Tyler Cowen On His New Book: "Big Business: A Love Letter To An American Anti-Hero"

Hey everybody, it's Erik Thornberg, co-founder, partner of Village Global, a network-driven venture firm. And this is Venture Stories, a podcast covering topics relating to tech and business with world-leading experts. Hey everybody, welcome to another episode of Venture Stories by Village Global. I'm here today with the very special repeat guest, Tyler Cowen, and we are here to talk about his new book, Big Business: A Love Letter to an American Antihero. Tyler, welcome to the podcast.

My pleasure. Hi, Eric.

So Tyler, what is the thesis of this book? Why is big business an American antihero, and why write this book in 2019?

We've entered an age where big business is being attacked more than it has been for a long time. More young Americans profess to believe in socialism than they have for decades. The notion that big tech companies are evil is something a lot of people simply take for granted. I thought we needed a book to counter these presumptions. I consider it a contrarian book that ought not to be contrarian at all.

This is somewhat of an extension of, or follow-up to your last book, Stubborn Attachments, which is a moral and philosophical defense of of capitalism. Is that accurate?

This is a very practical, fact-based defense. That's right.

Right. Let's get into some of these criticisms. What are the most prominent criticisms that you're hearing that you think are overrated?

Well, that big business is too monopolistic is a common one, that everyone hates their jobs, that big business is just a bunch of crooks, that Wall Street essentially adds no value, and the financial sector is out of control, and that big business controls the American government, just for a few.

Yeah, we're going to go into each one, but let's get at the roots. Where do you think this anti-business, anti-capitalism comes from? How does it keep stemming up? And how do we nip this anti-business or anti-capitalism ethos in the bud?

Well, the anti-business ethos has been with us for most of American history. It's a common recurring theme. It tends to become stronger when times are bad.. And of course we have had the financial crisis. There's been slow wage growth for a lot of Americans. So it's not a surprise to me that it's come back. Even our supposedly pro-business president, Trump, he's actually very anti-business. He loves to attack business, business leaders on Twitter. He's highly unpredictable on trade and immigration. He's very often doing the opposite of what business wants. I don't think there's a simple fix for getting out of this intellectual mess. I wrote this book as my effort to try to clarify matters.

Are we just somehow unable to look back at the last 100 years and look at how much our life is improved to big business and capitalism?

People forget that. They take it for granted. They assume that things are simply produced, and then they're there to be distributed. That's one of the intellectual errors that we make. Big business makes things and it gives us jobs. And whatever else you might say against it, those are two very big positives.

If in 20 years or 50 years, we have a much more positive view of big business and capitalism, what happened for that to be true? How could that happen? Or do you dispute that premise?

I think you need a new group of intellectual thought leaders committed to defending what the West and what America is all about. So I don't think we have that right now. There's a lot of passivity. Then there's just a lot of partisan harshness, which is not very intellectual. I think we need a new kind of thought movement the way we had in the 1960s and '70s, say, with Milton Friedman.

Unpack what happened in the 1960s and '70s. What did Milton Friedman bring?

Well, if you look at the post-war West, in the universities or amongst intellectuals, you have many of them believing in Marxism or even thinking Chairman Mao was doing a good job. Having very little respect for the contributions of business, and overall leaning in a fairly Marxist direction. And then you have Milton Friedman and a number of other thinkers, Friedrich Hayek, Henry Hazlitt, who made an intellectual case for business being useful and productive, and yes, highly imperfect, but for the most part, much better than socialism. And then you have the era of the '80s and '90s, where there's a lot of pro-globalization reforms, much more free trade, more countries moving to democracy and freer markets. That was a big plus. Now, we're running that in reverse.

Right. It seems almost to be a couple of things. One is that I remember reading, I think it's the book Command and Control about how capitalism and socialism have risen up in different geographies. It talks about how communist soldiers died with the word Stalin on their lips, but no one is dying with Milton Friedman on their lips. So is it sort of— it's a combination of like a branding challenge, like we're not as creative in defining mythology or narratives, but it's also just sort of very unintuitive in the sense of socialism, communism is how we act with our families, but scaled up, it's harder to see, to intuit the benefits of business. Would you share both of those premises?

Yes, it's cooler to be radical and to challenge the existing order. And on one hand, we can understand that. But actually, business itself is a big bringer of radical change into the world. Big business, for instance, recognized same-sex partnerships and provided benefits very often before the government legalized gay marriage.

That's one thing you talk about in your book, how we look to business to set our norms. Can you give— like Google and James Damore was sort of an example that you're writing around free speech. Can you give other examples and what that means and how how we should think about that?

Well, business tends to encourage tolerance. They want to be able to hire as many different people as possible, often from a global labor market. They want there to be a minimum of friction. Business, big business tends to encourage values of cooperation and in general inclusion. Most businesses want to sell to the largest markets possible. So for a long time in American history, business has been on the side of basically minority rights and tolerance, and most of the values that most of us would hold dear, often highly imperfectly, but again, very often ahead of governments, ahead of the general citizenry.

Let's get into business a little bit. What is a corporation in the first place? You have pushed back a little bit on the theory of the firm definition in terms of reducing transaction costs.

