AI transcript
0:00:06 [Music]
0:00:06 Pushkin
0:00:18 Hey, it’s Jacob. Recently, I co-hosted an episode of another Pushkin podcast,
0:00:24 a show called Cautionary Tales, hosted by Tim Harford. And Tim and I, on that show,
0:00:29 answered a bunch of listener questions. And as it happens, those questions were
0:00:33 largely about themes that we talk about a lot on what’s your problem, technological innovation,
0:00:42 climate change, etc. So I thought that show would be interesting to people who listen to this show,
0:00:46 would be interesting to you. So here’s the episode. I hope you like it.
0:00:53 Hello, listeners. Tim Harford here. As loyal listeners will know, Cautionary Tales is a podcast
0:00:58 about learning from the mistakes of the past. But it also seems to me that we can learn from
0:01:03 things that have gone well in the past. For example, getting Jacob Goldstein on the show.
0:01:10 Jacob is back for an episode of Cautionary Questions. Hello, Jacob.
0:01:14 What’s the opposite of a cautionary tale? A salutary tale?
0:01:18 A salutary story, I guess. We salute you, Jacob.
0:01:20 We can do better. Let’s try and punch that up.
0:01:24 We’ll work on it. For those of you who don’t know, Jacob is the host of Pushkin podcast,
0:01:29 What’s Your Problem, which is a brilliant show about people who are trying to make technological
0:01:35 progress. He’s also the author of the book Money, The True Story of a Made-Up Thing,
0:01:41 and he’s the perfect person to help me answer all of the questions that you lovely people
0:01:46 have been kind enough to send in. So Jacob, wonderful to have you back. Of course,
0:01:51 our virtual mailbag is bursting with queries on topics as varied as climate investing and
0:01:59 careers advice. So, Jacob Goldstein, are you ready? Yes. Let’s do it.
0:02:24 So, Tim, we’re going to start with a couple of emails that came in after the last time
0:02:29 you and I talked on the show. And one of the things we talked about was what happens if AI
0:02:35 and robots take all of our jobs? So, the first question about that, which is frankly really
0:02:40 more of a comment, but a lovely comment, comes from Karen, who writes, “Dear Tim Harford,
0:02:45 I was, as usual, enjoying your recent Q&A episode with Jacob Goldstein.”
0:02:47 She’s a woman of taste. I like how this starts.
0:02:52 I like her already. And your lively discussion about what happens when everyone loses their
0:03:01 jobs to AI. At one point, you said, “How would we react if our desire for mastery or desire
0:03:07 for meaning or desire to feel useful, if all that had to be satisfied without having a job?
0:03:11 And what would we do? And could we cope? And I don’t know.”
0:03:17 Well said, Tim Harford. Karen writes, “You could just have easily asked,
0:03:20 ‘What do people do after they’ve retired?'”
0:03:27 She goes on, “My work was very meaningful to me, too. I led policy teams that advised
0:03:32 government ministers. It was fast-paced, exciting, fun, challenging. I loved my job.
0:03:37 So when I retired, I wondered about all the things you expressed concerns about on your show.
0:03:42 Here is the truth as I see it. Whatever you’re doing for a living, it’s not all of you.
0:03:46 It just takes most of your time. All the other parts of you,
0:03:51 all those pushed down by the demands of capitalist discipline, emerge once your
0:03:56 time has been freed. Then you find out what else you are, what else makes you happy,
0:04:01 and what else gives you meaning and purpose. So there is really nothing to fear from our robot
0:04:07 overlords. My very best regards, Karen.” Wow. Way to start the show with our best question.
0:04:09 The other questions can’t possibly be as good as that.
0:04:11 It’s really lovely, right? Thoughtful?
0:04:18 It’s really lovely. And I agree with all of the stuff about what we do for a living is not all
0:04:26 of us. It’s a very interesting thought, though. Is retirement the same as living your entire life,
0:04:31 not working because a robot took your job? And we have some evidence on this point.
0:04:33 Tell me, what is the finding?
0:04:38 So these three German economists published this research just over a decade ago,
0:04:42 looking at people’s life satisfaction, turns out people are quite happy being retired.
0:04:46 And if you have a job and then you retire, nothing happens to your life satisfaction.
0:04:52 You were fine before, you’re fine after. But if you’re unemployed, you’re miserable,
0:04:59 and if you then retire from a situation of unemployment, your life satisfaction goes up.
0:05:03 I mean, it’s the same thing, right? Like you go from not having a job to not having a job,
0:05:08 but there’s something about your identity as a retired person versus a person who
0:05:12 is looking for a job and can’t find a job. It makes a huge difference to how people feel about
0:05:18 themselves. Unemployed in the data does not mean a person who doesn’t have a job, right?
0:05:23 It means a person who wants a job and doesn’t have a job. And that’s an important difference.
0:05:30 And so I wonder in that study, if that difference is actually quite significant, right? Like,
0:05:36 if you want a job and don’t have a job, you’re going to be unsatisfied in that dimension.
0:05:42 Whereas if you don’t have a job and don’t want a job, that sounds fine.
0:05:47 Yeah. So I think that’s right, Jacob. And I think a lot of this depends on
0:05:51 what people’s expectations are, their expectations of themselves, what they think
0:05:56 other people expect of them. But I would guess there’s a huge difference in the scenario where
0:06:03 the robots take everyone’s job and we’re all basically just doing, you know, hobbies, whatever
0:06:08 we want, our living standards are taken care of by the robots and everyone’s in the same boat,
0:06:14 versus a situation where a lot of people lose their jobs to the robots and a lot of other people
0:06:20 don’t, which I think is more likely. So traditionally, we thought of technological
0:06:27 unemployment as happening to people with lower job skills, right? People with less education,
0:06:35 strong people who were getting replaced by machines. Plainly, the new wave of generative AI
0:06:42 threatens you and me, which is what makes it existentially threatening. It does.
0:06:49 People losing their jobs to technology are more broadly drawn from across the income spectrum
0:06:53 and the education spectrum. How does it change the sort of social implications? Because on a
0:06:59 fundamental level, what we’re really talking about is whether you have a job or not and how you feel
0:07:04 about that is largely determined by social norms, right? That’s actually what’s going on here.
0:07:09 It’s a status game to some significant degree and it’s uncomfortable to call it that. I don’t think
0:07:13 I like my job because it gives me status. I think I like my job because it’s fun and
0:07:16 I’m contributing something to the world. But obviously, we all care about status.
0:07:20 And it does give you status. You have one of the best jobs in the world. You’re a podcaster.
0:07:24 Listen, we’re walking right up to the next question in a very elegant way from Neil.
0:07:31 Hello, Tim. During your recent cautionary questions episode, Jacob Goldstein jokes
0:07:37 that if AI takes everyone’s jobs, the two of you will still do a free podcast together.
0:07:44 I understand the jest, but it begs the question. By the time AI is good enough to take over most
0:07:50 jobs, won’t it also be better than us at creating entertainment and art? I think we as humans don’t
0:07:55 want to admit that as possible, but it’s definitely the goal of AI developers all over the world at
0:08:00 this very moment. I’m curious what that possibility could mean for humanity and what we might do to
0:08:06 avoid or prepare for it. Thank you for all your excellent content. The robots have nothing on you
0:08:15 yet. Yes. Jacob, have you heard the podcasting software that Notebook L.M. have just released?
0:08:22 This is a Google product. Tim, not only have I heard it, I uploaded a chapter of my book
0:08:27 about paper money in China and queued up a moment of it to play for you right now.
0:08:32 You know how we always hear about Marco Polo bringing back these crazy stories from China?
0:08:39 Well, get ready for this try-out. China was light years ahead of Europe when it came to money.
0:08:44 Centuries ahead, to be exact. We’re talking paper money, folks. Centuries before it ever
0:08:49 showed up in Europe. It’s wild. It really flips the script on how we usually think about financial
0:08:57 history. Absolutely. So just to be clear, I just uploaded a chapter of the book, clicked whatever,
0:09:02 make a podcast, didn’t make any choices, didn’t tell it to do anything but that,
0:09:10 and that’s what came out. And these are two synthetic voices reading a script that was
0:09:16 created by a genitive AI in response to your wonderful book, Money, the True Story of a Made-Up
0:09:23 Thing, and it’s pretty good. It’s pretty good. It’s definitely good enough to be very scary.
0:09:29 I’ve heard worse human podcasters for sure. So I mean, maybe this is all happening
0:09:36 sooner than we think. But what Neil is basically driving at is by the time the robots take our
0:09:42 jobs, won’t they also be better than us? So they will make a better podcast than we will.
0:09:46 They will draw better pictures than we will. They will write better prose than we will.
0:09:53 They will compose better music than we will and so on. And is that a problem? I’m not sure that’s
0:09:56 the problem I’m worried about. The computer already draws better than I do.
0:10:05 Low bar, very low bar. And it’s great. I’m like, wow, I can create art for my hobby projects.
0:10:10 That’s great. I’m not doing anybody out of a job. But now my own creativity is unlocked
0:10:15 by the computer. Of course, maybe there comes a time where I don’t need to do any of that. I just
0:10:19 press the button and the computer just produces everything and it’s better than what I could
0:10:26 produce. Does that matter? I want to add a wrinkle. A wrinkle away. When I was talking about making a
0:10:33 podcast with you after the robots take our jobs, part of what I was imagining was that somebody
0:10:39 would listen. Not that we could make a living out of it, but that we would be doing it for some
0:10:48 audience. My hope, although I really don’t know, is that even if AI makes a better podcast than us,
0:10:53 people will listen just because people like people. And one interesting case to consider
0:11:03 is chess, right? Chess has this history where first people were better than machines. And then
0:11:09 for a long time, computers could beat people. But a person working with a computer was better
0:11:13 than just a computer. And then a few years ago, that ceased to be the case. And obviously,
0:11:20 many, many computers can beat every single human being on earth. But chess players still
0:11:28 like are famous among nerds, right? Magnus Carlson is like a rich guy. He’s a superstar and people
0:11:35 pay lots of money to watch him play worse chess than a computer. So my hope is we can be, if not
0:11:41 the Magnus Carlson’s of podcasting, whoever is like, you know, way worse than Magnus Carlson,
0:11:47 but still a pretty good chess player. Sure. And you may be right. But I think my point is
0:11:53 it’s worth playing chess, even if nobody watches you, even if it’s just you and a friend.
