw talent versus what’s called deliberate practice.
0:04:48 We’ve had that debate on this program in episode 244 called
0:04:51 How to Become Great at Just About Anything.
0:04:57 Too often, this debate ends up obscuring what strikes me as a pretty obvious fact.
0:05:02 To become great at anything, you need both talent and practice, lots of each.
0:05:06 But even that fact seems pretty narrow, don’t you think?
0:05:11 Because athletic success, like any success in life or any failure,
0:05:14 it’s what you might call multifactorial.
0:05:17 A lot of inputs, a lot of variables.
0:05:24 Imagine you’ve got two athletes with identical talent levels and identical training methods.
0:05:28 Do you really want to make a big bet that their athletic careers also end up identical?
0:05:35 As much as we might want to turn the pursuit of success into science, into a recipe,
0:05:40 real life is more nuanced than that. Also, more interesting.
0:05:49 So, I mean, Jay-Z sold drugs, grew up in Marcy projects to a single mother.
0:05:53 That’s Dominique Foxworth, who played six seasons in the NFL.
0:06:03 Now, he is a multi-millionaire married to Beyonce, the most amazing talent we have today.
0:06:09 So, why don’t we set it up so that all young men must sell drugs when they’re kids
0:06:14 and have only their mother and grow up in Marcy projects in Brooklyn, New York?
0:06:22 He had a great talent, and to be honest, there’s probably a great deal of luck.
0:06:26 He happened to not be there when one of his friends got arrested and his friend didn’t
0:06:31 snitch on him. That is a lot of luck. And I think the same thing is true for me.
0:06:35 Like, I can go through the course of my life and look at all the things that happened,
0:06:39 that were just happenstance that led me to these positions.
0:06:42 And I’m not going to say that it’s a model that should be followed.
0:06:48 I understand that there are occasional outliers, but trying to build around that seems crazy.
0:06:54 So, okay, we are not going to arrive at some perfect model for turning an ordinary person
0:06:59 into a world-class athlete, but we’ll do our best to describe some of the inputs
0:07:04 that seem to be strong contributors. Let’s start with physical ability.
0:07:09 It may not surprise you to learn that a lot of elite athletes exhibited a pretty high baseline
0:07:15 level of talent from an early age. Mark Tashara, for instance, a three-time Major League Baseball
0:07:19 All-Star. Yes. And most kids grow up being, you know,
0:07:22 if you’re an elite athlete, you’re going to be the best kid on your team.
0:07:26 I’ve played every sport as a kid. Was baseball your best sport from the outset?
0:07:30 Always was. And I actually enjoyed playing basketball more. I played backyard football.
0:07:36 I played soccer, tennis. But I was always good at baseball. So, I knew baseball was going to be,
0:07:41 you know, a sport for my future. Athletic talent is considered one of the more heritable traits
0:07:46 passed from parent to child. In Super Free Economics, one of the books I wrote with the economist
0:07:51 Steve Levitt, we performed a rough calculation showing that if a Major League Baseball player
0:07:58 has a son, that boy is about 800 times more likely than a random boy to also make the majors.
0:08:04 So, it may not surprise you that a lot of the athletes we’ve been interviewing for the series
0:08:10 came from athletic families. Here’s Kerry Walsh Jennings, who’s won three Olympic gold medals
0:08:15 in beach volleyball. Oh, man. Well, my life has literally been family and sports,
0:08:20 like from day one, I think, from birth. My parents are both super-study athletes. They
0:08:25 both come from very athletic families. My parents are both athletic.
0:08:27 And that is the Alpine skier, Michaela Schifrin,
0:08:34 who has won two Olympic gold medals and has more World Cup wins than any skier in history.
0:08:40 My mom is extremely athletic, and even now she’s had knee surgeries and hand surgeries
0:08:44 and neck surgeries and everything, but she’s still such an incredible athlete.
0:08:48 Well, I mean, my dad kind of did every sport when he was growing up.
0:08:51 And the gold medal gymnast, Sean Johnson.
0:08:57 He was a hockey player. He wrestled. He did BMX. He raced MotoX. I mean, everything.
0:09:03 Just how powerful is the sports gene? David Epstein is a science journalist and author
0:09:09 of a book called The Sports Gene. In it, he tells the story of a man named Donald Thomas.
0:09:15 Donald is about six-two lean Bahamian guy.
0:09:20 Thomas played basketball at a small college in Missouri, but he was far from an elite player
0:09:26 and the college program was far from elite. One day in the gym, he was bragging about how high
0:09:33 you could jump. And the best jumper on the track team, a guy named Carlos, overheard him and said,
0:09:37 you know, you’re talking all that trash. You wouldn’t even clear a bar of six foot six in a
0:09:43 real competition. And Donald says, yes, I would. So they go out to the track and Carlos sets the
0:09:49 high jump bar at six feet, six inches. Donald still wearing his basketball sneakers, runs up,
0:09:57 jumps, clears it easily. Carlos moves the bar higher and higher. Donald keeps clearing it.
0:10:01 We’re talking about the first high jumps of his life. He’s going over the bar backward,
0:10:06 of course, which he’d never done before. And Carlos gets the bar to seven feet and Donald
0:10:09 clears seven feet at which point Carlos is worried he’s going to hurt himself.
0:10:16 Donald Thomas soon moved on to Auburn University on track scholarship. And not long after that,
0:10:21 he competed in the World Track Championships. And this is Donald Thomas,
0:10:27 very much an unknown quantity, really. Thomas was jumping against much more experienced and
0:10:34 accomplished athletes. And he goes clear. Donald Thomas goes clear at two meters 35, the man that
0:10:42 started high jump only two years ago. But that is an incredible jump. And not only does he win,
0:10:48 but he records the highest center of mass jump ever in history. He doesn’t set the
0:10:52 world record because his form is so bad. He looks like he’s riding an invisible deck chair through
0:10:57 the air. It turned out that Donald Thomas had a physiological trait, an abnormally long Achilles
0:11:02 tendon that gave him a big advantage. So there aren’t that many Donald Thomas’s in terms of
0:11:07 winning the World Championships. But this happens at lower levels all the time, where somebody will
0:11:12 step in with no or very little background and win some kind of regional or state championship.
0:11:16 And then those are the people who end up training and going on to become champions.
0:11:21 David Epstein also writes about the success of talent transfer programs in the UK,
0:11:26 Australia, China, and elsewhere. Well, they’ll take people who maybe aren’t making a national team
0:11:29 or making it to the top in a certain sport and say, Hey, why don’t you go try this other stuff?
0:11:35 Some converted athletes have done remarkably well. The UK won several gold medals in rowing
0:11:41 and skeleton with athletes who began in other sports. In the 2002 Winter Olympics,
0:11:46 the Australian Elisa Camplin, a converted sailor, won gold in aerial skiing.
0:11:53 She wins the Olympic gold medal and was still so poor at skiing that when she was invited to
0:11:58 ski down the mountain to the gold medal winners press conference, she fell and like rolled down
0:12:01 the mountain on the winners flowers because she still didn’t know how to ski. I heard she learned
0:12:04 how to ski later like on vacation, but not by the time she’d won the Olympic gold medal.
0:12:07 Yep. I think the gift is number one.
0:12:13 Mark Tashara again. Because without the gift, you can’t take a kid that has zero athletic ability
0:12:17 and just happens to be a hard worker and he goes to the big leagues.
0:12:21 But talent on its own, as we all know, it only gets you so far.
0:12:24 You know, at any given time, there’s a thousand big leaguers out there,
0:12:30 but there’s probably 10,000 players, whether in college or amateur baseball or low professional
0:12:34 ranks that are good enough to someday make it. Talent wise, you’re saying.
0:12:41 Yes. There’s 10,000 talented players with a gift. It’s of those 10,000 players,
0:12:44 which are the ones that work hard enough, which are the ones that figure it out,
0:12:49 which are the ones that get it, that make the right decisions and train the right way and
0:12:53 eat the right way and do preparation for games. Those are the ones that make it.
0:12:58 The most talented player that I ever saw as an amateur was Corey Patterson.
0:13:03 And he had a decent big league career, but talent wise, I would kill for his talent.
0:13:07 Talent wise, there were a ton of guys that I thought had more talent than me,
0:13:09 but I thought I figured it out.
0:13:14 My brother was inherently more talented than I was.
0:13:19 That’s JJ Redick. He played 15 seasons in the NBA and recently became head coach
0:13:21 of the Los Angeles Lakers.
0:13:27 He could never shoot the basketball the way that I could, but he could hit a baseball a mile.
0:13:31 He had a cannon for an arm. My best friend from high school was the same weight.
0:13:37 You know, certain kids are just, everything sort of comes easy to them and it’s natural to them.
0:13:44 I have seen some of the most physically gifted and talented gymnasts I think our sport has ever seen.
0:13:45 Sean Johnson again.
0:13:51 But they just do not have the mental capability to get themselves to that elite level.
0:13:56 And it’s not a matter of training them or, you know, getting them to the right sports
0:13:59 psychologist or getting the right people around them. It’s just, it’s not there.
0:14:06 So I think you have to be born with some sort of innate ability to, you know,
0:14:15 push out all pain and emotion and push yourself past a boundary that 99% of the world operates within.
0:14:20 I remember being in an apartment we lived in in Indianapolis.
0:14:21 Dominique Foxworth again.
0:14:25 And I told my father I wanted to be a professional football player.
0:14:26 He was eight years old.
0:14:32 And he told me, all right, well, you set a goal, you should do something to get you closer to that goal every day.
0:14:38 And I took that to heart. So I did a bunch of push-ups and sit-ups that night until I was throwing up.
0:14:40 It’s like ridiculous.
0:14:44 What was it that gave Foxworth such an intense drive for football?
0:14:49 I was in love with the game in part because of how violent it was, honestly.
0:14:55 And like whatever warped sense of masculinity I had at that age that probably has not fully left me.
0:15:00 It was like basketball is for the soft kids, football is for the men and I want to play football.
0:15:03 I just, I trained my ass off.
0:15:03 I loved it.
0:15:07 And then when I got in the race, I just, I didn’t want to lose.
0:15:12 That’s Lance Armstrong, the seven-time Tour de France champion who was stripped of his titles
0:15:16 when it was proved that he, along with many cyclists of his era, had been doping.
0:15:21 I’d asked Armstrong what drove him when he was a kid.
0:15:27 As a 46-year-old and I look back on it and really, really far removed from that part of my life,
0:15:28 they’re probably things.
0:15:31 I mean, I didn’t have, I didn’t grow up on the street,
0:15:36 but I didn’t grow up behind a white picket fence with 2.3 brothers and sisters and an SUV
0:15:38 and a mom and a dad.
0:15:44 My mom and I were scrappers and I never met my biological father and I’m not making excuses here,
0:15:50 but I’m just trying to, you know, there was the only father figures in my life were my coaches.
0:15:52 Did you, I was going to ask, did you ride angry?
0:15:58 I don’t mean quite angry, but you were, you know, really cocky and confident.
0:15:59 All right, angry.
0:16:02 I didn’t walk around angry.
0:16:06 I just felt it served me best to be angry.
0:16:12 The anger part, and I also know that this happens in every locker room of every sport.
0:16:17 So let’s just say, right, let’s just use Texas football and Oklahoma football.
0:16:20 It’s the biggest rival where you have the week leading up to the game.
0:16:26 Those coaches every single day, guess what is posted on the board in the University of
0:16:28 Texas, Longhorns locker room meeting room.
0:16:31 It is articles and quotes from the other team.
0:16:33 We’re going to kick their ass.
0:16:34 That’s so-and-so player.
0:16:36 He’s, he’s mediocre in the coaches.
0:16:37 They love that.
0:16:41 Hey, Joey, did you see what number 82 said about you?
0:16:46 And so we, if I didn’t have that, if I didn’t have a rival speaking out
0:16:50 on the press saying, oh, I saw him strong last week, he looked average or he,
0:16:52 he looked like he’s passed his best.
0:16:55 If I didn’t have that, which I did plenty of times, then I’d make it up.
0:16:57 I’d go read some article.
0:17:01 I’d say that mother, can you believe that he said that?
0:17:03 And the next day I’d go out and train.
0:17:05 And I mean, it would be the only thing on my mind.
0:17:11 Now it sounds a little toxic, but it made me ride harder, made me train harder, made me hustle.
0:17:15 You know, I think my insecurity drives me really, really hard.
0:17:18 You know, Kerry Walsh Jennings again.
0:17:22 At every kind of leveling up, you know, from eighth grade to high school,
0:17:25 high school to college, college to the Olympic team, there was a moment,
0:17:28 there were many moments of insecurity and the transition.
0:17:31 Many moments of, oh, SHIT, can I do this?
0:17:32 Am I good enough?
0:17:34 Oh, it’s exhausting.
0:17:38 It’s really exhausting.
0:17:40 I want to leave this sport being known as a bad mother.
0:17:48 So yes, most of the athletes we’ve heard from were extraordinarily driven and talented,
0:17:52 but of course, they’ve also had to work incredibly hard at perfecting their craft.
0:17:54 Most of them, at least.
0:17:57 Remember Donald Thomas, our high jumping friend?
0:17:59 And he goes clear.
0:18:03 Donald Thomas goes clear at two meters 35.
0:18:06 David Epstein interviewed Thomas’s college track coaches.
0:18:11 They said they would usually find him like outside, you know, shooting free throws
0:18:13 when he was supposed to be inside learning how to high jump.
0:18:18 Most athletes, however, do train incredibly hard, in part because they’re not allowed not to,
0:18:21 by their coaches, their teams, maybe their parents.
0:18:23 But of course, they also push themselves.
0:18:26 I think it’s about how much you want it, how much you love it,
0:18:29 and how much you’re willing to sacrifice for it.
0:18:33 Mike McGlinchey is an offensive lineman on the NFL’s Denver Broncos.
0:18:35 I was never the best athlete on my team.
0:18:40 I’m still not the best athlete on my team here, but I’ve always wanted it more.
0:18:42 I’ve always worked harder than everybody else.
0:18:46 And just attention to detail and the things that you need to know how to self-correct.
0:18:47 You need to know how to learn.
0:18:53 Knowing how to learn is particularly valuable when the skills you’re trying to learn are unusual.
0:19:00 Playing offensive line is one of the more unnatural human movements on earth in sport,
0:19:01 I think.
0:19:04 You’re required to move other large men out of the way.
0:19:07 And when you’re trying to stop them in past protection,
0:19:08 you’re completely moving backwards.
0:19:11 So it’s a really, really different thing to have to learn how to do.
0:19:13 And until your body can feel it,
0:19:17 until you can watch it on film and self-diagnose right when things happen,
0:19:19 that’s where the separation comes in.
0:19:21 Swimming is like pretty difficult.
0:19:28 That’s Simone Manuel, who won two gold and two silver medals at the 2016 Olympics.
0:19:33 Because you’re in the water, which is like totally defying gravity,
0:19:36 you have to work out every day.
0:19:39 Because if you’re out the water for one day, even when I take my day off on Sunday,
0:19:42 when I come back Monday morning, I feel terrible.
0:19:49 And you have to kind of practice all of those aspects of the sport on a regular basis.
0:19:51 Or else you’re not going to improve.
0:19:57 There’s also the fact that the training opportunities in some sports are inherently constrained.
0:20:00 Ski racing is a really unique sport in many ways.
0:20:01 McKill’s shifrin.
0:20:06 When you think about it, the actual time that I spend or any racer spends
0:20:11 on the hill actually skiing during a day of training,
0:20:16 let’s say you get one course length is about 60 seconds long,
0:20:19 and you get seven runs in one training session.
0:20:24 And that takes about somewhere between three to five hours,
0:20:26 depending on how long the chairlift takes.
0:20:30 So you’re adding up about seven minutes total of practice in your sport
0:20:32 for the entire training session,
0:20:38 which is comparative to say three to five hours of somebody playing tennis in a single session,
0:20:42 which makes me feel like the deliberate practice component is that much more essential.
0:20:46 You know, there’s skiers out there, teammates of mine in the past,
0:20:52 who spend their time from the top of the chairlift to the top of the race course.
0:20:56 It could be half of a trail length that they’re skiing down,
0:20:59 and they’re just kind of like flailing about and doing whatever.
0:21:02 And I was like doing drills to the top of the course,
0:21:05 trying to make use of every square inch of space on the mountain.
0:21:10 Every time I’m deliberately practicing skiing and my technique and everything,
0:21:13 then I’m kind of getting a one-up on everybody else who’s not.
0:21:20 Because it’s so demanding to master the skill set that accompanies each sport,
0:21:23 whether it’s skiing or swimming or football,
0:21:27 you can imagine an aspiring athlete would want to spend as much time as possible on
0:21:32 that skill set and not waste time on, say, other sports.
0:21:35 This has become a huge debate in youth sports.
0:21:40 At what age should an athlete stop playing other sports and commit to theirs?
0:21:44 And once they do commit, is it definitively better to spend most of your time
0:21:46 in deliberate structured practice?
0:21:50 Or what about a more free-flowing, unstructured environment,
0:21:52 what’s sometimes called deliberate play?
0:21:59 You know, I totally agree with this notion that there’s something to be gained from less structure.
0:22:03 That, again, is JJ Redick, now coach of the LA Lakers.
0:22:06 As an example, he brings up his former teammate Jamal Crawford.
0:22:11 Jamal is one of the best ball handlers in NBA history.
0:22:13 He’s had a fantastic career.
0:22:16 Jamal will tell you he’s really never done a drill.
0:22:21 He’s never done a ball handling drill, but he has incredible ball handling skills.
0:22:28 And he’s done that through just playing pickup or taking a basketball around his neighborhood
0:22:34 when he was growing up and literally putting moves on bystanders as he passed them in the street.
0:22:40 Redick’s own view on unstructured versus structured practice evolved over time.
0:22:42 I had a teammate in Orlando.
0:22:43 His name was Anthony Johnson.
0:22:45 I played with him for two years.
0:22:45 He was much older.
0:22:48 This was early in my career.
0:22:52 And about five years after we’d stopped playing together, I met up with him for lunch
0:22:56 and I was telling him about all the workouts I was doing that summer.
0:23:01 And he said to me, “Dude, don’t worry about being the best workout guy.
0:23:03 Worry about being the best player.”
0:23:06 And it kind of annoyed me when he said that.
0:23:12 But I’ve thought about him saying that probably 50 times over the last five years.
0:23:14 For me, part of it is I want structure.
0:23:16 I feel like I thrive in structure.
0:23:17 I like having a plan.
0:23:20 I like going to a gym and saying this is what I’m going to work on today.
0:23:24 But then the other part of it is it’s sport, right?
0:23:26 There’s something organic about it.
0:23:29 There’s something that has to flow naturally.
0:23:32 And if your point of reference is only structure,
0:23:37 well, the game is not really structured, right?
0:23:40 You’re constantly reacting to things as they happen.
0:23:41 There’s nine other players.
0:23:42 There’s one ball.
0:23:48 And so I think that’s actually been incredible advice for me over the last five years of my career.
0:23:55 JJ Redick grew up in rural Virginia and his practice environment then was pretty unstructured.
0:24:01 My dad put up a hoop and it was just for me being in that backyard
0:24:07 and shooting a basketball and seeing it go through the net became just an obsession.
0:24:12 And it’s something that I wanted to do over and over again and repeat over and over again.
0:24:18 When we spoke with Redick, he was trying to reconnect with that unstructured practice environment.
0:24:25 You get a safe place to work on your weaknesses and improve those weaknesses.
0:24:31 Look, if I go into a gym and I’ve got 30 people in the gym watching,
0:24:36 it’s a little nerve wracking to work on your weaknesses in front of people
0:24:40 in a structured setting, but alone, away from any lights.
0:24:45 You know, it’s a more calming experience and you can gain confidence from doing that.
0:24:53 So what does the research say about the relative benefits of structured versus unstructured practice
0:24:57 or what you might call deliberate practice versus deliberate play?
0:25:02 One study of 22 young Brazilian basketball players tried to answer this question.
0:25:07 The researchers put half the players in organized games with referees and coaches.
0:25:10 The other half played in unstructured games.
0:25:14 After 18 sessions, the researchers measured the change
0:25:17 in the player’s tactical intelligence and creativity.
0:25:23 The kids in the unstructured practice showed significant gains on both dimensions.
0:25:27 The kids who played in the structured games showed no improvement.
0:25:31 It’s just one small study, but it would seem to offer some evidence,
0:25:35 at least on the youth level, that less structure can be beneficial.
0:25:40 And how about specialization? A lot of young athletes, and especially their parents,
0:25:46 seem to think the best move is to pick your sport early and focus solely on that sport.
0:25:48 Man, it drives me nutty.
0:25:49 Kerry Walsh Jennings.
0:25:54 It’s just, I think it’s such a flawed place to come from, specialization in anything.
0:25:59 Let alone when you’re a child and you’re eight years old, you do not need to pick your sport
0:26:02 that you’re going to maybe get a college scholarship for.
0:26:07 You know, and play 365, 24/7, which is mentally and spiritually and physically.
0:26:09 Just, it’ll crush you.
0:26:11 So I have a major problem with the way things are right now.
0:26:17 I absolutely know that I am a great athlete because I did everything growing up,
0:26:19 and I wanted to be a great athlete.
0:26:23 Yeah, I was never that child that turned 10 years old and said,
0:26:29 “Oh my gosh, I need to give up everything and everyone and just commit my life to the Olympics.”
0:26:31 The gymnast, Sean Johnson.
0:26:35 I had this, you know, blue collar family, all American, Midwest,
0:26:38 just kind of parents that wanted me to be normal.
0:26:42 And they pushed me to be in so many sports and so many activities and
0:26:49 tried the oboe and clarinet and piano practice and mock trial and all these things that kind
0:26:51 of distracted me from this Olympic dream.
0:26:56 But it always gave me this perspective of I love everything, but I love gymnastics more.
0:27:00 And so whenever I was at gymnastics practice, I focused more than
0:27:05 any other activity and gave more effort there because I knew that was my favorite.
0:27:09 There is some research to back up these stories from Johnson and Walsh Jennings.
0:27:15 So, for example, after the last World Cup, a group of German scientists
0:27:21 published a study where they attract the development of soccer players in Germany.
0:27:25 That’s David Epstein, and he’s talking about the 2014 World Cup,
0:27:30 and found that the athletes who went on to the national team, which by the way won that World Cup,
0:27:34 had played more different sports when they were younger,
0:27:39 spent more time in self-structured or unstructured soccer play when they were younger,
0:27:43 but not more time in deliberately structured soccer training.
0:27:48 Only by age 22 did they start playing fewer sports and spending more time in structured
0:27:51 soccer than athletes who plateaued at lower levels.
0:27:56 So this sort of less structured development turns out to be completely characteristic
0:27:57 of athletes who go on to become elite.
0:28:04 Okay, but what if you are a young athlete or the parent of one,
0:28:09 and your ultimate goal isn’t to become an elite professional athlete,
0:28:15 but rather to get into an elite university, like one of the top 10 schools in the country?
0:28:19 You know, I’ve actually been thinking about that exact problem.
0:28:22 That’s Steve Levitt, my Freakonomics friend and co-author.
0:28:24 He’s an economist at the University of Chicago.
0:28:34 By my calculation, about 0.4% of kids, so about one in 250 kids,
0:28:36 will make it to one of those top 10 schools.
0:28:38 So it’s a hard, hard goal to do it.
0:28:41 And I can’t say I thought about the universe of things you could do,
0:28:46 but I thought about sports, and I stumbled onto something that was pretty surprising to me.
0:28:52 So the answer, I think, is you want your kid to be a fencer.
0:28:57 Okay, now you might say that sounds crazy, like this college fencing even existed.
0:29:02 And the answer is there turned out to be exactly 46 schools that have fencing.
0:29:07 But the correlation between quality of school and having a fencing team is incredibly high.
0:29:11 So for instance, among the top 10 ranked schools in the country,
0:29:17 nine of those 10 have a fencing team. The only exception being my own University of Chicago.
0:29:21 And each fencing team has quite a few slots to fill.
0:29:24 There’s three different blades. There’s at bay, there’s saber, and there’s foil.
0:29:26 And there’s male and there’s female fencing.
0:29:32 And given that relatively few kids in the US are serious youth fencers.
0:29:38 So it’s something like 6 or 7% of the kids who ever try to be fencers
0:29:41 end up being college fencers. Now, I’m not saying they get scholarships,
0:29:45 but they’re likely to be admitted to college based on their fencing.
0:29:50 How much does Levitt think fencing increases your chances from that 0.4% baseline?
0:29:55 So fencing seems to raise that number, holding everything else constant,
0:29:58 something like 15 bold.
0:30:01 We should say here that college admissions being what they are,
0:30:05 fencing doesn’t necessarily increase your chances all that much.
0:30:09 Your grades would still need to be very, very good to get into those top schools.
0:30:16 That said, as an admissions sweetener, how does Levitt think fencing compares to other sports?
0:30:19 My God, if you want to go to an Ivy League school,
0:30:22 forget about soccer and basketball and football.
0:30:28 There’s something like 300,000 kids playing high school soccer.
0:30:32 And presumably any of those kids would love to be college soccer players.
0:30:37 But the chance of having soccer be your vehicle to get to college as opposed to fencing
0:30:40 turns out to be about 75 or 80 times harder.
0:30:43 So how many of your kids have you turned into fencers, Levitt?
0:30:45 Exactly one. And so far, so good.
0:30:49 I couldn’t say I really turned him into a fencer.
0:30:53 He’s strangely enough gravitated towards fencing when he was about nine years old.
0:30:57 And he fenses at a really good club in Chicago.
0:31:00 And I don’t know, his grades aren’t that good.
0:31:05 So he knows, and I know, and everyone else knows,
0:31:08 if he’s going to go to an Ivy League school, it’s going to be because of fencing.
0:31:15 Coming up after the break, the story of an athlete who did go to an Ivy League school,
0:31:20 but when it came time to go pro, that apparently counted against him.
0:31:25 If he had played at Kentucky or Duke, he would have been a top pick in the draft.
0:31:26 The problem was he played at Harvard.
0:31:31 Also, what’s at risk when youth sports become professionalized?
0:31:33 It just scares me because it’s become so much of a business
0:31:36 of itself and less about true, true, true development.
0:31:40 I’m Stephen Dubner. This is Freakonomics Radio.
0:31:43 And you are listening to a bonus episode, an update from our archive
0:31:57 called Here’s Why You Are Not an Elite Athlete. We’ll be right back.
0:31:59 [Music]
0:32:03 As we’ve been hearing, there are a lot of inputs that go into the production
0:32:08 of an elite athlete. Talent, drive, the right kind of practice,
0:32:12 maybe a pair or two to get you to the rink or the gym or the track at 5 a.m.
0:32:17 And as Sean Johnson told us earlier, you might need some luck.
0:32:21 I mean, you can’t get hurt. You can’t have the flu on the wrong day.
0:32:24 You have to find the right coach in the right city.
0:32:27 I was incredibly lucky to end up with my coaches.
0:32:28 So how’d that happen?
0:32:31 It was kind of this freak occurrence.
0:32:33 My coach was Chinese, born and raised Chinese.
0:32:36 When he was three years old, he was taken away from his family
0:32:39 and raised to be an Olympic gymnast.
0:32:45 And he kind of had this crazy career that I would say almost traumatized him.
0:32:49 He lost his childhood. He kind of lost his family, this crazy career.
0:32:56 So when he was 21 years old, he actually left China, came to the United States,
0:32:59 opened a gym in West Des Moines, Iowa, of all places,
0:33:06 and had this dream, this American dream, to raise an Olympian or Olympians
0:33:10 that were also children and had a balance in life and were, you know, fun-loving
0:33:13 and had a true childhood.
0:33:15 Johnson had started her training at a different gym.
0:33:18 And I loved it. It was awesome.
0:33:22 But Chao, my coach that took me to the Olympics,
0:33:25 opened up a gym about five minutes from my parents’ house.
0:33:29 And my parents ended up switching me because it saved gas money.
0:33:34 And I was really, really blessed to fall under his guidance and his coaching.
0:33:40 I mean, I was a very, very fortunate child within the gymnastics community
0:33:45 to have very loving, very, very protective people around me.
0:33:53 And he, I mean, given today’s society, I can thankfully say that he kept me safe.
0:33:55 And I am forever grateful for that.
0:34:01 Chao Johnson’s good luck created good opportunities,
0:34:05 which she worked hard to parlay into an Olympic gold medal.
0:34:08 But what about the young athletes who don’t get the right opportunities,
0:34:14 whether through bad luck or through something much more concrete, like lack of money?
0:34:20 In 2022, the youth sports industry was worth more than $35 billion.
0:34:24 It’s expected to hit nearly $70 billion by the end of the decade.
0:34:28 And a lot of youth sports involve some sort of pay-to-play model.