Well, there's the word business, which is a general word. There's the word corporation, which has a clear legal meaning, which varies somewhat across state. But what I'm writing about in the book is simply the common-sense understanding of what's a business. An organization or institution that makes things, hires people, and then sells those things to customers. That's what I mean by business. I don't cover, you know, a little kid's lemonade stand, so larger forms of business. And big business in particular, the famous companies you've heard of, including tech companies.

And why do you push back on, on one of the benefits being reduction of transaction costs?

I don't always think businesses reduce transactions costs. So for instance, say you work in a company and you want to buy a new computer, you know, for your office. Is it easier for you to just click on Amazon or is it easier to go through your company's purchasing department? Well, it depends, of course, but I think in most cases, it's easier just to click on Amazon. The company might get you a better price because it buys in bulk, but I don't think the company is necessarily lowering transactions costs. I see businesses as institutions which lower some transactions costs and raise others, whereas for Ronald Coase, a very famous Nobel Prize-winning economist, he was suggesting it's the very essence of a business to lower transactions costs, and I don't quite agree with that.

One of the things you talk about in your book is how you would be dubious of a nonprofit sushi restaurant. With that in mind, what should be nonprofit and which should be business? Because the big critique of neoliberalism is that they try to privatize increasingly more parts of society. What shouldn't be privatized or made into a business?

Well, universities are a good example, or I think the for-profit form has in some regards clearly failed. So there's a lot of very good not-for-profit universities, Harvard, Caltech, MIT, uh, they are mostly successful ventures and the for-profits have in some regards turned out to be ripoffs and they're failing and people are not so interested in paying money anymore. So that's the case where for some reason the nonprofit has a longer term time horizon and produces more trust. And there's something about education where you want to go to a school that 40, 50 years from now, it will still be considered a good school, and the nonprofit works better. But I think in most sectors of our economy, the for-profits are more trustworthy, actually more honest, more effective. Charity is another example where often the nonprofits do better.

Can you love capitalism and be skeptical of big business and prefer it to be much more distributed, less monopolistic, more small business, medium business?

Well, I also prefer a less monopolistic business, but that's what we've been getting in this country for several decades. Due to the internet, if nothing else, your ability to buy something from many, many different places and have incredible choice compared to the past has gone up extraordinarily rapidly. I think there are some exceptions to that. So you can't buy, say, open-heart surgery over the internet. I think there's often a monopoly problem with hospitals. Most of our economy has grown less monopolistic, not more.

But what about, uh, would you say that the internet has gotten less monopolistic?

Well, it depends on what you mean by less monopolistic. There are plenty of sites you can go to, and there are more sites from more people and more countries than ever before. Google is great at helping you find them. People use common platforms more, say Facebook and Twitter. That's different from 10 or 15 years ago. That has pluses and minuses, but you see different styles on the internet competing with each other. And in different years, you know, some styles are more or less popular than others. So if you don't like Facebook, well, you can in fact still write a blog. WordPress is out there. It works. You can write on Medium. You can do things, you know, with Snap. There's many, many ways of reaching other people or reading other people.

Let's get into Silicon Valley. What do you think are the biggest criticisms of GAFA, Facebook, Google, Amazon, Microsoft, that you think are overrated?

The criticism varies with the company. A claim you hear very often is social media somehow swung the election to Donald Trump. There's really not evidence that that is true. They had an extraordinarily minimal impact, if anything. Keep in mind, under any systems of communication media, whether it's TV or telephone, there's going to be some false information sent around. That's hardly unique to social media. Another is the claim that these companies are exercising some kind of very unjust monopoly power. Keep in mind, the price for these services typically is zero. It's not zero to buy ads, say, from Google, but in terms of effectiveness, Google is giving you a much better deal than, say, radio or television advertising. So, for the most part, these are institutions which operate as anti-monopolies. They make other markets more competitive. They spread information. They give people more opportunities. In the markets they're in, such as search or connecting to your friends, again, they're charging you a price of zero.

What about the Ben Thompson argument that the economics of the internet have led to these aggregators building monopoly, but in a different way, not by controlling supply, but by aggregating all demand and building network effects. And so it's very difficult to regulate them. And in fact, regulations often make them stronger and more powerful, and that these monopolies are different than Microsoft and the ones of old, and thus sort of will continue to exist for quite some time. What do you say to that?

Well, I think you have to ask yourself, what's the concrete practical problem? Facebook and Google are very large in their reach. But they don't stop people from doing other things. So you can call them a monopolistic platform. The quality of what they offer, users judge to be relatively high. There are many, many other ways to connect with people, including texting, email, just calling them up on the phone, knocking on their door, believe it or not, uh, using other social media, using Twitter. You can write a blog as I do. That's a way of connecting with people. Building a social network. It's hardly that they're the only game in town. There are, in fact, many search engines. Some of them are fully private if that's what you want. Google may well be the best. It's the one I use, but it's doing well in the market because it is offering the highest quality service.

What about on the data side, maybe similar to your critiques people have on patents within music in terms of being unable to remix or build on top of, because Facebook and Google silo their data and they have quite valuable data about us. Imagine if that data was open source, all the things that could be built on top of it, all the innovation that could stem from that.

