Interview with Economist Tyler Cowen — The Soul of Enterprise: Business in the Knowledge Economy

—We're emerging from the economy of the Industrial Revolution, an economy confined to and limited by the Earth's physical resources, into the economy in mind, in which there are no bounds on human imagination and the freedom to create is the most precious natural resource.

Welcome to The Soul of Enterprise: Business in the Knowledge Economy, sponsored by Sage, energizing business builders around the world through the imagination of our people and the power of technology. I'm Ed Kless with my friend and co-host Ron Baker, and on today's show, folks, our interview with Professor Tyler Cowen. How's it going, Ron?

Good, Ed, how are you?

Good, good. It's only been a couple of, uh, hours since I last saw you. We were in Chicago this week and, uh, teaching about The Subscription Economy. That was a lot of fun.

It was fun, and we had a very special guest there too in the audience, which was amazing.

Yes, Paul Dunn. What a, what a great honor it was to have him as well. And speaking about his B1/G1 stuff, we really gotta have him. And okay, we have noted that our guest has joined us, so I am going to begin and welcome Tyler to the show. But first, to let you guys know, Tyler is a professor of economics at George Mason University, a faculty member at the Center for the Study of Public Choice, the director at the Mercatus Center. I became a fan of Tyler's by reading his blog, The Marginal Revolution, which has been around since 2003, Ron. I think that was the advent of blogging. Sometimes, they have half a dozen posts a day, so just keeping up with some of the stuff that he and his other writers at Marginal Revolution come up with is a full-time job. I don't know how they have time to do all of their other stuff. His latest book, which I know you're going to talk about with him, is Big Business: A Love Letter to an American Antihero. If you read both Tyler Cowen's blog and his columns for Bloomberg, he's just one of those economists that you want to have a beer with, except in one of his blog entries, he sides with the Mormons on that and is a teetotaler. We're going to make that a club soda with lime today. His podcast, Conversations with Tyler, is on both your and my feeds. We're big advocates and love listening to that. Thrilled today to have our own conversation with Tyler. Welcome to The Soul of Enterprise, Tyler Cowen.

Hello, thank you for having me.

Well, I guess let's just start off by introducing you to the audience and tell us a bit what you do as the director of the Mercatus Center.

We are a research center at George Mason University. Uh, the single main thing we do is support graduate students. We're the largest supporter in the school. But we also put on events such as my podcast, Conversations with Tyler Cowen. A few weeks ago, we had Margaret Atwood in. Recently, I interviewed Carl Knousgaard. We've done Larry Summers, David Brooks, Paul Krugman, Malcolm Gladwell. And that's a free podcast, no ads, no charge, for the world to use and enjoy.

And we do enjoy it. In fact, I was listening to the one again with Margaret Atwood today, and she was— what a great guest she was for you.

So lively, and you know, she's 79 years old and as quick as anyone I've met. And a funny Canadian. And she'll answer any question you ask, she'll ask you a question in return.

Yes, I caught that, that was fantastic. And what about the Center for the Study of Policy Choice? You're also on the faculty of that, and that has to do with public choice theory, right?

That's right, that's political economy, how economic features shape policymaking. And how politicians are guided by incentives.

Yes, Ron and I did a show way back in May of 2015 on that, and it's just such a fascinating topic. I wanted to jump in and ask you about some of your more recent columns. In one, you say that in the next 20 years, what is the most unexpected transformative technology And then there's, and you believe this will be in the next 20 years, the automobile. And you're not talking about driverless cars. Could you unpack that for me?

Well, when you ask people like, what's the hot new tech? People want to say things crazy, like, you know, robots that will do every job or the Hyperloop or Mars colonies. But most things that end up happening, you know, are serving large markets and have infrastructure in place. And are pretty popular. And we Americans spend a lot of time in our cars and a lot of money on our cars. So I think they're gonna get much safer. I think we'll have features which are not strictly driverless, but software that helps prevent crashes. A lot of parts of the US are moving to congestion pricing, which is freeing up rush hours. And we have Uber already, but that market can still grow. That means you can get places without having to drive. So those of you who do drink, that's now a lot easier. So I think we've already seen major improvements, a lot more on the way, and that's the next big revolution in our lives. It will be something actually pretty mundane.

And it's interesting because Ron and I, the last two days, have been— did a program in Chicago for mostly accountants and technologists around the subscription-based economy. And one of the things that keeps coming up in the examples that we use is the fact that you can subscribe to Porsche now. Right, not a Porsche, but Porsche as the company, and they'll give you an unlimited number of vehicles and you can swap them out. And there was one statistic that Ron cited that one industry analyst thinks that by 2025, 1 in 5 cars on the road will be a subscription car. So do you think that that also might factor in just the way that we go about purchasing our vehicles or using our vehicles, paying for our vehicles, I should say?