0:34:31 Pay-to-play is something that just scares me
0:34:36 because it’s become so much of a business of itself and less about true, true, true development.
0:34:38 That’s Brandon McCarthy.
0:34:43 He was a pitcher in Major League Baseball, seven teams over 13 seasons.
0:34:45 It’s a tournament in California this weekend.
0:34:47 The next weekend you go to Nevada and after that it’s Texas.
0:34:52 I don’t understand how two working parents could ever afford to put their kids through that
0:34:54 and then take the time to travel with them.
0:35:00 The theme of economics the last 10 or 15 years has been income inequality
0:35:03 and connected to that, the rich getting richer.
0:35:05 It sounds like what you’re saying with youth sports is
0:35:09 that’s being mirrored all the way down the line, yes?
0:35:10 I would think so.
0:35:14 I mean, there’s two players on your team and one player at the age 13 level
0:35:17 can make all the tournaments in the summer and one can only make two of the tournaments.
0:35:21 Well, how much playing time is the player whose family can afford
0:35:23 for him to go on those trips and then the coach doesn’t favor him and play him.
0:35:26 I think there’s that trickle-down effect from there
0:35:30 and there’s less access to top coaching, lessons, equipment, you name it.
0:35:33 Over time it’s starting to bear itself out as some income inequality
0:35:36 just creates better baseball players and worse baseball players.
0:35:42 Or in one noteworthy instance, a huge drop in baseball players.
0:35:47 In 1981, there was 18.7 percent African American players in the major leagues
0:35:51 as of 2018, 7.8 percent.
0:35:54 So the question is, why the decline?
0:35:59 David Canton is a history professor and director of African American studies
0:36:00 at the University of Florida.
0:36:04 The huge drop of black players in baseball, he argues,
0:36:09 has a number of historical causes, including the relative rise
0:36:11 of black football and basketball players.
0:36:15 But he puts most of the blame on deeper structural issues.
0:36:16 So I look at these factors.
0:36:21 Deindustrialization, mass incarceration and suburbanization.
0:36:24 So with deindustrialization, lack of tax base,
0:36:29 we know there’s no funds to what construct and maintain ball fields.
0:36:33 So you see the rapid decline of the physical space in the Bronx,
0:36:37 in Chicago, in these other urban areas, which leads to what?
0:36:38 Lack of participation.
0:36:42 Suburbanization, Canton says, had a similar effect,
0:36:46 drawing resources away from cities with large African American populations.
0:36:52 What’s left in the city’s abandoned fields, lack of resources, decrease in tax base.
0:36:55 And then there’s incarceration, Canton says,
0:37:00 which has a disproportionately high impact on African Americans.
0:37:05 So I can imagine 1980, if you were 18 year old black man in LA,
0:37:11 Chicago, New York, all of a sudden you’re getting locked up for nonviolent offenses.
0:37:14 So I’m going to assume that you played baseball.
0:37:18 I’m arguing that those men, if you did a survey and go to prison today,
0:37:23 federal state, I bet you a nice percentage of these guys played baseball.
0:37:25 Now some were not old enough to have children.
0:37:29 And the one that did weren’t there to teach their son to play baseball.
0:37:34 To volunteer in little league because they were in jail for nonviolent offenses.
0:37:36 Add it all up, David Canton says.
0:37:40 And this explains the huge decline of African Americans in baseball,
0:37:45 which, by the way, has been countered by a huge rise in players from Latin America.
0:37:53 That said, major league baseball is well aware of and concerned by the drop off in African American players.
0:38:00 So we have a league called the RBI League, which is reviving baseball in the inner cities.
0:38:02 That’s Kim Aang.
0:38:05 When we interviewed her, she was major league baseball’s
0:38:08 senior vice president of international baseball development.
0:38:12 A few years later, she became general manager of the Florida Marlins,
0:38:15 the first female GM in league history.
0:38:23 So we’ve seen academies develop in Kansas City, in Philadelphia, New Orleans.
0:38:25 Washington, DC.
0:38:32 And these academies are really providing opportunity for young kids, you know,
0:38:35 particularly of color, to come and train with us.
0:38:37 Free of charge, of course.
0:38:40 And you really hone their skills.
0:38:44 So the RBI program, people like CeCe Sabathe de Yankees, he went through it.
0:38:49 They do have some success stories, but most of those players are not successful.
0:38:53 The reality is, is that baseball is for people with resources.
0:38:57 Most major league players with African American come from middle class backgrounds.
0:39:02 They have the resource for travel baseball, which is expensive, personal training.
0:39:06 And I think there’s a cultural thing, that if you’re middle class African American,
0:39:09 you are comfortable being in predominantly white spaces.
0:39:14 And we don’t want to talk about that, because as we know, everybody’s a good person.
0:39:17 But we know racism, privilege are systems.
0:39:19 So let me give you an example.
0:39:24 If you play AAU basketball, you’re the white guy, trust me, your space is African American.
0:39:29 So from March to July, you are going to be a black guy’s all summer.
0:39:32 Your parents are going to be a black family’s all summer.
0:39:34 Let’s switch to the baseball.
0:39:37 If you’re a black middle class kid who grew up in the suburbs,
0:39:42 you are comfortable being the only black in the all white space all summer.
0:39:45 So they’re the ones that are more likely to be in the major leagues.
0:39:53 You could argue that sports are among the most meritocratic endeavors that humans do.
0:39:58 After all, when you’re measuring outcomes with a stopwatch or a yardstick,
0:40:03 by whether the ball goes in the net or doesn’t, you’d think that an athlete’s background,
0:40:06 where they come from, what they look like, that it wouldn’t matter much.
0:40:07 But sometimes it does.
0:40:13 Professional sports teams in particular often have very conservative mindset.
0:40:17 They tend to go looking for players who look a lot like their previous players,
0:40:22 which means they might overlook someone who absolutely should not have been overlooked.
0:40:36 In 2012, the New York Knicks went on a 9-3 winning streak,
0:40:39 sparked by an obscure young point guard named Jeremy Lin.
0:40:56 During this 12-game stretch, Lin averaged 22.5 points and 8.7 assists.
0:40:59 If you don’t know basketball numbers, well, those are good ones.
0:41:05 Lin’s success was so dramatic, so unpredicted, that it produced a movement.
0:41:09 Lin’s sanity continues here at Madison Square Garden.
0:41:13 Lin grew up in California to parents who’d immigrated from Taiwan.
0:41:16 Even though he put up great numbers in high school,
0:41:19 he received no athletic scholarship offers to college.
0:41:22 He wound up playing at Harvard while studying economics.
0:41:25 Once again, he put up great basketball numbers.
0:41:30 But when it came time for the NBA draft, Jeremy Lin’s name was not called.
0:41:34 The Golden State Warriors signed him as an undrafted free agent,
0:41:39 making him the first American of Taiwanese or Chinese descent to play in the NBA.
0:41:42 But he barely played, and three times that year,
0:41:44 the Warriors sent him down to their minor league club.
0:41:48 During the NBA’s offseason, he played a few games in China,
0:41:52 then the Knicks signed him, and Lin’s sanity broke out.
0:42:03 Lin played nine years in the NBA, and he now plays in Taiwan.
0:42:08 His final contract in the NBA was a three-year deal worth more than $38 million.
0:42:13 How could someone worth nearly $13 million a year
0:42:17 have been assigned a value of essentially zero?
0:42:21 Let’s ask one of the people who did take an early look at Jeremy Lin.
0:42:24 Darryl Morey, general manager of the Houston Rockets.
0:42:26 Morey, after we interviewed him,
0:42:31 moved on to become president of basketball operations for the Philadelphia 76ers.
0:42:36 At the time we spoke, the Houston Rockets were one of the winningest teams in basketball,
0:42:40 and Morey had just been named NBA executive of the year.
0:42:43 Morey was also one of the first executives in basketball
0:42:47 to make extensive use of analytics to help choose players.
0:42:52 So I asked him why Jeremy Lin’s college numbers had not lit up his model.
0:42:55 Well, one thing that was tough about Jeremy,
0:42:59 because he did actually produce in college at a level that looked, you know,
0:43:06 insanely well, meaning if he had played at, say, Kentucky or Duke or whatever,
0:43:08 for sure he would have been a top pick in the draft.
0:43:09 I have no doubt of that.
0:43:13 The problem was he played at Harvard, and actually,
0:43:18 most of the models that are used from an analytics perspective to forecast draft picks,
0:43:20 they’re built on people who are drafted.
0:43:23 And Jeremy didn’t look like anyone who was drafted.
0:43:27 The number of Ivy League players that have become NBA players is extremely small.
0:43:31 So one of the things you have to be careful about with analytics is when to not use things.
0:43:38 And I incorrectly chose to not wait his time in the Ivy League high enough,
0:43:40 and he ended up going undrafted.
0:43:46 Morey and the Rockets did, however, bring Lin into training camp as an undrafted rookie.
0:43:49 He actually did look quite good in our training camp,
0:43:52 but unfortunately, at that time, we had four point guards.
0:43:56 And so, yeah, I then incorrectly let him go.
0:43:58 What about his being Asian?
0:44:02 How much did that just, you know, the fact that he did not, quote,
0:44:08 look like what most basketball people think a good basketball player looks like,
0:44:11 and how much that may have actually obscured the real data?
0:44:14 It’s sort of an unknowable question.
0:44:19 But the founders of behavioral science, you know, a lot of their research was on,
0:44:23 yeah, how people mostly unconsciously, sometimes overtly,
0:44:27 put people into, you know, basically buckets or categories,
0:44:29 and then use those for making decisions.
0:44:32 And often those heuristics really serve you well in life.
0:44:36 I E, I’ve categorized that animal is dangerous,
0:44:39 and so I’m going to avoid them so they don’t eat me, right?
0:44:41 But many times they don’t serve you well.
0:44:44 And what you’re asking is a question that’s impossible to answer.
0:44:48 It’s basically how did Jeremy’s heritage change,
0:44:52 how he was viewed by NBA talent evaluators?
0:44:53 I don’t know. And how much was it Ivy League?
0:44:56 How much it was, yeah, nobody knows.
0:44:58 The reality was it happened to him, not just in the NBA.
0:44:59 It happened to him consistently.
0:45:02 He was a top player in high school.
0:45:06 He then got literally almost no interest from college head coaches,
0:45:09 but he should have been recruited by the Dukes and the Kentucky’s.
0:45:12 And then again, he was overlooked in the NBA.
0:45:13 No one can really know why,
0:45:17 but there’s obviously a bunch of factors that probably played a role.
0:45:23 The more you talk to athletes and the people around them,
0:45:26 the more you realize that the path to elite status
0:45:29 isn’t nearly as predictable as you might imagine.
0:45:32 There are cognitive biases involved.
0:45:34 There’s personality and politics.
0:45:35 And remember, luck.
0:45:39 Plainly, there’s no guarantee that a given athlete
0:45:42 will get the right opportunity to make it to the top.
0:45:46 But if you do, well, if you do get the opportunity,
0:45:49 that’s when the real challenge begins.
0:45:53 Now you’ve got to work even harder, devote yourself even more completely,
0:45:56 and that comes with a cost.
0:45:58 It’s the flip side of opportunity.
0:46:02 And it’s what economists call, yes, opportunity cost.
0:46:06 Meaning for every hour you spend on your sport,
0:46:08 you surrender an hour of something else.
0:46:11 For every opportunity the sport gives you,
0:46:14 there’s another opportunity you have to sacrifice.
0:46:16 So fighting takes up a lot of time.
0:46:21 And, you know, fighters, they have to diet pretty hard.
0:46:25 Lauren Murphy is a professional mixed martial arts fighter
0:46:27 in the flyweight division of the UFC.
0:46:29 They have to work out all the time.
0:46:30 They also need to rest.
0:46:31 A lot of us work.
0:46:33 So there’s just not a lot of time in the day.
0:46:38 And a lot of times the first thing that kind of gets taken off the plate
0:46:39 is time with family.
0:46:43 And so I remember missing a couple Thanksgiving dinners,
0:46:46 you know, not being able to drive out to my sister’s house for Christmas.
0:46:48 And I remember my family kind of being like, what the hell?
0:46:52 Why, you know, why are you suddenly neglecting us so much?
0:46:55 And I didn’t really have a good answer for them at the time.
0:46:57 I just thought this is something that I want to do
0:46:59 and I want to be really good at it while I do it.
0:47:01 And so I need to, you know, make these sacrifices now
0:47:03 so I can have a good performance later.
0:47:06 In high school, you know, by the time I was a sophomore
0:47:08 and I knew I had a chance, I started preparing.
0:47:10 The former baseball all-star, Mark Tashara.
0:47:14 I didn’t go to my high school homecoming for three straight years
0:47:16 because I was playing fall baseball.
0:47:18 You know, I didn’t do a lot of stuff in the summertime.
0:47:20 I played 70 games every summer.
0:47:22 My friends are going to concerts.
0:47:24 My friends are, you know, having a good time at the beach
0:47:25 and all these kind of things.
0:47:30 So for me, I sacrificed from the time I was, I don’t know,
0:47:36 probably in high school is when I started to forgo other opportunities.
0:47:38 That, again, is Dominique Foxworth,
0:47:41 who overdid his push-ups and sit-ups at age eight
0:47:43 in order to make the NFL.
0:47:45 Then in college, I wanted to be a computer science major
0:47:47 at University of Maryland.
0:47:49 And my academic advisor was like,
0:47:53 “Though that course load is going to make it very difficult
0:47:55 for you to make it to our practices, their labs,
0:47:56 and blah, blah, blah, blah.”
0:47:58 So I was like, “Nope, not going to do that.”
0:48:00 So instead you did, was it American Studies?
0:48:02 Yeah, I did American Studies.
0:48:03 And journalism, right?
0:48:04 Right.
0:48:06 Which just shows how easy what I do is that you could do it
0:48:08 and another major while playing football.
0:48:14 No, I enjoyed those and it was good, but it wasn’t what I wanted to do.
0:48:17 And then the summers when people were getting internships
0:48:20 or whatever, I was working out and getting ready for football.
0:48:23 And I say all that to say, once I got to the league,
0:48:25 then I got drafted and I was in the third round.
0:48:27 So that’s, it’s money, it’s good money,
0:48:28 but it’s not life-changing money.
0:48:31 It doesn’t make up for all the things that you’ve given up
0:48:32 through the course of your life.
0:48:38 You shouldn’t feel too sorry for Foxworth.
0:48:41 He played long enough to enter a free agency.
0:48:44 His final NFL contract paid him about $27 million.
0:48:47 But now, out of football for a few years,
0:48:51 he’s still feeling the after-effects of his single-mindedness.
0:48:56 So like my whole life since I was a kid, I had a very clear goal
0:48:58 and I worked towards that goal.
0:49:02 And I made lots of decisions that would get me closer to that goal
0:49:05 but get me further away from other important and interesting things,
0:49:09 including friends and including family.
0:49:11 And then I was like, all right, I’m done playing.
0:49:14 So I will be in this state of transition.
0:49:18 His transition included getting an NBA from Harvard
0:49:20 and working at the NBA Players Union.
0:49:23 He’s now doing some writing and sports casting.
0:49:26 I mean, I think it’s a feeling of loneliness, honestly, which,
0:49:30 and it’s not like I have three kids and my wife
0:49:32 and I’m not like alone, obviously.
0:49:34 And I love them and I have fun with them.
0:49:37 And but throughout my life,
0:49:42 I have been almost myopically focused on a goal,
0:49:45 which being focused on that goal, I gave me purpose.
0:49:49 And I’m sure I’m going to butcher the Nietzsche quote,
0:49:53 but it’s something to the effect of when a man has a why,
0:49:56 he can bear almost anyhow.
0:50:01 And like I was, I didn’t, I don’t drink now.
0:50:02 I never drank in my life.
0:50:03 I never smoke weed.
0:50:07 Like I was singularly focused on doing everything.
0:50:08 Every decision I made was like, all right,
0:50:09 I’m going to get close to this goal.
0:50:12 And I, the people I was close with in high school,
0:50:14 like those aren’t my friends anymore.
0:50:18 People I was close with in college, like not really my friends anymore.
0:50:21 And then at 35, I’m in D.C.
0:50:25 where my wife has a bunch of family and friends,
0:50:27 friends that she’s been close with since they were in the second grade.
0:50:31 And like, and I’m like, I don’t really have that.
0:50:33 And like I was making these choices,
0:50:38 which I thought were choices to get me what you wanted.
0:50:38 Right.
0:50:42 And I didn’t realize at the time that I was
0:50:46 foregoing like long lasting relationships.
0:50:48 And while you’re a professional athlete,
0:50:50 you walk around with this skepticism, frankly,
0:50:52 of all new people in your life.
0:50:57 So even if there were like the potential of some great friendships,
0:50:59 like I wasn’t open to them.
0:51:01 Yeah, I’d go to these places, people like, oh, you’re a football player.
0:51:04 And I’d pretend and be nice to them because that’s what you do.
0:51:09 And they’d pretend or whatever it’d be into me because that’s what you do.
0:51:09 And then you move on.
0:51:12 And and then you’re 35 and you’re like, hey,
0:51:16 you haven’t talked to your best friend from high school in 10 years.
0:51:19 So I mean, I feel like I’m in a perpetual state of transition,
0:51:23 which is interesting and uncomfortable at the same time.
0:51:31 Coming up after the break, how far does it set you back if you pursue the athletic dream
0:51:32 and don’t make it?
0:51:39 The person who plays baseball is making about 40% less on average 10 years after they enter
0:51:43 the game than the person who decides not to play baseball and who just wanted a regular career.
0:51:45 I’m Stephen Dubner.
0:51:47 This is Free Economics Radio.
0:51:55 We’ll be right back.
0:52:05 It’s one thing if all the sacrifices, all the opportunities foregone, translate into
0:52:11 a successful athletic career as it did for Dominique Foxworth and Mark Tashara and Lauren Murphy.
0:52:16 But what about the athletes who make the sacrifices but don’t make the big time?
0:52:18 Just look at the numbers.
0:52:22 At any given time, there are only about 1700 players in the NFL.
0:52:26 In Major League Baseball, there are fewer than a thousand.
0:52:32 Roughly 80% of the athletes drafted by a Major League Baseball team never make it past the
0:52:33 minor leagues.
0:52:36 One of those 80% was Justin Humphries.
0:52:40 You get a phone call that says how does it feel to be the next member of the Houston
0:52:43 Astros and you just get, you get, it’s a dream come true.
0:52:45 So I ended up signing.
0:52:49 He started playing Minor League Baseball at 18, which meant skipping college.
0:52:52 Although he did start taking some courses later on.
0:52:58 In 2009, he retired at age 27 without ever making the majors.
0:53:04 He enrolled at Columbia University and took a sociology class with a professor named Sudhir
0:53:04 Venkatesh.
0:53:07 So I was sitting there in this classroom.
0:53:11 I started thinking about all the issues that I had seen in independent baseball and affiliated
0:53:15 baseball, guys living check to check, struggling with whether they should go back to school,
0:53:17 family life, issues at home.
0:53:21 And I thought if I could use some of the things that we were learning in class,
0:53:25 talk to some of these guys and find out whether the stories and things that I was seeing and
0:53:27 hearing would be reflected in the numbers.
0:53:31 We followed a sample of the draft class of 2001.
0:53:34 And so that’s about, you know, it’s 10 years.
0:53:36 And that is Sudhir Venkatesh.
0:53:40 And so we thought that would help us to understand what happens to these folks.
0:53:44 I think one of the most curious things that we find is how much 10 years matter.
0:53:48 So if you take two people who grew up in the same circumstances, let’s say one played baseball
0:53:54 and one didn’t, the person who plays baseball is making about 40% less on average.
0:53:59 10 years after they enter the game, then the person who decides not to play baseball
0:54:00 and who just wanted a regular career.
0:54:01 All right.
0:54:05 So what kind of background is typical for these players you’re tracking?
0:54:11 The average player probably looks like an upper middle class kid who comes out of college
0:54:12 or comes out of high school.
0:54:16 And when you follow an upper middle class kid for about seven to 10 years,
0:54:19 they’re probably going to make higher than the median average income.
0:54:23 They’re probably going to live in a neighborhood that’s relatively safe.
0:54:24 They’re going to have a career.
0:54:29 Now, when you take the counterpart among the pool that was drafted, that median kid,
0:54:37 that kid looks like he’s making about 20 to $24,000 a year, which is not a lot of money.
0:54:41 He’s working probably five to seven months playing baseball and then struggling to find
0:54:43 part-time work in the off season.
0:54:45 Might be coaching.
0:54:46 Might be doing some training.
0:54:47 Might be working on a construction site.
0:54:49 Might be working in fast food.
0:54:56 Well, when you’re 25, playing an independent ball, making less than $2,000 a month,
0:55:01 living off your parents because you can’t financially sustain yourself like that,
0:55:04 at some point you have to say, look, I’ve got with no degree,
0:55:07 I had less than an associate’s degree at that point.
0:55:11 So at some point you have to tell yourself, I can’t do this to myself.
0:55:13 I can’t do this to my parents.
0:55:17 And I can’t continue when I know there’s untapped potential to do other things.
0:55:25 Knowing when to quit anything is hard, especially if it means abandoning a lifelong dream.
0:55:31 Quitting an athletic dream is especially hard because baked into the ethos of sport is the idea
0:55:35 that you should never quit, never give up, never back down.
0:55:36 But think about it.
0:55:41 If you had been playing in the minor leagues or some equivalent for a decade,
0:55:44 would you really think your moment was ever going to come?
0:55:48 Would you really think there was any chance at all?
0:55:53 Before you answer, I’d like to introduce you to someone named Andre Ingram.
0:55:55 Hey, Steve, how you doing, man?
0:55:56 Sorry I’m late.
0:55:58 No, no, no worries.
0:56:00 Let’s talk a little bit about your background.
0:56:03 I believe you grew up in Richmond, Virginia, where you still live.
0:56:03 Is that right?
0:56:04 That’s correct.
0:56:09 I’m curious, is your family the same Ingram family of the gospel group, the Ingramettes?
0:56:10 That’s very good.
0:56:11 Yep, that’s exactly correct.
0:56:13 That’s on my father’s side.
0:56:14 And then tell me about you.
0:56:15 Are you musical?
0:56:16 Are you talented?
0:56:20 No, so my brother and I are the athletes.
0:56:25 And it’s funny because everyone else in our family is musically gifted in some way.
0:56:26 My brother and I, we got none of that.
0:56:29 So yeah, we just, we got the athletics.
0:56:36 Ingram was a good basketball player in high school and then played his college ball at
0:56:40 American University, a solid basketball program, but hardly elite.
0:56:43 It had produced only one NBA player in its history.
0:56:48 Ingram was a three-point shot specialist and he left American as its fifth leading all-time
0:56:49 score.
0:56:52 But that was not enough to get drafted into the NBA.
0:56:57 So he entered the NBA’s minor league, which at the time was called the D-League,
0:57:02 the D standing for development, since changed its name and a sponsorship deal to the G-League,
0:57:04 with the G standing for Gatorade.
0:57:09 Anyway, Andre Ingram entered the D-League with the hopes of being called up to the NBA.
0:57:12 He wound up staying for 10 years.
0:57:19 It pays so poorly, around $40,000 a season, that most young players just give it a year or two
0:57:23 before going to play pro in Europe or elsewhere.
0:57:26 Ingram tried Australia briefly, didn’t like it.
0:57:32 Plus, he wanted to stay nearby, just in case the NBA finally came calling.
0:57:36 There were many times where I was, you know, ready to just the turn the other way and do
0:57:41 something else and, you know, wife and kids, family, you know, the D-League or G-League is not
0:57:44 paying you much, like, you know, you need to do something else.
0:57:48 Like, I came to that point so many times and, you know, something kept me going every time.
0:57:50 But he did keep going.
0:57:53 He was playing for a D-League team called the South Bay Lakers,
0:57:55 who were owned by the Los Angeles Lakers.
0:57:59 Ingram led the G-League in three-point shooting percentage.
0:58:05 But still, he was 32 years old by now and still in the G-League.
0:58:07 For extra money, he tutored kids in math.
0:58:12 At the end of the season, he was called in for his regular exit interview.
0:58:15 So, you know, I’m thinking, all right, this is, you know, the same old thing.
0:58:19 But then we get upstairs, we get in this big conference room and
0:58:24 not only is the GM and head coach there, our president is there.
0:58:25 And I’m like, okay, this is a bit different.
0:58:28 I’ve done this before and usually our president’s not here.
0:58:32 The president he’s talking about was the president of basketball operations,
0:58:38 not for the South Bay Lakers, but for the Los Angeles Lakers, Magic Johnson.
0:58:42 So, you know, Hart is kind of racing at that moment and then they tell me the news.
0:58:46 The news was that the L.A. Lakers, with just two games left in their season,
0:58:49 were calling Andre Ingram up to play.
0:58:53 He would make his NBA debut at age 32.
0:58:56 But just everything that I was feeling is exactly what you thought,
0:59:00 or anybody would think knowing my story, knowing my situation.
0:59:05 I just didn’t let it out like my wife and my mom did when I told them to lose.
0:59:05 They let it out.
0:59:09 They just let it be raw and, you know, the real emotion that, you know, people love to see.
0:59:13 I was a little bit more subdued, but was feeling it all inside.
0:59:17 And so, you know, immediately after that, though, my first thought goes to,
0:59:20 okay, who do we play again tomorrow?
0:59:22 They were playing the Houston Rockets.
0:59:27 Late in the first quarter, Ingram finally got his chance to play in the NBA.
0:59:32 Eleven years, 384 games after his professional career begins,
0:59:35 Andre Ingram getting called up by the Lakers.
0:59:38 You know, I think before I got there, in the night before,
0:59:42 was when all the emotions were running wild and I’m not sure how to feel.
0:59:45 And you’re so excited, yet nervous and all these other things.
0:59:47 But when it came time for the actual game,
0:59:52 it really turned into basketball very quickly for me and made things a whole lot easier.
0:59:54 How easy was it?
1:00:08 Ingram scored 19 points that night, including four three-point shots.
1:00:11 It was one of the best debuts in Lakers history.
1:00:15 It was one of the most amazing debuts ever, the 32-year-old rookie.
1:00:23 The crowd began chanting MVP, MVP.
1:00:34 So we had no idea the reach of this until my brother and my niece had called and told me.
1:00:36 They said, hey, you are blowing up on Twitter.
1:00:38 You’re blowing up on Instagram.
1:00:41 You know, you’re everywhere and you just have no idea.
1:00:45 So I know that you’re a great three-point shooter, historically great.
1:00:50 So, but forgive me for saying this, your shot looks a little bit ugly,
1:00:52 if I’m being honest with you, Andre.
1:00:55 You know, it’s a little off balance and I know it works,
1:00:57 but I’m really curious to ask you.
1:00:59 I don’t mean just to insult you.
1:01:00 It’s an insult with a question.
1:01:01 No, I get it.
1:01:05 Do you think that maybe is part of what’s kept teams in the past
1:01:07 from giving you a shot at the NBA?
1:01:11 And I asked this thinking about the story about Jeremy Lin,
1:01:15 who so many teams overlooked and they later admitted they overlooked him
1:01:19 because he was an Asian guy and he didn’t fit the template of what,
1:01:20 you know, an NBA player was.
1:01:23 And I’m curious if whether you think that your untraditional shot
1:01:28 may have hurt you in some way, even if just like perception wise.
1:01:30 You know what, I mean, it’s a good question.
1:01:32 I don’t think so.
1:01:34 I would say the gray hair probably has more to do with it.
1:01:38 But if I had to guess, maybe the awkwardness of the shot
1:01:42 or not so much the awkwardness of it, but the release point of it,
1:01:46 because it’s a bit lower than most guys, I’m already not the tallest guy.
1:01:49 So maybe there is worry about, well, hey,
1:01:51 this shot is going to get blocked in our league.
1:01:53 The guys are too athletic for him to get that off.
1:01:55 So maybe that was a thought, to be honest with you.
1:01:56 All right.
1:01:58 So here’s the big question.
1:01:59 What’s your future?
1:02:00 Yeah.
1:02:04 So right now my agent is in talks with, you know, different teams.
1:02:06 We’re trying to get into a training camp right now.
1:02:07 That’s the goal.
1:02:10 And, you know, hopefully there’ll be some new soon of where I’ll be,
1:02:12 but nowhere yet.
1:02:15 So what happens if, you know, you don’t get in a training camp,
1:02:19 you don’t get to play for an NBA team?
1:02:20 What do you do this coming season?
1:02:21 Yeah.
1:02:24 Well, it could definitely be the G-League again.
1:02:28 You know, and it could be another season of it.
1:02:31 I mean, the job for me is simple, you know, just stay ready.
1:02:35 But the goal is, and we will be continuing to play that that much.