0:11:58 Yeah. But is it worth making a podcast if nobody listens? Then what are we bothering with the
0:12:03 microphones for? Then you could just call me. Yeah, okay, we could have, I think it’s a podcast
0:12:07 that nobody listens is a phone conversation. Welcome to the podcast for no one. I’m Jacob
0:12:12 Goldstein. If people weren’t listening, it would be different. But I think people would still be
0:12:18 creating stuff. People would still be making art. And that will be fine. So that’s my answer to Neil.
0:12:25 Okay, Tim, we’re going to go from the robot apocalypse to the climate apocalypse with our next
0:12:33 question from Julian who writes, Dear Tim, lately, more and more news breaks of climate
0:12:39 change harming the economy. For example, I remember a recent story about home insurance premiums
0:12:45 rising steeply in hazard zones for flooding storms or landslides. That made me wonder,
0:12:50 isn’t there a way to profit from climate change to that would allow us to hedge against these
0:12:56 economic risks? Could you set up a fund that would act in effect like a climate change insurance
0:13:03 policy? Excellent show, by the way. Deep insights told via gripping stories. All the best from Vienna,
0:13:09 Julian. It’s a very interesting question. The thing that immediately springs to my mind
0:13:16 is I once saw one of the most amazingly persuasive pieces of rhetoric ever that was not intended
0:13:22 to be persuasive. And it was at a commodities conference. It was a bunch of guys who trade
0:13:29 agricultural commodities and therefore have a big interest in climate variability, but at the same
0:13:35 time were culturally Midwestern and therefore climate skeptic. And the guy giving a talk at
0:13:42 this conference was a rather professorial Germanic character. I can’t remember if he was German or
0:13:49 Austrian or Swiss. And he was from one of those big re-insurance companies. He just gave a talk
0:13:54 explaining how they were raising all of their insurance premiums because of climate change
0:14:00 and showed loads and loads of data about climate change and how they were changing their pricing
0:14:07 model. And this bunch of people who I think were politically predisposed to be climate skeptics
0:14:14 were like, “Huh. This guy is not Hillary Clinton and the Dems coming to take away our freedoms.
0:14:18 This guy doesn’t want to persuade us of anything. He’s just telling us that the price of insurance
0:14:24 is going up and here’s why.” And I really felt the mood in the room change because of that talk.
0:14:30 It was fascinating. And what that gets at is that insurance gives us a kind of truth about the risks
0:14:34 that we face because insurance companies operate in a competitive market. They want to offer the
0:14:38 most expensive premiums they can get away with, but they’re forced by competition to keep the
0:14:43 premiums low. And so as the premiums rise and rise and rise, that generally indicates that the risk
0:14:48 is rising and rising and rising too. So to return to Julian’s question, is there a way to profit
0:14:52 from climate change? I mean, your podcast, What’s Your Problem, Jacob? You’ve talked to many entrepreneurs
0:14:56 who are hoping to make money while also saving the planet.
0:15:04 I was thinking about that. It is encouraging to talk to these people who are very smart and I
0:15:10 think truly believe that the work they’re doing will mitigate the damage from climate change.
0:15:16 And the progress has been extraordinary, right? Like the fall in the price of solar power in
0:15:21 particular, it’s staggering. You know, people are making batteries better and there are really
0:15:27 hard parts of the problem like cement and planes and people are working on that. And you know,
0:15:32 Bill Gates started a venture capital fund called Breakthrough Energy Ventures. That is exactly what
0:15:38 Julian is asking about, right? Like the point of this fund is to profit from climate change
0:15:44 by helping to solve or mitigate climate change. So I think there are all these hopeful stories
0:15:50 and it is very encouraging, but fundamentally to come back to this idea of our kind of inverse
0:15:56 insurance policy, I think that the answer is no. Fundamentally, insurance
0:16:03 moves the cost around. So the person whose house got burned down or the person whose home was
0:16:08 destroyed in a hurricane, they don’t have to pay for rebuilding it. Instead, the insurance company
0:16:13 pays, but somebody still has to pay and insurance moves that risk around. And that’s very valuable,
0:16:20 but it doesn’t make the cost go away. And climate change increases these costs and all the insurance
0:16:24 in the world is not going to reduce them in aggregate. It’ll shift them to different people,
0:16:28 but it’s not going to reduce them. For that, we need your solar panels, Jacob.
0:16:35 You know, when you put it that way, like what we really want in terms of moving the economics is
0:16:41 you want the people who are consuming the fossil fuel, who are flying on the plane, who are eating
0:16:48 the hamburger to pay the full cost of that. You want to internalize that cost, which is now not
0:16:54 in that transaction. And you can do that with a carbon tax. It’s a great idea. You can even
0:16:58 have a carbon tax and then just give everybody the money back. The government collects money from
0:17:04 people for consuming carbon, essentially, and then sends a check to everybody in the country
0:17:07 at the end of the year. So the government doesn’t even have to take more money in the aggregate.
0:17:12 And like it’s super elegant and it’s just politically doesn’t really seem to be happening.
0:17:15 But it is, in a way, solving the problem fundamentally.
0:17:16 Absolutely.
0:17:21 All right. That’s enough about that. We’ll be back in just a minute.
0:17:36 We are back. I’m Tim Harford. I am talking to the amazing Jacob Goldstein.
0:17:40 And this is another of our cautionary questions episodes where you have been
0:17:44 sending in your questions and Jacob and I are going to try and answer them.
0:17:45 Jacob, what have you got for me?
0:17:54 Tim, this is a throwback. It’s from Robert who writes, “Hi, Tim. Why did no one go to jail
0:17:59 after the 2008 financial crisis? I remember the savings and loans financial crisis during
0:18:06 the Reagan presidency when Charles Keating was jailed. Love your show, Robert from Illinois.”
0:18:12 Yeah. And a throwback because we first met each other shortly after the financial crisis.
0:18:17 In 2010, when the question on everybody’s lips was, “Who’s going to jail?”
0:18:22 Yeah. I mean, it’s not literally true that nobody went to jail. Bernie Madoff went to jail, for
0:18:27 example. I mean, I think that the short answer is if you want people to go to jail, then first
0:18:32 they have to commit a crime. And the weird thing about the financial crisis is I don’t think
0:18:37 many people did commit crimes. All of this crazy stuff that happened and all the outrageous things
0:18:42 that people did were, I think, mostly legal, which is of course the real scandal.
0:18:50 Yeah. Everybody talked about housing and crazy sliced up bonds built on mortgages.
0:18:56 That was the sort of part of the story that everybody heard and told. And that part of
0:19:02 the story is true. But there is another piece of the story that I actually think is a really
0:19:08 fundamental driver of the crisis that you didn’t hear as much because it’s a little more abstract
0:19:15 and a little nerdier. And that is basically that starting a long time before the crisis,
0:19:22 starting in the 1970s, there arose in the United States what came to be called a shadow banking
0:19:28 system, where because of regulations on banks in the U.S. that were set up after the Depression,
0:19:34 when there was a giant banking crisis, clever finance people came up with financial structures
0:19:39 that looked like banks but weren’t regulated like banks. And in particular, they looked like
0:19:45 bank deposits. So a bank deposit is a weird thing where you put your dollar in the bank
0:19:51 and you have your deposit and it’s worth a dollar and then the bank takes your dollar and lends
0:19:55 it out to somebody else or your thousand dollars and lends it out to somebody else for a mortgage
0:20:01 that doesn’t have to be paid back for 30 years. And so then there is this inherent fragility in
0:20:06 that system, right? Because if we all come back and ask for our money, the bank won’t have it. And
0:20:12 it’s not because the bank is greedy or evil or incompetent, it’s because of the fundamental
0:20:16 structure of banking. That fragility is inherent in the fundamental structure of banking. And
0:20:22 what happened in the financial crisis is that there were billions of dollars that were deposit
0:20:26 like. They weren’t exactly deposits. They weren’t insured by the federal government, but they were
0:20:32 in money market mutual funds, which people may be familiar with and were explicitly set up
0:20:37 to be like a bank deposit but could pay higher interest and weren’t regulated. And in the repo
0:20:43 market, which is like a weirder version of the same thing, let’s say. And everybody came and asked
0:20:49 for their money back in 2008. And of course, the shadow banks, which were not called banks or
0:20:54 shadow banks, didn’t have it. And that was a core driver of the crisis. And it wasn’t illegal,
0:21:00 as you said. But it’s like, that is what all financial crises are. They just have like different
0:21:04 flavors, different skins. Yes. I mean, you said it wasn’t because the shadow banks
0:21:08 were lazy or incompetent or greedy. I mean, I think they probably were incompetent and greedy
0:21:13 as well. Fair. Well, greed, I shouldn’t have brought greed into it. Greed should be fine,
0:21:16 but greed, right? Like incompetence is not illegal and neither is greed.
0:21:24 Yeah. They certainly didn’t break the rules, right? And in fact, one of the key under the radar
0:21:31 failures that week in September in 2008, when Lehman Brothers, the investment bank failed and
0:21:35 then everybody else failed and the government bailed everybody out, was the very first money
0:21:41 market mutual fund that had been created 40 years earlier and was very much like a bank and suddenly
0:21:46 couldn’t give everybody their money back. And so it’s totally understandable that everybody
0:21:51 is angry when one industry blows up the economy. And by the way, all the people in that industry
0:21:55 are getting rich and it’s not obvious what they’re providing to us. But it is, in fact, a really
0:22:01 hard problem to solve. Like banks are inherently unstable and people love making things that look
0:22:07 like banks and are inherently unstable. Thank you, Jacob, for reminding me of the concept of
0:22:14 shadow banking. It’s like real banking, but the headquarters are in Mordor. That’s great.