Absolutely, that would make usage of vehicles easier for many people. I think also electric cars are on their way, so vehicles won't be nearly as polluting, which would be a major, major improvement for climate change. So it's just a very thick market with a lot going on. And I think, you know, 30 years from now, that Mars colony still won't be there.

Yeah, but seeing as it takes, what, 18 months to get there, so it's going to be a lot more challenging.

And eventually driverless cars will come. It may not be as quick as we thought a year ago. There's a lot of kinks to be worked out, but then you'll be able to sleep in the back seat or use Wi-Fi or watch TV, and that will be a huge gain.

And then I was also thinking about the economic impact of all of the small towns. I'm in just outside of Dallas, Texas, but south of me there's a lot of towns that make almost 80% of their budget is the speeding tickets that they get. And what will be the impact on some of those places?

They'll have to look for other sources of money, but some of those towns may go away. A lot of towns, you know, started using Uber as their form of mass transit. And people hate this, it doesn't feel right. But you know, those places are depopulating. They're not gonna put in like big new bus and rail lines. And Uber's probably what they should be doing.

Yep. I want to turn your attention to another column that you wrote in April, in which you laid out your best argument for the gold standard. In it, you write, so while you don't favor a gold standard— or it says, I should read from your perspective. So while I don't favor a gold standard, first, governments have a long history of interfering with gold standards for better or for worse. So it doesn't really remove politics from monetary policy. I think that's such a great point. Is it possible that technology like Bitcoin or some cryptocurrency privacy might help overcome at least that government interference problem?

I think we're a long way from having crypto that people actually want to use. It's been a novelty, and for a while it was a bubble, and maybe it's useful for buying, uh, somewhat illegal things. But, you know, you go to, uh, Nordstrom and you buy something, uh, why do I need crypto? They'll take my dollars, they'll take my credit card. And I don't think the killer app for crypto is here yet, and it may be some ways away. I would say I'm cautiously optimistic, but I don't see it as around the corner. Facebook is going to try something with crypto. We don't quite know yet. Maybe that's the best shot.

Yeah, I've also heard that possibly Amazon as well doing something with crypto, but that's, I think, more of a long shot. You haven't written about Bitcoin in nearly a year, so it really has kind of lost some of its luster, don't you think?

Yes, you know, in some ways that may be a good thing. So when the price is high and rising, You get a lot of charlatans in on it, and when the price is lower, you know, they're wiped out, and it's more the substantive people who wanna make these systems work. Maybe in the long run that's a good thing that everyone's not so excited. But that said, again, dollars work pretty well is the fundamental problem. And other than for illegality, we need to figure out what we can do with these systems. You can use them for record keeping, but we have other methods of record keeping., and they too are getting better with information technology. So it's a race amongst things that are all getting better. You know, it's not just Bitcoin versus the status quo.

Yeah, I think I talked to somebody on a different podcast that I do, maybe the best use of blockchain might be some of these smart contract things that automatically execute. And the thing that, that she was working on, and I thought this was interesting, is brokerage statements that are based on a percentage of the, the the assets, right, and, and the transactions, and that they in a sense can be automatically verified through the blockchain. I thought that was an interesting use case.

I could see blockchain being used for a lot more internet-to-internet activities. It might be better, but those are already pretty cheap to keep track of, so I'm just not sure that would be a big thing. But I do think that's the natural next place for it to achieve a foothold. But say we could make brokerage records cheaper and more reliable. Who'd be against that? But on the other hand, what percent of GDP is that going to improve?

Yeah, probably not a substantial amount. So I saw a chart today, and I thought of you, and this might be a good transition for Ron to take over after a commercial break. But it said that for the first time ever, there are now more people in the world over older than 65 than younger than 5. And how much of a concern do you think that is from an economic perspective, or is it one at all?

I worry that as an older society we are innovating less. That is a concern. That older people are wiser but perhaps more set in their ways and less open. I am hopeful that medical science will ease the burden of being old mentally as well as physically. Already we've seen a lot of this coming. That older people exercise much more is a very positive development, and it keeps them sharper. A lot of countries could still use women more effectively in the labor force, or a lot of people retire too early, especially in China and Russia. So I don't think the aging problem is nearly as bad as the worrywarts suggest, but it's still a legitimate concern.

Yeah, just because I guess, as has been proven by a lot of people, that we're most productive in our 30s, right? Or that that's where a lot of the great ideas come from. I think Charles Murray wrote a whole book on that, that Human Accomplishment.

Yes, but again, keep in mind, on the plus side, we have all sorts of countries, you know, India, Nigeria, where 30 years ago people were in such desperate circumstances, we didn't get much innovation from those places.. And now, while they'll end up eventually aging, we have access to all of their geniuses who at least have a chance to contribute. So the sort of de facto supply of brilliant young people, I think, is still rising. Most of Africa is still a kind of untapped frontier, much of South Asia. So again, I would say I'm concerned, but when you dig into the numbers, they in many ways don't look quite as bad as they might at first.