1:02:36 I can tell you.
1:02:41 It’s interesting, you know, as a sports fan, I’ve been, you know,
1:02:45 my whole life seen people trying to squeeze meaning out of sports
1:02:47 beyond the game itself.
1:02:50 And a lot of times it feels kind of forced,
1:02:52 but it strikes me that your story was really different.
1:02:55 What is the lesson that we maybe should take from your story?
1:02:58 What I would like for people to get out of it the most is that
1:03:01 it wasn’t just that, you know, I stuck with it all the way through
1:03:03 and was happy about it all the time.
1:03:04 I definitely had doubts.
1:03:06 I had, you know, disbelief.
1:03:07 I had discouragement.
1:03:10 You know, you don’t get to something or any dream
1:03:11 or anything worth having.
1:03:13 Just, you know, Scott free.
1:03:16 I think that part about it is the realest part.
1:03:23 Andre Ingram never had the NBA career he hoped for.
1:03:28 After those final two games of the 2018 season,
1:03:29 he went back to the G-League.
1:03:33 He was called up for another short spell with the Lakers.
1:03:35 The next season, but that was it for the NBA.
1:03:38 He did make his mark in the G-League.
1:03:41 He holds league records for most games played
1:03:43 and most three pointers.
1:03:47 And in 2020, he was elected president of the G-League’s
1:03:48 brand new players union.
1:03:52 He last played professionally in 2022
1:03:54 and then stepped away to care for his mother,
1:03:56 who had been diagnosed with cancer.
1:04:01 But now Ingram says he’s hoping to come back to the G-League.
1:04:05 To play us out today, here is his family’s gospel group,
1:04:08 Maggie Ingram and the Ingramettes,
1:04:11 with a song called Work Until I Die.
1:04:22 Freakonomics Radio is produced by Stitcher and Renbud Radio.
1:04:25 You can find our entire archive on any podcast app
1:04:27 also at Freakonomics.com,
1:04:29 where we publish transcripts and show notes.
1:04:32 This episode was produced by Anders Kelto,
1:04:34 with help from Derrick John and Harry Huggins,
1:04:36 and updated by Teo Jacobs.
1:04:39 Our staff also includes Alina Kullman, Augusta Chapman,
1:04:43 Dalvin Abalaji, Eleanor Osborn, Elsa Hernandez,
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1:05:25 The Freakonomics Radio Network,
1:05:28 the hidden side of everything.
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1:05:31 Stitcher.
1:05:34 (upbeat music)

0:00:08 So, let’s talk a little bit about what you see as the purpose of college.
0:00:14 I’ve heard you say that some people use it for chasing status, was your phrase, while
0:00:20 others use it to prepare themselves to improve not just themselves and their families, but
0:00:21 society.
0:00:23 So, what do you see as the mission?
0:00:29 Well, part of the ethos of Jesuit institutions from the beginning is that we want our students
0:00:34 to learn and get all the tools they need to flourish, and we want to give them opportunity.
0:00:38 But we also want them to have all of that, not just for them, but for the world.
0:00:43 That we have this enormous force multiplier of sending them out with the desire to matter
0:00:45 and the skills to really do that.
0:00:51 And they will choose how, but we really need for them to understand that the saccharine
0:00:57 high of just getting the job that pays the most or seeking status for themselves, that’s
0:01:01 not what will make them happy, and that is not the point of their lives.
0:01:05 And so, they can do that and still be happy, but what really drives you is knowing, looking
0:01:08 back on your deathbed at your life.
0:01:10 How did I matter?
0:01:17 I’d like to introduce our guest for today, Tanya Tetlow, president of Fordham University.
0:01:22 Fordham is a well-regarded private university in New York City, founded in 1841 and run
0:01:27 for most of its history by the Jesuits, the Roman Catholic religious order that dates
0:01:29 to the 16th century.
0:01:34 Tetlow is the first female president of Fordham, as well as the first layperson.
0:01:38 There’s a very daunting hall of portraits outside of my office, you know, all of these
0:01:41 priests going back to 1841.
0:01:48 Tetlow’s own father was, in fact, a priest, but while getting his psychology PhD at Fordham,
0:01:52 he met his would-be wife, another graduate student, so he left the priesthood.
0:01:58 Tanya was born in New York not long before the family moved to New Orleans, so Fordham
0:01:59 is in her genes.
0:02:04 A good way to recruit me is they can tell me, “You exist because of us.”
0:02:09 Fordham did recruit her, and she returned as president in 2022.
0:02:14 Before that, Tetlow was president of Loyola University in New Orleans, another Jesuit
0:02:19 school, one of 27 in the U.S. and about 130 globally.
0:02:25 The Jesuits have always been big on educating as well as evangelizing.
0:02:31 Tetlow is a lawyer by training and taught law for a while at Tulane, and before that,
0:02:34 she was a federal prosecutor in New Orleans.
0:02:39 What does it say about the state of higher education that Fordham chose as its president
0:02:43 not only a non-priest, but a former prosecutor?
0:02:49 We spent our time, all of us in these jobs, playing defense and navigating crises.
0:02:57 Everything from the protest movements to efforts from those who work here to make sure that
0:03:03 they’re paid well and fairly and how to balance that against remaining affordable to students,
0:03:05 and bridging that gap just gets harder and harder.
0:03:11 Today on Freakonomics Radio, another conversation in our ongoing look at what college is really
0:03:13 for.
0:03:18 With higher ed under attack from multiple angles, Tetlow sees an urgency in turning
0:03:20 things around.
0:03:25 The countries against whom the U.S. competes, none of them are disinvesting from education
0:03:26 right now.
0:03:30 We talk about the difference between religious and secular universities.
0:03:34 I don’t have to be afraid to talk about values in my out loud voice.
0:03:41 And we talk about why, despite all the trouble and controversy, the enterprise is worth defending.
0:03:59 If you want a great city, build a university and wait 200 years.
0:04:05 This is Freakonomics Radio, the podcast that explores the hidden side of everything with
0:04:15 your host, Steven Dubner.
0:04:20 Kamala Harris, before serving as vice president and U.S. senator, was a prosecutor, the district
0:04:24 attorney for San Francisco and the California Attorney General.
0:04:30 Now that she’s running for president, Harris is leaning into her experience as a prosecutor.
0:04:37 So in those roles, I took on perpetrators of all kinds.
0:04:47 So hear me when I say, I know Donald Trump’s tight.
0:04:51 As a fellow former prosecutor, I really admire that background in her.
0:04:57 Can you imagine ways in which that background can be useful as perhaps president of the
0:04:58 United States?
0:05:06 Well, in a funny way, you have such ultimate power as a prosecutor over your one single
0:05:07 case.
0:05:13 I found that really good preparation for having power in other settings.
0:05:18 What did you learn from being a prosecutor that helps you in your role as a college president?
0:05:21 It’s the only kind of lawyer where your ethical duty is not to represent a client, but to
0:05:23 do justice.
0:05:24 That is what you’re charged with.
0:05:30 And so I spent as much time talking to witnesses or defendants who are cooperating about how
0:05:34 they ended up there and what their lives were like and really learning who they were as
0:05:40 people in ways that I don’t know is typical of people in that job, but I really loved.
0:05:43 Tell me maybe your most memorable case.
0:05:53 I had a case where a high school teacher helped an old buddy who was in prison collect some
0:05:54 packages.
0:05:56 That isn’t going to end well.
0:05:57 No.
0:06:02 And it was just one of the most fascinating cases about human beings and how we delude
0:06:03 ourselves.
0:06:07 A high school teacher whose old buddy from high school, the popular kid who would never
0:06:14 talk to him in high school, finally reached out from prison to see if they could be friends.
0:06:19 And he out of so many high school drama kind of psychology decided, “Oh, sure, I will accept
0:06:23 these packages coming in the mail without knowing what they are,” and got dragged into
0:06:25 this whole drug scheme.
0:06:28 So the teacher who got dragged into it cooperated.
0:06:31 No one else would have been brave enough to do it because he was up against the major
0:06:32 kingpins.
0:06:34 He’s your witness then?
0:06:35 He’s my witness.
0:06:39 And we were going against the person who was running a heroin scheme from jail.
0:06:45 But it took a long time to just get him to admit his real emotions rather than have bravado
0:06:47 on the stand.
0:06:51 And finally, after berating him and prep, got him to admit, “I was afraid.”
0:06:53 I mean, I don’t blame him.
0:06:54 Did you in that case?
0:06:55 Yes.
0:07:02 So when I think of the Jesuit tradition, I think of inquiry and intellectualism.
0:07:07 And I think especially of the concept of discernment, which I gather is very important within the
0:07:08 tradition.
0:07:13 And it strikes me that discernment is fairly absent these days, at least in the public
0:07:14 square.
0:07:19 One reason I wanted to speak with you today, because I figured you could teach me and all
0:07:24 of us a little bit about how to get in touch with that, maybe apply it.
0:07:30 So I’d like you to define discernment as you see it and describe how you try to spread
0:07:34 that as a president of a Jesuit university.
0:07:40 It is basically the opposite of social media in shorthand.
0:07:48 So discernment means to take time to consider a big decision and not to jump to conclusions.
0:07:50 It means being open and curious.
0:07:55 It means assuming good intentions of the person you’re disagreeing with, which we are all
0:07:57 very bad at right now.
0:08:03 And it means being self-aware enough of your own biases and filters that you realize what
0:08:06 will prevent you from seeing the truth.
0:08:12 And right now, I think we’re all feeling the pressure to teach those skills to our students,
0:08:17 especially this fall as we approach the election and all the turmoil that society’s going
0:08:18 through.
0:08:22 How do we double down on teaching those skills when they have become so counter-cultural?
0:08:28 Yeah, but I would imagine that you are recruiting for students who already buy into the notion
0:08:30 of discernment, no?
0:08:31 It’s chicken and egg, right?
0:08:37 The students who are attracted to us tend to have this sense of purpose.
0:08:41 And I will say the two Jesuit institutions I’ve led have student communities who don’t
0:08:46 lean into self-righteousness in quite the same way that young people are tempted by
0:08:47 right now.
0:08:52 What do you think would happen if you could play some version of Freaky Friday and bring
0:09:01 the entire educational architecture of Fordham to a place like Harvard or Penn for a week
0:09:07 and apply all the layers of discernment in education there?
0:09:10 How would that go over with those student bodies, do you think?
0:09:16 Well, there is a freedom I find in being in a religious institution where I don’t have
0:09:21 to be afraid to talk about values in my out loud voice in quite the same way that in a
0:09:27 secular institution, we were just so afraid of offending by having any reference to religion
0:09:28 at all.
0:09:34 Can you give an example of some kind of conversation you might have liked to have at Tulane where
0:09:38 you felt it wouldn’t be accepted?
0:09:44 When we would talk about diversity there, we were left to some of the more tepid values
0:09:46 of hospitality and welcome.
0:09:52 And when I talk about it at a Jesuit institution, I’m able to really lean into the fact that
0:09:59 our faith believes profoundly in the equality and human dignity of every single person,
0:10:04 that we believe that we owe people more when they need more.
0:10:09 Pope Francis, who’s the first Jesuit pope, has said that some universities I know in
0:10:14 America are too liberal and he accused them of training technicians and specialists instead
0:10:15 of whole people.
0:10:17 I’m curious for your take on that.
0:10:23 Well, it’s interesting because this parallel attack in this country on the value of liberal
0:10:30 arts and for us as Catholic institutions, we cling to our core curriculums fiercely.
0:10:33 In this country, it’s not really a liberal problem.
0:10:39 It’s more from the other side, this mocking of English majors as if much of the powerhouse
0:10:41 of this country didn’t major in English, right?
0:10:48 And when we talk to employers, they’re desperate for us to teach those kind of emotional intelligence,
0:10:53 communication, critical thinking skills that you learn in philosophy and English and all
0:10:57 of those kinds of courses because that’s really hard to teach on the job.
0:11:01 They can teach technical skills on the job and frankly, the technical skills we teach
0:11:06 are often defunct by the time the kids graduate, right?
0:11:09 Those change too much.
0:11:13 So Fordham is a Catholic university, but the share of students who describe themselves
0:11:15 as Catholic surprised me.
0:11:17 Can you talk about that?
0:11:19 It’s about 40%.
0:11:25 We became religiously pluralist in a way that’s kind of a hidden story of American higher
0:11:26 ed.
0:11:32 Catholic students were not always welcome in the first half of the 20th century and before
0:11:36 at elite institutions, which we sometimes forget were founded as Protestant institutions
0:11:42 and had attitudes towards really immigrants, Irish Italians, others coming in off the ships
0:11:47 and not wanting them there in the same way they created quotas and caps for Jewish students.
0:11:52 And so Catholic schools, when they were founded, were full of Catholics who did not have other
0:11:56 options and we welcome Jewish students who often did not have other options.
0:12:01 When those doors opened, we had some of the same dilemmas of women’s colleges and HBCUs
0:12:03 of what do we do?
0:12:07 And so we very much welcome students from all face and it changed who we are.
0:12:10 We became very ecumenical.
0:12:14 But now far more of our student body is just secular.
0:12:17 They were raised with no religious tradition whatsoever.
0:12:23 When I look at the student population at Fordham, I see that it’s got about 40% of what are
0:12:31 called underrepresented populations, 17% Hispanic, Latino, 13% Asian, 5.5% Black.
0:12:35 It strikes me that you’re significantly more diverse than a lot of the very liberal schools
0:12:38 that talk about diversity a lot.
0:12:40 How does that happen?
0:12:44 Well, partly success begets success.
0:12:48 To come to a school that is already diverse means you have strength in numbers, where
0:12:51 you won’t be alone.
0:12:55 And I think it really helps to be in New York, a place that is already so diverse.
0:12:59 We get to recruit in our backyard, we get to attract people to a city that has everyone
0:13:02 in the world here.
0:13:09 I’m curious how the Jesuit tradition and Catholicism generally intersect with the politics of
0:13:10 this moment.
0:13:17 Many of my Catholic friends and family members are really torn because they don’t like Donald
0:13:21 Trump as a person or a candidate for a variety of reasons.
0:13:23 But they do really like the fact that he’s created a Supreme Court that has put much
0:13:25 stricter limits on abortion.
0:13:28 And I’m curious how that plays out at Fordham.
0:13:33 Well, Catholic doctrine does not neatly fit in either political party, because in many
0:13:39 ways it’s the opposite of libertarianism, which also doesn’t neatly fit in either party.
0:13:46 So Catholic teaching would be somewhat more conservative, restrictive on social issues,
0:13:50 but far more progressive on economic issues than the Republican Party.
0:13:55 Catholic social teaching to many more conservative Catholics seems incredibly radical, but it
0:13:58 is, in fact, the doctrine we’ve had for a very long time in the church, and it’s pretty
0:14:01 clearly what’s in the Gospels.
0:14:04 Give an example of that for those who don’t know.
0:14:08 The Catholic Church believes profoundly in caring for the poor as a priority, caring
0:14:14 about the right to organize labor, racial justice, all of those kinds of issues that
0:14:21 don’t neatly fit with a Republican Party that does care about restricting abortion and
0:14:22 other things.
0:14:28 In American society, we’ve always had a balance that was critical between individual rights
0:14:32 and a sense of community and responsibility.
0:14:35 That balance is really out of whack right now.
0:14:40 We’ve leaned so heavily into individual rights, which are crucial, but if they’re unmoored
0:14:45 from the idea of community, of what we owe each other, they’re really quite dangerous.
0:14:48 If we’re all in it for ourselves, who are we?
0:14:53 And so what Catholic teachings really offer is a reminder that we do have to care about
0:14:58 community, that we have not just rights, but responsibilities.
0:15:02 After the break, the friction between rights and responsibilities and how it played out
0:15:04 at Fordham this past spring.
0:15:07 You don’t point bullhorns at the library during study session.
0:15:08 I’m Stephen Dubner.
0:15:09 You’re listening to Free Economics Radio.
0:15:10 We will be right back.
0:15:25 As President of Fordham University, Tanya Tetlow oversees roughly 17,000 students and
0:15:26 750 faculty.
0:15:31 The biggest majors are in finance, psychology, and government.
0:15:35 Fordham also has several prestigious graduate programs in business and law, education and
0:15:39 social work, and even some theology still.
0:15:44 The school is split between two main campuses, both in New York City, one in the Rose Hill
0:15:48 section of the Bronx, the other at Lincoln Center in Manhattan.
0:15:51 Those two campuses are about nine miles apart.
0:15:56 If you walked from one Fordham campus to the other, you would pass right through Columbia
0:15:58 University.
0:16:04 This past spring, as pro-Palestinian demonstrators set up encampments at many schools, Columbia
0:16:09 had some of the most intense protests, which led to more than a hundred arrests.
0:16:11 So what was happening at Fordham?
0:16:13 I asked Tetlow to describe it.
0:16:21 We have students who are from Palestine who are very worried about parents and grandparents
0:16:22 they can’t get in touch with.
0:16:28 They’re going through all the stages of grief and trauma, and they’ve been extraordinary.
0:16:33 And I’ve also felt, you know, if yelling at me will make you feel better for even half
0:16:34 a minute, go for it.
0:16:38 It is my honor because they are feeling so powerless.
0:16:45 We also have members of our community who are Jewish and Israeli and who lost family
0:16:47 members on October 7th.
0:16:54 And so it made me realize how close New York is to the Middle East and of how profound that
0:16:57 pain is for part of our community.
0:17:03 And so what was really impressive this year is student activists did prayer vigils and
0:17:08 they did teachings and they talked and they listened and they engage with complexity and
0:17:14 they really tried to do the work of expressing outrage at that which they are outraged by,
0:17:21 but without just yelling at the nearest authority figure or trying to disrupt the right of their
0:17:28 fellow students to learn, that got ratcheted up when the clearing out of Hamilton Hall at
0:17:29 Columbia happened.
0:17:30 By the police, we should say.
0:17:31 By the police.
0:17:32 Yeah.
0:17:38 By the next morning, students who told us later were really upset by that came and started
0:17:42 a little encampment in a classroom building in our Manhattan campus.
0:17:48 We persuaded most of them to leave, but we did end up having the police arrest on minor
0:17:52 misdemeanors, about 15 mostly students.
0:17:59 So that was painful because, you know, how do you navigate the rights of our 17,000 students
0:18:05 to learn on the CASPA finals with the rights of those dozen students to express themselves
0:18:06 and to protest.
0:18:07 And it was really hard.
0:18:08 And what happened then?
0:18:11 Did it deescalate after those arrests?
0:18:12 Yes.
0:18:18 I’ve read that when you were a kid, your father, who was a psychologist and professor and also
0:18:23 counseled prisoners, that he had a sign on his desk that said, “Question authority, but
0:18:26 politely and with respect.”
0:18:35 How do you feel that slogan relates to, let’s say, the campus politics around this particular
0:18:36 issue at Fordham?
0:18:41 Was authority questioned politely with respect and fruitfully or not really?
0:18:44 I think for the most part it was.
0:18:50 We met with student activists and they have been profound and persuasive and respectful
0:18:53 and thus very effective, right?
0:18:57 Going to people and saying, “I think that you’re an evil, awful person and I’m going
0:18:59 to scream at you until you agree with me.”
0:19:00 Doesn’t work.
0:19:01 It feels good.
0:19:04 It’s venting, but it is not the same as activism.
0:19:09 We have always authorized any request to protest on our campus at Student Spring Us.
0:19:11 We’re at 100% with that.
0:19:14 But what we navigate with them is, you know, you don’t point bullhorns at the library during
0:19:15 study session.
0:19:21 You find ways to make your ability to express yourself, not have to disrupt the education
0:19:22 of your fellow students.
0:19:26 And so when we think about those restrictions, we need to think about them, both for protest
0:19:28 we agree with and those we don’t.
0:19:34 You can’t just imagine that the protesters are expressing a cause that you believe in.
0:19:37 You also have to imagine one that you might find repugnant because the rules have to be
0:19:40 the same for both or we lose credibility.
0:19:46 I know that back in 2016, which predates your presidency by quite a few years, there was
0:19:51 a movement by Fordham students to start a chapter of Students for Justice in Palestine,
0:19:55 which is a national organization, and that was at the center of many of the campus protests
0:19:57 last year, and that was denied.
0:20:03 I believe there was a court case around that, and the court upheld the Fordham decision
0:20:04 if I’ve got that correct.
0:20:05 Yes.
0:20:10 And I also know that according to the Foundation for Individual Rights and Expression Fire,
0:20:15 which looks at free speech on campuses, Fordham ranks in the bottom 10 for colleges or universities
0:20:17 across the country.
0:20:21 So how do you as a president try to create a balance where you’re not limiting free speech,
0:20:30 but also not turning your campus into a hotbed where it can’t accomplish the central purpose?
0:20:34 First of all, those fire rankings, we don’t really understand how they come to them.
0:20:37 It is always tricky, right?
0:20:42 At Fordham, we famously, it got litigated, suspended a student who after a verbal argument
0:20:47 with fellow students went and bought an assault rifle and then posted that on social media.
0:20:51 If he had shot up the campus, we would have been reamed if we had not done anything.
0:20:57 It was so obvious a warning, but by suspending him, we got really attacked by some free speech
0:21:01 purist groups saying, “How dare you, it’s just because you’re against guns,” right?
0:21:07 So those are the kinds of lines we have to navigate every day, and what I find really
0:21:14 a shame right now is those who push for more speech on campus have suddenly flip-flopped
0:21:15 on a lot of those issues, right?
0:21:19 Now they’re yelling at us because we don’t suppress speech more.
0:21:23 This would have been a moment to really stand up and say, “We find some of these protests
0:21:28 to be anathema and disturbing, but this is what it looks like to put up with speech that
0:21:29 you disagree with.”
0:21:34 But instead, we’re just being called hypocrites because we don’t suppress it, and they’re
0:21:37 being hypocrites and accusing us of hypocrisy.
0:21:42 So it’s very head spinning because what remains is the question of are you for this freedom
0:21:43 or are you not?
0:21:50 Do you have any evidence that discernment, as we discussed earlier, can help fight polarization
0:21:54 or these kind of standoffs in the moment?
0:22:00 I know from our faculty that every day in the classroom, they try to not just teach knowledge
0:22:06 but the skills of discernment, of what it means to have reflective practices where we’re
0:22:10 going to really think about what we learned and stop and take time.
0:22:15 This is something that, as a law professor as part of our ethos, I need for you to articulate
0:22:19 the other side of the argument, not because we’re morally relativists, but because you
0:22:24 can’t know the strength of your belief until you’re willing to think about the other side.
0:22:28 And as a lawyer, your job is to argue the best case for whoever you end up representing,
0:22:32 which I guess is a way to train and seeing the other side, yeah?
0:22:33 Right.
0:22:37 I mean, legal education has a leg up in this because we’ve always done this work.
0:22:43 And I think our faculty do a brilliant job of navigating how to take the temperature down
0:22:48 when people disagree, how to say, “Okay, you are attacking the other student who you disagree
0:22:49 with.
0:22:50 You’re attacking them personally.
0:22:51 You’re assuming they have bad intentions.
0:22:53 You’re not listening to them.”
0:22:55 Are you sure this is the job you want?
0:22:56 I mean, it’s a hard job.
0:23:02 It is a very hard job, but I do love it because it matters, and sometimes things are hard
0:23:03 because they’re important.
0:23:09 So one way universities are important, or at least supposed to be, is as an institution
0:23:11 that can build social trust.
0:23:16 Researchers who study this argue that universities and the military and even sports teams are
0:23:21 places that do this well because in each case, you’ve got a bunch of individuals from different
0:23:27 backgrounds coming together with a common goal, or at least as part of a community.
0:23:32 And I’m really curious how you think about, I mean, this is an absurd and large question,
0:23:39 but how you think about the rights and role of the individual in a community or a society
0:23:42 today with Fordham as the microcosm of that.
0:23:46 Well, universities are one of the places of great hope.
0:23:51 We do bring people together, and that’s not just the obvious demographics.
0:23:53 It’s also rural and urban.
0:23:55 It’s different backgrounds economically.
0:23:59 It’s just different upbringings, and we’ve leaned into that from a progressive point
0:24:04 hard, but also that they find commonality, that they have so much more in common when
0:24:05 they least expect it.
0:24:14 I think that our job is to express both and to treat diversity as we used to be allowed
0:24:17 to do before the Supreme Court banned it, but about that quality of community and what
0:24:18 it means.
0:24:21 And so the court has continued to allow that in the military academies because they understand
0:24:24 exactly how valuable it is there.
0:24:30 They’ve now forbidden us from overtly considering that in admissions, but regardless, we have
0:24:37 the opportunity in our communities to really encourage, nudge, persuade students to know
0:24:39 each other to lean into that.
0:24:45 For example, Greek life can be wonderful, but it can also divide.
0:24:46 So we don’t have that here.
0:24:51 We try to find ways to get students to bond that aren’t the obvious finding people from
0:24:55 exactly your tribe, but really reaching out across that.
0:24:56 But it is …
0:24:57 What’s it, for instance, of that?
0:25:03 Of kind of making student organizations really more about interest than about identity or
0:25:07 self-selection and exclusivity.
0:25:11 One of the most important places we teach is in the residence halls, right, of how we
0:25:16 use peer mentoring because we have RAs who are just a little bit older than the students
0:25:21 that they’re mentoring and thus have credibility that we don’t, and of how they’re on the front
0:25:26 lines of navigating that profound loneliness that modern society has created.
0:25:32 Social media sort of buries them in connection that is empty, especially after COVID when
0:25:35 they were literally isolated.
0:25:39 They have to learn the skills of how to really be with each other, and we’re now having
0:25:46 to teach that in ways that we didn’t 10, 20 years ago.
0:25:51 After the break, Tanya Tetlow on university finances and pricing.
0:25:55 We’re stuck in a really stupid pricing model.
0:25:56 I’m Stephen Dubner.
0:25:57 This is Freakonomics Radio.
0:25:57 We’ll be right back.
0:26:13 Tell me a little bit about the finances of Fordham, maybe operating budget, and I’m just
0:26:16 curious to know how things are looking.
0:26:17 It’s going well.
0:26:22 We’re not in the kind of crisis that most of higher ed is in right now financially,
0:26:25 but it’s still a squeeze every year.
0:26:29 We’re hitting the ceiling of what American families can afford to pay.
0:26:35 In a world where we very much want to have normal and fair and generous pay increases
0:26:39 for all of our employees, we’re basically a service industry.
0:26:44 Most of our budget goes to our people, and so those pressures are hard because we’re
0:26:47 pretty tuition dependent to pay for that.
0:26:49 Our budget’s about 700 million.
0:26:51 Most of that is for the people we hire.
0:26:56 It’s very labor-intensive work to teach and serve, and then maintain a campus.
0:26:58 What’s your endowment for Fordham?
0:27:00 It is just about a billion.
0:27:04 Okay, so that sounds like a lot of money to the average person, except Harvard’s is 50
0:27:05 billion.
0:27:06 Exactly.
0:27:11 It’s hard fought for a school that mostly taught first generation students for so many
0:27:13 decades, almost two centuries.
0:27:19 It’s sort of like a museum endowment, that that interest on that is what supports us.
0:27:23 In our case, it very specifically supports primarily scholarships.
0:27:26 For us, it’s maybe 5% of our budget.
0:27:31 It’s not like an Ivy League that’s no longer dependent on tuition because they get so much
0:27:33 revenue from their endowment.
0:27:37 What would you do if you had a 50 billion endowment at Fordham?
0:27:41 We’d be able to fully meet need for all of our students first and foremost, which would
0:27:43 be a joy.
0:27:47 We’d invest in everything that we want to do in our ambitions.
0:27:48 What would that be?
0:27:52 It would be research, but it really matters to keep that in balance with the quality of
0:27:54 our teaching.
0:28:00 Research prowess that also means those faculty are in the classroom every day teaching students.
0:28:06 We are so strong in the humanities and law and business, and to really be relevant and
0:28:11 at the table, we need to connect with what’s going on in AI, with how to wake people up
0:28:17 about climate change and find answers to the threats to democracy all over the world.
0:28:19 Which is just absurdly expensive.
0:28:22 Fordham is in the $60,000 a year range tuition.
0:28:23 Is that right?
0:28:24 Yeah.
0:28:31 Talk about how you deal with financial aid, whether it’s need-based and also merit aid.
0:28:37 We are need-blind in admissions, but we are not one of the handful of schools wealthy
0:28:39 enough to fully meet need.
0:28:41 That is our biggest priority.
0:28:45 The biggest part of our budget is making ourselves affordable.
0:28:50 We’re starting to try to shift more of our money from merit aid to financial need.
0:28:53 The advantage of merit aid is you attract top students.
0:28:56 You make them feel more special because of the scholarship.