0:22:20 Yes. Oh, good times. Good times. Jacob, there are more questions in the mail bag. Would you mind
0:22:25 if I were to read the next question to you because I want to hear your answer because
0:22:30 you are the author of Money, the True Story of a Made-Up Thing and I feel like this question is
0:22:36 made for you. One of my friends posted this on Facebook, but is it true? This is the Facebook
0:22:42 post. This is why I keep telling the younger generation to stop avoiding cash. I have a 50
0:22:48 pound banknote in my pocket. I go to a restaurant and pay for dinner with it. The restaurant owner
0:22:52 then uses the note to pay for the laundry. The laundry owner then uses the note to pay the
0:22:57 barber. The barber will then use the note to pay for shopping. After an unlimited number of payments,
0:23:02 it will still remain a 50 pound value, which has fulfilled its purpose to everyone who used it for
0:23:10 payment. But if I go to a restaurant and pay digitally via card, the bank fees for my payment
0:23:17 transaction charged to the seller are 3%. So around £1.50 for the £50 payment. This will also
0:23:23 be the case for laundry payment, payment to the barber and so on. Therefore, after 30 transactions,
0:23:30 the initial £50 will exist at only £5 and the remaining £45 has become the property of the
0:23:35 bank. That’s not actually how percentages work, but that’s fine. Thanks to all the digital transactions
0:23:42 and fees, use it or lose it, folks. Once it’s gone, we won’t get it back. Cash is king. Okay,
0:23:46 so the arithmetic on this is wrong. We don’t need to bother with that. But Jacob, what about the
0:23:52 economics? What’s your reaction to this? So that was from Wendy, right? And she says,
0:23:57 if you pay with a 50 pound bank note at the restaurant, the restaurant owner then uses
0:24:02 the note to pay for the laundry and so on. Yeah, and the note never gets used up. It just goes
0:24:07 around and around. Right. So at the risk of being pedantic, I think it is relevant to say
0:24:13 that is not in fact what happens. There is a cost borne by the restaurant of dealing with cash,
0:24:17 right? They pay somebody to count it, they pay somebody to take it to the bank. And so
0:24:23 there is a cost to cash. So the relevant question is, how does the cost of cash compare
0:24:28 to the cost of a credit card and also to the cost of a debit card? Those two things feel the same
0:24:35 to us as customers, but as it happens, they’re not the same to merchants. And for the most part,
0:24:40 and it varies from country to country, debit cards are the cheapest for merchants.
0:24:47 Then cash is in the middle and credit cards are the most expensive. So like the most efficient
0:24:52 mode of transaction for the merchant in most countries is the debit card. Basically because
0:24:56 you compare the cost of dealing with the cash, of paying people to count the money to take it to
0:25:03 the bank, etc., to the fees they have to pay to use credit cards and debit cards. And you know,
0:25:08 from a sort of first principles perspective, if you just step back and think what is most efficient,
0:25:14 it should be that a card is cheaper, right? Like it’s obviously costly to deal with cash,
0:25:20 it’s a security risk, you have to actually physically move it around. And so on one level,
0:25:26 we should ask, well, why is a card ever more expensive, right? And they’re paying some amount
0:25:29 for credit, right? Because a credit card, there’s a risk that the bank won’t get paid back because
0:25:36 it is in fact credit, there’s a risk of fraud. And so that cost is born. Debit should be really
0:25:40 cheap because you can just have the computer at the restaurant, ask the computer at the bank,
0:25:45 hey, does this person have the money in their account? And the bank says yes, and the payment
0:25:50 goes through and it should be very cheap. So there is a question, why does it cost anything for debit?
0:26:00 One answer to why is because Visa controls a huge percentage of the debit card payment system in
0:26:06 the US. And in fact, the US Department of Justice, the federal government is suing Visa for basically
0:26:12 monopolistic practices in the debit card business. I mean, there’s a lot wrong with this Facebook
0:26:17 post, but there is a grain of truth in that there is a monopolistic provider or allegedly monopolistic
0:26:22 provider of these payment services and they’re raking off a disproportionate fee. On the other hand,
0:26:28 I mean, Visa, just like the barber and just like the laundromat owner and just like the restaurant
0:26:32 owner, Visa is also a business. So if they take the money, well, they can also spend the money
0:26:36 back into the economy. I mean, it may feel a bit unfair, but I mean, the money is still
0:26:42 goes around. I mean, this Facebook post is acting like the thing that’s scarce is the money, like
0:26:47 the £50 note is the thing that’s potentially scarce. But actually, you can always make more
0:26:52 £50 notes if you are the central bank. So money is in fact not the thing that is scarce. What is
0:26:58 scarce is laundromats and restaurants and chefs and all of these real resources in the economy.
0:27:03 And the money, whether it’s digital money or whether it’s paper money is just a way of kind
0:27:06 of keeping track of things. And then which gets back to your question, which is which is the most
0:27:11 of efficient way of keeping track of things. And that’s an open question, I think.
0:27:16 I mean, efficiency gains are good, right? Like the question does matter in the sense that
0:27:22 we want to spend as little as possible on payment rails. That’s fundamentally what this is about.
0:27:27 We can all get more stuff we like, more restaurant meals and nice haircuts if we’re
0:27:32 spending as little as possible moving the money around, right? And so we want technology
0:27:38 to make it cheaper to move money around. Ideally, there should be a cheaper way to do it than cash
0:27:44 and we’re getting there. So don’t get your economics from Facebook posts. Get your economics
0:27:47 from Jacob Goldstein. Thank you, Jacob. Caught in retails, we’ll be back
0:28:04 after this break. Tim, let’s talk about housing. Sure. Fred writes, “Hi, Tim. I absolutely love
0:28:10 your podcast. It scratches the itch of economics in society and every episode is a great lesson.
0:28:16 My question is about housing, nimbies, and the impact on the economy. I’ve long been a believer
0:28:22 in the housing theory of everything and find it appalling that as nearly everything has gotten
0:28:26 more affordable in real terms, housing has become completely out of reach for younger people,
0:28:32 particularly in the UK. Quite beyond the ethical implications, I’m interested in your view of
0:28:38 its impact from a macroeconomic angle. How impactful do you think housing reform would be on the UK
0:28:43 economy? How would you deal with nimbies from a behavioral economics/policy perspective?”
0:28:51 Thanks, Fred. I think Fred is completely right. I think the UK economy desperately needs housing
0:28:55 reform. Fundamentally, we’ve just made it very, very difficult to build houses and if you make
0:29:00 it very, very difficult to build houses, that makes houses very expensive. And that’s a problem
0:29:06 in its own right because people need somewhere to live, but it also damages the economy because
0:29:12 people don’t get to move around to where the jobs are and it’s also inequitable. So it means that
0:29:16 people who are older have a lot more money than people who are younger disproportionately
0:29:19 because they’ve just sat in houses that they bought when they were cheap and those houses
0:29:25 have got more and more expensive. And it’s also inequitable within generations because, not to
0:29:30 put too fine a point on it, if you are the only child of parents with a house, you’re going to
0:29:36 inherit the house, which is hugely valuable if you’re one of three or four children or if your
0:29:40 parents never had a house in the first place, you’re not going to inherit and it becomes incredibly
0:29:45 difficult to afford a house. And so there are a huge number of different economic problems being
0:29:51 caused by the fact that we’re just not willing to let people build more houses. And in a nutshell,
0:29:56 I mean, houses are incredibly expensive in the UK. Fundamentally, if you let people build houses,
0:30:02 the cost of a house is going to fall to the cost of building a house. That’s how much is going to
0:30:07 cost you to buy a house. It’s like whatever it costs to build a house, which is a lot less than
0:30:12 the market price of a house in the UK at the moment. As you may know, houses are also really
0:30:18 expensive in many parts of the United States and for similar reasons. But one really interesting
0:30:25 and encouraging and surprising thing to me is that there has actually been some progress on this
0:30:30 in the United States, not enough to solve the problem, but enough to suggest that the problem is
0:30:35 at least somewhat solvable. Fred referenced NIMBI’s, which means not in my backyard, which is people
0:30:40 who say don’t build apartment buildings on my block or whatever. They’re better than bananas,
0:30:44 right? You know what banana stands for? Build absolutely nothing anywhere near anybody.
0:30:51 I like that. In the US and starting in the Bay Area, as far as I know, in the San Francisco
0:30:57 Bay Area where houses are extraordinarily expensive, we have had the YIMBI movement,
0:31:03 the yes in my backyard movement, which has in the past decade or so scored some real victories
0:31:08 in California. One of the really interesting things to me, you know, Fred says, how would you
0:31:13 deal with NIMBI’s from a behavioral economic/policy perspective? We haven’t heard that much about
0:31:20 the YIMBI’s and I have a theory for why and that is, as you may have heard, America is a rather
0:31:28 politically polarized place these days, but the YIMBI-NIMBI fight is not particularly polarized.
0:31:37 It is not left-coded, right-coded the way immigration or capital gains tax rates or many other things
0:31:42 are, which I think is actually great. It means you can have a rational as opposed to tribal
0:31:47 discussion about it. So that’s one piece of it. And the other piece of it is somewhat wonkier,
0:31:53 but it is this, at least in the U.S., the rules about housing, we call it zoning,
0:31:58 are typically locally imposed. They’re imposed basically at the city level and there’s a sort
0:32:03 of political economy reason for that, which is homeowners care a lot and they show up at the
0:32:09 city council meeting and they say, don’t let anybody build apartments in my neighborhood because
0:32:12 that’ll lower the value of my house, right? Homeowners don’t want the value. Which is probably
0:32:16 the point, right? It’s the whole point, right? There’s this weird thing, we’re like, yes, houses
0:32:21 are too expensive. We need to lower the value of your house. So instead of dealing with it
0:32:27 at the city level, the Yimbis went to the state and got California to pass laws overriding cities
0:32:32 that said to cities, you basically can’t do exclusionary zoning anymore. You can’t say
0:32:38 there can only be single-family homes. But in most of California now, you can build what are called
0:32:42 ADUs, additional dwelling units. You can build a little apartment over the garage or in your
0:32:47 backyard, for example. And other rules like that have passed the state. So there is encouraging
0:32:53 progress though houses are still too expensive. It’s a problem that can be solved. Okay, Tim,
0:32:59 this one is for you. It’s from Benji from Brisbane. He writes, hi, Tim and all. Appreciate you taking
0:33:06 the time to read my question. What happened to Muhammad Yunus and Grameen Bank? There was so much
0:33:11 promise with microfinance as a tool for good in helping the underbanked in developing economies.