Okay, gotcha. Well, this is, uh, we're up against our first break. And while Conversations with Tyler is a free podcast, unfortunately ours is not, and we have some sponsors that we have to pay. So right now we want to go to our first commercial break and a word from our sponsors.

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Have you ever read a book that changed your life? I sure have. But have you ever read a book where the foreword changed your life? Me neither. Hello, I'm Greg Kite. I wrote the foreword to Ron Baker and Ed Kless's new ebook, The Soul of Enterprise: Dialogues on Business in the Knowledge Economy. The value of this book is found entirely in its foreword, so when you buy it, think of it as buying the foreword and getting the rest of the book for free. Available now for download exclusively on Amazon.com.

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Well, welcome back everybody. We're here with economist Tyler Cowen, and Tyler, I've been reading your books for quite a while, and, and one that I just found absolutely interesting was published in 2009. And it's titled Create Your Own Economy: The Path to Prosperity in a Disordered World. And one of the things you say in there is forget that you saw the movie Rain Man, and then you list all these people throughout history who we believe are on the autistic spectrum somewhere. And wow, it's a who's who— Charles Darwin, Thomas Edison, Albert Einstein, possibly Adam Smith, Steven Spielberg, Bill Gates. Does technology enhance these folks? Um, obviously autism, Asperger's been around for a long time. What makes their contributions now in modern society different? Is it, is it because of the World Wide Web?

Who can process a lot of information quickly, all of a sudden have this big comparative advantage. And that's been the fundamental shift. Wow. So there's so much at your fingertips. If you can absorb quickly and process and order things and then spit them back out, you're just a lot more effective than in say 1972. Right, right. Interesting.

The other thing that you write about in this book is this idea of multitasking. And a lot has been written about this, that our brains can't multitask. And you actually, I think, kind of have a counterintuitive response to this. You think that multitasking serves a useful purpose.

Can you explain that? Well, a lot of people call something multitasking, but they're not literally doing two things at the same time. They're just leaping back and forth a lot. But that keeps them interested. It keeps them involved. You know, you're watching a basketball game on TV, you glance at your computer, someone calls on the phone. It's easy to say that's distracting, you could be more productive, you know, that might even be true, but the alternative might be you're, you know, not even working altogether. So if multitasking keeps us involved, it actually can be a lot more efficient than it looks.

Right. And the other thing that you pointed out, and this is kind of goes back to the autism thing, but Adam Smith's Pin Factory is a parable of autism performing a repetitive task which Marx and both Smith thought might be boring and alienating, but you claim it's more of a benefit than a cost. Why is that?

Well, it depends who you are, but I think what's good for a lot of people is a mix of intense repetition and then intense variety, and you need to think of it as a portfolio problem. So if part of your life you're doing, you know, this multitasking with a lot of things changing right in front of your eyes all the time. And then a fair amount of the time at work, you're just doing a particular thing again and again, which few of us can avoid. I think that's the way people find order and balance, but also variety. And the idea that at all points in time, you know, you should have just the right amount of focus, I don't think that's practical. I think we kind of specialize at any given moment. And at a particular moment, it might feel like too much or too little. Multitasking. But again, that's how we develop a flow that works for us.

Right. And I also found your discussion about education really fascinating because you wrote that most education requires the physical presence of other human beings. You call it education as theater. Do you think traditional brick-and-mortar colleges will be around, say, 100 years hence? I mean, They're not gonna be displaced by so-called MOOCs?

Oh, I think the big ones you've heard of will all be around. I think a large number of smaller schools will go bankrupt. So if you're a small private school in the Midwest and you have 1,800 students, I doubt if you will last. But the big state schools, the famous private schools like Harvard, USC, they offer, you know, mating services. They offer class selection. They offer certification. To some extent, it is fun. You're involved. You build networks. And if you learn something while you're there, you know, so much the better. And of course, the parents can afford it. People are paying these huge bribes to try to get in. So I think they have a pretty sound economic model. It's not in every way socially ideal, but I don't think they're going anywhere. But that said, I think we're going to see, say, 20% of all classes be online. Not most of your classes, but sometimes there's a class you can't get at your school, you want a special instruction somewhere else, you just don't want to get up at 8 AM in the morning for your school's version of that class, you want to do it over the summer. People will do this online. And that's one of the factors that will drive under all of these really small schools. They won't be able to compete in that market.

Hmm. What do you think about Bryan Caplan's argument in his book, The Case Against Education, about signaling versus human capital? Well, Bryan and I have been debating this for 15 years.

He has persuaded me partially that a lot of education is just about certifying your quality, that you stuck at it for so many years that you gained admission to a prestigious school. But that said, I think people learn at school more than he thinks they do., and a lot of that learning is a kind of social conditioning or learning of cues or acculturation, and that's quite important for many people. Not for everyone, maybe not for Brian, but I think if you go to say the Cal State system, there's a significant upgrading of people's own sense of their potential, and for that you need to actually go to school.