0:29:01 The disadvantage is, of course, some of those students who are the top students also have
0:29:03 need, but some of them don’t.
0:29:07 You’re spending money that you’d rather spend on those who can’t afford to be there.
0:29:11 But we’re stuck in higher ed in a really stupid pricing model.
0:29:16 The part that we know about is the price discrimination where we charge the wealthy what they can afford
0:29:19 to pay and thus supplement those who can’t.
0:29:24 But the part that I think is hidden is that the market really drives sticker price being
0:29:28 high because sticker price signals quality.
0:29:32 The elite schools tend to have more of the barbell, the very wealthy and those really
0:29:33 struggling.
0:29:38 Most of us have far more of the middle class who often, frankly, get squeezed out of the
0:29:39 elite schools.
0:29:44 When schools like ours reduce our sticker price to what we tend to actually charge on
0:29:50 average, those schools have tended to fail because the consumer is suspicious that that
0:29:53 school is not as good because it does not charge as much.
0:29:57 So what is your actual average price at, let’s say, an incoming freshman will pay this year
0:30:02 with a sticker price of around $60,000, what will the actual average be?
0:30:03 $30,000.
0:30:04 Wow.
0:30:07 There have been accusations that colleges and universities have colluded in the past.
0:30:09 Sometimes they’ve been busted for it.
0:30:12 There are others who argue that they should collude more.
0:30:16 And I would think that this would be a case where collusion would be good to fight this
0:30:17 very problem that you’re talking about.
0:30:19 Has there been any progress toward that?
0:30:24 So there’s a world where we would all say, okay, let’s all lower our prices to what we
0:30:30 really charge because that sticker price is so disheartening and so scary to those without
0:30:33 the sophistication to understand it’s not real.
0:30:34 But we’re not allowed to do that.
0:30:36 We can’t collude on price.
0:30:40 So this is where the market is, you know, it sounds silly except that when you go to
0:30:48 buy, you know, a jacket and there’s one jacket that’s $100, that’s 50% off and one jacket
0:30:52 that’s $50, even if they’re the same jacket, you’re going to go for the first one, right?
0:30:55 This is human psychology, this is how we all behave.
0:30:59 And if you get the 50% off because you are special, because you earned the scholarship,
0:31:01 it makes you feel even better about it.
0:31:05 And so it is very hard for us to break out of the system.
0:31:09 Let’s talk a little bit about growing the size of student populations.
0:31:14 Historically, the college population in the US rose and rose and rose and rose and rose,
0:31:18 but then it hit what looked to be a bit of a ceiling and it’s come back down a little
0:31:19 bit.
0:31:23 There are some schools, however, who just don’t like to grow.
0:31:26 There’s research by these two economists, Peter Blair and Kent Smetters, that finds
0:31:31 that elite colleges have mostly capped their enrollment numbers since the 1980s.
0:31:36 Their argument is that those caps have to do with mostly universities wanting to maintain
0:31:39 their prestige, protect their reputations.
0:31:43 And they argue in a kind of quiet voice that this is a shame, the idea being that if these
0:31:48 universities are so good and so elite at educating people, they should educate more people just
0:31:52 like any firm that’s successful wants more customers, not the same number.
0:31:58 So let’s just start with that, your thoughts on the notion that elite schools keep their
0:32:05 populations about the same, why they do that and why you’re not thinking like that.
0:32:10 When you look at when elite schools stopped growing, it was exactly the same time US news
0:32:12 introduced the rankings.
0:32:18 And those rankings until very recently encouraged a major category of selectivity.
0:32:22 They created these profound incentives for all of us, but the elites who battle with
0:32:28 each other for top dog to reject as many students as possible, that’s how you were measured.
0:32:34 The elites get status and prestige and very specifically rankings by virtue of how low
0:32:35 that acceptance rate is.
0:32:41 My favorite satirical headline once was Stanford achieved 0% admission rate.
0:32:44 It was a joke, but it was something very real.
0:32:45 Just barely.
0:32:46 Yep.
0:32:47 Yes, exactly.
0:32:53 After we’ve landed, the idea that the solution to this is to get a few thousand more students
0:32:57 into those elite schools, I think begs the question of why they are the answer.
0:33:03 Because what the rankings also did is it took a higher ed system of glorious complexity
0:33:08 and variety, about 4,000 nonprofit schools, and it put us in line order when really we’re
0:33:10 in clumps of ties.
0:33:15 And it was never true that you could only get a good education at a handful of schools.
0:33:19 I think to buy into that, to say that that should be the focus really ignores the fact
0:33:23 that there are probably 100 universities in this country that provide the same kind of
0:33:25 academic excellence.
0:33:31 And we need to remind ourselves of that, because the more we just play into the rankings game
0:33:35 of chasing status, the more alumni get status from giving to those universities.
0:33:40 We’ve really ratcheted up the cleaving between the haves and have nots, and that gets worse
0:33:41 and worse.
0:33:46 So Fordham, I believe, has increased enrollment by about 10% over the past 10 years.
0:33:48 Does that sound about right?
0:33:49 I think so, yeah.
0:33:50 So talk to me about that.
0:33:55 When you’re trying to grow, especially in a city like New York, what are the big challenges?
0:33:57 Are there enough good professors?
0:33:58 What does it mean for facilities?
0:34:01 Are there enough students that you want and so on?
0:34:07 The biggest challenge is students, because right now we have a demographic downturn in
0:34:14 the number of 18-year-olds generally, and that will peak 18 years after the 2008 recession
0:34:15 started.
0:34:19 People dramatically had fewer children, but we also have a drop in the percentage of
0:34:23 Americans going to college, and that has been rather dramatic.
0:34:30 It’s a mix of COVID and then most recently of the FAFSA form debacle.
0:34:35 So you may have seen in the news, but the Department of Ed stumbled for all sorts of
0:34:38 reasons to redo the FAFSA form.
0:34:45 In case you haven’t seen the FAFSA debacle in the news, FAFSA stands for Free Application
0:34:46 for Federal Student Aid.
0:34:49 It is administered by the federal government.
0:34:54 This past admission season, there were technical problems that meant FAFSA came online three
0:35:02 months late and then sent inaccurate financial aid offers to around a million applicants.
0:35:07 What it means is that for most schools, they’re looking at a decline in their populations
0:35:11 and in community colleges, especially a quite dramatic one.
0:35:18 So for any school other than the very, very elites to grow is not possible right now.
0:35:22 What I worry about is that for most of higher ed, they’re just not going to be able to
0:35:25 make it anymore, and the country will suffer so much from that.
0:35:31 We understand still as a society that K through 12 is a right, is not seen as some kind of
0:35:36 commie experiment, but somehow higher ed is not seen as a right anymore.
0:35:41 After World War II was the last time the economy really shuttered to a halt because we weren’t
0:35:43 building weapons anymore.
0:35:48 And Congress made the brilliant decision to invest in all those millions of veterans
0:35:53 coming home from the war who would not have jobs to say, “We will pay for your education.”
0:35:59 And it fueled so many Nobel Prizes and Pulitzers and the rise of the middle class in the ’50s
0:36:01 and global economic dominance in the world.
0:36:06 It was such a smart thing to do, and yet now we’re doing the opposite.
0:36:10 The Pell Grants, which when they were unveiled in the ’70s were enough to cover tuition room
0:36:14 and board for most schools, now are a pittance.
0:36:18 And states are disinvesting from their public institutions.
0:36:19 China’s not doing that.
0:36:24 The public’s perception of academia has fallen a lot.
0:36:28 It began on the right, but now the left is catching up.
0:36:32 There are many perceptions out there, one of which is that college campuses can be hostile
0:36:34 to young men.
0:36:38 Fordham is now majority female, I was surprised to see.
0:36:42 There’s another perception that colleges are hostile to anyone who leans even a little
0:36:46 bit conservative in any dimension, students and faculty.
0:36:51 There’s the perception that it’s too expensive, it’s too exclusive, it’s not useful enough
0:36:52 in the real world.
0:36:56 So how are you reckoning with that general perception of decline?
0:37:02 Well, it’s hard because there’s great political benefit to tearing down trust in institutions.
0:37:06 It’s easy to do, it resonates with people who are understandably cynical.
0:37:10 And once you’ve done it, it’s done, and it’s very hard to rebuild.
0:37:14 All of higher ed has become majority female, and that’s a much deeper topic to grapple
0:37:17 with than when I worry about as well.
0:37:21 You worry because there are all those men who are not getting involved in that kind
0:37:22 of system?
0:37:23 Exactly.
0:37:28 I think men are opting out of the opportunities that they need in an increasingly knowledge
0:37:33 based economy, and we will all suffer as a result of that, and so I worry about that.
0:37:37 So the return on investment is sort of laughable because when you look at the data, it is so
0:37:42 clear the financial return on investment, which just proves that you can make things
0:37:43 up and they stick.
0:37:49 And I would say that part of what I find really offensive are politicians saying that it’s
0:37:53 not worth it to go to college, none of whom say that to their own children.
0:37:55 None of whom didn’t go to college either.
0:37:56 Exactly.
0:37:57 And law school on top of that.
0:37:59 And graduate school.
0:38:05 So we become a political football of late in ways that make us really vulnerable, but
0:38:11 what’s so sad about that is the countries against whom the US competes, none of them are disinvesting
0:38:13 from education right now.
0:38:20 We are shooting ourselves in the foot in profound ways when we decide for political points,
0:38:25 we will take away one of the great higher education systems in the world that’s been
0:38:27 the envy of the world for so long.
0:38:32 We’re going to keep pulling back from it, pulling funds, pulling credibility and trust,
0:38:36 all for scoring political points in a temporary way.
0:38:41 If we’re going to talk about the attacks on institutions generally, let’s not ignore
0:38:44 the one that you’re associated with, which is the Catholic Church.
0:38:49 That’s a case where it mostly revolved around the priest sex scandals that have been revealed
0:38:53 and the coverups really of the past 30 or 40 years.
0:38:58 I haven’t seen numbers lately on the perception of the Catholic Church as an institution,
0:39:03 but I’m guessing it’s fallen very similarly to the way the reputation of colleges and
0:39:04 universities have.
0:39:12 The trust in religious institutions generally plummeted a while back, and then of course
0:39:16 trust in the Catholic Church, given the scandals, deservedly plummeted.
0:39:21 What I know from having spent much of my career fighting against sexual abuse is that that
0:39:28 denial, those coverups, the level of abuse still exists in all other institutions that
0:39:33 have trusting relationships over children, and my worry is we’re not learning the painful
0:39:35 lessons the Church learned.
0:39:37 What other institutions do you mean?
0:39:44 We’re seeing scandals emerge from Boy Scouts, from other religious institutions, but also
0:39:49 the vast majority of child sex abuse happens within families.
0:39:53 What I used to do every day was to go into court and beg judges to care about that, and
0:39:57 they found it so depressing that they just decided it was made up most of the time.
0:40:03 That’s a whole other episode, but the reality is, again, these problems weren’t unique to
0:40:04 the Church.
0:40:08 The Church really messed it up, and my hope is that everyone else will stop being in
0:40:11 denial about where we still have a crisis.
0:40:15 Do you have much of a relationship with the Cardinal of the Archdiocese of New York?
0:40:16 Yes.
0:40:21 Cardinal Dolan and I get together at least once a year, if not more often.
0:40:28 It’s not that Catholic universities report to the Church, nor do we get funding from
0:40:33 them, but we exist in relationship, and I’m lucky in that it’s a very friendly and cordial
0:40:34 relationship.
0:40:40 Do you think it makes sense that academic institutions like Fordham have such big tax
0:40:44 advantages in a city like New York?
0:40:49 If you look at the biggest landowners in New York, two of them are universities, Columbia
0:40:56 and NYU, and then the Catholic Church is another big one, and they’re all tax exempt, and you
0:40:59 at Fordham are kind of at the sweet spot of those two.
0:41:04 Does that make sense to you in a 21st century tax environment?
0:41:06 Here’s why it does.
0:41:13 When you are taxing a for-profit entity, you are creating a business expense, you’re taking
0:41:17 off a profit margin to fund city institutions.
0:41:23 The idea, in general, is that if you are a nonprofit civic organization doing good for
0:41:26 the world, we’d rather you spend your money doing that.
0:41:31 We are huge economic engines for cities, Senator Moynihan had a great quote that if you want
0:41:36 a great city, build a university and wait 200 years.
0:41:40 If you were to design what will make an economy flourish, it would not just be the infrastructure
0:41:44 taxes pay for, it would be great universities.
0:41:50 If we were looking ahead to Fordham, let’s say 20 or maybe even 50 years from now, in
0:41:54 what significant ways would you like it to be very different than it is today?
0:41:57 You can keep all the good stuff, but what would you like to change?
0:42:04 I think when I look ahead, deep down, that what I would like us to do is to not chase
0:42:05 status.
0:42:10 It’s just to do good for the world, and that has become ever more crucial because the problems
0:42:17 of the world just seem so urgent and full of despair, and so that we look back on our
0:42:20 careers here at Fordham and know that we mattered.
0:42:25 Not about silliness, it doesn’t matter, but we have hundreds of thousands of living alumni,
0:42:28 and they matter every day in ways we’ll never see.
0:42:35 Did we have a profound impact on the kind of ethics and empathy and work that they do
0:42:36 every day?
0:42:43 I’d like to thank Tanya Tetlow, president of Fordham University for a conversation that
0:42:47 was much meatier than many conversations I hear these days with people in positions
0:42:54 of authority, so I appreciate her forthrightness and her courage in saying how she really
0:42:57 sees things, or at least what I think is how she really sees things.
0:43:02 Maybe I’ve been the target of a massive con job, but I don’t think so.
0:43:06 One reason I wanted you to hear this conversation today is because next week we are going to
0:43:11 start playing for you an updated version of one of the most important series we’ve ever
0:43:17 made about the economics of higher education, the supply and the demand, the controversies
0:43:22 and the hypocrisies, the answers and the questions.
0:43:25 Why are more women going to college than men?
0:43:29 What happens when black and Hispanic students lose admissions advantages?
0:43:32 How does the marketplace for higher education operate?
0:43:37 I tell you something, it’s a darn good question.
0:43:38 That’s next time on the show.
0:43:43 Until then, take care of yourself, and if you can, someone else too.
0:43:46 Free Economics Radio is produced by Stitcher and Renbud Radio.
0:43:52 You can find our entire archive on any podcast app, also at freeconomics.com, where we publish
0:43:54 transcripts and show notes.
0:43:58 This episode was produced by Zach Lipinski with help from Dalvin Abouajie.
0:44:03 Our staff also includes Alina Cullman, Augusta Chapman, Eleanor Osborne, Elsa Hernandez,
0:44:08 Gabriel Roth, Greg Rippen, Jasmine Klinger, Jeremy Johnston, John Schnars, Julie Canford,
0:44:13 Lyric Bowditch, Morgan Levy, Neil Caruth, Rebecca Lee Douglas, Sara Lilly and Theo Jacobs.
0:44:16 Our theme song is “Mr. Fortune” by The Hitchhikers.
0:44:19 Our composer is Luis Guerra.
0:44:25 As always, thanks for listening.
0:44:42 We have always—sorry, I can’t think of the word.
0:44:45 (gentle music)
0:44:47 you

0:00:08 Andrew Yang is a politician, an entrepreneur, an author.
0:00:12 We’ve had him on the show a few times, most recently to talk about voting reform in an
0:00:16 episode called Why Don’t We Have Better Candidates for President?
0:00:23 He is enthusiastic about voting reform, especially open primaries and ranked choice voting.
0:00:27 He’s also enthusiastic about the idea of a universal basic income, which he brought
0:00:32 to mainstream attention when he ran for president in 2020.
0:00:37 Yang is enthusiastic about a lot of interesting ideas, which is a big reason I like speaking
0:00:38 with him.
0:00:42 One of these ideas is something that I’m enthusiastic about too.
0:00:47 This idea has been around for a while, but it’s still pretty obscure.
0:00:53 So today, on Freakonomics Radio, we would like to give it a bit of exposure and maybe
0:00:55 it’ll catch fire.
0:01:00 This idea has a variety of names, so I asked Andrew Yang what he likes to call it.
0:01:09 I’ve been using multivariate economy, but that is sexy, yeah, multivariate economy.
0:01:13 But we can use time banking, it’s probably the most popular.
0:01:20 Time banking can also be known as time dollars or human dollars or labor certificates.
0:01:22 The idea is pretty straightforward.
0:01:29 You set up a system in which people agree to use time as a measure of value, not replacing
0:01:33 money, but creating a parallel human-centered economy.
0:01:40 You can imagine it being a time barter system on steroids enabled by modern technology.
0:01:42 Talk about the mechanics of it, how it would actually work.
0:01:49 Maybe just give one example, how this human dollar, let’s call it, gets spent and shared.
0:01:52 What are the tasks that create the value?
0:01:57 So I put myself out there and say, “Hey, guys, I’m not good at a lot of things, but
0:02:03 I am good at tutoring kids in middle school math and reading.
0:02:07 So if anyone needs a tutor for this, I’m going to be your person.”
0:02:10 And you say, “I’m offering X number of hours a week.”
0:02:14 Yes, I’m offering X number of hours a week here where I’m located.
0:02:19 If you take me up on this and then I show up and then you sign off and say, “Yes, he
0:02:22 actually did show up and he did a good job and here’s a picture of him with my child
0:02:29 and it’s non-creepy,” then I will have earned, let’s call it, 20 human dollars.
0:02:30 Then I say, “Well, great.
0:02:32 What am I going to do with these?”
0:02:33 And then I look around and say, “You know what?
0:02:38 I could really use a home-cooked meal because I’m terrible at that,” which by the way is
0:02:41 a pretty real example.
0:02:45 And then there’s someone that’s like, “I’d love to cook and I am happy to make surplus
0:02:50 food and I will happily take those human dollars off your hands.
0:02:57 You can wind up supercharging everyone’s communal experience.”
0:03:02 This kind of exchange may sound old-fashioned, like something we used to do all the time
0:03:07 that didn’t even need a name, but the digital age has changed many things.
0:03:13 One of them being how accustomed we are to getting what we want with just a few clicks.
0:03:18 I think it’s worth asking what may have been lost in this revolution of convenience and
0:03:21 as the old-fashioned barter system fades away.
0:03:27 There was the face-to-faceness of it, of course, but it also reminds you of a time before the
0:03:33 financialization of everything, which we’ve also become accustomed to.
0:03:40 So maybe it’s time to give this obscure old-fashioned idea a real shot.
0:03:43 Maybe it’s time we start a time bank of our own.
0:03:45 You know, we’re going to need a catchy name, ASAP.
0:03:48 I guess Yang Freak is not quite right.
0:03:49 Yeah, no.
0:03:52 That’ll just scare people off and have them running the other direction.
0:03:55 So we could call it time banking for the time being.
0:03:56 Okay.
0:04:00 For the time being, we will call it time banking.
0:04:03 Maybe this idea doesn’t sound very promising to you.
0:04:08 It’s old-fashioned, doesn’t have much momentum, doesn’t even have a real name.
0:04:09 Maybe you can help us with the name.
0:04:15 If you have an idea, email it to us radio@freakonomics.com.
0:04:20 As for the momentum, well, maybe you can help with that, too.
0:04:24 At the end of this episode, I’ll tell you what we’re looking for.
0:04:27 In the meantime, we will hear from a time banking booster.
0:04:30 It just blew my mind.
0:04:31 And a skeptic.
0:04:36 I just don’t think of it as a scalable way to run a significant part of the economy.
0:04:40 But what kind of show would we be if we let a little skepticism stop us?
0:05:09 They’re going to freaking do it.
0:05:14 You could look at time banking as just another market, and economists are good at thinking
0:05:17 about how markets work or don’t work.
0:05:20 Al Roth is particularly good at this.
0:05:24 I’ve done a lot of market design, and a lot of market design involves going and talking
0:05:28 to people about their problems and understanding their problems.
0:05:34 Roth teaches at Stanford, and he has won a Nobel Prize for his work in market design.
0:05:39 Back in 2015, we made an episode called “Make Me a Match” about Roth’s inventive system
0:05:45 to match potential kidney donors with people who need a kidney transplant.
0:05:50 That system has saved thousands of lives and inspired a lot of Freakonomics radio listeners
0:05:51 to get involved.
0:05:57 I’m hoping this episode about time banking will also get some of you involved.
0:06:00 I asked Al Roth what he thinks of time banking.
0:06:05 He suggested that before starting up some crazy new currency, we should appreciate
0:06:07 what we’ve already got.
0:06:14 Let’s take a moment to be astounded at how successful money is as a market design invention.
0:06:15 Someone wrote a book called “The Pencil.”
0:06:19 The thing about a pencil is it’s a compound object made on different machines with resources
0:06:22 gotten in different places, and it’s cheap.
0:06:26 All of those interactions, you know, getting the rubber for the eraser and the graphite
0:06:27 for the pencil itself.
0:06:30 All of those are mediated by money, and that’s the miracle of money.
0:06:32 It’s quite a remarkable invention.
0:06:35 So now you’re saying, can we do the same thing with time?
0:06:38 So think of all the things that had to be done to make money money, right?
0:06:42 There was coinage originally, and then you worried that people would cheat on the coinage
0:06:45 by scraping off little bits.
0:06:51 Centuries went into figuring out how to organize trade in things like precious metals.
0:06:56 I appreciated Roth’s points about money, and its advantages are clear.
0:07:02 Money is fungible, it stores value over time, it’s simple to exchange.
0:07:07 But years ago, I came across a couple books written by Edgar Kahn, a lawyer and social
0:07:08 activist.
0:07:12 One was called “No More Throwaway People.”
0:07:16 The other was called “Time Dollars,” the new currency that enables Americans to turn
0:07:22 their hidden resource, time, into personal security and community renewal.
0:07:26 I once went to see Kahn speak because I was working on my own book at the time about the
0:07:29 psychology of money.
0:07:34 Back then, I was interested in learning how the standard economy works and doesn’t work,
0:07:38 who thrives in an economy like ours and who struggles.
0:07:43 So let’s hear how Edgar Kahn came up with the idea of time banking.
0:07:47 He was the one who brought modern time banking back during the Ronald Reagan administration
0:07:50 when a lot of the social services were drying up.
0:07:55 And he realized that we needed to come up with a different economy where individuals
0:07:58 can rely on one another, not just a public institution.
0:08:00 That is Krista Wyatt.
0:08:05 She is the CEO of a group called TimeBanks.org, which carries on the work of Edgar Kahn.
0:08:08 He died in 2022.
0:08:13 We asked Wyatt to read a key passage from a speech that Kahn once gave about the shortcomings
0:08:15 of money and prices.
0:08:20 When we look at what price does, we see it devalues everything we define as a human
0:08:21 being.
0:08:27 Yet, these capacities, the ones we all share, are what enable our species to survive, caring
0:08:33 for each other, coming to each other’s rescue, rearing infants, protecting the frail and
0:08:38 vulnerable, standing for what’s right, opposing what’s wrong.
0:08:45 Krista Wyatt, before becoming CEO of TimeBanks.org, worked for a variety of charitable organizations.
0:08:49 One of them helped bring together women who had recently been diagnosed with breast cancer
0:08:52 and other women who had already gone through the same experience.
0:08:57 I’ve been a nonprofit for 30 years, and I didn’t find out about time banking until
0:09:00 about 10 years ago, and it just blew my mind.
0:09:03 I’m like, why is this not on every corner?
0:09:05 Why are people not talking about it?
0:09:07 So why aren’t people talking about it?
0:09:15 We did a survey 2002, and we found out that we had over 40,000 members out there, and
0:09:22 we have at least 500 time banks in the US, and there are time banks in other countries.
0:09:25 We have 22 time banks in China.
0:09:27 There is a huge time bank in the UK.
0:09:32 We cover at least 42 countries, and we’re working on one in Saudi Arabia.
0:09:38 On a planet of nearly 8 billion people, 40,000 members is pretty small, especially for an
0:09:41 idea that’s been around for a while.
0:09:46 Time banking started in the early industrial revolution with an anarchist, Joshua Warren.
0:09:51 He opened a time bank in 1827 called Time Store in Cincinnati.
0:09:56 In the 20th century, during World War II, a Japanese woman named Teruko Mizushima gave
0:09:58 the idea a try.
0:10:04 She traded her sewing skills for fresh vegetables during the Pacific War in the early 1940s,
0:10:09 and she started her time bank in 1973 called Volunteer Labor Bank.
0:10:11 She had over 1,000 members.
0:10:14 Most of her members were women, usually housewives.
0:10:19 That time bank still exists, run out of Osaka.
0:10:24 But despite a few successes, time banking just didn’t catch on.
0:10:28 You might think the COVID pandemic would have revived interest, but it didn’t.
0:10:33 There are time banks that had closed because of the lack of member engagement and the funding
0:10:34 wasn’t there.
0:10:35 I’ll be perfectly honest.
0:10:38 We are not great in funding.
0:10:43 We have a private donor that really believes in the time bank community, and he’s the one
0:10:49 who has really supported me through the last four years, but we need to do better.
0:10:50 We are struggling.
0:10:54 You said that you’d been in the non-profit world for a long time before you heard about
0:10:55 it.
0:10:56 Yes.
0:10:59 I mean, that sounds kind of like bad news, like it should be more prominent.
0:11:01 Why is it not, do you think?
0:11:02 There’s many reasons.
0:11:05 I didn’t see enough marketing material out there.
0:11:06 I don’t see it on the web.
0:11:09 I don’t hear it from public speakers.
0:11:16 And then also the concept is so easy to some and so complicated to others.
0:11:21 There have been college towns and other communities that have adopted time banking.
0:11:23 That again is Andrew Yang.
0:11:26 The core of it is that we all have value.
0:11:28 We all have things we can contribute.
0:11:31 There are ways that other people can help us.
0:11:36 And one of the main things that we’re combating really is a sense of isolation and desolation
0:11:38 and loneliness.
0:11:43 And so if you want people to reach out to each other, to help each other, to connect
0:11:49 to their neighbors and folks in their community, this would be a very, very powerful way to
0:11:50 make that happen.
0:11:56 And in my opinion, there has to be some kind of mechanism that encourages us to help each
0:11:57 other.
0:12:00 So you and I have talked about this, we’re both enthusiastic about this idea and we’ve
0:12:05 talked about actually trying to make this happen on a bigger scale or stage.
0:12:09 And granted, there have been a lot of people who’ve been doing exactly this on a small
0:12:13 scale in many places over time.
0:12:20 Can you just talk about what you see as the most fruitful way to set this up in terms
0:12:25 of whether it should be a private public partnership with government involved to some degree?
0:12:30 Is it primarily a software platform or is it more of an in real life thing?
0:12:34 Does it have a local focus or should it be national or even international?
0:12:36 What do you see as the best structure?
0:12:42 I think that it needs to be somewhat localized so that you encourage more in-person interaction.
0:12:47 Having people out of the house talking to each other and helping each other, traditionally
0:12:53 this sort of thing would be led with philanthropy and then you would bring in various corporates
0:12:55 and then the last domino is government.
0:12:59 But if you were to choose a particular location, let’s call it New York City for the sake of
0:13:04 this, then there’d be public officials cheerleading for it right and left because it solves a
0:13:07 lot of the problems that they’re most animated about.
0:13:13 You once wrote to me in an email, I’m convinced that the monetary economy is going to grind
0:13:18 us up and you’ve argued that it really already has ground up a majority of people in this
0:13:23 country and that a multivariate economy, caring and nurturing arts and creativity, fitness
0:13:29 and wellness, etc., is the only way out and will require multiple currencies to get right.
0:13:33 In addition to what we’re talking about today, what do you see as other currencies that do
0:13:37 exist that we might want to draft off of or even borrow from?
0:13:43 The best example I can use is that punch card at your local deli where you get 10 sandwiches
0:13:45 and then you have the 11th for free.
0:13:49 That has a place of honor in your wallet and you get really excited when you get close
0:13:50 to the free sandwich.
0:13:57 If you can imagine a version of the deli punch card or showing up to all sorts of things,
0:13:59 that’s the vision.
0:14:04 Americans love points, Americans love rewards, Americans love stuff.
0:14:11 I have these reward points on my AmEx and it’s mesmerizing even though right now it
0:14:14 doesn’t cost them anything because I’m not going to redeem it because I’m hoarding for,
0:14:18 I don’t know what I’m hoarding for.
0:14:23 That’s really the core idea is that if you give Americans cumulative rewards for doing
0:14:25 awesome stuff, you’ll see more awesome stuff.
0:14:32 Okay, so who could possibly be against a scheme that rewards people for doing awesome stuff?
0:14:38 Well, there is a certain Nobel Prize winning economist.
0:14:41 Some people’s time might be more valuable than other people’s.
0:14:43 That’s coming up after the break.
0:14:52 I’m Stephen Dubner and this is Freakin’ AmEx Radio.