0:33:18 Kind regards, Benji. So the short answer is Muhammad Yunus is now a senior advisor to the
0:33:24 government of Bangladesh and won a Nobel Prize, not for economics but for peace. So he’s doing fine.
0:33:35 So microfinance is basically the idea that you give very small loans to entrepreneurs in very
0:33:41 poor communities at low interest rates and they can use that to build their business. So Yunus
0:33:48 was famous for saying all people are entrepreneurs. And the founding story of Grameen Bank, which is
0:33:54 the microfinance outfit that he started, he was an economist. He went to a village near the
0:33:59 university in Bangladesh where he worked and he found that these local women were weaving baskets
0:34:04 and selling these baskets and that’s how they made their money. But they had to borrow money from the
0:34:11 village moneylender to pay for the materials to make the baskets. And the village moneylender
0:34:18 was charging them 10% a day. Just an astonishingly high interest rate. I did the maths once. That
0:34:24 interest rate would turn one cent into larger than the entire US government debt over the course of a
0:34:29 year. So it’s a very high interest rate. And Yunus came in and said, “I’ll lend you money. I won’t
0:34:33 charge you much interest.” These women borrowed money off him and they paid it back and it was
0:34:38 fine. And suddenly not having to pay 10% on top of your costs every single day was the difference
0:34:44 between grinding inescapable poverty and the chance to build your own small business. So it’s
0:34:51 a lovely idea. The development economist came in and said, “Well, this sounds great, but does it
0:34:58 actually work?” And they found mixed pictures. So it was a really interesting study in South Africa
0:35:03 which was conducted by Dean Carlin and Jonathan Zinman to development economists. And they found
0:35:09 that people borrowing money from what seemed pretty much like a payday loan company at very
0:35:14 high interest rates. I think it was a 200% annual percentage interest rate. They randomised it so
0:35:19 that some people who this company were going to turn down for loans, at random some of them were
0:35:26 offered loans anyway. And the people who at random were offered the loans versus at random were not
0:35:30 offered the loans. The ones who got the loans were doing much better six months later. So really
0:35:34 interesting randomised trail. So even this very expensive credit was great because what they
0:35:39 were doing was they were using the loan to buy a suit to go to a job interview or to fix their
0:35:46 bike in order to stay in employment. But other research was more mixed. And I think the fundamental
0:35:51 idea that the reason why people are poor in poor countries is because they don’t have access to
0:35:56 cheap loans. I mean, there’s so much else going on. So it’s only ever going to be a part of the
0:36:02 story. The other really interesting thing is the commercial companies came in. So there was a one
0:36:10 called Compatamos in Mexico, which was just a huge business that was lending money at pretty high
0:36:15 rates and making a lot of money. And it was just about to do an IPO, I think. And it made all the
0:36:20 founders of this organisation very rich. And Eunice was like, this is outrageous. He was trying to
0:36:26 excommunicate them from the microfinance movement because they were too commercial. But the problem
0:36:33 is there was always shades of grey between kind of non-profit microfinance and the moneylander
0:36:40 who Eunice was originally worried about. Even non-profit microfinance, they’re not lending
0:36:48 people loans at zero interest. Even the non-profits are often lending at 50, 60, 70% a year. And the
0:36:53 reason is you’re making such small loans for such a short period of time, like maybe you’re lending
0:36:59 somebody like $50 for three months. Unless you charge a big interest rate, your fee on that is
0:37:05 like 50 cents. And it’s just not enough to cover your costs. And so it’s this fine line between
0:37:12 what is abusive money lending and what is non-profit microfinance. It’s harder to draw that line
0:37:17 than you think. So it’s a fascinating area. But that is what happened to Mohamed Eunice and
0:37:24 Grammy Bank. Clearly, people are deeply, deeply uncomfortable fundamentally with the idea of
0:37:29 lending money at interest, right? Like we’ve gotten used to it in the developed world with a
0:37:36 mortgage or a car loan. But if you look historically, lots of places, there were rules for thousands of
0:37:41 years that said nobody’s allowed to lend money at interest because it’s fundamentally bad. It’s
0:37:45 unnatural, right? And you don’t have that with most other businesses. And I think that’s part of
0:37:50 what is going on here. Like lending money at interest makes people morally uncomfortable.
0:37:53 And so when you have someone riding in and being morally righteous by lending money at
0:37:57 interest, it’s going to get complicated. Have we got time for one more question, Jacob?
0:38:04 We do. Our last question, Tim, comes from Ella, who writes, “Hi, Tim. I’ve been listening to your
0:38:10 podcast for a while now. I’m a big fan, and you seem very insightful across a range of topics.
0:38:14 So I was wondering if you could help me out with a problem I’ve run into recently.
0:38:20 I’m in my second year of uni studies, physics, if you’re curious. And I keep getting asked what I
0:38:25 want to do for a career path. Aside from further academics, I’m not really sure what there is
0:38:30 that I like the sound of. And I know eventually I will have to finish my education. I do know
0:38:35 that I’m in the right field. I just don’t know what jobs are waiting for me on the other side
0:38:39 of my studies. Do you think I should be worrying about where I’m going to end up? Or is a more
0:38:44 go-with-the-flow attitude fine for something this serious? Thanks for the help. Ella.
0:38:50 So this is where I hope that Ella’s parents aren’t listening to this podcast. Because I’m going to
0:38:58 tell Ella not to worry. I think go-with-the-flow is fine. I mean, physics is such a desirable degree.
0:39:03 I’m sure you’ll have no trouble finding somebody to give you a job in the end, Ella.
0:39:08 So Jacob and I are collectively over a hundred. So we’re basically two old geezers.
0:39:11 We’re probably not really very well qualified to give you advice. But
0:39:17 when I look back at my career, I didn’t know what I wanted to do when I went to university.
0:39:22 I didn’t know what I wanted to do when I left university. I didn’t have any particular plans
0:39:27 to become a journalist or a writer. And in fact, I didn’t become a journalist or a writer until I
0:39:35 was nearly 30. And I think all of the things that I did in my 20s, some of them were mistakes,
0:39:40 some of them were not, but they all kind of contributed to who I am now. If there’s something
0:39:44 that you’re really passionate about and you’ve got this vision, you want to chase it, that’s fine.
0:39:49 But I think it is also fine to experiment and to try different things and to see if you like them.
0:39:54 What do you think, Jacob? Certainly, I agree. I mean, I majored in English, which unlike physics,
0:40:00 gave me no fundamentally useful skills, except for living, right? Like, I still think all the time
0:40:05 of stuff that I read in college. And I’m certainly glad that I studied English. But I think this,
0:40:09 when you’re in college, people say, oh, what are you studying? And then you say what you’re
0:40:15 studying. And then the next question in a sort of robotic way is, what do you want to do with that?
0:40:21 The thing I wish I had known when I was in college is the people asking, don’t actually care, right?
0:40:25 Like, I felt all this pressure of like, oh, my God, everybody wants to know what I am going to do.
0:40:30 They don’t actually want to know. They’re not really thinking that much about you. They’re just
0:40:35 making conversation. They’re just talking about the weather, right? I mean it in a good way when I
0:40:40 say other people don’t care. Everybody is mostly thinking about themselves. I would phrase it slightly
0:40:44 differently. I would say there’s no pressure. There’s just curiosity. They’re just interested.
0:40:49 They’re not even that interested is my take. They’re just making small talk and like recognizing
0:40:54 small talk as small talk is a hugely empowering thing. And it’s fine. Like, we’re just social
0:40:59 animals following norms and asking a college student what they want to do is just what people do.
0:41:03 So I would say to Ella, just make up an answer and know in your heart that you’re going to
0:41:08 figure it out. And people love hiring physicists. Wall Street is full of physicists and consulting
0:41:13 firms are full of physicists. Anybody who can think hard about the most difficult problems
0:41:16 in the world in a quantitative way is going to be eminently employable.
0:41:21 And you know, another thing you can do with an undergraduate degree in physics is a postgraduate
0:41:30 degree in economics. Twist. Jacob, thank you so much for joining me. Tim, it’s so fun. I truly
0:41:35 would do it for free, even if nobody listened. Thank you so much, Jacob. And thanks to all
0:41:40 of you for sending in your questions. We will be back again on our regular schedule with another
0:41:46 classic episode of Cautionary Tales. But in the meantime, happy Thanksgiving to our US listeners.
0:41:54 And if you have a question for us, please send it in to tales@pushkin.fm. That’s T-A-L-E-S,
0:41:59 tales@pushkin.fm. Thank you. We love hearing from you.
0:42:06 Cautionary Tales is written by me, Tim Harford, with Andrew Wright.
0:42:11 For a full list of our sources, see the show notes at timharford.com.
0:42:17 The show is produced by Alice Fiennes with Marilyn Rust. The sound design and original music
0:42:24 are the work of Pascal Wise. Sarah Nix edited the script. Cautionary Tales features the voice
0:42:30 talents of Ben Crow, Melanie Gutteridge, Stella Harford, Gemma Saunders and Rufus Wright.
0:42:37 The show wouldn’t have been possible without the work of Jacob Weisberg, Ryan Dilly, Greta Kohn,
0:42:42 Eric Sandler, Carrie Brody, Christina Sullivan, Kira Posey and Owen Miller.
0:42:49 Cautionary Tales is a production of Pushkin Industries. It’s recorded at Wardall Studios
0:42:56 in London by Tom Berry. If you like the show, please remember to share, rate and review. It does
0:43:03 really make a difference to us. And if you want to hear the show ad free, sign up to Pushkin Plus
0:43:15 on the show page on Apple Podcasts or at pushkin.fm/plus.