Right, right. Now I think you have a really good point about the— it requires the physical presence. There's something about human presence that makes, makes it different than learning online.

But you know, a lot of people, I would say at least 10% of us are great online learners. Again, that won't displace face-to-face, but online education will be much bigger in 10, 15 years than it is right now. It will be a very strong niche, and there'll be a lot of reasons to do it. Say you're in the military, say you're a parent raising children at home, say you're disabled, many, many reasons Those will flourish.

Another thing that you, you, you mentioned, and I thought this was just fascinating. It's one of the reasons I love reading you is because just because you make you, make you think in a much different way, even than traditional economists. You said there's plenty of studies that measure education's ROI, but what are they comparing education to? No one has ever compared modern education to a placebo. If you could, what might that study look like?

Let's say you took a group of students— and I know this wouldn't be ethical, I'm not saying we should do it— but ran them through 4 years of education theater where they somehow felt they were being educated and hearing from very wise, noble people and intensely studying, but in fact what they were doing was empty nonsense. But they kept on feeling elevated and their aspirations were higher. How would that compare to education? I don't think we know. To me, that's a very interesting question. How much of the value is the theater and how much is concrete things you learn? Now, if you're doing computer science, I think it's mostly concrete things you learn. But if you're doing humanities, education, communications, English, a lot of the biggest majors, I suspect a lot of it is a kind of theater.

Right, right. Yeah, because the placebo effect is, is very real, as you point out.

In medicine, sure, a lot of evidence for it.

Absolutely. Um, your book from last year, Stubborn Attachments: A Vision for a Society of Free, Prosperous, and Responsible Individuals, which I just absolutely loved— I mean, it's— this is so thought-provoking on so many different levels. But you write in there that we need to develop a tougher More dedicated, and indeed a more stubborn attachment to prosperity and freedom. Why is that?

In that book, I look at the benefits of sustained economic growth. So if you have an economy that grows, say, 3% a year instead of 2% a year, in any given year, it doesn't seem like much. But over 50 or 100 years, it compounds into a huge difference. So the arguments in this book are really about the power of compounding. That we should think more in terms of compound returns and look for solutions to our problems that give us exponential growth at relatively high rates of compounding returns. And that means a view that's very pro-economic growth.

You also wrote that you hold pluralism as a core moral intuition. What's good about human life can't be boiled down to any single value, that pluralist theories are more plausible. Is— do you think capitalism is too materialistic, or the defenders of capitalism or free markets are just taking a too materialistic view? Or is it also spiritual, allowing for a more pluralistic life?

I think more and more defenders of capitalism are realizing they need to incorporate the spiritual dimension. If you read David Brooks or Ross Douthat at the New York Times, That comes through very clearly. But that said, often the best way, you know, to support the ability to be creative or spiritual is to have some cushion of wealth and not just be struggling for subsistence or working long hours at two jobs just to put your kids through college. So I don't think they're necessarily opposed, but I agree advocates of capitalism have not done that great a job as of late.

You know, we've pulled, what is it, some 1 billion people out of bone-crushing poverty, $2 a day, $1.25 a day, however you measure it, in the last decade and a half or two decades. Do you think that we take wealth for granted because it's just so all around us? I mean, we have all this angst amongst the young people, but yet they live in one of the most prosperous times ever in the history of civilization.

In America, many of us do. I would say especially the kind of people who probably listen to the show. I wouldn't quite say the whole nation does by any means, but our educated class very much so. We've never been this wealthy, and it's not just about your income, it's about your wealth. We haven't had a major war for a long time, and we've just accumulated more and more wealth in the form of property and buildings and assets and institutions. It's really quite remarkable.

It is. It's one of the greatest stories never told, or at least never talked about very much. But in this book also, you lay out a wealth-plus measurement where you're talking about not just the GDP of a country, but also its leisure time and its household production and environmental amenities. We know that GDP is a flawed measure because when a sheep is born, per capita GDP goes up, but when a human is born, it goes down. Can you kind of explain that Wealth Plus concept?

Well, as you say, GDP is a highly imperfect measure. We also have a lot of free goods. Well, you read Wikipedia, you enjoy that, it doesn't really boost GDP at all. So I argue we should maximize what I call Wealth Plus. It's really GDP properly understood if we would count all of the things which currently are left out. For a lot of problems, those omissions don't matter so much, but for some issues they do. The environment would be a major example. You don't want to maximize GDP by just polluting as much as possible. You should take those environmental losses into account and try to limit them.

Right. And what you're— and also really kind of the other thing that you're saying is that committing to growth is really creating a better future. I mean, I'm so glad our forebears did that and they built things and capital infrastructure and just knowledge. I mean, we have the same resources as the caveman, but, you know, because of the knowledge that we've accumulated, we have an entirely different standard of living. Do you think there's too much focus on alleviating poverty as opposed to creating wealth? Especially among like development economists, the World Bank, these other institutions that try and help countries develop?