0:14:59 As appealing as the idea of time banking is to me and to Andrew Yang, most economists
0:15:03 think that money is a much better measure of value than time.
0:15:06 Here again is Al Roth.
0:15:11 Time is an interesting commodity and we buy and sell it all the time.
0:15:13 When you hire a lawyer, he bills you by the hour.
0:15:17 You give him money for his time and expertise.
0:15:22 You might hire someone to house it for you and water your plants while you’re away.
0:15:26 So we trade time a lot, but not for time.
0:15:30 And part of the reason is that time is sort of a clunky commodity.
0:15:32 It’s a lot easier to trade other things.
0:15:33 But why is it so clunky?
0:15:37 I mean, just as a dollar is a dollar, an hour is an hour.
0:15:42 Well, one of the things we worry about with monetary markets is some people have more
0:15:46 dollars than other people do and that gives them more access and maybe we don’t always
0:15:47 feel great about that.
0:15:52 And so I think some of the charm to people who are charmed by time banks is that everyone
0:15:54 has 24 hours in a day.
0:16:00 But you know, a working mother of three kids has less time than a retired banker who has
0:16:03 a cleaner come into his house and a gardener.
0:16:05 So not everyone has the same amount of time.
0:16:08 And it’s clunky because it’s also hard to transfer.
0:16:13 There’s the joke about the lawyer who goes to see a dentist and dentist fills his cavity
0:16:14 in 10 minutes.
0:16:17 But the lawyer says to him, “You make more per hour than I do.”
0:16:20 And the dentist says, “Would you prefer that I took an hour?”
0:16:27 So we solicited a few other economists to come on the show to talk about time banking.
0:16:31 One of them, who shall go unnamed, wrote back to say, “The more I think about it, the more
0:16:34 I think it is the dumbest idea in the world.
0:16:38 So do you hate the idea as much as that economist?”
0:16:41 I don’t hate it as much as that economist.
0:16:48 By and large, I think that finding more opportunities for valuable exchange, for exchange that improves
0:16:50 welfare on both sides, is a good thing.
0:16:53 So I certainly have nothing against swapping time for time.
0:16:58 I just don’t think of it as a scalable way to run a significant part of the economy.
0:17:02 The reason the idea appeals to me is because I’ve spent a lot of time with people like
0:17:07 you, economists, and when you get a little bit off the beaten path, you start thinking
0:17:12 about things like shadow time, the hours I have when I’m not on the clock and what they’re
0:17:15 worth to me and how I could spend them.
0:17:19 And then I also just think about human capital, which economists are always going on and on
0:17:20 about.
0:17:24 It feels like that’s the purpose of a lot of economic research these days is to show
0:17:29 how important it is for people to build human capital through education and social networks
0:17:33 and so on, because human capital is indeed really valuable.
0:17:42 But then when I look around the world, I see so much surplus, dare I say, wasted human capital.
0:17:47 People who are able to do things that may not be that valuable in a regular market circumstance
0:17:52 and may not even be that valuable to them, but might be very valuable to other people.
0:17:58 And wouldn’t it be wonderful to find a way to give value to that surplus human capital?
0:18:03 I mean, if you add it all up, that could be the biggest natural resource in the world,
0:18:08 worth more than all the petroleum and other mineral products combined.
0:18:13 And then I thought, well, who out there in the world would appreciate that more than Al
0:18:19 Roth, who recognized that there is surplus sitting around in people’s bodies, for instance,
0:18:25 in the form of a second kidney and found a way to set up a system to make those extra
0:18:27 kidneys available.
0:18:32 So does that make time banking a tad more viable in your view?
0:18:38 Well, I already said that I am in favor of looking for ways to increase valuable exchanges.
0:18:42 So when time for time works, that’s great.
0:18:46 But when you talk about human capital, you’re already suggesting that on some tasks, some
0:18:51 people’s time might be more valuable than other people’s because they have more human
0:18:57 capital and that’s what makes time clunky if all we’re doing is swapping time.
0:19:01 I live on a college campus, so we trade time all the time by inviting people to dinner
0:19:03 and then they invite us back to dinner.
0:19:07 Dinner is sort of time you expect you’re going to spend two, two and a half hours with people
0:19:10 and create connections that can’t be monetized.
0:19:12 And it’s part of what makes life worth living.
0:19:15 And if they had to eat and run, it would be a less successful dinner.
0:19:20 We sometimes have the feeling we’ve now been invited to your house three times and we haven’t
0:19:21 invited you back yet.
0:19:22 We’d better do that.
0:19:26 You could consider just saying, hey, here’s a couple hundred dollars for those three dinners.
0:19:27 Have you ever tried that?
0:19:29 That would end a friendship pretty quickly, wouldn’t it?
0:19:34 Well, it could be advantageous if it’s a friendship that’s in a condition where they’ve had you
0:19:37 over three times and you haven’t wanted them to come to your house once.
0:19:39 Well, sure.
0:19:45 Supporters of time banking think it can be useful for more than just dinner parties among
0:19:46 college professors.
0:19:51 Andrew Yang spends a lot of time talking about the so-called invisible economy.
0:19:55 The work some of us do that the regular economy simply doesn’t count.
0:20:00 My wife who’s at home with our son who’s autistic, that has immense value.
0:20:04 The market right now does not give that appropriate value.
0:20:10 If someone is painting a mural in their neighborhood and beautifying it, that has value that maybe
0:20:12 doesn’t show up in our current system.
0:20:18 If someone shows up to a nursing home and volunteers, if someone is tutoring children,
0:20:25 if someone is making people around them healthier and more active, all of these things have
0:20:32 positive values that right now would not get properly recognized or rewarded in our current
0:20:33 monetary economy.
0:20:39 What if I were to say, Andrew, you’re also a political player and the reason that so
0:20:43 much money is drawn into politics is because there’s so much leverage in the political
0:20:44 system.
0:20:50 Wouldn’t it be better to focus on that, to remake the political system so that all the
0:20:56 benefits that you want from this human dollar system were just there already?
0:21:00 You wouldn’t have to recreate this whole second system to take care of it.
0:21:04 In other words, set up the political system to make the economy more human-centered in
0:21:05 the first place.
0:21:06 Why isn’t that the best solution?
0:21:09 Oh, I love that solution too, Stephen.
0:21:11 We should definitely pursue that.
0:21:16 I’m working on that every day, but there’s no reason why we can’t demonstrate what’s
0:21:20 possible given current technologies and what resources we have.
0:21:27 I could imagine countless religious organizations and food banks and volunteer programs hearing
0:21:29 us talk about this and say, “Hey, what do you think we’re doing?
0:21:31 What do you think we’ve been doing forever?
0:21:33 How is this different?”
0:21:37 Hopefully it supercharges many of those organizations and communities.
0:21:43 If you do time banking at scale, you wind up having a lot of that energy flow through
0:21:49 existing nonprofits and religious orgs because in many ways they’re the best situated to
0:21:55 be able to encourage and monitor and benefit from more people getting out and doing more
0:21:58 things for other people.
0:22:02 Now I want to talk to someone who could tell us some more about volunteering generally.
0:22:08 One has to realize how important volunteering is to the large national network of nonprofit
0:22:16 organizations that are a backbone and an under-recognized asset within U.S. society.
0:22:17 That is Nathan Dietz.
0:22:22 I’m the research director at the Dugodd Institute at the University of Maryland.
0:22:24 And what is the Dugodd Institute?
0:22:28 The Dugodd Institute is a policy center within the School of Public Policy.
0:22:33 Our focus is on studies of nonprofits and philanthropy in general.
0:22:38 In his research, Dietz has found that volunteering in the U.S. has been declining for at least
0:22:39 a couple decades.
0:22:45 We can start right after September 11, 2001, the first national data collection in a long
0:22:47 time about volunteering was done.
0:22:52 Before then, data on volunteering was collected only every few decades as part of the current
0:22:55 population survey that’s run by the Census Bureau.
0:23:02 But researchers wanted to know how the national tragedy of 9/11 would affect volunteering.
0:23:07 In the early 2000s, they found that nearly 30% of Americans were doing some volunteering
0:23:12 through formal organizations like nonprofits or religious institutions.
0:23:14 And then we saw a decline.
0:23:19 We’ve always read that as the decline that’s kind of a result of the wearing off of whatever
0:23:24 feelings of unity and ties to community that people felt after 9/11.
0:23:28 Starting in about 2010, 2011, we started to see declines every year.
0:23:32 And I don’t think anyone really noticed the fact that that had happened because the declines
0:23:33 were so small every year.
0:23:34 It’s a classic —
0:23:36 The frog in the pot of water?
0:23:37 Right.
0:23:39 Which I think is probably not a true thing I’ve read.
0:23:40 Oh, I hope not.
0:23:42 You know, for the frog’s sake.
0:23:43 Okay.
0:23:49 So you’re saying that the current volunteering rate in the U.S. is lower than what in recorded
0:23:50 history you’re saying right now?
0:23:51 Yeah.
0:23:56 The 2021 volunteering rate is certainly lower than it ever has been in the last 50 years.
0:24:02 Why do you think there’s been such a significant downward trend in volunteering?
0:24:04 That is the $64,000 question.
0:24:08 Some trends that we’ve seen when we started digging into this have been suggestive.
0:24:14 One is that we saw declines that were greater in suburban areas and rural areas than they
0:24:16 were in urban areas.
0:24:20 Maybe what we saw there was the fact that people were moving out of those areas and
0:24:24 taking their time and their talents and their energies with them.
0:24:29 And when that happens, you also see an increasingly aging population in those areas.
0:24:34 So when people have to drop out of civic life or the volunteer workforce specifically, there
0:24:36 aren’t very many people to take their places.
0:24:41 Social capital is the concept that connects all the activities that we call civic engagement.
0:24:47 I think we’re seeing declines in social capital that are reflected in the declines in volunteering
0:24:48 rates.
0:24:52 One of the most important ways in which trust helps build social capital is to get people
0:24:55 to realize that they can count on other people.
0:25:00 Let’s say that time banking, time dollars, human dollars, whatever we want to call it,
0:25:08 makesper at least a small uptick in volunteering and maybe a small uptick in social capital,
0:25:10 social trust.
0:25:13 How would you see that benefiting society overall?
0:25:19 I think the key is to get people to recognize that in many cases, receiving actually is
0:25:20 as good as giving.
0:25:24 It’s a key principle that underlies the whole time banking concept.
0:25:28 That’s the idea that runs most counter to most people’s intuition.
0:25:32 The Bible tells you the opposite, it’s better to give than to receive.
0:25:33 That’s really interesting.
0:25:37 I feel like I’m having a little bit of a breakthrough here personally, like I’m in a therapy session,
0:25:38 Nathan.
0:25:39 I mean, I kind of feel the same way.
0:25:42 Well, what it made me think of is this, I mean, this is getting a little personal.
0:25:47 I hope you don’t mind, but my father died when I was about 10 or 11 and I lived in a
0:25:52 rural area where there were quite a few people who really went out of their way to help me
0:25:53 and my family.
0:25:57 I was the youngest in a big bunch of kids and I was the last one at home.
0:26:02 There were a couple men who would take me on fishing trips and whatnot.
0:26:09 As much as I enjoyed the benefits per se, I hated being seen as and feeling like a charity
0:26:10 case.
0:26:11 I hated it.
0:26:14 I’m not saying that was a good choice, a bad choice.
0:26:19 It was just the way my emotions worked at the time, but I think as I outgrew that age,
0:26:26 I compounded that response and it strikes me now speaking to you that there’s something
0:26:32 very ungenerous about being unwilling to accept other people’s generosity.
0:26:36 It’s what you said a moment ago that made me realize that there is something very powerful
0:26:44 about not just giving plainly, but receiving and about the notion of participating in reciprocity.
0:26:47 So anything more you have to say about that?
0:26:52 Just that participating in reciprocity, that’s the norm that I think we ought to get people
0:26:53 to buy into.
0:26:57 It doesn’t have to be the case that receiving is just as good as giving.
0:27:01 I think the time banking people would probably be happy to relax that statement a little
0:27:06 bit, but receiving is perfectly okay and actually when you receive, you’re making it possible
0:27:09 for someone else to obtain the benefits of giving.
0:27:16 So it sounds like you might like to participate in our harebrained idea here.
0:27:18 Is that the case or am I reading into your enthusiasm?
0:27:24 I’d be happy to help because I think this is an important, interesting concept.
0:27:27 And I think that nothing but good could come of an experiment.
0:27:31 Would it be a better idea to have like a New York City time bank than a US time bank?
0:27:36 Would it be an even better idea to have an Upper West side of Manhattan time bank versus
0:27:38 a New York City time bank?
0:27:39 Oh, I think so.
0:27:41 I think that’s the way most institutions work best.
0:27:47 You know, even the Federal Reserve has regional banks, anything that brings the institution
0:27:51 closer to the members of the community is going to encourage participation.
0:27:55 That’s, I think, probably the only way in which a time bank would work is if it were
0:27:58 located in the community.
0:28:04 Coming up after the break, if we can get this idea going, we’ll need someone to run it.
0:28:07 Is that someone you?
0:28:08 Keep listening for details.
0:28:09 I’m Stephen Dubner.
0:28:19 This is Freakonomics Radio, we’ll be right back.
0:28:24 After talking to Nathan Deets and Krista Wyatt and Andrew Yang about time banking, I was
0:28:30 getting encouraged, but then I read a new paper by researchers who followed a big experimental
0:28:34 project that gave people a guaranteed income.
0:28:38 This is similar to the universal basic income idea that Yang promoted a few years ago while
0:28:39 running for president.
0:28:42 He called it a freedom dividend.
0:28:48 In this experiment, 1,000 low-income people were given $1,000 a month for three years,
0:28:52 and the researchers wanted to see how the money changed their lives.
0:28:57 They also set up a pool of 2,000 low-income people who got only $50 a month so that they
0:29:00 would have a comparison group.
0:29:02 And what the researchers find?
0:29:10 The people getting $1,000 a free money a month worked a bit less, which you might expect.
0:29:14 They spent more time sleeping and hanging out with friends.
0:29:21 What they didn’t spend more time on was either building up their own human capital or volunteering
0:29:23 to help out other people.
0:29:30 I interpreted this as not such good news, so I went back to Al Roth, the market design
0:29:36 expert, to see if he had any ideas to make time banking a more attractive prospect, even
0:29:38 though he’s not a big fan of the idea.
0:29:41 I’d want some kind of reputational review system.
0:29:43 You need some customary contracts.
0:29:45 You need ways of keeping account, right?
0:29:47 We do that with money all the time.
0:29:50 You put money in the bank and they don’t let you take out more than you put in, whereas
0:29:54 with time, the question is, who does the reporting?
0:29:59 Let’s pretend for just a minute that time banking or time dollars are a going concern
0:30:03 where you are and you were a member of this community.
0:30:10 What would you offer as work that you could do and what kind of tasks or work would you
0:30:13 look for for other people to do for you in exchange?
0:30:19 Well, in fact, I’m a little bit of a member of that community because I’m a professor.
0:30:23 One of the things I do is teach classes and those are on a clock.
0:30:27 Another thing I do is I talk to students, typically graduate students, and a lot of scientific
0:30:30 progress has its origin in just talk.
0:30:34 You talk about problems, you hear how they’re thinking, you tell them how you’re thinking,
0:30:37 and sometimes directions emerge.
0:30:39 Are there any other physical tasks?
0:30:41 Can you fix my car or put on a new roof?
0:30:46 I cannot fix your car or put on a new roof, so I could, of course, trade for that.
0:30:51 But I don’t know how long it takes and I don’t know how much skill and risk and things like
0:30:52 that are involved.
0:30:54 All of which are things that should get priced into it.
0:31:00 So one of the advantages of having competitive roof fixers is you can get a couple of quotes
0:31:02 and find out what it costs to fix your roof.
0:31:08 But I could imagine a scenario where let’s say there’s a person running a roofing business.
0:31:13 Maybe they’re second or third generation, even, and they’ve decided that the way forward
0:31:15 is to do solar installations.
0:31:16 You’re in California.
0:31:18 I’m sure there’s a big market for that there.
0:31:22 But they don’t really know how to set up their business to optimize for that.
0:31:26 They don’t know what kinds of partnerships and maybe there’s some tax strategy and just
0:31:28 setting up the business that they’re not clear on.
0:31:33 But boy, Professor Roth, he loves to talk to people about problems like that and he
0:31:34 also needs a new roof.
0:31:41 So that sounds like a really nice possible exchange that could happen in the time bank.
0:31:43 Would you be open to discussing that?
0:31:45 I’d be open to discussing it.
0:31:47 He said reluctantly.
0:31:51 I say reluctantly because I certainly wouldn’t want that to be the only way I could get my
0:31:52 roof repaired.
0:31:53 Okay.
0:31:58 So it sounds like you’re not particularly enthusiastic about or interested, certainly
0:32:04 in joining our project to try to make time banking a successor to pilot it.
0:32:11 But assuming that you like me enough to not want to see this project fail from step one,
0:32:14 is there any piece of advice in particular you might have?
0:32:18 Let’s say that we’re going to try to do this with some kind of perhaps government cooperation,
0:32:25 some kind of nonprofit cooperation, try to find, let’s say a CEO who could really organize
0:32:26 this.
0:32:29 I think the simplest kind of time banking is for people who are actually prepared to
0:32:33 be in relationships with each other and are going to repeatedly trade time with each other
0:32:35 and they can evaluate the quality.
0:32:39 Babysitting cooperatives, for instance, are a good example because you also get some feedback
0:32:41 from the kids if they’re old enough.
0:32:47 But as soon as I’m earning time by babysitting for your kids and now I’m spending it on roofers,
0:32:52 I want to know is this a roofer who gives good value for the amount of time I’m putting
0:32:53 into the bank?
0:32:57 Given that I don’t have a relationship with him, what happens if the roof takes more time
0:32:59 than any of us anticipated?
0:33:03 Who pays for the extra time that he actually spent doing a good job fixing my roof?
0:33:08 There has to be some situation where he doesn’t stop with the hole in the roof and now it’s
0:33:09 worse than when he started.
0:33:13 He finishes the good job, he gets a review of doing a good job, but someone has to pay
0:33:14 him back the time.
0:33:18 The banking part of time banking is going to be important when there aren’t personal
0:33:19 relationships.
0:33:23 So you need reviews and you need a way for him to say, “It took me 12 hours.”
0:33:24 Who would have thought?
0:33:30 But there was a dragon implanted in the roof and I had to fight the dragon.
0:33:34 The things that you put up with in California, dragons and roofs, I don’t know how you deal
0:33:35 with it.
0:33:40 We deal with it by paying the roofer.
0:33:44 So first let me preface this by saying I’m convinced that AI is going to change a lot
0:33:48 of things in our economy and it’s going to make it harder and harder for a lot of people
0:33:50 to compete.
0:33:51 That’s Andrew Yang again.
0:33:56 It’s getting stronger, faster, smarter, more powerful and we are not.
0:34:01 So if you play out the way this is going, we already live in maybe the most extreme winter
0:34:03 take all economy in the history of the world.
0:34:09 It’s going to become more extreme with the advent of AI and associated technologies.
0:34:15 And so the goal would be to build an economic system that rewards people pursuing activities
0:34:20 that right now would not get properly rewarded in our current monetary economy.
0:34:25 And what share of, if it could be measured, what share of let’s say GDP, would you like
0:34:30 this entire separate version of the economy to comprise?
0:34:34 I would think of it as a parallel instead of a percentage of GDP, but our current economy
0:34:37 is around $24 trillion.
0:34:43 And if you think about how much we could benefit in education and nurturing and health and
0:34:49 wellness, we’re spending maybe 17 or 18% of that $24 trillion on our healthcare right
0:34:50 now.
0:34:52 So let’s call that $4 trillion.
0:34:57 And we all know that we could generate immense value if we all took better care of ourselves
0:34:59 and had preventative care and everything else.
0:35:04 So just in the healthcare space, you can see trillions of dollars, environment, trillions
0:35:09 of dollars, education, trillions of dollars, arts and creativity, I would argue you could
0:35:11 also get up to that level.
0:35:17 So you can imagine something that gets up into the tens of trillions of dollars that
0:35:21 mirrors the size of what we consider right now, the economy.
0:35:28 If we want good things for ourselves, our families, our communities, we have to actually
0:35:32 build the mechanisms for those good things.
0:35:35 And if we don’t, then we kind of know which way things are going to head.
0:35:42 So are you willing and committed to join me/us Freakonomics Radio to try to actually make
0:35:43 this work?
0:35:44 Oh, yeah.
0:35:46 The great collab is beginning.
0:35:49 We’re going to freaking do it.
0:35:51 You can count me in 100%.
0:35:56 Let’s actually build this in real life so that people can experience it, point to it
0:35:58 and say people are good.
0:35:59 We want this in more places.
0:36:03 What would success look like to you in five years, let’s say?
0:36:11 Success would be thousands of people living better lives and a model that other people
0:36:13 say that’s totally replicable.
0:36:16 We can do that where we live and work.
0:36:20 So Andrew, if we want to get this thing going, we need someone to run it.
0:36:24 You’d probably be good at it, but you’re busy with 18 million other things.
0:36:29 I’m pretty busy too, but even if I weren’t, I’d be terrible at running something like
0:36:30 this.
0:36:37 So I think what we really need is a CEO, someone who hears this episode and is as enthusiastic
0:36:43 about the idea as we are and actually has the ability and the courage to get it done.
0:36:48 So what kind of background or characteristics would you suggest that the ideal candidate
0:36:49 has?
0:36:55 I’d say that person is comfortable going into a room of people in a community in Queens
0:36:59 or Staten Island or Brooklyn and saying to them, “Hey, this is what we’re doing and this
0:37:02 is why you should sign up and this is why it’s awesome,” and then feel equally comfortable
0:37:08 going into a room of marketing executives or foundation grant writers and say, “This
0:37:12 is what we’re doing and this is why you need to get on board as quickly as possible.”
0:37:16 So the profile that comes to mind for me is someone who has run a nonprofit, someone who
0:37:20 has had some kind of role in public service would also make sense and entrepreneur would
0:37:21 make sense.
0:37:24 Those three profiles appeal to me.
0:37:28 Does that sound like you or someone you know?
0:37:34 Andrew Yang has built a bipartisan political operation called Humanity Forward and the
0:37:39 Yang Gang still has a lot of assets that would be useful for time banking.
0:37:43 But still, this would be a big operation and we’ll need some help.
0:37:46 Let’s start with someone to run it.
0:37:51 If you’d like to nominate yourself or someone else or if you have any other ideas that might
0:37:55 help make this work, please write to us.
0:38:05 Here is an email address time@humanityforwardfoundation.org that’s time@humanityforwardfoundation.org.
0:38:08 We will keep you updated on how this project goes.
0:38:14 For now, big thanks to Andrew Yang, Krista Wyatt, Nathan Deets, and even Al Roth the
0:38:19 Skeptic for speaking with us today and thanks especially to you for listening.
0:38:21 Coming up next time on the show.
0:38:27 There is a freedom in being in a religious institution where I don’t have to be afraid
0:38:29 to talk about values in my out loud voice.
0:38:36 Tanya Tetlow used to be a federal prosecutor, which toughened her up for her current job,
0:38:37 college president.
0:38:41 What we navigate with them is, you know, you don’t point bullhorns at the library during
0:38:42 study session.
0:38:45 Tanya Tetlow is president of Fordham University in New York.
0:38:50 She’s the first female president there, as well as the first president who is not a Catholic
0:38:51 priest.
0:38:55 The Jesuits here laugh that you say all the same stuff, Tanya, but people listen to you.
0:39:00 Another conversation in our ongoing look at what college is really for.
0:39:03 That’s next time on the show.
0:39:04 Until then, take care of yourself.
0:39:07 And if you can, someone else too.
0:39:11 Pre-economics radio is produced by Stitcher and Renbud Radio.
0:39:17 You can find our entire archive on any podcast app, also at Freakonomics.com, where we publish
0:39:19 transcripts and show notes.
0:39:22 This episode was produced by Zach Lipinski.
0:39:27 Our staff also includes Alina Cullman, Augusta Chapman, Dalvin Abouaji, Eleanor Osborn,
0:39:32 Elsa Hernandez, Gabriel Roth, Greg Rippin, Jasmine Klinger, Jeremy Johnston, John Schnarrs,
0:39:38 Julie Canfer, Lyric Bowditch, Morgan Levy, Neil Coruth, Rebecca Lee Douglas, Sarah Lilly,
0:39:39 and Theo Jacobs.
0:39:42 Our theme song is “Mr. Fortune” by the Hitchhikers.
0:39:46 Our composer is Luis Guerra.
0:39:48 It’s always fun to talk to you, Al.
0:39:50 You too, and you know, spend your time well.
0:39:51 Cheers.
0:40:03 The Freakonomics Radio Network, the hidden side of everything.
0:40:04 Stitcher.
0:40:07 [MUSIC PLAYING]

0:00:02 (upbeat music)
0:00:05 – Hey there, it’s Stephen Dubner.
0:00:07 And yes, we are busting into your
0:00:10 Freakonomics Radio feed with a bonus episode.
0:00:12 In 2019, we put out an episode
0:00:15 about a problem and a possible solution.
0:00:18 The problem was rising rents,
0:00:20 particularly in coastal cities.
0:00:23 The proposed solution was rent control,
0:00:27 laws that put a limit on what landlords can charge.
0:00:28 You can see why that might seem
0:00:30 to be a sensible solution,
0:00:33 but nearly all economists agree,
0:00:35 based on volumes of research,
0:00:37 that rent control does more harm than good.
0:00:39 Since we made that episode,
0:00:41 the problem has gotten worse.
0:00:42 According to a report from
0:00:45 Harvard’s Joint Center for Housing Studies,
0:00:48 rents have risen 26% nationally
0:00:50 and even more in cities like New York,
0:00:54 which has become the poster child for the rent crisis.
0:00:56 And so once again,
0:00:59 policymakers have returned to the idea of rent control.
0:01:00 Just this month,
0:01:03 the Biden administration pushed Congress
0:01:05 to pass legislation that would force landlords
0:01:07 with more than 50 units
0:01:10 to cap annual rent increases at 5%
0:01:13 or risk losing federal tax breaks.
0:01:16 So we thought it was a good time to revisit
0:01:19 that 2019 episode about rent control
0:01:21 and why it does not work.
0:01:24 We have updated facts and figures where necessary.
0:01:26 As always, thanks for listening.
0:01:34 I’m sure you know this already,
0:01:36 but let me say it anyway.
0:01:39 Cities have become really popular all over the world.
0:01:43 An ever larger share of the U.S. and global population
0:01:44 lives in cities
0:01:47 and that large share is expected to get even larger.
0:01:50 As demand for city living grows,
0:01:53 the supply of housing often can’t keep up,
0:01:56 which results in, and you know this too,
0:01:58 a rise in prices.
0:02:01 In the U.S., median rent has doubled since the 1990s,
0:02:04 outpacing inflation by quite a bit.
0:02:06 In many cities, this makes it hard for people
0:02:08 who already live there to stay
0:02:11 and hard for people who’d like to move there.
0:02:12 I’m sure you’ve heard the horror stories
0:02:16 about rents in cities like London and Hong Kong,
0:02:19 Seattle and San Francisco.
0:02:21 The problem is so bad in New York City
0:02:24 that it inspired a new political party.
0:02:27 I represent the rent. It’s too damn high-party.
0:02:29 People are working eight hours a day and 40 hours a week
0:02:31 in summer third job.
0:02:32 New York, like many cities,
0:02:34 has over time put in place
0:02:37 various affordable housing policies.
0:02:40 One time-honored tradition is some form of rent control.
0:02:42 That might mean setting a price cap
0:02:43 on what a landlord can charge
0:02:46 or limiting the amount the rent can be raised.
0:02:49 Here’s the Stanford economist Rebecca Diamond.
0:02:51 From an economics point of view,
0:02:53 it provides insurance
0:02:56 against getting priced out of your neighborhood.
0:02:59 And rent control seems to be having a moment.
0:03:01 It already exists in a number of places.
0:03:05 The most expensive cities in the U.S.,
0:03:07 they almost all have rent control.
0:03:09 And the appetite is spreading.
0:03:13 You see rent control popping up politically
0:03:16 when housing prices and rents are going up.
0:03:19 Today on Freakinomics Radio,
0:03:22 how well does rent control work?
0:03:25 As with many complicated issues
0:03:28 that have multiple actors and crossed incentives,
0:03:31 the answer depends on whom you ask.
0:03:34 Well, I’m in favor of residential rent control
0:03:35 and rent regulations.
0:03:37 If you were starting from scratch
0:03:38 and you were designing
0:03:42 the most efficient rent regulation system,
0:03:44 what would that look like?