0:43:23 [BLANK_AUDIO]
0:00:06 Pushkin
0:00:18 Hey, it’s Jacob. Recently, I co-hosted an episode of another Pushkin podcast,
0:00:24 a show called Cautionary Tales, hosted by Tim Harford. And Tim and I, on that show,
0:00:29 answered a bunch of listener questions. And as it happens, those questions were
0:00:33 largely about themes that we talk about a lot on what’s your problem, technological innovation,
0:00:42 climate change, etc. So I thought that show would be interesting to people who listen to this show,
0:00:46 would be interesting to you. So here’s the episode. I hope you like it.
0:00:53 Hello, listeners. Tim Harford here. As loyal listeners will know, Cautionary Tales is a podcast
0:00:58 about learning from the mistakes of the past. But it also seems to me that we can learn from
0:01:03 things that have gone well in the past. For example, getting Jacob Goldstein on the show.
0:01:10 Jacob is back for an episode of Cautionary Questions. Hello, Jacob.
0:01:14 What’s the opposite of a cautionary tale? A salutary tale?
0:01:18 A salutary story, I guess. We salute you, Jacob.
0:01:20 We can do better. Let’s try and punch that up.
0:01:24 We’ll work on it. For those of you who don’t know, Jacob is the host of Pushkin podcast,
0:01:29 What’s Your Problem, which is a brilliant show about people who are trying to make technological
0:01:35 progress. He’s also the author of the book Money, The True Story of a Made-Up Thing,
0:01:41 and he’s the perfect person to help me answer all of the questions that you lovely people
0:01:46 have been kind enough to send in. So Jacob, wonderful to have you back. Of course,
0:01:51 our virtual mailbag is bursting with queries on topics as varied as climate investing and
0:01:59 careers advice. So, Jacob Goldstein, are you ready? Yes. Let’s do it.
0:02:24 So, Tim, we’re going to start with a couple of emails that came in after the last time
0:02:29 you and I talked on the show. And one of the things we talked about was what happens if AI
0:02:35 and robots take all of our jobs? So, the first question about that, which is frankly really
0:02:40 more of a comment, but a lovely comment, comes from Karen, who writes, “Dear Tim Harford,
0:02:45 I was, as usual, enjoying your recent Q&A episode with Jacob Goldstein.”
0:02:47 She’s a woman of taste. I like how this starts.
0:02:52 I like her already. And your lively discussion about what happens when everyone loses their
0:03:01 jobs to AI. At one point, you said, “How would we react if our desire for mastery or desire
0:03:07 for meaning or desire to feel useful, if all that had to be satisfied without having a job?
0:03:11 And what would we do? And could we cope? And I don’t know.”
0:03:17 Well said, Tim Harford. Karen writes, “You could just have easily asked,
0:03:20 ‘What do people do after they’ve retired?'”
0:03:27 She goes on, “My work was very meaningful to me, too. I led policy teams that advised
0:03:32 government ministers. It was fast-paced, exciting, fun, challenging. I loved my job.
0:03:37 So when I retired, I wondered about all the things you expressed concerns about on your show.
0:03:42 Here is the truth as I see it. Whatever you’re doing for a living, it’s not all of you.
0:03:46 It just takes most of your time. All the other parts of you,
0:03:51 all those pushed down by the demands of capitalist discipline, emerge once your
0:03:56 time has been freed. Then you find out what else you are, what else makes you happy,
0:04:01 and what else gives you meaning and purpose. So there is really nothing to fear from our robot
0:04:07 overlords. My very best regards, Karen.” Wow. Way to start the show with our best question.
0:04:09 The other questions can’t possibly be as good as that.
0:04:11 It’s really lovely, right? Thoughtful?
0:04:18 It’s really lovely. And I agree with all of the stuff about what we do for a living is not all
0:04:26 of us. It’s a very interesting thought, though. Is retirement the same as living your entire life,
0:04:31 not working because a robot took your job? And we have some evidence on this point.
0:04:33 Tell me, what is the finding?
0:04:38 So these three German economists published this research just over a decade ago,
0:04:42 looking at people’s life satisfaction, turns out people are quite happy being retired.
0:04:46 And if you have a job and then you retire, nothing happens to your life satisfaction.
0:04:52 You were fine before, you’re fine after. But if you’re unemployed, you’re miserable,
0:04:59 and if you then retire from a situation of unemployment, your life satisfaction goes up.
0:05:03 I mean, it’s the same thing, right? Like you go from not having a job to not having a job,
0:05:08 but there’s something about your identity as a retired person versus a person who
0:05:12 is looking for a job and can’t find a job. It makes a huge difference to how people feel about
0:05:18 themselves. Unemployed in the data does not mean a person who doesn’t have a job, right?
0:05:23 It means a person who wants a job and doesn’t have a job. And that’s an important difference.
0:05:30 And so I wonder in that study, if that difference is actually quite significant, right? Like,
0:05:36 if you want a job and don’t have a job, you’re going to be unsatisfied in that dimension.
0:05:42 Whereas if you don’t have a job and don’t want a job, that sounds fine.
0:05:47 Yeah. So I think that’s right, Jacob. And I think a lot of this depends on
0:05:51 what people’s expectations are, their expectations of themselves, what they think
0:05:56 other people expect of them. But I would guess there’s a huge difference in the scenario where
0:06:03 the robots take everyone’s job and we’re all basically just doing, you know, hobbies, whatever
0:06:08 we want, our living standards are taken care of by the robots and everyone’s in the same boat,
0:06:14 versus a situation where a lot of people lose their jobs to the robots and a lot of other people
0:06:20 don’t, which I think is more likely. So traditionally, we thought of technological
0:06:27 unemployment as happening to people with lower job skills, right? People with less education,
0:06:35 strong people who were getting replaced by machines. Plainly, the new wave of generative AI
0:06:42 threatens you and me, which is what makes it existentially threatening. It does.
0:06:49 People losing their jobs to technology are more broadly drawn from across the income spectrum
0:06:53 and the education spectrum. How does it change the sort of social implications? Because on a
0:06:59 fundamental level, what we’re really talking about is whether you have a job or not and how you feel
0:07:04 about that is largely determined by social norms, right? That’s actually what’s going on here.
0:07:09 It’s a status game to some significant degree and it’s uncomfortable to call it that. I don’t think
0:07:13 I like my job because it gives me status. I think I like my job because it’s fun and
0:07:16 I’m contributing something to the world. But obviously, we all care about status.
0:07:20 And it does give you status. You have one of the best jobs in the world. You’re a podcaster.
0:07:24 Listen, we’re walking right up to the next question in a very elegant way from Neil.
0:07:31 Hello, Tim. During your recent cautionary questions episode, Jacob Goldstein jokes
0:07:37 that if AI takes everyone’s jobs, the two of you will still do a free podcast together.
0:07:44 I understand the jest, but it begs the question. By the time AI is good enough to take over most
0:07:50 jobs, won’t it also be better than us at creating entertainment and art? I think we as humans don’t
0:07:55 want to admit that as possible, but it’s definitely the goal of AI developers all over the world at
0:08:00 this very moment. I’m curious what that possibility could mean for humanity and what we might do to
0:08:06 avoid or prepare for it. Thank you for all your excellent content. The robots have nothing on you
0:08:15 yet. Yes. Jacob, have you heard the podcasting software that Notebook L.M. have just released?
0:08:22 This is a Google product. Tim, not only have I heard it, I uploaded a chapter of my book
0:08:27 about paper money in China and queued up a moment of it to play for you right now.
0:08:32 You know how we always hear about Marco Polo bringing back these crazy stories from China?
0:08:39 Well, get ready for this try-out. China was light years ahead of Europe when it came to money.
0:08:44 Centuries ahead, to be exact. We’re talking paper money, folks. Centuries before it ever
0:08:49 showed up in Europe. It’s wild. It really flips the script on how we usually think about financial
0:08:57 history. Absolutely. So just to be clear, I just uploaded a chapter of the book, clicked whatever,
0:09:02 make a podcast, didn’t make any choices, didn’t tell it to do anything but that,
0:09:10 and that’s what came out. And these are two synthetic voices reading a script that was
0:09:16 created by a genitive AI in response to your wonderful book, Money, the True Story of a Made-Up
0:09:23 Thing, and it’s pretty good. It’s pretty good. It’s definitely good enough to be very scary.
0:09:29 I’ve heard worse human podcasters for sure. So I mean, maybe this is all happening
0:09:36 sooner than we think. But what Neil is basically driving at is by the time the robots take our
0:09:42 jobs, won’t they also be better than us? So they will make a better podcast than we will.
0:09:46 They will draw better pictures than we will. They will write better prose than we will.
0:09:53 They will compose better music than we will and so on. And is that a problem? I’m not sure that’s
0:09:56 the problem I’m worried about. The computer already draws better than I do.
0:10:05 Low bar, very low bar. And it’s great. I’m like, wow, I can create art for my hobby projects.
0:10:10 That’s great. I’m not doing anybody out of a job. But now my own creativity is unlocked
0:10:15 by the computer. Of course, maybe there comes a time where I don’t need to do any of that. I just
0:10:19 press the button and the computer just produces everything and it’s better than what I could
0:10:26 produce. Does that matter? I want to add a wrinkle. A wrinkle away. When I was talking about making a
0:10:33 podcast with you after the robots take our jobs, part of what I was imagining was that somebody
0:10:39 would listen. Not that we could make a living out of it, but that we would be doing it for some
0:10:48 audience. My hope, although I really don’t know, is that even if AI makes a better podcast than us,
0:10:53 people will listen just because people like people. And one interesting case to consider
0:11:03 is chess, right? Chess has this history where first people were better than machines. And then
0:11:09 for a long time, computers could beat people. But a person working with a computer was better
0:11:13 than just a computer. And then a few years ago, that ceased to be the case. And obviously,
0:11:20 many, many computers can beat every single human being on earth. But chess players still
0:11:28 like are famous among nerds, right? Magnus Carlson is like a rich guy. He’s a superstar and people
0:11:35 pay lots of money to watch him play worse chess than a computer. So my hope is we can be, if not
0:11:41 the Magnus Carlson’s of podcasting, whoever is like, you know, way worse than Magnus Carlson,
0:11:47 but still a pretty good chess player. Sure. And you may be right. But I think my point is
0:11:53 it’s worth playing chess, even if nobody watches you, even if it’s just you and a friend.