Well, I'm a pretty big fan of alleviating poverty. Where I see there is too much talk is when people talk about inequality. It's not the gap between rich and poor that worries me. It's simply that the poor are low. So I don't think you generally raise the poor by cutting down the rich. You look for win-win solutions. So that people who are wealthy and able can do more things to help the poor. So I don't talk much about inequality, but I talk quite a bit about fighting poverty. Right.

And, and do you think that the best way to fight poverty is by creating wealth? I mean, is that kind of—

In general, I mean, China has done a fantastic job of that. India is behind somewhat, but, you know, growing at, say, 7% a year. That's fantastic. We never expected that. Ethiopia is growing at about 10% lately. Uh, we need more countries doing that. Essentially, that's the main problem in the world right now.

And Tyler, just before we take a break, do you think China will get old before it gets rich? Is there some truth to that cliché?

I think China will end up a nation of maybe 200 million people at a U.S. standard of living, and maybe, say, 800 million people at a Mexico standard of living. How you want to describe that in those terms, you could debate, but that's what I expect will happen there. Oh, wow.

Okay. Well, this has been great, Tyler. Thank you so much. And folks, I'd like to remind you, if you want to get a hold of Ed or myself, you can send us an email to asktsoe@verish.com. And now we want to hear from our sponsors.

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Have you ever read a book that changed your life? I sure have. But have you ever read a book where the foreword changed your life? Me neither. Hello, I'm Greg Kite. I wrote the foreword to Ron Baker and Ed Kless's new ebook, The Soul of Enterprise: Dialogues on Business in the Knowledge Economy. The value of this book is found entirely in forward. So when you buy it, think of it as buying the forward and getting the rest of the book for free. Available now for download exclusively on Amazon.com.

From the boardroom to you, Voice America Business Network.

You are tuned into The Soul of Enterprise with Ron Baker and Ed Klass. To find out more about our show, visit us on the web at thesoulofenterprise.com. You can also chat with us on Twitter using #AskTSOE. Now, back to The Soul of Enterprise.

And we are back on The Soul of Enterprise with Tyler Cowen, professor of economics at George Mason University, author of the current book— I'm sorry, I have it here in a second. Where did I lose it? Tyler, what's your current book? I'm sorry, I have not— it's not on my list here. Big Business, Big Business, there it is. The Big Business, a letter to, a love letter to the American antihero. And for those of you who don't get a chance to or haven't listened to conversations with Tyler on his podcast, I'm going to do something now that he has given me, graciously given me permission to do, and that is turn the tables on a segment that he always does that I find absolutely fascinating. He asks his guests a list of random things and to state whether or not they are underrated or overrated. And perhaps a reason why they are or are not. So are you ready to— ready for underrated, overrated, Tyler?

I'm ready, and you can do this without my permission, for that matter.

It's your show. I just thought it was nice of you. Anyway, okay, here we go. Number 1, behavioral economics.

Behavioral economics at the moment is underrated. So there's this thing called the replication crisis in social psychology. And that means you find a result once, you go out, you look for it again, it's gone. People think that invalidates behavioral economics. But I think the most important results in behavioral economics are about addiction. And addiction is a critically important issue. And we're still understudying it. So I would say behavioral economics, everyone thinks it's overrated. That means it's probably actually underrated.

All right. The threat of catastrophic climate change.

Somewhat underrated, not as underrated as it used to be, but the data that comes in, the reports we're getting, seem to indicate the chance of it being really bad is getting higher. We are complacent. We're not actually doing very much to stop it. The percentage of world power that comes from fossil fuels has stayed roughly the same since the early 1990s. Coal is still common. So this worries me a great deal.

Canadian literature and poetry.

I love Margaret Atwood. I like Robertson Davies. I've read a lot of scattered Canadian poetry. My favorite is Alice Munro. Atwood is highly rated, but at this point very famous. I think Alice Munro is the still underrated Canadian writer, even though she has a Nobel Prize.

Uh, the Electoral College. Underrated.

You know, people hate it because it doesn't always give them what they want. Uh, I can sympathize with that in the concrete, but nonetheless it means a candidate has to appeal to many different regions of this country. And overall I think it's a good thing. The Founding Fathers were brilliant. Uh, they're still smarter than we are on those issues, and a bit we need to suck it up and realize, uh, if we're not happy about the system complain about something else.

All right, I've got two more for you. The next one: the prospect of eliminating umpires from calling balls and strikes at the major league level in baseball.

I don't think we'll ever do it or should do it, so the idea is overrated. I think fans like getting mad at the umpire. They like ambiguity. They like controversy. They like to curse at the umpire. It introduces some luck, some randomness. Of course it's not fair, but sports are not entirely fair to begin with. So I hope they keep human umpires. But that said, there's new evidence the young ones are much better and the old ones are much worse. So maybe there should be, uh, like fixed tenure at 10 or 15 years.