0:03:46 The sort of bombing I know of no way to destroy a city
0:03:48 that was more effective than rent control.
0:04:07 This is Freakinomics Radio,
0:04:11 the podcast that explores the hidden side of everything,
0:04:13 with your host, Stephen Dubner.
0:04:23 Oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh.
0:04:27 Most economists say that rent control is a bad idea,
0:04:29 as is just about any form of price control.
0:04:31 They believe that markets work best
0:04:33 when supply and demand are allowed
0:04:35 to find a natural equilibrium
0:04:39 with price acting as the referee.
0:04:40 Here’s one such economist.
0:04:42 My name is Ed Glazer,
0:04:44 and I am the Fred and Eleanor Glimp
0:04:46 Professor of Economics at Harvard,
0:04:48 where I teach both microeconomic theory
0:04:49 and the economics of cities.
0:04:52 Ed, you have one minute to convince someone
0:04:55 that rent control is a terrible idea. Go.
0:05:02 All right, so they’ve already squandered five of my seconds.
0:05:03 It’s not particularly fair.
0:05:07 It’s not a good way of allocating scarce space.
0:05:09 It’s not a good way of helping the downtrodden.
0:05:13 It’s a way that freezes a city
0:05:15 and stops it from adjusting to changes.
0:05:17 It’s a way that freezes people in apartments
0:05:20 and stops the motion that is inherent in cities.
0:05:24 So that’s a baseline economic take, at least.
0:05:26 Let’s try to unravel this issue,
0:05:28 starting with a brief history of rent control.
0:05:32 Rent controls really became ubiquitous in World War II.
0:05:36 And the idea here was the nation was laying down its life
0:05:39 to try and bring freedom to the world.
0:05:42 And it seemed wrong that some people
0:05:45 who were well-placed should earn some form of extra bonuses
0:05:47 by being able to raise up rents
0:05:50 on people maybe whose sons and daughters
0:05:53 were off fighting for the U.S. elsewhere.
0:05:55 And rent control was seen as being a way
0:05:56 of somehow trying to keep America
0:05:59 being a bit fairer during World War II.
0:06:02 Now, lots of places introduced rent control during this period.
0:06:04 After the war, most of them got rid of it
0:06:07 because that cause seemed to be a little bit less pressing.
0:06:10 But some cities kept it, and New York, of course,
0:06:12 is the most famous place that still has it.
0:06:15 Glazer himself grew up in New York.
0:06:17 And, you know, I lived in a rent-stabilized unit
0:06:19 for the first 10 years of my life.
0:06:23 I mean, something like 72, 74% of New York City’s
0:06:25 households were renters in those days.
0:06:27 And indeed, you know, the mid-1970s
0:06:29 was an era in which New York’s housing didn’t,
0:06:31 you know, didn’t seem that expensive.
0:06:33 And so affordability just wasn’t the same issue
0:06:34 that it was today.
0:06:37 Now, flash forward 30 years.
0:06:38 The cities have been enormously successful.
0:06:41 They haven’t built enough to accommodate the new demand.
0:06:43 They risk becoming boutique towns
0:06:45 affordable only to the wealthy.
0:06:47 And people are desperate to see that those cities
0:06:49 don’t, you know, push out every poor resident,
0:06:51 that they don’t become monocultures
0:06:53 built around the privileged and the rich.
0:06:57 And rent control appears to be at least one avenue
0:06:58 for doing it.
0:06:59 But it’s a very blunt instrument.
0:07:02 Just how blunt?
0:07:05 There are decades worth of economic research
0:07:08 describing the downsides of rent control.
0:07:10 The first major paper was written in 1946
0:07:13 by Milton Friedman and George Stigler.
0:07:13 Here’s Friedman.
0:07:17 Rent control is a law that supposedly has passed
0:07:20 to help the people who are in housing.
0:07:23 And it does help those who are in current housing.
0:07:26 But the effect of rent control is to create scarcity
0:07:31 and to make it difficult for other people to get housing.
0:07:32 Where did the scarcity come from?
0:07:35 For one, developers had less incentive
0:07:37 to build new housing if there was a ceiling
0:07:39 placed on what they could charge.
0:07:41 Friedman also argued that rent control
0:07:45 created a haphazard and arbitrary allocation of space.
0:07:50 This was echoed in a 1972 paper by Edgar Olson,
0:07:53 which found that rent control led to what economists
0:07:56 call an overconsumption of housing.
0:08:01 Let’s say you rented an apartment in New York in 1955.
0:08:02 You had three small kids.
0:08:03 You rented a three-bedroom.
0:08:06 It was perfectly matched for the needs of you
0:08:08 with your kids growing up.
0:08:11 They moved out of the house in the early ’70s.
0:08:14 By the late ’80s, maybe your husband or wife actually died
0:08:16 and you’re living on your own in a three-bedroom apartment
0:08:17 in New York.
0:08:19 But my goodness, would you ever move out?
0:08:22 Your rent is a fraction of what the market rent is.
0:08:24 One of my favorite stories about this,
0:08:25 and this is quoted by Ken Oledas,
0:08:27 the streets were paved with gold.
0:08:29 He cites Nat Sherman,
0:08:30 the famous tobacconist to the world
0:08:32 by this big shop on Fifth Avenue,
0:08:35 who said that he pays, I forget what it was.
0:08:41 $355 a month for a six-room apartment, it says here.
0:08:42 Isn’t that amazing?
0:08:43 Keep in mind, it’s a few decades ago,
0:08:45 but it’s an unbelievable deal.
0:08:47 Now, what’s outrageous about this
0:08:49 is he then says, “I think it’s fair
0:08:51 because I use it so rarely,”
0:08:54 which means that he’s not getting very much value out of it.
0:08:56 But the crazy thing about this is there were lots of New Yorkers
0:08:57 who would love to have that apartment
0:08:59 and who would get a lot more value out of it.
0:09:03 In 1997, Ed Glazer did his own analysis
0:09:04 of rent control in New York City,
0:09:08 trying to determine just how economically inefficient it was.
0:09:12 He and his co-author, Erzo Lutmer, found that, quote,
0:09:16 “This misallocation of bedrooms leads to a loss in welfare,
0:09:19 which could be well over $500 million annually
0:09:21 to the consumers of New York,
0:09:24 before we even consider the social losses
0:09:26 due to under supply of housing.”
0:09:30 Glazer’s work has also inspired a new generation of economists
0:09:33 to further the literature on rent control.
0:09:36 Historically, people relied much more in theory
0:09:38 in making their arguments about rent control.
0:09:41 That’s Rebecca Diamond again.
0:09:43 She’s a former student of Ed Glazer’s.
0:09:46 Because even without a lot of data,
0:09:49 you can make some pretty simple theoretical predictions
0:09:53 about what rent control might do to a housing market.
0:09:56 But there are some things that fury alone cannot tell you.
0:10:02 One of the biggest open questions in the literature of rent control
0:10:06 is what happens to those tenants that get rent control?
0:10:08 Really, how much are the renters benefiting?
0:10:11 Because they’re the potential big winners of rent control.
0:10:15 And to measure that, you really need to have data
0:10:21 on where everybody lives, who gets access to rent control,
0:10:24 and whether they decide to stay in that rent control department
0:10:26 or go somewhere else.
0:10:30 And traditional data sources that economists work with
0:10:36 very rarely track migration of an individual.
0:10:42 So you recently co-authored with Tim McQuade and Franklin Qian
0:10:45 a paper called The Effects of Rent Control Expansion
0:10:49 on Tenants, Landlords, and Inequality Evidence from San Francisco.
0:10:51 First, if you would talk about the data.
0:10:54 So yeah, we have some really cool data.
0:10:58 So traditional data sets, you can get things on the distribution
0:11:00 of earnings and income, things like that,
0:11:02 but you won’t also see their migration.
0:11:07 So we have this, you could call administrative data,
0:11:09 which tracks people’s address histories.
0:11:11 And where did these migratory data come from?
0:11:14 We bought them from a company called InfoTour.
0:11:19 They are a company that works in identity management.
0:11:23 So they have this history of addresses for everyone,
0:11:26 which they collect from a number of different sources
0:11:27 and stitch them together,
0:11:30 which is very useful for the private sector
0:11:33 and firms that need to keep track of up-to-date addresses.
0:11:36 But from a research perspective, it’s super exciting data
0:11:40 because it’s so big and so detailed.
0:11:47 Armed with this super exciting data on individual tenants,
0:11:50 Diamond and her fellow researchers set out to measure
0:11:54 some of the long-term effects of rent control in San Francisco.
0:11:58 They made particular use of a change in the city’s rent laws.
0:11:59 San Francisco had rent control,
0:12:03 but it didn’t apply to many of the city’s smaller apartment buildings.
0:12:06 And the exemption was basically thought of as, well,
0:12:08 these are mom and pop landlords.
0:12:10 They don’t have market power.
0:12:15 They’re not corporations, so we don’t need to regulate their rents.
0:12:20 And then newspapers reported that those smaller multi-family buildings
0:12:24 were increasingly purchased by corporate entities
0:12:26 because that’s really where you could make your money
0:12:27 in the housing market.
0:12:31 And that led to a vote in 1994
0:12:33 where everyone in the city got to vote
0:12:38 about whether we could remove this small multi-family exemption.
0:12:40 And that would then expand rent control
0:12:42 not just to the large multi-family housing stock,
0:12:44 but also the small multi-family housing stock.
0:12:47 And that indeed passed.
0:12:50 So you’ve got this awesome new law,
0:12:53 awesome for you guys at least as researchers,
0:12:55 that lets you mark before and after.
0:12:59 It’s a perfect little natural experiment with a control group.
0:13:03 And then you’ve got these wonderful data sets.
0:13:07 And then you mash up all of these data together and analyze it.
0:13:10 And you find the following.
0:13:14 Your paper concludes that among many things,
0:13:18 quote, rent control limits renters mobility by 20%
0:13:21 and lowers displacement from San Francisco,
0:13:23 especially for minorities.
0:13:25 So let’s start with this.
0:13:27 What does it mean exactly that renters mobility
0:13:30 is lowered by 20% and why is that important?
0:13:35 So we look at whether the renters who get access to rent control
0:13:39 choose to remain in their newly rent control department.
0:13:43 So we find that they’re 20% more likely to remain there
0:13:46 relative to our control group renters
0:13:48 who don’t get access to rent control.
0:13:50 So that seems totally unsurprising, yes?
0:13:54 Yes. I more see that result is a validation
0:13:56 that our data is good and high quality
0:13:58 and we have something to work with here.
0:14:02 Okay. Further, you write that rent control
0:14:05 lowers displacement from San Francisco.
0:14:06 What does that mean exactly?
0:14:10 So we can look at not just whether you remain
0:14:12 in the actual apartment you lived in
0:14:14 when you got access to rent control,
0:14:18 but whether you remain in San Francisco as a whole.
0:14:21 We find rent control has a dramatic impact
0:14:25 on whether you actually live in San Francisco or not.
0:14:29 So it prevents those renters from leaving the city as a whole,
0:14:32 which I think from a policy perspective
0:14:34 of rent control advocates,
0:14:37 that’s one of the goals they talk about
0:14:39 as preventing displacement from the city.
0:14:41 And then you write that especially
0:14:44 from minorities that displacement is lowered.
0:14:47 Right. So when you look at that first cohort
0:14:49 of renters that already lived in the city
0:14:50 at the time of rent control,
0:14:55 it is definitely helping minorities more.
0:14:58 It’s preventing displacement of them especially.
0:15:01 Furthermore, you write that landlords
0:15:03 who are susceptible to rent control
0:15:07 “reduce rental housing supplies by 15%
0:15:09 either by converting to condos,
0:15:12 selling to owner occupants, or redeveloping buildings.”
0:15:17 So now it starts to get a little more complicated.
0:15:20 Can you talk about who’s now starting to win here
0:15:21 and who’s starting to lose here?
0:15:25 So obviously when the landlord is first notified
0:15:28 about rent control, he or she can quickly deduce
0:15:31 that his or her rental stream is going to be
0:15:34 lower than previously expected.
0:15:39 And just like any other business owner,
0:15:43 they might think about changing their business strategy.
0:15:46 So if renting out their apartments
0:15:47 is no longer very profitable,
0:15:50 now they may decide, oh, maybe it’s worthwhile
0:15:54 to convert to condos and sell off the apartments
0:15:55 to owner occupants.
0:15:57 And that would be a way to recover
0:15:58 some of this loss income.
0:16:01 Or another thing they could do is say
0:16:03 knock down their old building
0:16:04 and build some new construction
0:16:06 and either sell those as condos
0:16:08 or rent them out as apartments.
0:16:11 Both of those options would avoid them
0:16:13 having to pay this tax of rent control,
0:16:16 help recruit some of their losses,
0:16:18 which is good for the landlords,
0:16:21 but is going to undermine the goals of rent control
0:16:23 because now we’re going to have less rental housing
0:16:26 out there available for rent control.
0:16:32 So you can start to see how rent control
0:16:35 may be accomplishing a narrow short-term goal,
0:16:37 making existing housing more affordable
0:16:39 for a select group of people
0:16:41 at the expense of the long-term goal
0:16:43 of making a city more affordable generally.
0:16:45 When you pass rent control,
0:16:49 the landlords of the property suddenly getting covered
0:16:50 by rent control are losing so much money.
0:16:54 They no longer really want to rent their apartments
0:16:57 out at the prevailing new prices,
0:17:01 so they decrease their supply of rental housing
0:17:03 to the market and if there’s less supply,
0:17:05 that’s going to drive up prices.
0:17:08 Okay, so let me just make sure I have it pretty straight.
0:17:09 You find evidence that rent control
0:17:12 increases gentrification,
0:17:14 one component of which is the displacement
0:17:16 of low-income tenants.
0:17:18 On the other hand, you also find evidence
0:17:20 that low-income people, including minorities,
0:17:24 at least those who are in rent control units already,
0:17:27 they’re likely to disproportionately benefit
0:17:28 from rent control.
0:17:30 So if I’m an affordable housing advocate,
0:17:33 I might say, oh, fine, fancy Stanford professor
0:17:35 who I’m sure has some kind of great
0:17:39 income and/or housing subsidy and/or situation.
0:17:44 I don’t care that some landlords are suffering.
0:17:48 I don’t care that the policy is having
0:17:51 some downstream effects that you don’t like.
0:17:53 I need to make sure that low-income people
0:17:57 aren’t going to get a rent increase of 50% overnight.
0:18:00 So how do you respond to that argument?
0:18:04 So when you think about those initial tenants,
0:18:06 that’s the best bet you’re going to get
0:18:08 for the benefits of rent control to low-income tenants,
0:18:10 the people that are already in the housing.
0:18:14 But even though we find that those tenants
0:18:16 are much more likely to stay in their apartment,
0:18:19 when we look 10, 15 years later,
0:18:23 the share of those 1994 residents that are still there
0:18:26 is down to, you know, 10% or so.
0:18:31 So 90% of them no longer live in that initial apartment.
0:18:34 And it’s that next low-income tenant
0:18:36 that wants to live in the city.
0:18:39 That low-income tenant is going to have a very hard time
0:18:40 finding an affordable option
0:18:42 because now there’s going to be less rental housing.
0:18:44 The prices that that low-income tenant
0:18:46 are going to face when they want to initially move in
0:18:48 are going to be higher
0:18:50 than they would have been absent rent control.
0:18:59 I’m curious how generalizable you think your findings
0:19:02 from San Francisco are for other cities.
0:19:08 I would suspect that the actual quantitative loss
0:19:10 of rental supply or benefits to the tenant
0:19:12 will depend a little bit city to city.
0:19:15 But I think the qualitative takeaway
0:19:18 that landlords are savvy
0:19:20 and are going to work hard to not lose money
0:19:22 on their investments,
0:19:23 I think is a very general point.
0:19:29 For economists who already felt confident
0:19:31 in the theoretical arguments against rent control,
0:19:34 research like diamonds provides empirical evidence
0:19:36 that essentially tells the same story.
0:19:39 Yes, there are some winners in rent control,
0:19:42 but the losing is more widespread and longer term.
0:19:46 But how about empirical evidence from a reverse angle?
0:19:51 That is not when a city adds or expands rent control
0:19:53 like San Francisco did, but when it gets rid of it.
0:19:57 So there’s other work by David Otter and co-authors
0:19:59 that looks at the removal of rent control
0:20:02 in Cambridge, Massachusetts in 1994.
0:20:05 By the early 1990s, Cambridge was one of the few
0:20:08 remaining rent control strongholds in Massachusetts.
0:20:11 Landlords have been trying to get rid of it for years,
0:20:14 but there are a lot fewer landlords than there are tenants.
0:20:18 So any attempt to change the local law was voted down.
0:20:23 Finally, the rent control opponents had a winning idea.
0:20:26 Put the issue up on a statewide referendum
0:20:27 where there might be less empathy
0:20:30 for all those city dwellers with below market rents.
0:20:32 When the referendum was held,
0:20:37 nearly 60% of the voters in Cambridge were opposed,
0:20:38 but statewide it passed.
0:20:42 And so Cambridge began to deregulate its rents.
0:20:45 Years later, a trio of MIT economists
0:20:48 examined the effects of removing rent control.
0:20:51 Okay, so the classic paper on this has been written
0:20:53 by David Otter, Parik Pathak, and Chris Palmer.
0:20:55 Ed Glazer again.
0:20:59 It showed that when units were brought out of rent control,
0:21:00 their owners invested in them.
0:21:03 So they upped the quality of the units.
0:21:06 There was more of a supply of higher-end housing.
0:21:11 They find that the rent control departments experience
0:21:12 a lot of renovation.
0:21:14 The landlords renovate a lot,
0:21:17 and that drives up the desirability
0:21:18 of living in those apartments.
0:21:21 Also, they find that that creates spillovers
0:21:24 onto the nearby apartment buildings
0:21:26 that they themselves weren’t rent controlled.
0:21:28 So neighboring apartments became more valued
0:21:31 as a result of the end of rent control.
0:21:33 And the most recent paper has shown that crime has gone down,
0:21:35 particularly street crime has gone down.
0:21:39 Right after the elimination of rent control in Cambridge.
0:21:40 So it looked like rent control had
0:21:43 negative externalities on the neighborhood.
0:21:51 So what does economic research tell us about rent control?
0:21:54 There are at least two conclusions,
0:21:55 which if I’m reading it right,
0:21:57 sort of work against each other.
0:21:59 The first conclusion is that rent control
0:22:01 doesn’t help many people for very long,
0:22:04 in part because it constrains the supply
0:22:06 of affordable housing.
0:22:09 The second conclusion is that just getting rid
0:22:11 of rent control does not in and of itself
0:22:13 lead to more affordable housing.
0:22:16 In fact, a deregulated housing market
0:22:18 can easily lead to less affordable housing.
0:22:21 The Boston Cambridge area is one of many places
0:22:23 experiencing a steep shortage
0:22:24 in not just affordable housing,
0:22:25 but housing overall.
0:22:28 So even if you accept that rent control
0:22:31 is a big contributor to the affordable housing problem,
0:22:35 getting rid of it isn’t necessarily a solution.
0:22:38 You can see why politicians and policymakers
0:22:39 are confused.
0:22:42 In some states, rent control legislation has failed.
0:22:45 Advocates in Massachusetts, for instance,
0:22:48 have dropped their push for statewide rent control.
0:22:50 But other states are doubling down.
0:22:54 California now caps rent increases at 5% plus inflation
0:22:56 with a maximum increase of 10%.
0:22:59 And this November, California voters
0:23:01 will decide on Proposition 33,
0:23:03 which would give local jurisdictions
0:23:05 more power to control rents.
0:23:08 Rebecca Diamond has an experience
0:23:09 with seeing her research used
0:23:12 in these rent control debates.
0:23:16 It was interesting to see how our results were
0:23:19 used by policymakers and the media
0:23:22 on both sides of the fight,
0:23:23 because indeed some of our results
0:23:25 are like rent control are good,
0:23:26 other ones make them look bad.
0:23:28 You got to read the whole paper
0:23:30 and take it all into account to make a decision,
0:23:32 but it was a very policy relevant paper
0:23:34 for that discussion.
0:23:36 I’m curious what you can tell us
0:23:39 about the political dimensions of rent control.
0:23:41 I may be wrong, but I believe that rent control
0:23:43 is generally supported by Democrats
0:23:45 and generally opposed by Republicans.
0:23:47 I think it’s a simplification to say
0:23:48 all Democrats support rent control.
0:23:52 But I think in the short run,
0:23:55 you can see the benefits of rent control,
0:23:57 like the tenants right away benefit.
0:23:59 What’s much harder to see
0:24:02 are these indirect effects that take a long time
0:24:05 and it’s harder to put your finger on that.
0:24:10 The losses are spread everywhere a little bit
0:24:13 and harder to see walking down the street
0:24:15 or talking to your constituents.
0:24:18 There certainly are some poor people
0:24:21 who can benefit and it’s a very tangible benefit, right?
0:24:23 It’s not some complicated thing
0:24:24 which requires you to trust in the market.
0:24:26 It’s just sort of very clear.
0:24:28 And if you think that people on the left,
0:24:31 many of them just don’t trust markets to begin with,
0:24:32 then saying there’s going to be
0:24:34 some negative market effect to them,
0:24:35 that sounds like capitalist hocus pocus.
0:24:37 Whereas what they can see right now
0:24:39 is that Mrs. Ray’s rents won’t go up
0:24:40 because of their regulation.
0:24:48 Economists tend to believe their models
0:24:52 and say, you know, end of story and believe me, right?
0:24:57 That is Vicky Bean.
0:25:01 But communities don’t necessarily have to believe economists
0:25:03 and so economists need to do a better job
0:25:07 of responding to the very real fears that communities have.
0:25:09 Bean used to be commissioner
0:25:10 of the New York City Department
0:25:13 of Housing Preservation and Development.
0:25:15 Now she’s a law professor at New York University
0:25:17 and she directs the Furman Center
0:25:19 for Real Estate and Urban Policy.
0:25:22 The Furman Center has embarked on a project
0:25:25 that we call Not Your Grandmother’s Rent Control
0:25:28 to try to figure out if you were starting from scratch
0:25:33 and you were designing the most efficient rent regulation system,
0:25:34 what would that look like?
0:25:41 Coming up after the break, what would that look like?
0:25:44 You really need to have a holistic look.
0:25:47 And what about rent regulation for commercial properties,
0:25:50 like all those empty storefronts in New York?
0:25:52 First and foremost, I’m an angry New Yorker.
0:25:54 [Music]
0:26:12 As we’ve been hearing, economists are generally opposed
0:26:13 to rent control.
0:26:16 It rewards some people, but fairly arbitrarily.
0:26:18 It punishes many others
0:26:19 and generally doesn’t do much
0:26:22 to improve overall access to housing.
0:26:27 That said, most people don’t think like economists
0:26:31 or even believe them, which is why many politicians
0:26:35 and members of the public think rent control is a great idea.
0:26:38 Well, I’m in favor of residential rent control
0:26:39 and rent regulations.
0:26:41 That is David Eisenbach.
0:26:43 He teaches history at Columbia University
0:26:47 and back in 2019, he ran for citywide office
0:26:51 during a New York special election for public advocate.
0:26:56 There are in New York City about 3.4 million apartment units,
0:27:00 nearly one million of which are rent stabilized.
0:27:04 And New York’s rental market is incredibly expensive,
0:27:06 as it is in many other cities
0:27:08 with regulated rents like San Francisco.
0:27:12 Economists argue that overall high prices
0:27:16 are a direct consequence of rent regulation.
0:27:18 What does Eisenbach think?
0:27:20 I disagree.
0:27:24 I mean, there are a lot of reasons why real estate
0:27:26 in San Francisco and real estate in New York are high.
0:27:31 Blaming it on rent stabilization is definitely not it.
0:27:34 The consequences of getting rid of either rent control
0:27:39 and/or rent stabilization would be the immediate displacement
0:27:43 of a big portion of the population.
0:27:45 And that would just be cruel at this point.
0:27:50 I don’t know how anybody could justify even somebody
0:27:52 looking at it purely in economic terms,
0:27:55 how anybody could justify that in just in human terms.
0:27:58 You’re going to blame the high rents on rent control?
0:27:58 Come on.
0:28:02 Okay, so Eisenbach does not believe
0:28:04 the economic research on rent control.
0:28:05 What does he believe in?
0:28:09 Well, first and foremost, I’m an angry New Yorker
0:28:12 who walks around the streets of New York
0:28:16 and sees empty storefront after empty storefront
0:28:18 and just feels like my city is dying.
0:28:21 Some commercial rents in New York have spiked
0:28:22 along with residential rents.
0:28:24 Still, in some parts of Manhattan,
0:28:27 as much as 20 percent of retail space
0:28:30 is either vacant or soon to be vacant.
0:28:31 And I found out that there is this bill
0:28:33 called the Small Business Job Survival Act.
0:28:37 It was initially submitted back in the 1980s
0:28:41 and I figured why don’t I run for office pushing this bill
0:28:44 and so I ran for public advocate on the platform.
0:28:45 We’re going to pass this bill.
0:28:47 It’s going to save small business in New York City.
0:28:51 We should say that Eisenbach did not win the election.
0:28:53 He came in 13th in a field of 17,
0:28:55 but he did get a fair amount of attention
0:28:58 for talking about all those empty storefronts,
0:29:00 which have upset a lot of people.
0:29:01 There are two major provisions
0:29:03 of the Small Business Job Survival Act.
0:29:06 One, it guarantees a 10-year lease renewal offer
0:29:08 from the landlord to the tenant
0:29:11 for any tenant with a commercial lease in New York City.
0:29:13 Number two, if the landlord and tenant
0:29:15 cannot come to an agreement,
0:29:17 they go to legally binding arbitration.
0:29:22 And that arbitrator then will pick a fair market rent,
0:29:25 which will then be charged in the next 10-year lease renewal.
0:29:30 Opponents of this proposal call it commercial rent control.
0:29:33 But this bill, the Small Business Job Survival Act,
0:29:35 is absolutely not rent control.
0:29:38 It doesn’t put a limit on how much rent can be charged,
0:29:40 which is the very definition of rent control.
0:29:43 It’s legally binding arbitration.
0:29:44 Much different.
0:29:45 Are there other cities that have
0:29:48 this kind of Small Business Jobs Protection
0:29:50 on the real estate front that works well?
0:29:51 It’s going to be unique.
0:29:57 Eisenbach lost his election,
0:30:01 but the city council has continued to debate legislation
0:30:02 that would rein in commercial rents.
0:30:05 I was interested to know what the economists
0:30:06 we’ve been speaking with,
0:30:09 Rebecca Diamond of Stanford and Ed Glazer of Harvard,
0:30:12 what they thought about commercial rent regulation.
0:30:14 So I’m also very interested in that,
0:30:16 and I also know almost nothing about it.
0:30:19 I’ve never seen any work on it.
0:30:21 You could easily tell a story where the threat
0:30:22 of some form of rent control
0:30:25 makes the vacancy problem worse in the short run.
0:30:28 So for example, I don’t want to rent right now
0:30:30 to a lower-end tenant who could fill my space
0:30:33 because I’ll be locked in by the rent control law,
0:30:34 and I’ve got that tenant forever.
0:30:36 So that means I’m going to really hold out
0:30:39 for a blue-chip tenant because I have this threat of this law
0:30:40 over my shoulder.
0:30:42 So do I think vacant empty storefronts are a problem?
0:30:42 Sure.
0:30:44 I mean, we can talk about it from a perspective
0:30:45 of merely as an urbanist,
0:30:48 where we think it’s unattractive to have these things.
0:30:50 But I’m also disturbed by it as an economist,
0:30:53 because someone’s got space to sell.
0:30:55 There are people who want to buy that space.
0:30:57 Why isn’t the transaction happening?
0:31:00 It’s sort of the market is going awry.
0:31:02 And the answer to that,
0:31:04 of why the market is going awry,
0:31:06 is not immediately obvious.
0:31:07 There are, of course, plenty of theories
0:31:11 as to why so many storefronts in New York are vacant.
0:31:12 Here, again, is Vicki Bean,
0:31:14 the former housing official
0:31:16 who studies the real estate market at NYU.
0:31:17 I think there are a lot of questions
0:31:20 about how commercial rent regulation would work
0:31:26 and how it might interfere with an efficient market.
0:31:28 One concern that I would have right now
0:31:32 is we seem to be in the middle of an upset
0:31:36 of a transition in retail in general,
0:31:39 because of the availability of internet retail.
0:31:41 A lot is in flux.
0:31:44 But there are two points of evidence against that,
0:31:45 one of which is that many of these storefronts
0:31:47 formerly held services,
0:31:49 and I don’t think a nail salon
0:31:52 has been made obsolete by Amazon just yet.