0:11:58 Yeah. But is it worth making a podcast if nobody listens? Then what are we bothering with the
0:12:03 microphones for? Then you could just call me. Yeah, okay, we could have, I think it’s a podcast
0:12:07 that nobody listens is a phone conversation. Welcome to the podcast for no one. I’m Jacob
0:12:12 Goldstein. If people weren’t listening, it would be different. But I think people would still be
0:12:18 creating stuff. People would still be making art. And that will be fine. So that’s my answer to Neil.
0:12:25 Okay, Tim, we’re going to go from the robot apocalypse to the climate apocalypse with our next
0:12:33 question from Julian who writes, Dear Tim, lately, more and more news breaks of climate
0:12:39 change harming the economy. For example, I remember a recent story about home insurance premiums
0:12:45 rising steeply in hazard zones for flooding storms or landslides. That made me wonder,
0:12:50 isn’t there a way to profit from climate change to that would allow us to hedge against these
0:12:56 economic risks? Could you set up a fund that would act in effect like a climate change insurance
0:13:03 policy? Excellent show, by the way. Deep insights told via gripping stories. All the best from Vienna,
0:13:09 Julian. It’s a very interesting question. The thing that immediately springs to my mind
0:13:16 is I once saw one of the most amazingly persuasive pieces of rhetoric ever that was not intended
0:13:22 to be persuasive. And it was at a commodities conference. It was a bunch of guys who trade
0:13:29 agricultural commodities and therefore have a big interest in climate variability, but at the same
0:13:35 time were culturally Midwestern and therefore climate skeptic. And the guy giving a talk at
0:13:42 this conference was a rather professorial Germanic character. I can’t remember if he was German or
0:13:49 Austrian or Swiss. And he was from one of those big re-insurance companies. He just gave a talk
0:13:54 explaining how they were raising all of their insurance premiums because of climate change
0:14:00 and showed loads and loads of data about climate change and how they were changing their pricing
0:14:07 model. And this bunch of people who I think were politically predisposed to be climate skeptics
0:14:14 were like, “Huh. This guy is not Hillary Clinton and the Dems coming to take away our freedoms.
0:14:18 This guy doesn’t want to persuade us of anything. He’s just telling us that the price of insurance
0:14:24 is going up and here’s why.” And I really felt the mood in the room change because of that talk.
0:14:30 It was fascinating. And what that gets at is that insurance gives us a kind of truth about the risks
0:14:34 that we face because insurance companies operate in a competitive market. They want to offer the
0:14:38 most expensive premiums they can get away with, but they’re forced by competition to keep the
0:14:43 premiums low. And so as the premiums rise and rise and rise, that generally indicates that the risk
0:14:48 is rising and rising and rising too. So to return to Julian’s question, is there a way to profit
0:14:52 from climate change? I mean, your podcast, What’s Your Problem, Jacob? You’ve talked to many entrepreneurs
0:14:56 who are hoping to make money while also saving the planet.
0:15:04 I was thinking about that. It is encouraging to talk to these people who are very smart and I
0:15:10 think truly believe that the work they’re doing will mitigate the damage from climate change.
0:15:16 And the progress has been extraordinary, right? Like the fall in the price of solar power in
0:15:21 particular, it’s staggering. You know, people are making batteries better and there are really
0:15:27 hard parts of the problem like cement and planes and people are working on that. And you know,
0:15:32 Bill Gates started a venture capital fund called Breakthrough Energy Ventures. That is exactly what
0:15:38 Julian is asking about, right? Like the point of this fund is to profit from climate change
0:15:44 by helping to solve or mitigate climate change. So I think there are all these hopeful stories
0:15:50 and it is very encouraging, but fundamentally to come back to this idea of our kind of inverse
0:15:56 insurance policy, I think that the answer is no. Fundamentally, insurance
0:16:03 moves the cost around. So the person whose house got burned down or the person whose home was
0:16:08 destroyed in a hurricane, they don’t have to pay for rebuilding it. Instead, the insurance company
0:16:13 pays, but somebody still has to pay and insurance moves that risk around. And that’s very valuable,
0:16:20 but it doesn’t make the cost go away. And climate change increases these costs and all the insurance
0:16:24 in the world is not going to reduce them in aggregate. It’ll shift them to different people,
0:16:28 but it’s not going to reduce them. For that, we need your solar panels, Jacob.
0:16:35 You know, when you put it that way, like what we really want in terms of moving the economics is
0:16:41 you want the people who are consuming the fossil fuel, who are flying on the plane, who are eating
0:16:48 the hamburger to pay the full cost of that. You want to internalize that cost, which is now not
0:16:54 in that transaction. And you can do that with a carbon tax. It’s a great idea. You can even
0:16:58 have a carbon tax and then just give everybody the money back. The government collects money from
0:17:04 people for consuming carbon, essentially, and then sends a check to everybody in the country
0:17:07 at the end of the year. So the government doesn’t even have to take more money in the aggregate.
0:17:12 And like it’s super elegant and it’s just politically doesn’t really seem to be happening.
0:17:15 But it is, in a way, solving the problem fundamentally.
0:17:16 Absolutely.
0:17:21 All right. That’s enough about that. We’ll be back in just a minute.
0:17:36 We are back. I’m Tim Harford. I am talking to the amazing Jacob Goldstein.
0:17:40 And this is another of our cautionary questions episodes where you have been
0:17:44 sending in your questions and Jacob and I are going to try and answer them.
0:17:45 Jacob, what have you got for me?
0:17:54 Tim, this is a throwback. It’s from Robert who writes, “Hi, Tim. Why did no one go to jail
0:17:59 after the 2008 financial crisis? I remember the savings and loans financial crisis during
0:18:06 the Reagan presidency when Charles Keating was jailed. Love your show, Robert from Illinois.”
0:18:12 Yeah. And a throwback because we first met each other shortly after the financial crisis.
0:18:17 In 2010, when the question on everybody’s lips was, “Who’s going to jail?”
0:18:22 Yeah. I mean, it’s not literally true that nobody went to jail. Bernie Madoff went to jail, for
0:18:27 example. I mean, I think that the short answer is if you want people to go to jail, then first
0:18:32 they have to commit a crime. And the weird thing about the financial crisis is I don’t think
0:18:37 many people did commit crimes. All of this crazy stuff that happened and all the outrageous things
0:18:42 that people did were, I think, mostly legal, which is of course the real scandal.
0:18:50 Yeah. Everybody talked about housing and crazy sliced up bonds built on mortgages.
0:18:56 That was the sort of part of the story that everybody heard and told. And that part of
0:19:02 the story is true. But there is another piece of the story that I actually think is a really
0:19:08 fundamental driver of the crisis that you didn’t hear as much because it’s a little more abstract
0:19:15 and a little nerdier. And that is basically that starting a long time before the crisis,
0:19:22 starting in the 1970s, there arose in the United States what came to be called a shadow banking
0:19:28 system, where because of regulations on banks in the U.S. that were set up after the Depression,
0:19:34 when there was a giant banking crisis, clever finance people came up with financial structures
0:19:39 that looked like banks but weren’t regulated like banks. And in particular, they looked like
0:19:45 bank deposits. So a bank deposit is a weird thing where you put your dollar in the bank
0:19:51 and you have your deposit and it’s worth a dollar and then the bank takes your dollar and lends
0:19:55 it out to somebody else or your thousand dollars and lends it out to somebody else for a mortgage
0:20:01 that doesn’t have to be paid back for 30 years. And so then there is this inherent fragility in
0:20:06 that system, right? Because if we all come back and ask for our money, the bank won’t have it. And
0:20:12 it’s not because the bank is greedy or evil or incompetent, it’s because of the fundamental
0:20:16 structure of banking. That fragility is inherent in the fundamental structure of banking. And
0:20:22 what happened in the financial crisis is that there were billions of dollars that were deposit
0:20:26 like. They weren’t exactly deposits. They weren’t insured by the federal government, but they were
0:20:32 in money market mutual funds, which people may be familiar with and were explicitly set up
0:20:37 to be like a bank deposit but could pay higher interest and weren’t regulated. And in the repo
0:20:43 market, which is like a weirder version of the same thing, let’s say. And everybody came and asked
0:20:49 for their money back in 2008. And of course, the shadow banks, which were not called banks or
0:20:54 shadow banks, didn’t have it. And that was a core driver of the crisis. And it wasn’t illegal,
0:21:00 as you said. But it’s like, that is what all financial crises are. They just have like different
0:21:04 flavors, different skins. Yes. I mean, you said it wasn’t because the shadow banks
0:21:08 were lazy or incompetent or greedy. I mean, I think they probably were incompetent and greedy
0:21:13 as well. Fair. Well, greed, I shouldn’t have brought greed into it. Greed should be fine,
0:21:16 but greed, right? Like incompetence is not illegal and neither is greed.
0:21:24 Yeah. They certainly didn’t break the rules, right? And in fact, one of the key under the radar
0:21:31 failures that week in September in 2008, when Lehman Brothers, the investment bank failed and
0:21:35 then everybody else failed and the government bailed everybody out, was the very first money
0:21:41 market mutual fund that had been created 40 years earlier and was very much like a bank and suddenly
0:21:46 couldn’t give everybody their money back. And so it’s totally understandable that everybody
0:21:51 is angry when one industry blows up the economy. And by the way, all the people in that industry
0:21:55 are getting rich and it’s not obvious what they’re providing to us. But it is, in fact, a really
0:22:01 hard problem to solve. Like banks are inherently unstable and people love making things that look
0:22:07 like banks and are inherently unstable. Thank you, Jacob, for reminding me of the concept of
0:22:14 shadow banking. It’s like real banking, but the headquarters are in Mordor. That’s great.