And last one, uh, the presidency of Donald Trump.

Well, it depends whom you ask. It's either very underrated or very overrated. I have not been a supporter. I'm not one now, but I do think we'll get through it actually much more fine than many people think.

So, which is kind of a great—

educated class, I'd say underrated. But again, I'll be happy when it's over.

But which is kind of a reflection on the genius of the system of government that was put, put together, that we're— we will survive this, right?

That's right. Most checks and balances are working. Again, I don't like every concrete policy that's been passed, I hate the rhetoric, the divisiveness, but I also think we're stronger than that, and this country will be fine.

Outstanding. Well, thank— thanks for participating in that. Now, uh, going back, way back to 2011, you wrote an interesting piece that I saw on foreignpolicy.com. I'm not sure where it originally appeared. It was 6 Ideas for the Ash Heap of History, and they were: number 1, uh, illegal Mexican immigration is a growing threat; Number 2, green energy will save us. Number 3, bank runs are a thing of the past. 4, the eurozone is pretty much for everyone in Europe. 5, bailouts should be incremental. And then number 6 is fiscal stimulus should be temporary, targeted, and timely. And I wanted— that's a really good list, and if so far maybe unheeded by, by most, but what, what might you add to it today, 9, 8 years hence?

For ideas that are wrong, That America is extremely polarized to an unprecedented degree. I think that's simply not true. And that if you look at issues such as trade or immigration, the party a person is in does not so well predict his or her views. And I think we have a very, you know, active and volatile and emotional set of political debates, but it's not actually mainly the Republicans versus the Democrats.

Yeah, this is such a, such a challenge because people— that's that as we're becoming more and more tribal, so we speak, or so we're led to believe. But I think the majority of people don't really care all that much in the end. Uh, that's correct.

I think we're seeing a lot of political flux. The stakes are high, so emotions are more heated, but that's not the same as polarization.

Most people just want to live their lives after transition period.

And it's easy to mistake that for polarization, which in my view peaked around 2011 with like Obama versus the Tea Party.

Interesting. Well, cool. Um, another article you've written recently, you noted that contrary to what Alexandria Ocasio-Cortez and other concerned millennials, uh, write, you, you wrote, fear of climate change is justified. It is not, however, a reason not to have children. And that's because those kids of yours are more likely to be part of the solution than the problem. I know we talked a little bit about this earlier when you were talking with Ron about China, but elaborate a little bit more on that, about why you think that people should be not so down on having children for the future.

Well, your kid might be one of the great innovators who fixes the problem, right? So there's plenty of evidence from history, from the work of Michael Cramer or Jared Diamond, that highly populated groups with a lot of scale solve problems better than small groups. So if you have kids, and your kids especially are well-educated, the odds are they're going to be a net positive. It's not a guarantee of anything. Don't have kids if you don't want to, but you shouldn't feel guilty about it. You're probably contributing to the problem.

And there's something that you haven't written about in a while that I just wanted to see if you updated your thinking on, and it ties in with something that Ron asked you about about earlier, and that is college education. What do you think about collegiate athletics? Do you think they will continue to grow, or do you think that there's room for, hey, maybe we ought to rethink the whole economics of this and maybe create more minor league system in, say, basketball and football as opposed to just in baseball?

My wife and I argue this all the time. I think athletics are a good economic deal for the colleges which are good at them, not for everyone. And I think they will persist. I do think over time football may dwindle because it's so dangerous, or just the rules will change a great deal that it will barely be the same sport anymore. Uh, but in terms of getting donors interested in a school, basketball teams, track and field, whatever, I don't think that's going anywhere. And people want that as a way to stay in touch with their colleges. And you know, in basketball, you used to have a minor league. It was called the CBA. And college basketball was just as popular. It wasn't really a substitute.

Yeah, there's— I think the NBA now even has a developmental league, a D-League. And I don't know if they could think it's done all that well, actually.

Yeah, people don't care, but they care a lot about UNC versus Duke. And I think they always will.

Sure will. Well, I always pull for George Mason when they make it to the dance.

So do I, of course.

But football brings up another interesting point is that the whole concussion incident and the research that I've done on it, I don't know if you've written on this as well, it might not even be the full force of the concussion. It might be all of the smaller sub-concussive blows that happen perhaps thousands of times in practice even. And I think, do you think that that could have a huge impact on the sport as well if it's discovered that it's really even not even the full-blown concussions that are the problem?

Yes, I think it could. I think we will know for sure fairly soon. But either way, I would be happy if people simply stopped playing the sport. I don't want to force them to stop, but a lot of kids get pressured into it, or they think it's the path to glory, or they're just not informed about how dangerous it is. And if we just, you know, stopped it, I think we'd be much better off as a society.

Well, I've got one more question for you, and then we're going to go to our break. What, what are you working on now?