0:31:54 And secondly, the rents, the asking rents,
0:31:56 at least according to the most recent
0:31:58 real estate board of New York report,
0:32:00 in many of these areas are still sky high.
0:32:02 It’s not like there’s no demand for areas
0:32:05 where you’re charging $300, $400 per square foot
0:32:07 to rent these areas.
0:32:09 In the long term, all of the economic push
0:32:11 for both the landlords and the tenants
0:32:13 is to get those units occupied
0:32:16 and get the rent payments again flowing to the landlord.
0:32:19 Landlords, whether small or large,
0:32:21 are often left out of public discussions
0:32:23 about property markets.
0:32:24 And if they’re not left out,
0:32:26 they’re usually drawn as villains.
0:32:29 Vicky Bean, in thinking about the project
0:32:31 that she calls “not your grandmother’s rent control,”
0:32:33 she’s trying to change that.
0:32:37 I think the thing that you really need to focus on is,
0:32:41 how can I ensure that the landlord
0:32:44 is getting a reasonable return,
0:32:46 because otherwise people will take their money
0:32:48 and put it elsewhere and you won’t get building?
0:32:51 And how can we, at the same time,
0:32:55 try to close some of these avenues
0:32:58 that landlords could use to try to escape rent regulation
0:33:04 without it becoming a system that’s so weighed down
0:33:07 with so many different enforcement challenges
0:33:12 that it kind of collapses of its own weight, right?
0:33:16 You need to pay attention to the different ways
0:33:21 in which property owners are making money on the property.
0:33:24 So you really need to have a holistic look.
0:33:28 At the same time, you need to have very open eyes
0:33:33 view of the kinds of costs that we’re imposing on them.
0:33:36 There’s one huge cost that drives real estate prices,
0:33:39 whether we’re talking about rentals or sales,
0:33:41 for both commercial and residential buildings.
0:33:44 So in New York City, for example,
0:33:48 a very high percentage of rent goes for property taxes.
0:33:52 So we can’t be saying to landlords,
0:33:54 “Hey, keep prices down,”
0:33:57 but by the way, your property tax just went up by 10%.
0:34:03 So we have to recognize that we, as a tax-paying body,
0:34:06 have an obligation to understand the effect
0:34:09 that those increases may have on rents,
0:34:13 and we can’t just turn around and say to the landlord,
0:34:16 “You absorb them. Don’t pass them on to the tenant,”
0:34:19 because that’s an unsustainable system.
0:34:21 So it’s certainly true that renters implicitly
0:34:23 have to pay for property taxes.
0:34:24 And it’s not obvious that that’s wrong,
0:34:26 because the idea of property taxes
0:34:29 is the paying for city services and renters use city services too.
0:34:31 That’s obviously not wrong.
0:34:33 So here’s a big question that I really hope you can answer,
0:34:35 because I’ve wondered this for a long time.
0:34:40 Some of the biggest property owners in a city like New York,
0:34:42 and some of the wealthiest property holders generally,
0:34:46 are universities, religious institutions,
0:34:49 hospitals, and other not-for-profit institutions,
0:34:52 which makes them either partially or wholly exempt
0:34:53 from paying property taxes.
0:34:57 So I’m curious, how does that exemption affect, A,
0:34:59 the taxes paid by everyone else,
0:35:04 and how does that, B, ultimately affect housing prices for everyone?
0:35:06 First of all, clearly you’re right.
0:35:09 The government has decided to subsidize certain institutions
0:35:12 by enabling them not to pay property taxes.
0:35:16 And from a purely accounting point of view,
0:35:18 those taxes need to come from somewhere else.
0:35:21 On the other hand, it is also true that at least
0:35:24 some of the institutions that you’re talking about
0:35:27 have proven to be extraordinarily important
0:35:28 for the economic health of the area.
0:35:31 We’re subsidizing the university student.
0:35:34 We’re making it cheaper for them to rent than it would be otherwise.
0:35:35 Is that fair?
0:35:37 Well, we thought that somehow or other,
0:35:39 it was a good idea to subsidize educational institutions
0:35:40 at one point in time.
0:35:42 We thought there might be some spillovers from that,
0:35:44 some benefits from encouraging people to become educated.
0:35:46 But we should be open to reinvestigating that.
0:35:48 And anyway, you shouldn’t take my word for it,
0:35:50 because after all, I’m the employee of an educational institution.
0:35:52 So, you know.
0:36:02 We can ask whether or not the blanket property tax exemption
0:36:05 that we’ve given to religious institutions
0:36:07 and educational institutions is appropriate.
0:36:10 I mean, that seems like a reasonable question to ask.
0:36:11 In the case of religious institutions,
0:36:14 it in some sense goes back to fundamental issues
0:36:15 about separation of church and state in the US,
0:36:17 but we can still ask this question.
0:36:22 I would be surprised if we think that changing those tax rates
0:36:25 is the number one step to take to promote affordability
0:36:26 in New York City, though,
0:36:30 relative to, you know, bringing more space on market
0:36:33 that you can actually build on changing the regulations.
0:36:35 I mean, it seems like that’s not likely to be the case,
0:36:38 but it is true that, you know, you move stuff
0:36:41 to a religious area in educational use.
0:36:43 In many cases, you’re moving it away from an owner
0:36:45 who would actually build on it.
0:36:46 And that’s also correct.
0:36:49 (upbeat music)
0:36:51 Coming up after the break,
0:36:54 a lot of regular people who aren’t institutions
0:36:57 would also like a break on their rent.
0:36:58 Rent control sounds like a dream, man.
0:37:01 I’m Stephen Dubner.
0:37:02 You were listening to a bonus episode
0:37:05 of Freakonomics Radio, and we will be right back.
0:37:17 So what have we learned about housing,
0:37:18 especially affordable housing,
0:37:20 especially in the most desirable cities?
0:37:24 For starters, we’ve learned that it’s complicated.
0:37:28 Property taxes play a large under-appreciated role
0:37:30 in driving up costs,
0:37:33 and the tax burden isn’t necessarily spread so equitably.
0:37:35 Rent regulations, meanwhile,
0:37:38 appeal to the public and politicians,
0:37:40 but they also create perverse incentives
0:37:43 that in the long run work against affordable housing.
0:37:46 How about housing vouchers?
0:37:49 Aren’t they a more flexible way to subsidize housing?
0:37:52 The advantage of a voucher is you can go through
0:37:55 all of those eligibility requirements
0:37:58 and really target the voucher to the families
0:37:59 that you think are most in need.
0:38:04 And we, in New York and in many other major cities,
0:38:08 we have prohibitions against a landlord refusing a tenant
0:38:11 because they’re using a voucher rather than earned income.
0:38:17 But we’re still getting enormous resistance from landlords
0:38:21 because if you have a federal government that shuts down
0:38:23 and isn’t paying its voucher payments,
0:38:26 and there the landlord is stuck with that, right?
0:38:30 Or if you have a city like New York City did
0:38:33 that issued vouchers and then changed its mind and said,
0:38:35 “Oops, that program is over,”
0:38:38 then the landlord has a tenant in place
0:38:39 who no longer can pay the rent
0:38:42 and the landlord has to take them to court
0:38:43 and bear the cost of that.
0:38:47 Meanwhile, the market price of housing in a place like Manhattan
0:38:50 lies somewhere between punitive and prohibitive.
0:38:54 Here’s what we heard when we took our microphones outside
0:38:56 to Bryant Park in Midtown Manhattan.
0:38:59 Manhattan rent, onerous.
0:39:00 Astronomically high.
0:39:02 That’s too expensive, way too expensive.
0:39:03 That’s why I live in New Jersey.
0:39:07 And what do these people think about regulated rents?
0:39:10 Rent control sounds like a dream, man.
0:39:11 Rent control sounds good.
0:39:14 It’s really key to find all those stabilized rent buildings.
0:39:15 If you do, I think it’s golden.
0:39:16 If not, it sucks.
0:39:19 Pull disclosure, I did do economics, so market failure.
0:39:27 So if rent control isn’t a viable tool
0:39:29 in the fight for affordable housing, what is?
0:39:33 The most natural tool towards affordability is supply
0:39:36 and to make sure that we are making it easy enough
0:39:41 to build moderate cost rental apartment buildings in these cities.
0:39:42 Ed Glazer again.
0:39:46 We’ve used regulations to so restrict our ability
0:39:48 to provide affordable housing units
0:39:52 that now we’re at this restricted frozen and amber form.
0:39:55 In the case of New York, gosh, New York is New York.
0:39:57 It’s hard to imagine how much housing
0:39:59 you’d really need to say to man for New York.
0:40:01 What about Boston where you live?
0:40:04 Boston is facing what it calls a historic housing shortage.
0:40:07 The city is growing, not enough housing to match.
0:40:09 What do you suggest Boston do to accommodate that surge
0:40:12 other than let the market work its famous magic?
0:40:15 Look, drive around Boston.
0:40:18 It doesn’t look overcrowded to me,
0:40:20 and I don’t think it should look overcrowded to anyone else.
0:40:22 There’s a lot of vacant industrial space
0:40:25 that could easily house tens of thousands of units.
0:40:26 If you’ve made it easy enough to build,
0:40:31 I’ve got to think that this is a doable problem,
0:40:34 at least from an engineering and economics point of view.
0:40:36 The politics, of course, are more difficult.
0:40:38 What specifically would need to be done to change it?
0:40:42 The big answer is you need as of right zoning
0:40:44 that enables fairly high density levels
0:40:47 over a fair amount of space.
0:40:50 Currently, Boston’s zoning plan is highly antiquated.
0:40:53 Every project is handled on an ad hoc basis.
0:40:55 Usually, it involves variances that are quite high
0:40:56 from the original plan,
0:41:00 which means that they are highly subject to a judicial challenge.
0:41:03 All of that is a recipe for uncertainty and delay
0:41:04 in endless community meetings.
0:41:06 The thing that works best
0:41:08 is when you have something where you’ve decided in advance,
0:41:09 this is how much we’re going to allow to build.
0:41:12 There are a couple of simple rules that you’ve got to follow.
0:41:14 Come here, bring your units, and make it happen.
0:41:15 And that’s what’s needed.
0:41:16 That’s what actually works.
0:41:18 It’s not something that involves a 10-year negotiation process,
0:41:21 but something that says, here are the rules up front.
0:41:22 Go to it.
0:41:28 It should be noted that not all U.S. cities
0:41:30 impose the same level of red tape you see
0:41:33 in Boston and New York and San Francisco.
0:41:35 If you want to look for affordability,
0:41:37 the American Sun Belt is pretty great.
0:41:41 The Atlantas, the Houston’s, the Dallas’s,
0:41:44 the places that just have made it very easy to build
0:41:45 over the last 40 years.
0:41:48 You want to ask why Atlanta, Dallas, Houston, Phoenix,
0:41:50 each added a million people between 2000 and 2010
0:41:51 as metro areas.
0:41:52 It’s because they make it astonishingly easy to build.
0:41:55 And you can go and you can buy a great-looking house
0:41:57 for a fraction of what you’d pay in New York in these places.
0:42:00 And, you know, we don’t have an affordable housing crisis
0:42:02 in the U.S. nationally.
0:42:03 We have lots of affordable housing in places
0:42:06 with names like Atlanta, but just not in New York City.
0:42:10 Many European cities, meanwhile, are more like New York,
0:42:12 in fact, exaggerated versions of New York.
0:42:15 Much of Europe is quite restrictive in your cities,
0:42:18 but I am much more comfortable about the idea
0:42:20 that much of central Paris is, you know,
0:42:22 patrimony of the world and needs to be protected.
0:42:25 While policies vary from city to city and country to country,
0:42:29 almost all major European cities have rent control.
0:42:33 Sweden, of course, is the place where Acer Lindback,
0:42:34 the famous economist.
0:42:36 And although he was market-oriented,
0:42:37 he certainly skewed to the left.
0:42:40 Acer famously said that short of bombing,
0:42:42 I know of no way to destroy a city
0:42:44 that was more effective than rent control.
0:42:47 And he certainly had stock home in mind.
0:42:54 Right now, there are around 10 million people
0:42:55 living in Sweden.
0:43:01 Around 550,000 of these people were standing in a queue
0:43:03 waiting for an apartment in Stockholm.
0:43:05 That is 5% of the Swedish population.
0:43:08 That’s the economist Tommy Anderson.
0:43:11 I am a professor at Lund University,
0:43:13 which is located in the south of Sweden.
0:43:17 I focus on an area called market design.
0:43:20 Since we spoke with Anderson back in 2019,
0:43:22 the number of people waiting for an apartment in stock home
0:43:24 has grown to over 800,000.
0:43:27 Sweden has nationwide rent control.
0:43:31 The rental system in Sweden is based on collective bargaining.
0:43:34 So according to the Swedish law,
0:43:37 there is a union called the Swedish Union of Tenants.
0:43:42 And their job is essentially to negotiate the rents for tenants.
0:43:47 And it’s based on something which is called the utility value,
0:43:54 which essentially means that if you have two comparable apartments,
0:43:55 they should have the same rents.
0:43:57 Another objective that they have
0:44:00 is that they should keep the rents low.
0:44:03 The rents cannot be increased by too much.
0:44:06 If you’ve been listening closely,
0:44:08 it may not surprise you to learn that this system
0:44:10 has led to a housing shortage.
0:44:13 Because people will not invest in new buildings
0:44:15 unless they can get good returns.
0:44:19 So if you look at this report written by this
0:44:22 National Board of Housing, Building and Planning from 2016,
0:44:30 they estimated that Sweden needs around 440,000 new homes before 2020.
0:44:35 This shortage is what can lead to long lines to get an apartment,
0:44:36 especially in the more desirable places.
0:44:39 How long do you have to wait in stock home?
0:44:43 You have to wait for 10 or 20 or even 30 years
0:44:46 to get an apartment right now if you would sign up today.
0:44:51 What if you don’t want to wait 10 or 20 or 30 years for an apartment?
0:44:56 So there are no official figures because it’s a black market,
0:44:59 but it’s clear that there exists a black market.
0:45:02 You can get an apartment in several different ways.
0:45:07 So one of them is essentially to buy a contract with black money.
0:45:13 You can also bribe someone in charge of allocating available apartments
0:45:15 to get a better position in the queue.
0:45:19 And another thing which is kind of popular is these fake swaps.
0:45:25 You’re allowed by law to swap apartments with other persons.
0:45:28 So you’re just pretending that you’re swapping apartments,
0:45:30 but essentially you are not.
0:45:33 In the old days what I’ve heard and I must stress that
0:45:35 I don’t have any scientific evidence on this,
0:45:41 but apparently a black contract used to cost around 10% of the market value.
0:45:47 But in recent years it has actually grown to say 20% of the market value of the apartment.
0:45:50 So it’s kind of expensive to buy a black contract.
0:45:53 And you know it’s always a risk to be involved in this business
0:45:56 because even if you pay the money it’s not clear that you will get the apartment.
0:46:00 Simply because I mean there are criminal gangs involved in this as well.
0:46:07 That does not sound like what the designers of the Swedish rental system were going for.
0:46:10 But the housing market in Stockholm is so bad
0:46:13 that even business leaders there have risen up in protest.
0:46:17 The CEO and the founder of Spotify in 2016,
0:46:20 he wrote an open letter to the people of Sweden saying that
0:46:25 unless you know you solve this housing situation in Stockholm,
0:46:29 Spotify may consider moving its headquarters out of Stockholm
0:46:33 simply because we cannot find housing for our future employees.
0:46:39 If policymakers can’t figure out smarter ways to encourage more affordable housing,
0:46:44 you can expect to see this kind of scenario playing out in cities all over the world.
0:46:49 What’s your experience with rent control or your opinion?
0:46:53 Let us know. Our email is radio@freakonomics.com.
0:46:55 Also please spread the word about our show.
0:46:58 That is the best way to support it.
0:47:01 You can also leave a rating or review on your podcast app.
0:47:03 Thanks for that.
0:47:07 We will be back very soon with another new episode of Freakonomics Radio.
0:47:11 Until then, take care of yourself and if you can, someone else too.
0:47:18 Freakonomics Radio is produced by Stitcher and Renbud Radio.
0:47:21 You can find our entire archive on any podcast app
0:47:26 also at Freakonomics.com where we publish transcripts and show notes.
0:47:28 This episode was produced by Zach Lipinski.
0:47:31 Our staff also includes Alina Kulman, Augusta Chapman,
0:47:35 Delvin Abouage, Eleanor Osborne, Elsa Hernandez,
0:47:37 Gabriel Roth, Greg Rippin, Jasmine Klinger,
0:47:40 Jeremy Johnston, John Schnarrs, Julie Kanfer,
0:47:42 Mjörk Baudic, Morgan Levy, Neil Karuth,
0:47:46 Rebecca Lee Douglas, Sarah Lilly, and Theo Jacobs.
0:47:49 Our theme song is “Mr. Fortune” by the Hitchhikers.
0:47:51 Our composer is Luis Guerra.
0:47:53 As always, thanks for listening.
0:47:58 How’s things?
0:48:00 Great. Yeah, things are nice.
0:48:01 Got some rain here in California.
0:48:04 Good. Congratulations. That’s important, I guess, yeah?
0:48:06 Thank you.
0:48:13 The Freakonomics Radio Network, the hidden side of everything.
0:48:18 Stitcher.
0:48:20 you
0:48:30 [BLANK_AUDIO]

0:00:03 [MUSIC PLAYING]
0:00:06 Last week in part one of this series,
0:00:10 we heard about the long and strange history of eyeglasses.
0:00:14 What we often see in early arts are representations
0:00:17 of the devil wearing spectacles.
0:00:20 And we learned how today, the $150 billion
0:00:23 eyewear industry, has one dominant player,
0:00:27 a French-Italian conglomerate called Esselor Luxorica.
0:00:29 They have full control over prices,
0:00:31 and that’s just a license to mint money from them.
0:00:34 We also heard how challengers like Warby Parker
0:00:37 are trying to change the economics of the industry.
0:00:40 When we had this idea to sell eyewear
0:00:44 for a fraction of the cost, people loved that idea.
0:00:47 Today on Freakonomics Radio, in part two of our series,
0:00:50 we learn about the massive rise of myopia,
0:00:54 the even more massive rise of China as an eyeglass market,
0:00:58 and what an eye doctor knows that you don’t know.
0:01:00 I always tell people, you don’t compromise
0:01:03 on parachutes or eyeglasses.
0:01:05 Oh yeah, one more thing.
0:01:08 We ask whether intense consolidation in an industry
0:01:13 like eyewear could be a threat to democracy itself?
0:01:16 If people feel a tiny group of consolidated industries
0:01:19 and their beneficiaries make all the money,
0:01:22 it tends to create a lot of widespread anger.
0:01:25 The surprising economics of the eyeglass industry,
0:01:27 part two, beginning now.
0:01:30 (upbeat music)
0:01:42 – This is Freakonomics Radio,
0:01:46 the podcast that explores the hidden side of everything
0:01:48 with your host, Stephen Dubner.
0:01:51 (upbeat music)
0:01:53 (upbeat music)
0:01:59 Tim Wu is a law professor at Columbia.
0:02:03 He has also been in both the Obama and Biden administrations
0:02:06 an advocate of stronger anti-trust legislation.
0:02:09 Wu argues that too many industries
0:02:11 have just one or two dominant players
0:02:13 which can push up prices.
0:02:16 This would include the eyeglass industry.
0:02:18 – It has to compare itself with other obscene margin takers
0:02:20 like the pharmaceutical drug industry.
0:02:23 The specific target of Wu’s criticism here
0:02:24 is S.L.O.R. Luxottica,
0:02:28 which controls a massive portion of the global industry
0:02:31 from eyeglass retailers to optical labs,
0:02:34 from luxury partnerships to vision insurance.
0:02:36 – Some of the worst abuses of market power
0:02:37 are in medical industries
0:02:40 where you can’t really go without the thing.
0:02:41 You need glasses, right?
0:02:44 If you wanna see things that are far away.
0:02:46 There is something particularly offensive
0:02:48 when you take advantage of an essential need
0:02:49 that people have.
0:02:52 – To be fair, I’m extremely grateful
0:02:54 to the whole history of science of eye care.
0:02:58 ‘Cause if I were born in an era before eyeglasses,
0:03:01 I would have been like Viking food.
0:03:01 They would have chopped me up
0:03:03 to feed to the horses or something.
0:03:04 I would have been useless.
0:03:07 So if I have to pay $1,000 for a pair of glasses
0:03:10 that let me see really well, I don’t love it,
0:03:11 but I am grateful.
0:03:13 I guess the story I’ve always told myself
0:03:15 is just think of all that technology
0:03:16 that has gone into that.
0:03:19 – Yeah, if Luxottica employed a team of crack scientists
0:03:22 who had invented eyeglasses five years ago,
0:03:23 I would be singing their praises and saying,
0:03:26 “Wow, look, these guys invented this thing.
0:03:27 “We’ll give them a break.”
0:03:30 I don’t know who invented the idea of a prism,
0:03:31 but certainly they didn’t.
0:03:33 That’s like giving American Airlines credit
0:03:35 for inventing the airplane.
0:03:36 They’re the one who’s throwing you
0:03:39 in the middle seat and charging you for overhead baggage.
0:03:40 They’re not the right brothers.
0:03:41 I think you got the wrong guys.
0:03:45 – One thing about the airline industry,
0:03:48 their product has gotten cheaper,
0:03:49 adjusted for inflation,
0:03:51 airline tickets have fallen by at least a third
0:03:53 over the past 40 years.
0:03:57 As for eyeglasses, there are some inexpensive ones out there.
0:04:00 Zeni Optical sells glasses online
0:04:02 for an average of $44 a pair.
0:04:05 Glasses at Warby Parker start at $95,
0:04:09 but the industry average is around $350.
0:04:11 What’s driving these prices?
0:04:14 Let’s talk to someone who knows the details.
0:04:17 – A regular single vision lens can start at $150.
0:04:20 That is Harvey Mascot.
0:04:23 He is an optometrist and the fourth generation
0:04:26 of his family to run the Mascot eyeglass chain,
0:04:28 which started in New York.
0:04:31 – And I both fixer upper, I like to consider myself.
0:04:33 I work in the family business my whole life,
0:04:35 summers for beer money.
0:04:37 So I was always introduced and exposed
0:04:38 to the optical business.
0:04:39 – When you grow up in a family business,
0:04:43 it’s what all of the generations talk about at dinner.
0:04:44 It’s a part of your culture.
0:04:47 – And that’s Zachary Mascot, Harvey’s son.
0:04:49 He’s the firm’s chief design officer.
0:04:51 That covers the design of their glasses,
0:04:53 as well as the Mascot shops,
0:04:56 which have some distinctive touches.
0:04:58 – Walking into a Mascot shop,
0:05:00 it’s like walking into my grandmother’s living room.
0:05:03 I don’t know if I can recreate the smell,
0:05:04 but it’s certainly-
0:05:06 – Would you want to recreate the smell?
0:05:07 – I’m not gonna answer that,
0:05:09 but it’s certainly a warm feeling.
0:05:13 There’s knickknacks, there’s random items at the cashier,
0:05:15 a little bunny rabbit holding a business card,
0:05:17 things that were collected by my grandfather
0:05:18 when he would bring it home.
0:05:19 And my grandmother said,
0:05:22 that’s not staying here, bring it back to the shop.
0:05:24 And that became the aesthetic of our brand.
0:05:26 – The story starts out in 1899
0:05:28 when my great-grandfather, Hyman,
0:05:30 who I’m named after, Harvey,
0:05:33 came to America with a classic story of coming to America
0:05:36 to pursue your dreams and escape oppression.
0:05:37 In Eastern Europe at the time,
0:05:40 he was an optician from the old country
0:05:42 and set up his wares on the Lower East Side,
0:05:43 Orchard Street,
0:05:46 and sold ready-made glasses from a push cart.
0:05:49 And then his son, Saul, was born in America in 1910,
0:05:51 and Saul was pretty entrepreneurial,
0:05:54 and they set up a brick and mortar shop.
0:05:56 And we sat on the corner of Orchard and Delancey
0:05:57 for 78 years.
0:06:01 My dad followed his father into the business as an optician.
0:06:03 They took their craft seriously.
0:06:04 They loved opticianry.
0:06:07 They loved taking care of clientele and customers.
0:06:10 – The Moscow aesthetic today is Old World New York
0:06:13 with a dash of nouveau cool.
0:06:15 We are at the, I would say the lower end
0:06:17 of the high-end segment.
0:06:20 We’re really positioned as a fashion brand
0:06:22 that of course offers medical functions
0:06:24 and the expertise of opticians,
0:06:27 but we’re really positioning ourselves
0:06:29 in the luxury brand side of things.
0:06:33 – The names of the frames at Moscow are memorable.
0:06:36 The Boy Chick, the Frankie, the Neb,
0:06:37 their best-selling frame,
0:06:40 worn by David Beckham and Johnny Depp
0:06:43 and Rashida Jones is called the Lemtosh.
0:06:45 I asked where that name came from.
0:06:48 – It was actually a made-up family word,
0:06:49 kind of like a Yiddish slang
0:06:51 that they would use when picking on one another.
0:06:52 – You’re such a Lemtosh.
0:06:54 – Stop being a Lemtosh.
0:06:56 – We never take ourselves too seriously, Stephen,
0:06:57 and we like to have fun.
0:06:59 And these were just words that were used in the family
0:07:01 that I heard growing up.
0:07:04 – So what is it about the Lemtosh
0:07:06 that makes it universally appropriate
0:07:08 or so widely appropriate at least?
0:07:11 Can you describe, you know, whether it’s the shape,
0:07:13 the textures, the way it sits?
0:07:15 Just what is it about that frame?
0:07:18 – It’s the perfect balance of square and round.
0:07:19 It is not perfectly round.
0:07:22 It is not perfectly square.
0:07:23 Because of that shape,
0:07:25 it inadvertently fits super well
0:07:27 on different types of noses
0:07:29 or as we call in the industry, bridges.
0:07:32 – What are you wearing right now, Harvey?
0:07:34 I mean, glasses-wise.
0:07:38 – I am wearing my Lemtosh in a champagne color,
0:07:39 which we call flesh.
0:07:43 – The fact is, while speaking to the Mascots,
0:07:47 I too was wearing a pair of Lemtosh frames.
0:07:49 I’ve been a Mascot customer for a few years now,
0:07:51 and that’s one reason I wanted to hear from them.
0:07:53 I started buying my glasses at Mascot
0:07:55 not because of how the frames look,
0:07:57 although I do like them.
0:07:59 I wound up there because the glasses I was getting
0:08:02 at other places just didn’t work very well.
0:08:05 The lenses, I mean, they were a little imprecise
0:08:08 or had too small of a sweet spot.
0:08:10 They scratched too easily.
0:08:13 I now told Harvey Mascot my eyeglass history,
0:08:15 and I asked him to walk me through the pricing.
0:08:17 – I don’t want to get too technical, but–
0:08:19 – No, I want the technical.
0:08:20 – Well, we have to start with,
0:08:21 are you wearing progressives?
0:08:22 – I am, yes.
0:08:25 – And is your prescription over a minus four?
0:08:26 – Yes.
0:08:27 – Sounds like you’re pretty nearsighted.
0:08:29 Highly myopic prescriptions
0:08:31 with high astigmatic corrections,
0:08:34 a lot of competitors have trouble
0:08:36 with these more complex prescriptions
0:08:38 that we take pride in providing,
0:08:39 and we’re comfortable doing,
0:08:42 and our licensed personnel understand.
0:08:43 Do you have prism?
0:08:44 – Yes.
0:08:46 So once I get into that fairly complicated lens,
0:08:49 and also let’s say I want my lens to be nice and thin,
0:08:51 ’cause I don’t want it to look like I’m looking through
0:08:52 the bottom of a Coke bottle.
0:08:54 What does that lens cost?
0:08:57 – You can add $100, $200 for higher indexes,
0:09:00 which is just increased density of the material
0:09:02 that makes the lens thinner.
0:09:06 You check all the boxes for a very complicated patient
0:09:08 and customer that Moscow loves to serve.
0:09:11 So you’re probably upwards of $1,000.
0:09:12 – Yes, I am, yeah.
0:09:15 And now, what would you say to someone who hears this
0:09:17 and maybe who doesn’t wear glasses yet,
0:09:20 who might once they hit 40 or whatnot,
0:09:22 and say $1,000 for a pair of glasses?
0:09:24 Come on, that’s absurd.
0:09:26 – Well, usually before 40, you don’t need progressives,
0:09:29 so they won’t be that expensive.
0:09:32 But if you’re over 40, I would say you have two eyes.
0:09:36 You want the best possible vision you can get.
0:09:38 Vision is a precious sense.
0:09:41 You don’t compromise on parachutes or eyeglasses.
0:09:46 – The Moscow brand has been growing,
0:09:47 especially over the past decade.