0:22:20 Yes. Oh, good times. Good times. Jacob, there are more questions in the mail bag. Would you mind
0:22:25 if I were to read the next question to you because I want to hear your answer because
0:22:30 you are the author of Money, the True Story of a Made-Up Thing and I feel like this question is
0:22:36 made for you. One of my friends posted this on Facebook, but is it true? This is the Facebook
0:22:42 post. This is why I keep telling the younger generation to stop avoiding cash. I have a 50
0:22:48 pound banknote in my pocket. I go to a restaurant and pay for dinner with it. The restaurant owner
0:22:52 then uses the note to pay for the laundry. The laundry owner then uses the note to pay the
0:22:57 barber. The barber will then use the note to pay for shopping. After an unlimited number of payments,
0:23:02 it will still remain a 50 pound value, which has fulfilled its purpose to everyone who used it for
0:23:10 payment. But if I go to a restaurant and pay digitally via card, the bank fees for my payment
0:23:17 transaction charged to the seller are 3%. So around £1.50 for the £50 payment. This will also
0:23:23 be the case for laundry payment, payment to the barber and so on. Therefore, after 30 transactions,
0:23:30 the initial £50 will exist at only £5 and the remaining £45 has become the property of the
0:23:35 bank. That’s not actually how percentages work, but that’s fine. Thanks to all the digital transactions
0:23:42 and fees, use it or lose it, folks. Once it’s gone, we won’t get it back. Cash is king. Okay,
0:23:46 so the arithmetic on this is wrong. We don’t need to bother with that. But Jacob, what about the
0:23:52 economics? What’s your reaction to this? So that was from Wendy, right? And she says,
0:23:57 if you pay with a 50 pound bank note at the restaurant, the restaurant owner then uses
0:24:02 the note to pay for the laundry and so on. Yeah, and the note never gets used up. It just goes
0:24:07 around and around. Right. So at the risk of being pedantic, I think it is relevant to say
0:24:13 that is not in fact what happens. There is a cost borne by the restaurant of dealing with cash,
0:24:17 right? They pay somebody to count it, they pay somebody to take it to the bank. And so
0:24:23 there is a cost to cash. So the relevant question is, how does the cost of cash compare
0:24:28 to the cost of a credit card and also to the cost of a debit card? Those two things feel the same
0:24:35 to us as customers, but as it happens, they’re not the same to merchants. And for the most part,
0:24:40 and it varies from country to country, debit cards are the cheapest for merchants.
0:24:47 Then cash is in the middle and credit cards are the most expensive. So like the most efficient
0:24:52 mode of transaction for the merchant in most countries is the debit card. Basically because
0:24:56 you compare the cost of dealing with the cash, of paying people to count the money to take it to
0:25:03 the bank, etc., to the fees they have to pay to use credit cards and debit cards. And you know,
0:25:08 from a sort of first principles perspective, if you just step back and think what is most efficient,
0:25:14 it should be that a card is cheaper, right? Like it’s obviously costly to deal with cash,
0:25:20 it’s a security risk, you have to actually physically move it around. And so on one level,
0:25:26 we should ask, well, why is a card ever more expensive, right? And they’re paying some amount
0:25:29 for credit, right? Because a credit card, there’s a risk that the bank won’t get paid back because
0:25:36 it is in fact credit, there’s a risk of fraud. And so that cost is born. Debit should be really
0:25:40 cheap because you can just have the computer at the restaurant, ask the computer at the bank,
0:25:45 hey, does this person have the money in their account? And the bank says yes, and the payment
0:25:50 goes through and it should be very cheap. So there is a question, why does it cost anything for debit?
0:26:00 One answer to why is because Visa controls a huge percentage of the debit card payment system in
0:26:06 the US. And in fact, the US Department of Justice, the federal government is suing Visa for basically
0:26:12 monopolistic practices in the debit card business. I mean, there’s a lot wrong with this Facebook
0:26:17 post, but there is a grain of truth in that there is a monopolistic provider or allegedly monopolistic
0:26:22 provider of these payment services and they’re raking off a disproportionate fee. On the other hand,
0:26:28 I mean, Visa, just like the barber and just like the laundromat owner and just like the restaurant
0:26:32 owner, Visa is also a business. So if they take the money, well, they can also spend the money
0:26:36 back into the economy. I mean, it may feel a bit unfair, but I mean, the money is still
0:26:42 goes around. I mean, this Facebook post is acting like the thing that’s scarce is the money, like
0:26:47 the £50 note is the thing that’s potentially scarce. But actually, you can always make more
0:26:52 £50 notes if you are the central bank. So money is in fact not the thing that is scarce. What is
0:26:58 scarce is laundromats and restaurants and chefs and all of these real resources in the economy.
0:27:03 And the money, whether it’s digital money or whether it’s paper money is just a way of kind
0:27:06 of keeping track of things. And then which gets back to your question, which is which is the most
0:27:11 of efficient way of keeping track of things. And that’s an open question, I think.
0:27:16 I mean, efficiency gains are good, right? Like the question does matter in the sense that
0:27:22 we want to spend as little as possible on payment rails. That’s fundamentally what this is about.
0:27:27 We can all get more stuff we like, more restaurant meals and nice haircuts if we’re
0:27:32 spending as little as possible moving the money around, right? And so we want technology
0:27:38 to make it cheaper to move money around. Ideally, there should be a cheaper way to do it than cash
0:27:44 and we’re getting there. So don’t get your economics from Facebook posts. Get your economics
0:27:47 from Jacob Goldstein. Thank you, Jacob. Caught in retails, we’ll be back
0:28:04 after this break. Tim, let’s talk about housing. Sure. Fred writes, “Hi, Tim. I absolutely love
0:28:10 your podcast. It scratches the itch of economics in society and every episode is a great lesson.
0:28:16 My question is about housing, nimbies, and the impact on the economy. I’ve long been a believer
0:28:22 in the housing theory of everything and find it appalling that as nearly everything has gotten
0:28:26 more affordable in real terms, housing has become completely out of reach for younger people,
0:28:32 particularly in the UK. Quite beyond the ethical implications, I’m interested in your view of
0:28:38 its impact from a macroeconomic angle. How impactful do you think housing reform would be on the UK
0:28:43 economy? How would you deal with nimbies from a behavioral economics/policy perspective?”
0:28:51 Thanks, Fred. I think Fred is completely right. I think the UK economy desperately needs housing
0:28:55 reform. Fundamentally, we’ve just made it very, very difficult to build houses and if you make
0:29:00 it very, very difficult to build houses, that makes houses very expensive. And that’s a problem
0:29:06 in its own right because people need somewhere to live, but it also damages the economy because
0:29:12 people don’t get to move around to where the jobs are and it’s also inequitable. So it means that
0:29:16 people who are older have a lot more money than people who are younger disproportionately
0:29:19 because they’ve just sat in houses that they bought when they were cheap and those houses
0:29:25 have got more and more expensive. And it’s also inequitable within generations because, not to
0:29:30 put too fine a point on it, if you are the only child of parents with a house, you’re going to
0:29:36 inherit the house, which is hugely valuable if you’re one of three or four children or if your
0:29:40 parents never had a house in the first place, you’re not going to inherit and it becomes incredibly
0:29:45 difficult to afford a house. And so there are a huge number of different economic problems being
0:29:51 caused by the fact that we’re just not willing to let people build more houses. And in a nutshell,
0:29:56 I mean, houses are incredibly expensive in the UK. Fundamentally, if you let people build houses,
0:30:02 the cost of a house is going to fall to the cost of building a house. That’s how much is going to
0:30:07 cost you to buy a house. It’s like whatever it costs to build a house, which is a lot less than
0:30:12 the market price of a house in the UK at the moment. As you may know, houses are also really
0:30:18 expensive in many parts of the United States and for similar reasons. But one really interesting
0:30:25 and encouraging and surprising thing to me is that there has actually been some progress on this
0:30:30 in the United States, not enough to solve the problem, but enough to suggest that the problem is
0:30:35 at least somewhat solvable. Fred referenced NIMBI’s, which means not in my backyard, which is people
0:30:40 who say don’t build apartment buildings on my block or whatever. They’re better than bananas,
0:30:44 right? You know what banana stands for? Build absolutely nothing anywhere near anybody.
0:30:51 I like that. In the US and starting in the Bay Area, as far as I know, in the San Francisco
0:30:57 Bay Area where houses are extraordinarily expensive, we have had the YIMBI movement,
0:31:03 the yes in my backyard movement, which has in the past decade or so scored some real victories
0:31:08 in California. One of the really interesting things to me, you know, Fred says, how would you
0:31:13 deal with NIMBI’s from a behavioral economic/policy perspective? We haven’t heard that much about
0:31:20 the YIMBI’s and I have a theory for why and that is, as you may have heard, America is a rather
0:31:28 politically polarized place these days, but the YIMBI-NIMBI fight is not particularly polarized.
0:31:37 It is not left-coded, right-coded the way immigration or capital gains tax rates or many other things
0:31:42 are, which I think is actually great. It means you can have a rational as opposed to tribal
0:31:47 discussion about it. So that’s one piece of it. And the other piece of it is somewhat wonkier,
0:31:53 but it is this, at least in the U.S., the rules about housing, we call it zoning,
0:31:58 are typically locally imposed. They’re imposed basically at the city level and there’s a sort
0:32:03 of political economy reason for that, which is homeowners care a lot and they show up at the
0:32:09 city council meeting and they say, don’t let anybody build apartments in my neighborhood because
0:32:12 that’ll lower the value of my house, right? Homeowners don’t want the value. Which is probably
0:32:16 the point, right? It’s the whole point, right? There’s this weird thing, we’re like, yes, houses
0:32:21 are too expensive. We need to lower the value of your house. So instead of dealing with it
0:32:27 at the city level, the Yimbis went to the state and got California to pass laws overriding cities
0:32:32 that said to cities, you basically can’t do exclusionary zoning anymore. You can’t say
0:32:38 there can only be single-family homes. But in most of California now, you can build what are called
0:32:42 ADUs, additional dwelling units. You can build a little apartment over the garage or in your
0:32:47 backyard, for example. And other rules like that have passed the state. So there is encouraging
0:32:53 progress though houses are still too expensive. It’s a problem that can be solved. Okay, Tim,
0:32:59 this one is for you. It’s from Benji from Brisbane. He writes, hi, Tim and all. Appreciate you taking
0:33:06 the time to read my question. What happened to Muhammad Yunus and Grameen Bank? There was so much
0:33:11 promise with microfinance as a tool for good in helping the underbanked in developing economies.