Well, you know, I just finished my book on business. I'm thinking about a project on what do we know about how to spot talent and to try to teach that to more people. That's my next project.

Outstanding. Well, if it matters, I vote for it. So, go for it. I want to remind our listeners that you can get a hold of Ron or me by sending an email to asktsoe@verisage.com. The website is the Soul of Enterprise, where you can catch show notes to all of our previous shows as well as previews to upcoming shows. But right now, a word from our sponsor, and in this case, my employer, Sage.

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Have you ever read a book that changed your life? I sure have. But have you ever read a book where the foreword changed your life? Me neither. Hello, I'm Greg Kite. I wrote the foreword to Ron Baker and Ed Kless's new ebook, The Soul of Enterprise: Dialogues on Business in the Knowledge Economy. The value of this book is found entirely in its foreword, so when you buy it, think of it as buying the foreword and getting the rest of the book for free. Available now for download exclusively on Amazon.com.

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You are tuned in Welcome to The Soul of Enterprise with Ron Baker and Ed Klass. To find out more about our show, visit us on the web at thesoulofenterprise.com. You can also chat with us on Twitter using #AskTSOE. Now back to The Soul of Enterprise.

Welcome back, everybody. We're honored to be here with economist Tyler Cowen. And Tyler, just one last question on your, your prior book, your last year's book, Stubborn Attachments. You talked in there about the happiness and wealth and the survey data and all that. But one of the things that you pointed out that I just thought was really an excellent point was that happiness gains don't dissipate through envy. It's better to envy your neighbor's Mercedes than his horse and buggy, and better still to envy a supersonic transport. Is envy a problem? I mean, is that Is that why we see some of the economic policies such as graduated income tax rates and, you know, soak the rich and have the rich pay their fair share? Is it just envy?

Some of it's envy, but keep in mind the rich do of course have a lot of money, and I think they should pay somewhat higher tax rates, and that's just where the money is if we're going to pay for things. I think of most people's envy as directed locally toward people they know, like colleagues, or people they went to high school with, or people in their immediate group. I don't think that many people envy Bill Gates, for instance, even though of course he's very wealthy. So envies get us irritated and resentful, uh, and I think we're seeing like the left and right wing resent each other more, but I don't think it's that much directed at the billionaires. The billionaires are a kind of symbolic stand-in. But they're not actually who or what is being disliked.

Right, right. Is there a link between happiness and income? I mean, you read about it and it's a lot of people tend to think that, well, income only gets you so much happiness up to a point. And then beyond that point, it really doesn't. But I got the impression that you kind of question that literature.

You know, I think in the short run, the link between your income and your happiness is close to zero. And that's the intuition people have. But in the long run, the link between being in a wealthier country and being happier is very strong. And the data show that there's less chance that one of your kids dies prematurely. You'll have a more rewarding job, greater choice of marriage partner, more women's rights, just more fun, more entertainment, greater ability to relax. So, you know, in this more important macro sense, Well, it does lead to happiness on average.

And I love the other point you made on that too. It says that the happiness surveys can't measure the benefits of life expectancy because you can't poll the dead.

That's right. And people live longer in the richer countries, of course. Right, right. And they're more able to manage their pain as they decline.

So tell us about your, your latest book, Business Big Business: A Love Letter to an American Antihero, because wow, there's a lot of negative press about big business and actually writing a love letter to them.

I see it being villainized more and more, sometimes on the left wing, like, oh, everything's a monopoly, everything's corrupt, big tech is ruining us. But also, you know, from the Republicans, Donald Trump, he tweets against different CEOs. He's very arbitrary or capricious, which is not what business wants. The views of business on trade and immigration, I think he mostly just dismisses. So I think on both sides of the political spectrum, business has become a kind of dirty word, and I wrote this book trying to set the record straight.

Do you worry that—

I intend it as a very factual, dispassionate book. I think there's a lot wrong with business. There is a lot of crooked business. But overall, the evidence shows, if anything, people are more likely to lie outside of a business context than within it.

Hmm. Do you worry that big business is becoming too concentrated? The Economist loves to write about this topic over and over.

Does that concern you? In most markets, there's more competition than there used to be. Your ability to choose what you buy, where you buy it from, your product selection, how quickly it can be delivered to you, is much better, much better than it was 20 years ago. I think there's a few sectors where that's not true. I think healthcare is a more complicated story. There's too many hospitals with some kind of market power. But again, most things we buy, much more competitive than in the recent past.

You know, I read a— I don't know if you saw this, but it was a review written by Kevin Tyler Cowen, Williamson's, and National Review on your book, and it was a very, very good review. And he said you have a great talent for revealing truths that are right under our noses but oddly overlooked, that big enterprises, you know, provide many jobs, they pay their workers more, they invest more in R&D, they're more productive, more innovative. But on the more innovative, I think most people have the idea that small businesses are more innovative. Are you really saying that big businesses are more innovative than small businesses?