0:09:49 They have more than two dozen shops around the world,
0:09:53 many in the U.S., but also in Japan, South Korea,
0:09:55 and spread around Europe.
0:09:57 Compared to Estelar Luxotica,
0:10:00 they are a minnow, and for a long time,
0:10:03 they didn’t even make their own lenses.
0:10:06 – It was the one piece of the puzzle that we hadn’t solved.
0:10:08 I personally had done everything in the optical business,
0:10:12 from opticianry, optometry, to working with frames,
0:10:14 but we would purchase our lenses
0:10:18 from various lens vendors, the Estelars of the world.
0:10:19 – In what form were they,
0:10:21 are they purchased finished essentially,
0:10:24 or are they kind of like a hockey puck that you grind down?
0:10:25 – They’re called finished blanks.
0:10:26 You can buy lenses finished,
0:10:29 and then you just edge them locally in your lab,
0:10:31 which means cutting them to the frame proper size,
0:10:32 and all of that.
0:10:35 – The degree of magnification is already set, you’re saying.
0:10:39 – Yeah, the prescription is ground by surfacing equipment
0:10:41 that grinds into the surface of the lens,
0:10:42 the front and back surface,
0:10:44 so that the prescription is accurate.
0:10:46 – But a couple of years ago,
0:10:49 Moscow took a page out of Estelar Luxotica’s playbook
0:10:53 by incorporating a bit of vertical integration.
0:10:55 Instead of buying lenses from a supplier,
0:10:58 Moscow started to make their own.
0:11:00 – It was something that we wanted to migrate to
0:11:02 and focus on and learn about.
0:11:03 – How come?
0:11:06 – Because at the end of the day, prices were rising,
0:11:09 costs continued to rise, we don’t sacrifice on quality,
0:11:11 and we would never, for example,
0:11:15 buy less expensive screws or wire templates.
0:11:17 I think it speaks to the fact that we’re control freaks,
0:11:21 and not being able to control certain aspects
0:11:23 of what you do was bothersome to me.
0:11:27 Relying on others to do your work is always problematic for us.
0:11:29 So now we service our own lenses,
0:11:31 we don’t have to buy them from the Estelars of the world,
0:11:34 and we actually grind the prescription in and control it,
0:11:35 but it wasn’t about profit,
0:11:37 it was more about service levels in our shops
0:11:40 and controlling the quality of the lenses
0:11:41 that we were producing,
0:11:43 understanding how they were made,
0:11:45 modifying them in a way that would optimize vision
0:11:47 for our customers.
0:11:50 – So you opened this lab just a few years ago,
0:11:51 and this is on Long Island, correct?
0:11:52 – Correct, yes.
0:11:54 – We started it from scratch,
0:11:56 a very gray as a result of it.
0:11:59 – So you’re investing in your lens operation,
0:12:02 you’re investing in expanding around the world,
0:12:04 a couple dozen shops,
0:12:05 have you taken any outside money,
0:12:08 or is this all mascot reinvestment?
0:12:12 – The latter, credit facilities for banks and our own money.
0:12:14 – I don’t wanna sound like your depression era
0:12:15 great-grandfather,
0:12:18 but does it keep you up at night sometimes?
0:12:20 – Sure, we expand the brand thoughtfully,
0:12:22 we do things for the right reasons,
0:12:24 not just for hitting targets and numbers.
0:12:28 So that’s why it’s taken us 109 years to have 27 shops.
0:12:33 – I told Harvey Mascot about the complaints
0:12:34 that Tim Woo had raised,
0:12:38 that eyeglass firms didn’t invent eyeglass technology
0:12:41 any more than American Airlines invented the airplane,
0:12:44 and that technologies usually get cheaper over time.
0:12:47 So why aren’t eyeglasses getting cheaper?
0:12:50 – The eyewear business requires licensed personnel
0:12:51 on the retail level.
0:12:55 It’s a unique specialty retail industry.
0:12:58 So licensed opticians are licensed by states.
0:13:02 You need to be licensed in order to open an optical shop
0:13:04 in New York, California, most of the states.
0:13:07 Doctors of optometry are the vision specialists
0:13:10 that provide prescriptions along with eye health exams.
0:13:12 So the cost structures are very different.
0:13:14 Doctors aren’t making what a gap employee
0:13:16 is making selling apparel.
0:13:20 So when you combine all these costs and laboratory costs
0:13:23 and specialized skilled costs, it’s very different.
0:13:28 And to just apply that to like a straight retail profit analysis
0:13:30 would be a little bit inaccurate.
0:13:33 – So you think Tim Woo is misunderstanding
0:13:35 the complexity of the industry a little bit?
0:13:36 – Most people do.
0:13:42 – I went back to the eyeglass industry analyst
0:13:44 we heard from in the first part of this series,
0:13:48 Cedric Rossi, who works for a European investment bank.
0:13:50 He is an expert in S-Lore Luxatica
0:13:53 but also knows a great deal about Warby Parker
0:13:56 and every other eyewear brand I could name.
0:14:00 I asked Rossi if he’s familiar with mascot.
0:14:01 – Yeah, a little bit.
0:14:02 It’s starting to expand in Europe.
0:14:05 It was a brand that was almost nonexistent
0:14:07 outside New York, if I’m correct.
0:14:08 – Yes, you’re right.
0:14:11 – Even in the US, actually it was not very well known
0:14:14 until now the owners are starting to realize
0:14:17 that there is some opportunities not only in the US
0:14:19 but also internationally.
0:14:21 Moscott is a very interesting brand
0:14:24 to differentiate yourself from competition.
0:14:27 And that’s why I think optical retailers in Europe
0:14:29 are offering a mascot into the stores
0:14:33 to attract new customers that are used to buying
0:14:35 a Reban and Oakley for years and years.
0:14:38 And now they also want to discover new brands.
0:14:40 – If you were Moscott and you’re trying to take
0:14:45 a relatively small New York retro fashion brand
0:14:48 that’s not inexpensive, where would you look
0:14:52 to expand particularly in the next five or 10 years?
0:14:54 – When you are a US brand, the obvious international markets
0:14:56 are the Anglo-Saxon markets.
0:15:00 It’s very convenient to start with the UK,
0:15:01 Australia, New Zealand.
0:15:03 The consumer behavior is pretty much similar
0:15:05 to what you have in the US.
0:15:07 And then Europe is also a market
0:15:10 which is quite relevant for Moscott.
0:15:13 Also because people are highly attracted by fashion.
0:15:15 Then Asia, but it’s a tough market
0:15:17 because you have a lot of intermediaries,
0:15:19 sometimes in Japan to exist.
0:15:22 You need to be distributed by department store chains
0:15:24 in South Korea, same story.
0:15:25 – Why is that?
0:15:27 Why can’t I have a standalone eyeglass store there?
0:15:30 – That’s how the market is structured.
0:15:32 – Is it because of the medical component or no?
0:15:33 – No, no, no.
0:15:36 Even for luxury companies, when they started
0:15:40 to expand in Japan or in South Korea in the 80s,
0:15:43 they were distributed into department store chains
0:15:46 because it was really hard to just have a freestanding store
0:15:48 in a very popular street.
0:15:50 – Is that because South Korea and Japan,
0:15:54 let’s say, want to constrain foreign direct investment?
0:15:56 They don’t want firms to come in
0:15:59 and basically manage the real estate.
0:16:01 They want to keep the real estate management more local
0:16:03 for taxes and ownership and so on.
0:16:04 – That could be part of the answer,
0:16:07 but the other reason is that department store chains
0:16:11 own a big chunk of the fashion market.
0:16:13 And so if you want to address a new market,
0:16:16 it’s more convenient to be distributed into department stores
0:16:18 because you rely on a distribution
0:16:19 that is already well-established.
0:16:24 – Rossi says that everyone in the eyeglass industry
0:16:28 is looking to Asia-Pacific for the next big growth spurt.
0:16:30 He says the most attractive target,
0:16:34 especially to a global giant like S. Laura Luxartica,
0:16:35 is China.
0:16:39 China is only 4% to 5% of S. Laura sales.
0:16:41 As a comparison, China already accounts
0:16:44 for more than 20% or 25% of some luxury groups
0:16:47 like Hermès or Moncler, for instance.
0:16:50 In the optical industry, it’s quite difficult
0:16:52 to penetrate in emerging markets
0:16:54 because to exist, you need to have
0:16:55 often monogists and opticians.
0:16:58 – So does S. Laura Luxartica
0:17:02 or any other eyewear manufacturer actually fund the education
0:17:06 or the business practices of optometrists in these countries?
0:17:07 – Exactly.
0:17:08 – They do, ah.
0:17:10 – Exactly, S. Laura Luxartica
0:17:13 opened a few schools to train opticians
0:17:16 because they know that if they want to develop
0:17:17 their business in those countries,
0:17:20 they also need to help the local governments
0:17:22 create from scratch the eyewear market.
0:17:24 And so that’s why the Chinese government
0:17:27 was highly supportive to the initiatives
0:17:29 implemented by S. Laura Luxartica at that time.
0:17:31 It’s because, you know, the welfare state
0:17:33 does not exist in China.
0:17:35 And so if they have some Western companies
0:17:38 helping to create the local eyewear market,
0:17:41 they were highly supportive to these initiatives.
0:17:43 – Does S. Laura Luxartica see that
0:17:45 as a cost center or a profit center?
0:17:47 They’re charging tuition or are they subsidizing
0:17:49 or somewhere in the middle?
0:17:51 – I would say it’s even more than that.
0:17:53 It’s an investment for the long-term growth.
0:17:56 (dramatic music)
0:17:57 – That makes sense, doesn’t it?
0:18:00 That S. Laura Luxartica would be willing
0:18:04 to invest in schools to train Chinese opticians
0:18:07 because the Chinese eyeglass market is growing fast
0:18:10 and it’s growing differently.
0:18:11 Coming up after the break.
0:18:13 – In China, I do see the commercial side
0:18:15 moving too quickly.
0:18:18 – A new treatment for myopia is big business
0:18:21 in China right now and S. Laura Luxartica
0:18:25 has positioned itself once again to take advantage.
0:18:25 I’m Stephen Dubner.
0:18:27 This is Freakonomics Radio.
0:18:28 We’ll be right back.
0:18:31 (gentle music)
0:18:41 – Maria Lu is a professor and researcher
0:18:42 in the Optometry School
0:18:44 at the University of California Berkeley.
0:18:48 She, like me and many, many, many other people,
0:18:52 has myopia, also known as nearsightedness.
0:18:53 – I’m fully convinced,
0:18:56 at least for my own nearsightedness,
0:19:00 this is heavily driven by my early introduction
0:19:03 of pretty intense academic stress.
0:19:06 – And just how intense was her academic stress?
0:19:10 – I skipped two years in primary school,
0:19:13 one year in middle school and one year in high school.
0:19:14 – Lu grew up in China
0:19:17 and was diagnosed with myopia at age 13.
0:19:19 She got a medical degree in ophthalmology
0:19:21 and practiced there for several years
0:19:23 before moving to the U.S.,
0:19:26 where she acquired several more degrees,
0:19:29 a doctor of optometry, an MBA,
0:19:32 a master’s in public health, and a PhD.
0:19:34 For many years, Lu says,
0:19:37 myopia was thought to be a purely genetic condition,
0:19:40 but she was of the school that thought otherwise,
0:19:43 that it can also be driven by environmental factors,
0:19:47 like long stretches of reading or other close-up work
0:19:50 or too much time focused on screens
0:19:52 or not getting enough sunlight.
0:19:54 Here’s one piece of evidence in her argument
0:19:57 that genetics aren’t the only driver.
0:20:01 She is the only near-sighted person in her family.
0:20:02 Here’s another piece of evidence.
0:20:05 The rate of myopia around the world
0:20:08 has been going bonkers over the past few decades.
0:20:11 – We know for any common condition,
0:20:14 if you see a drastic change in the disease prevalence,
0:20:19 this cannot be explained by the human genetic mutation
0:20:21 because human genetic makeup
0:20:24 simply do not mutate at this rate.
0:20:28 – In the US, 42% of the population has myopia.
0:20:32 In the 1970s, the rate was just 25%.
0:20:34 Several countries in Asia,
0:20:36 including China, Singapore, and Japan,
0:20:40 have myopia rates of 80% to 90%.
0:20:42 In Seoul, South Korea,
0:20:47 96.5% of 19-year-old men have myopia.
0:20:50 – Not only were seeing a very rapid increase
0:20:51 in the overall prevalence,
0:20:54 we’re also seeing a rapid change
0:20:57 in terms of the age of onset.
0:21:00 We’re seeing kids started developing myopia
0:21:02 at a younger and younger age.
0:21:04 This is very concerning
0:21:08 because the earlier the age of onset,
0:21:10 the faster the progression.
0:21:14 – As infants, our eyeballs grow to a round shape.
0:21:17 Myopia occurs when the eyeball elongates
0:21:20 past the round shape to more of an oval.
0:21:23 The environmental argument says that this elongation
0:21:26 is the eyes way of adapting to the demand
0:21:28 of focusing on something close to your face,
0:21:31 a book maybe, or perhaps more likely,
0:21:33 a smartphone or a computer screen.
0:21:37 It is now estimated that 30% of the global population
0:21:40 has myopia and researchers expect that number
0:21:43 to hit 50% by 2050.
0:21:46 Maria Lu thought that something should be done about that.
0:21:51 So at Berkeley, she started the myopia control clinic.
0:21:55 – When I was trying to start the clinic back in 2013,
0:21:59 our previous clinical director was not very convinced
0:22:02 that number one, myopia is even controllable
0:22:05 and number two, a commercial potential
0:22:07 for this type of service.
0:22:11 So I volunteered my Sundays to get the clinic started
0:22:13 just to really show that yes,
0:22:16 we have a huge demand for this kind of service
0:22:21 and yes, this is evidence-based practice, not some voodoo.
0:22:23 – And it isn’t just a matter of seeing better.
0:22:25 Myopia, left untreated,
0:22:29 can lead to a variety of severe eye conditions.
0:22:32 There are treatments to help slow the progression of myopia,
0:22:36 including eye drops, contact lenses, and surgery,
0:22:40 but there is a newer, perhaps more promising treatment.
0:22:42 – The use of the novel spectacles.
0:22:45 – The novel spectacle is a pair of glasses
0:22:48 designed to slow the elongation of the eyeball.
0:22:51 The lens includes thousands of micro dots
0:22:54 that diffuse the light that hits the eye.
0:22:57 – Novel spectacles will become, in the future,
0:23:02 in my personal opinion, the first line treatment globally
0:23:04 for progressive myopia.
0:23:07 Unfortunately, this is the type of treatment
0:23:10 that has not been approved by US FDA,
0:23:13 so we don’t have such treatment available
0:23:14 in our clinic yet,
0:23:17 but in China, novel spectacles,
0:23:20 based on those micro lens technology,
0:23:24 are becoming the first line defense for myopia control.
0:23:28 – And the Chinese market for novel spectacles is booming.
0:23:32 Liu sees this firsthand in her practice in California.
0:23:36 – Not only Chinese families going back to China
0:23:38 and getting those glasses,
0:23:41 but many families fly to Canada.
0:23:45 Canada offers a couple of those devices or designs already.
0:23:49 I’ve had multiple patient families flying to Canada,
0:23:52 specifically just to get those glasses.
0:23:56 – But Liu is concerned that some of these novel spectacles
0:23:58 won’t do what people are hoping they’ll do.
0:24:02 – To my knowledge, there are over 200 different designs
0:24:04 of those novel spectacles,
0:24:07 specifically for myopia control.
0:24:10 Out of these 200 plus designs,
0:24:12 there are about 10% of them
0:24:16 that actually underwent any sort of clinical testing.
0:24:18 In China, I do see the commercial side
0:24:20 is moving too quickly,
0:24:22 but in the rest of the world,
0:24:26 all of these major players are playing a vital role
0:24:28 in advancing the research side
0:24:31 for us to better understand and better manage myopia.
0:24:35 – One of those major players helping advance the research
0:24:39 is, as you may have guessed, Esalor Luxotica.
0:24:42 They’re one of the major manufacturers
0:24:45 that invested a lot in clinical testing.
0:24:48 The sample size, the rigorousness
0:24:52 of the clinical study designs are very, very different.
0:24:55 We’ve seen some designs being tested
0:24:57 with a sample size of 30,
0:25:01 but Esalor has pretty good clinical data,
0:25:05 not only in terms of the years of observation,
0:25:07 but also the diversity of the children
0:25:09 being recruited for the study.
0:25:12 – As an investment for Esalor Luxotica,
0:25:13 this makes a lot of sense.
0:25:16 The management of myopia is already big business
0:25:18 and we’ll be getting much bigger.
0:25:21 – This is gonna be the next major wave
0:25:25 in either revenue boosting or profit boosting.
0:25:29 The retail price range for novel spectacles
0:25:33 can be anywhere from a couple of hundred dollars
0:25:35 up to 1500 US dollars.
0:25:39 – Esalor Luxotica’s model is called the Stellist.
0:25:42 – Because of their upfront investment in R&D
0:25:44 and the clinical testing,
0:25:48 Esalor Stellist definitely is on the higher price range.
0:25:50 – There’s another design in the US
0:25:51 that’s currently making its way
0:25:53 through the FDA’s approval process.
0:25:58 It’s called Diffusion Optics Technology Lens or DOT.
0:25:59 It is a joint venture
0:26:04 between the American firm Cooper Vision and Esalor Luxotica.
0:26:06 Interestingly, the two designs,
0:26:09 the Stellist versus the DOT design
0:26:13 are based on very different design principles.
0:26:18 And so they are not just a copycat of one another.
0:26:22 So it’s good to see novel spectacle industry
0:26:25 offering designs based on different principles
0:26:29 so that in case a patient is a non-responder to one design,
0:26:32 we may be able to try a totally different design
0:26:35 rather than trying another copycat.
0:26:36 – And how does Lou feel about
0:26:39 the relatively high cost of novel spectacles?
0:26:40 – So the question is,
0:26:45 do I see a high price of these novel spectacles justifiable?
0:26:49 I would say yes and no.
0:26:54 The yes part is to manage pediatric myopia,
0:26:56 even just simply with glasses,
0:26:58 it takes a lot more chair time
0:27:01 for the practitioners to explain
0:27:04 why we’re prescribing those devices,
0:27:07 how frequent we need to see your child back
0:27:10 and there are a lot more auxiliary testing
0:27:14 that’s required to accurately evaluate the safety
0:27:17 and the efficacy of the treatment.
0:27:22 In the US, we’re able to charge more for the service fee,
0:27:25 but in China, there is no way
0:27:29 the doctors can charge for their chair time.
0:27:32 So all of the time they spend in patient
0:27:33 and parent education,
0:27:37 in making sure these devices are properly used,
0:27:41 are built into the overall cost of the lenses.
0:27:42 In China market,
0:27:46 a lot of the manufacturers are still very profit-driven,
0:27:49 it’s not evidence-based,
0:27:54 and it’s causing confusion more than helping the advancement.
0:27:56 – And how about the US market?
0:27:59 We’ve had patients asking for novel spectacles
0:28:01 on a daily basis,
0:28:04 so it’s whoever is doing the most heavy lifting,
0:28:08 being the first product approved in US market,
0:28:11 certainly deserve to have the momentum,
0:28:13 at least for the first two, three years.
0:28:15 – And a lot of that heavy lifting has been done
0:28:17 by Esalar Luxatica.
0:28:19 – I really respect their effort
0:28:23 in trying to help on the more basic research side,
0:28:25 not just something that’s immediately translatable
0:28:27 to a commercial profit.
0:28:30 – And so, on balance,
0:28:34 Maria Lu believes that Esalar Luxatica is a force for good
0:28:37 in the fight against myopia.
0:28:41 Using the billions of dollars they earn selling Prada
0:28:43 and Chanel branded glasses,
0:28:45 by selling Ray-Bans and Oakleys,
0:28:47 to invest in new optical treatments.
0:28:50 But again, we are living through an era of capitalism
0:28:53 where consolidation is the norm.
0:28:56 So, is it a problem that one player
0:29:00 in the eyeglass industry has so much global leverage?
0:29:03 Tim Wu says yes,
0:29:07 and not just for the reasons you may think.
0:29:08 That’s coming up after the break.
0:29:11 I’m Stephen Dubner, and this is Freakonomics Radio.
0:29:19 (dramatic music)
0:29:22 As we’ve noted throughout this series,
0:29:25 the French-Italian eyewear firm, Esalar Luxatica,
0:29:28 has a dominant position in the global industry.
0:29:31 Just last week, they bought the streetwear brand Supreme,
0:29:35 which doesn’t even make eyeglasses, at least not yet.
0:29:37 They were also reported to be in talks with Meta,
0:29:39 the parent company of Facebook,
0:29:41 that would have the software giant
0:29:45 taking on a minority stake in Esalar Luxatica.
0:29:47 Those two firms have already partnered
0:29:49 on a pair of Ray-Ban smart glasses,
0:29:52 Ray-Ban being a property that Esalar Luxatica
0:29:54 bought in 1999 and turned into
0:29:58 the biggest eyewear brand in the world.
0:30:03 So, Esalar Luxatica is very big and getting bigger.
0:30:06 This is the kind of thing that makes Tim Wu nervous.
0:30:09 He is the Columbia University legal scholar
0:30:12 who has spent time in two presidential administrations.
0:30:17 In 2018, he published a book called The Curse of Bigness,
0:30:20 Anti-Trust in the New Gilded Age.
0:30:23 I went back to Wu for a final word.
0:30:29 So, you argue that corporate or industrial concentration
0:30:31 can lead to a variety of bad outcomes,
0:30:33 but especially bad political outcomes,
0:30:37 including extreme nationalism, even fascism.
0:30:39 Give me an example of what you mean by that.
0:30:41 – I think the real road to serfdom
0:30:46 often goes through unmanaged aggregations of private power.
0:30:49 And what I mean by that is if you have
0:30:51 no active anti-monopoly policy,
0:30:56 if people feel a tiny group of consolidated industries
0:30:58 and their beneficiaries make all the money,
0:31:02 it tends to create a lot of widespread anger,
0:31:04 particularly if there’s an economic crash.
0:31:07 I think our best example is the 1930s,
0:31:09 where there was a ton of anger, obviously,
0:31:13 after the crash of the world’s economies.
0:31:14 Countries weathered it in different ways,
0:31:17 but most famously in Germany,
0:31:19 this widespread economic discontent
0:31:22 fed into the hands of a certain leader
0:31:24 who I don’t always like to mention,
0:31:26 but obviously the Nazi party rose during that period
0:31:28 on the backs of it.
0:31:30 I think you see this across history,
0:31:34 these aggregations of economic wealth and power,
0:31:37 big crashes leading to the rise of a populist.
0:31:39 We’ve had, obviously, a taste of that ourselves
0:31:41 over the last 10 years or so,
0:31:44 so I don’t think we’re entirely exempt from these tendencies.
0:31:47 You write that excessive concentration of economic power
0:31:51 will breed anti-democratic political pressures.
0:31:53 I could understand you saying
0:31:56 they could breed those pressures, but will breed.
0:31:59 Do you really feel there’s an inevitable connection
0:32:02 between that kind of economic concentration
0:32:04 and bad political outcomes?
0:32:09 – I think it depends on the critical question
0:32:11 of how the democratic government deals
0:32:14 with the inequality and inequities.
0:32:17 Will might be a strong word in that sentence,
0:32:20 which I predict is from my introduction,
0:32:23 but I think the more nuanced view
0:32:25 is if there’s a democratic failure,
0:32:28 if people feel that they haven’t done anything
0:32:32 or worse are facilitating unfairness in the economy,
0:32:35 then the demand rises for the strong man
0:32:37 who can really do what the people want.
0:32:39 I’ve studied the messaging of all these figures
0:32:40 who come to power.
0:32:43 It’s always like, you have this democracy,
0:32:46 but they don’t really serve you.
0:32:48 You need someone who has a direct line to the people,
0:32:49 and that’s me.
0:32:51 I’ve read a lot of Hugo Chavez’s speeches.
0:32:54 I’ve read the speeches of our former president or heard them.
0:32:56 I’ve read the speeches in 1930s.
0:32:57 It is basically the same,
0:32:59 usually coupled with some identity politics
0:33:00 and other sweeteners.
0:33:02 – I mean, the American situation is not as drastic
0:33:05 as Weimar Germany certainly, at least not yet,
0:33:07 and hopefully never will be,
0:33:11 but we have already been seeing the impact of consolidation
0:33:15 in the form of corporate capture or crony capitalism,
0:33:18 whatever you wanna call it over the past 20 or 30 years.
0:33:22 It strikes me that this has had a pretty significant cost
0:33:24 for American society.
0:33:26 – Yeah, I think it is a significant cost,
0:33:29 and it may ultimately be measured in the threat to democracy,
0:33:34 but also measured in the economic wellbeing of many people.
0:33:36 If you spend any time near Congress,
0:33:40 you realize that they will never really take a stand
0:33:43 against a powerful industry.
0:33:44 I mean, in the last 20 years,
0:33:46 you can count on the fingers of one hand
0:33:47 the times they’ve done something
0:33:49 that industry really doesn’t like,
0:33:54 and that was including after a major economic crash.
0:33:57 I agree, we’re not obviously where the 1930s are,
0:33:59 but in some ways we’re a more stable country.
0:34:01 Other countries are already flipped.
0:34:04 I mean, I don’t know what Hungary’s gonna be like,
0:34:07 or many other countries all across Central America,
0:34:09 but if you haven’t noticed authoritarianism,
0:34:11 dictatorship is on the rise,
0:34:13 and I think it’s almost always played on the back of,
0:34:14 well, the democracy failed.
0:34:17 But yes, it’s a huge cost to the American situation
0:34:19 to have corporate control of government.
0:34:21 – Do you think that the eyeglass industry
0:34:24 is important enough to worry about consolidation,
0:34:27 posing an actual danger to democracy?
0:34:30 – I wouldn’t, but that way I’d put it in combination
0:34:33 with a lot of other frustrations that people feel.
0:34:35 The eyeglass industry is somewhat small,
0:34:38 but potent symbol of what happens
0:34:40 when you allow corporate consolidation
0:34:41 to get out of control.
0:34:44 Obviously, it’s not the largest industry in the country,
0:34:46 and it’s not Google or Amazon,
0:34:49 but it is literally in your face or on your face.
0:34:52 It’s kind of a test case of an industry
0:34:56 which has been allowed to buy most of its competitors.
0:35:01 Luxotica has been allowed to vertically integrate itself,
0:35:04 both in the manufacture of lenses and in retail,
0:35:05 and also insurance,
0:35:08 and therefore find itself in a market position
0:35:10 where it can regularly charge margins
0:35:12 that would make even Apple computers jealous.
0:35:16 – What do you think of Tim Woo’s argument
0:35:20 that the kind of dominance exercised by Esalora Luxotica
0:35:23 is a threat to democracy?
0:35:25 Or what do you think about anything else
0:35:27 you heard in this series?
0:35:29 I’d love to hear from you.
0:35:33 Our email is radio@freakonomics.com.
0:35:36 Coming up next time on the show,
0:35:39 if modern capitalism is a problem,
0:35:43 how about this as a solution?
0:35:46 – Time is an interesting commodity.
0:35:48 – I’m like, why are people not talking about it?
0:35:50 – You can imagine it being a time barter system
0:35:54 on steroids enabled by modern technology.
0:35:56 – Are we at the point where time dollars
0:35:59 can challenge real dollars?
0:36:01 That’s next week on the show.
0:36:02 Until then, take care of yourself.
0:36:05 And if you can, someone else too.
0:36:09 Freakonomics Radio is produced by Stitcher and Renbud Radio.
0:36:12 You can find our entire archive on any podcast app
0:36:14 also at freakonomics.com
0:36:16 where we publish transcripts and show notes.
0:36:19 This episode was produced by Morgan Levy.
0:36:21 Our staff also includes Alina Cullman,
0:36:23 Augusta Chapman, Dalvin Abouaji,
0:36:26 Eleanor Osborne, Elsa Hernandez, Gabriel Roth,
0:36:29 Greg Rippen, Jasmine Klinger, Jeremy Johnston,
0:36:31 Julie Canfer, Lyric Boudic, Neal Karuth,
0:36:33 Rebecca Lee Douglas, Sarah Lilly,
0:36:35 Teo Jacobs, and Zac Lipinski.
0:36:37 Special thanks this week to John Schnars
0:36:39 and Ellen Frankman.
0:36:42 Our theme song is “Mr. Fortune” by the Hitchhikers.
0:36:44 Our composer is Luis Guerra.
0:36:46 As always, thank you for listening.
0:36:51 – Steven, we’re just trying to solve world peace
0:36:53 with Lentosh at a time.
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