0:33:18 Kind regards, Benji. So the short answer is Muhammad Yunus is now a senior advisor to the
0:33:24 government of Bangladesh and won a Nobel Prize, not for economics but for peace. So he’s doing fine.
0:33:35 So microfinance is basically the idea that you give very small loans to entrepreneurs in very
0:33:41 poor communities at low interest rates and they can use that to build their business. So Yunus
0:33:48 was famous for saying all people are entrepreneurs. And the founding story of Grameen Bank, which is
0:33:54 the microfinance outfit that he started, he was an economist. He went to a village near the
0:33:59 university in Bangladesh where he worked and he found that these local women were weaving baskets
0:34:04 and selling these baskets and that’s how they made their money. But they had to borrow money from the
0:34:11 village moneylender to pay for the materials to make the baskets. And the village moneylender
0:34:18 was charging them 10% a day. Just an astonishingly high interest rate. I did the maths once. That
0:34:24 interest rate would turn one cent into larger than the entire US government debt over the course of a
0:34:29 year. So it’s a very high interest rate. And Yunus came in and said, “I’ll lend you money. I won’t
0:34:33 charge you much interest.” These women borrowed money off him and they paid it back and it was
0:34:38 fine. And suddenly not having to pay 10% on top of your costs every single day was the difference
0:34:44 between grinding inescapable poverty and the chance to build your own small business. So it’s
0:34:51 a lovely idea. The development economist came in and said, “Well, this sounds great, but does it
0:34:58 actually work?” And they found mixed pictures. So it was a really interesting study in South Africa
0:35:03 which was conducted by Dean Carlin and Jonathan Zinman to development economists. And they found
0:35:09 that people borrowing money from what seemed pretty much like a payday loan company at very
0:35:14 high interest rates. I think it was a 200% annual percentage interest rate. They randomised it so
0:35:19 that some people who this company were going to turn down for loans, at random some of them were
0:35:26 offered loans anyway. And the people who at random were offered the loans versus at random were not
0:35:30 offered the loans. The ones who got the loans were doing much better six months later. So really
0:35:34 interesting randomised trail. So even this very expensive credit was great because what they
0:35:39 were doing was they were using the loan to buy a suit to go to a job interview or to fix their
0:35:46 bike in order to stay in employment. But other research was more mixed. And I think the fundamental
0:35:51 idea that the reason why people are poor in poor countries is because they don’t have access to
0:35:56 cheap loans. I mean, there’s so much else going on. So it’s only ever going to be a part of the
0:36:02 story. The other really interesting thing is the commercial companies came in. So there was a one
0:36:10 called Compatamos in Mexico, which was just a huge business that was lending money at pretty high
0:36:15 rates and making a lot of money. And it was just about to do an IPO, I think. And it made all the
0:36:20 founders of this organisation very rich. And Eunice was like, this is outrageous. He was trying to
0:36:26 excommunicate them from the microfinance movement because they were too commercial. But the problem
0:36:33 is there was always shades of grey between kind of non-profit microfinance and the moneylander
0:36:40 who Eunice was originally worried about. Even non-profit microfinance, they’re not lending
0:36:48 people loans at zero interest. Even the non-profits are often lending at 50, 60, 70% a year. And the
0:36:53 reason is you’re making such small loans for such a short period of time, like maybe you’re lending
0:36:59 somebody like $50 for three months. Unless you charge a big interest rate, your fee on that is
0:37:05 like 50 cents. And it’s just not enough to cover your costs. And so it’s this fine line between
0:37:12 what is abusive money lending and what is non-profit microfinance. It’s harder to draw that line
0:37:17 than you think. So it’s a fascinating area. But that is what happened to Mohamed Eunice and
0:37:24 Grammy Bank. Clearly, people are deeply, deeply uncomfortable fundamentally with the idea of
0:37:29 lending money at interest, right? Like we’ve gotten used to it in the developed world with a
0:37:36 mortgage or a car loan. But if you look historically, lots of places, there were rules for thousands of
0:37:41 years that said nobody’s allowed to lend money at interest because it’s fundamentally bad. It’s
0:37:45 unnatural, right? And you don’t have that with most other businesses. And I think that’s part of
0:37:50 what is going on here. Like lending money at interest makes people morally uncomfortable.
0:37:53 And so when you have someone riding in and being morally righteous by lending money at
0:37:57 interest, it’s going to get complicated. Have we got time for one more question, Jacob?
0:38:04 We do. Our last question, Tim, comes from Ella, who writes, “Hi, Tim. I’ve been listening to your
0:38:10 podcast for a while now. I’m a big fan, and you seem very insightful across a range of topics.
0:38:14 So I was wondering if you could help me out with a problem I’ve run into recently.
0:38:20 I’m in my second year of uni studies, physics, if you’re curious. And I keep getting asked what I
0:38:25 want to do for a career path. Aside from further academics, I’m not really sure what there is
0:38:30 that I like the sound of. And I know eventually I will have to finish my education. I do know
0:38:35 that I’m in the right field. I just don’t know what jobs are waiting for me on the other side
0:38:39 of my studies. Do you think I should be worrying about where I’m going to end up? Or is a more
0:38:44 go-with-the-flow attitude fine for something this serious? Thanks for the help. Ella.
0:38:50 So this is where I hope that Ella’s parents aren’t listening to this podcast. Because I’m going to
0:38:58 tell Ella not to worry. I think go-with-the-flow is fine. I mean, physics is such a desirable degree.
0:39:03 I’m sure you’ll have no trouble finding somebody to give you a job in the end, Ella.
0:39:08 So Jacob and I are collectively over a hundred. So we’re basically two old geezers.
0:39:11 We’re probably not really very well qualified to give you advice. But
0:39:17 when I look back at my career, I didn’t know what I wanted to do when I went to university.
0:39:22 I didn’t know what I wanted to do when I left university. I didn’t have any particular plans
0:39:27 to become a journalist or a writer. And in fact, I didn’t become a journalist or a writer until I
0:39:35 was nearly 30. And I think all of the things that I did in my 20s, some of them were mistakes,
0:39:40 some of them were not, but they all kind of contributed to who I am now. If there’s something
0:39:44 that you’re really passionate about and you’ve got this vision, you want to chase it, that’s fine.
0:39:49 But I think it is also fine to experiment and to try different things and to see if you like them.
0:39:54 What do you think, Jacob? Certainly, I agree. I mean, I majored in English, which unlike physics,
0:40:00 gave me no fundamentally useful skills, except for living, right? Like, I still think all the time
0:40:05 of stuff that I read in college. And I’m certainly glad that I studied English. But I think this,
0:40:09 when you’re in college, people say, oh, what are you studying? And then you say what you’re
0:40:15 studying. And then the next question in a sort of robotic way is, what do you want to do with that?
0:40:21 The thing I wish I had known when I was in college is the people asking, don’t actually care, right?
0:40:25 Like, I felt all this pressure of like, oh, my God, everybody wants to know what I am going to do.
0:40:30 They don’t actually want to know. They’re not really thinking that much about you. They’re just
0:40:35 making conversation. They’re just talking about the weather, right? I mean it in a good way when I
0:40:40 say other people don’t care. Everybody is mostly thinking about themselves. I would phrase it slightly
0:40:44 differently. I would say there’s no pressure. There’s just curiosity. They’re just interested.
0:40:49 They’re not even that interested is my take. They’re just making small talk and like recognizing
0:40:54 small talk as small talk is a hugely empowering thing. And it’s fine. Like, we’re just social
0:40:59 animals following norms and asking a college student what they want to do is just what people do.
0:41:03 So I would say to Ella, just make up an answer and know in your heart that you’re going to
0:41:08 figure it out. And people love hiring physicists. Wall Street is full of physicists and consulting
0:41:13 firms are full of physicists. Anybody who can think hard about the most difficult problems
0:41:16 in the world in a quantitative way is going to be eminently employable.
0:41:21 And you know, another thing you can do with an undergraduate degree in physics is a postgraduate
0:41:30 degree in economics. Twist. Jacob, thank you so much for joining me. Tim, it’s so fun. I truly
0:41:35 would do it for free, even if nobody listened. Thank you so much, Jacob. And thanks to all
0:41:40 of you for sending in your questions. We will be back again on our regular schedule with another
0:41:46 classic episode of Cautionary Tales. But in the meantime, happy Thanksgiving to our US listeners.
0:41:54 And if you have a question for us, please send it in to tales@pushkin.fm. That’s T-A-L-E-S,
0:41:59 tales@pushkin.fm. Thank you. We love hearing from you.
0:42:06 Cautionary Tales is written by me, Tim Harford, with Andrew Wright.
0:42:11 For a full list of our sources, see the show notes at timharford.com.
0:42:17 The show is produced by Alice Fiennes with Marilyn Rust. The sound design and original music
0:42:24 are the work of Pascal Wise. Sarah Nix edited the script. Cautionary Tales features the voice
0:42:30 talents of Ben Crow, Melanie Gutteridge, Stella Harford, Gemma Saunders and Rufus Wright.
0:42:37 The show wouldn’t have been possible without the work of Jacob Weisberg, Ryan Dilly, Greta Kohn,
0:42:42 Eric Sandler, Carrie Brody, Christina Sullivan, Kira Posey and Owen Miller.
0:42:49 Cautionary Tales is a production of Pushkin Industries. It’s recorded at Wardall Studios
0:42:56 in London by Tom Berry. If you like the show, please remember to share, rate and review. It does
0:43:03 really make a difference to us. And if you want to hear the show ad free, sign up to Pushkin Plus
0:43:15 on the show page on Apple Podcasts or at pushkin.fm/plus.
0:43:23 [BLANK_AUDIO]
What really drove the 2008 financial crash? What’s a shadow bank? And what’s the connection between NIMBYs and BANANAs? Tim Harford and Jacob Goldstein answer more of your questions. Enjoy this episode from Cautionary Tales, another Pushkin Podcast.
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