Well, look at, say, what Google has done with YouTube or Gmail or promoting self-driving cars or even Google Glass, which didn't work but probably someday will. We're seeing very innovative big businesses right now. Facebook upgrading Instagram and WhatsApp. So, you know, innovation doesn't stop when you grow from small to large. But the innovative small businesses, they become large pretty quickly.

Do any of the privacy concern— concern— privacy issues concern you out of Silicon Valley, like Facebook with all of our data, Google, all of that? Or do you think we're just kind of willy-nilly giving our, our privacy away? No, they concern me.

I do think we're stuck in a situation where most people don't care. About that kind of privacy, and it's hard to force them to care. So I'm not sure how to regulate our way out of the problem. I would also stress the people most likely to violate your privacy are your friends, colleagues, and acquaintances, not Mark Zuckerberg. So if you really care about privacy, you know, your Facebook account should maybe be your concern number 11, not your concern number 1 or 2. I don't like facial surveillance technology. I would consider limiting that by law. But I don't think social media are your main privacy issue for most people. It's gossip about you.

Do you think what the EU has done with their GDPR— I forget what is the acronym— GDPR, yes. Is that the right approach?

I don't think it's helped. So when you fly to Europe, you have to click on a lot of new irritating agreements. It's really a barrier to entry for small innovators. You know, the big firms can cope with all the process and legal requirements. Insurance and liability, and small firms cannot. So it's really cemented in the position of the larger tech firms that people supposedly don't like. I'm not sure there'll be a good legal solution as long as users themselves have a cavalier attitude toward what they, you know, put online. Hmm.

And Tyler, just some questions to you, just as an economist. What would you like to see changed in USA, say, macro or federal economic policy, if you could?

I think our economy in most sectors has too much regulation of business. I think it should be much easier to build in America's most productive cities, most of all San Francisco and Oakland. That would boost upward mobility. I think we need a renewed focus on quality of K-12 education. Um, I would start with some of those areas.

What would you like to replace the current tax system with? The current tax system?

If I were starting from scratch, I would tax consumption and not savings really at all. I tend to doubt there's a way to get from where we are at to there, but I don't think our tax system is right now our biggest problem. I'm glad we cut our corporate tax rate. I think we may have cut it a bit too low, but 35% as before was definitely too high. Uh, ideally you would like more favorable tax treatment for savings, but we've overspent in some areas, and again, I don't really know what the path would be to get there at this point. We have a high level of debt.

And what would you like to see on immigration?

A lot more legal immigration. I would be willing, you know, to boost the quotas we have by at least 2x per year. Relative to the stock of our population, the US takes in many fewer people than Canada or Australia. I think we can manage that. I do think we have a border crisis. I think our current system of taking in refugees and asylum isn't working. I would move to reform that and actually end it. But to take in more of those people by other legal means.

Do you buy any of the research that claims that even, you'll even say, illegal immigrants lower the wages of low-skilled workers?

I think they do by a slight amount, yes. I think there's also a cultural issue that people feel they are not in control, and that's maybe a more significant effect than the small wage effect. And I think our legal system at the border right now is overwhelmed. So we need a lot of reform in that area, in my opinion.

What would you like to see in healthcare?

Oh, that's another area where, you know, how do you get from there? Well, I wouldn't start from here. We need to make innovation much easier. Everything is too bureaucratized. If you want to, you know, create a new drug, it can cost you a billion dollars and take 10 years.. And it seems to me that's too much. We don't have a sense of urgency about innovation. I worry much more about innovation than I do coverage. Uh, the biggest coverage problem is when you're sick and the drug you need doesn't exist, and that we don't give enough attention to. Mm-hmm. Excellent point.

Um, and, and what would you do with the FDA? Just on that.

I would make approval processes much easier, and we did this for HIV drugs. AIDS drugs, that it was a much faster approval. It saved many thousands or tens of thousands or even hundreds of thousands of lives. Right now, people who are HIV positive in this country who get reasonable treatment, they have a life expectancy as long as anyone else. And that was— that approval process was eased for political reasons. I think we need to do it more generally. It will cost us some money, but I think we can do it. We need the will. To boost more innovation.

Excellent point. Well, Tyler, unfortunately we're at the end of our time, and wow, this has just flown by, but thank you so much for appearing on The Soul of Enterprise. It was an absolute honor to have a chance to talk with you.

My pleasure. Thank you for having me on. Thank you.

And Ed, what's on store for next week?

Next week, Ron, we're going to talk about our learnings from our first ever course on subscription-based economy.

Excellent, I'll see you in 167 hours.

This has been The Soul of Enterprise: Business in the Knowledge Economy, sponsored by Sage, energizing business builders around the world. The imagination of our people and the power of technology. Join us next week on Friday at 4 PM Eastern, that's 1 PM Pacific. In the meantime, please do visit us at www.thesoulofenterprise.com.