Well, I don't want the data about myself to be open source. So Facebook may hold it in the form of a file. That information in some manner is out there on the internet. I suspect it is marginally safer being held in a very large, very well-capitalized company with a great deal of talent in terms of security and hacker protection and the like. It is a highly imperfect arrangement, but a fundamental core behind the scenes here is most American citizens do not actually value their privacy that much. So it's very hard to have an arrangement with social media companies where the privacy is strongly protected, because people don't care enough. I do agree that's a problem, but I don't mainly blame the companies.

What do you think about the criticism or the point that at what threshold do these big corporations become public utilities, if they're becoming sort of the public town hall or where communication is happening in public, should it be sort of regulated in the same way that public utilities are? Or what do you say to that idea of sort of it becoming the public in some sense?

Well, the most prominent public utility in my life, I suppose, is the water company. And I turn on the tap when I get water. And my whole life, what I get from the faucet, it hasn't really changed. Maybe all I want is water, that's okay, but my water company does not innovate very much. When there's no prospect for innovation, maybe you entertain the idea of a public utility, but if you look at social media search, the last 10 years, 5 years, even the last 6 months, there've been remarkable amounts of innovation. And Google/Alphabet has changed so many parts of our lives, or will change them. Look at, say, driverless cars. Which probably will be a big innovation. That's coming out of originally Google, now Alphabet. I don't know why you would want to take our economy's greatest innovators and turn them into public utilities when right now, the price is zero.

What do you think about antitrust regulation as it relates to, say, Google, Facebook, or Amazon? At what point do they become monopolies in the bad sense of which they should be regulated? And what should regulation be, if any?

Well, I wouldn't apply antitrust right now very much. I did think Ben Thompson had a reasonable argument about Apple managing its App Store, and to some extent, perhaps Google, but that's a very, very small issue compared to the internet or social media as a whole. If you look at a very large sector of the economy, you will always find at least a small number of antitrust violations, but the current overall market structure I would not overturn with either regulation or antitrust.

Do you think if we can go back in time, would we have stopped Facebook from being able to buy Instagram or WhatsApp?

Well, Facebook made Instagram and WhatsApp much, much better. What people love about those two services is how clean they are. So if they were their own companies to become eventually profitable, they would end up having to give us messy pages. And Facebook, to some extent, forestalled that. People think of WhatsApp and Instagram as if they would be their current selves, independent of Facebook, competing against Facebook, but that's not true. Just as Google upgraded YouTube, I find the Facebook main page very messy, but I understand it's how they pay their bills. I mean, that's a trade-off. I fully accept that. WhatsApp and Instagram would face that much, much more if they were not currently bundled with Facebook, the page. Within Facebook, the company.

Right. What about the criticism that these corporations optimize for shareholder value, but that doesn't include all stakeholders, often, users or customers, and that they should be modified to include them? What are your thoughts there?

Well, who do you trust to do the modifications? Our federal government is a slow-moving, clumsy, highly bureaucratic object, which pursues its own self-interest, Furthermore, it's appealing to voters who are often not very well informed about the issues. I'm sure you remember that moment in Mark Zuckerberg's congressional testimony where he was asked, "What does Facebook do?" He had to tell them that they sell ads. It's like, my goodness. How much can we expect from this process? I do think there are areas in privacy law that we need to think through more carefully and possibly change where we are at now. I'm not saying no change. Is the best thing to do. But the mere fact that you have very profitable, large, well-capitalized companies giving us wonderful things for free, it just doesn't bother me that much.

What would you change regarding privacy?

I don't think we have the correct system worked out, and I'm not even sure privacy is people's actual concern. I think they just don't like the idea that information is out there, which they cannot control. So it's maybe people want more of a feeling of control. Rather than wanting more privacy, because people are giving up that information quite freely on a very regular basis. So I think we need to restructure the framing of some of social media so that users feel in more control. I think we also need a tighter firewall between private sector and public sector. So I worry that any information that right now, say Google, Facebook, Apple have, the government in various ways can seize when it wants to. I'm genuinely unsure how to fix that problem. I very much would educate people more to care more about their privacy. That's step number one for any solution. It has to start there. So, that's the biggest change I would like to make. That would at least help address all of these problems. But that's difficult to do. Most Americans realize the main threat to their privacy are their friends, their acquaintances, their spouses, their coworkers. Not Mark Zuckerberg. Right.

You know, if I'm sort of projecting a little bit, one sort of theme I see in your work a little bit— this is projection— is the idea that maybe people can't handle the truth and need to believe a narrative that is easier for them to understand and get on board that leads to an outcome that maybe they didn't foresee or understand but is better for them. And then maybe this is part and parcel with your fascination with Strossi and interpretation. Is that accurate?

Uh, that's one side of the coin, but I would also stress another side of the coin, that for the most part, the internet and social media give you more privacy. So there's plenty of data that people are spending more time alone or more time with the friends they met through the internet, people who accept them for what they really are. Uh, it's easier to be a nonconformist. You don't just have to make your friends through work or high school. More and more people are marrying online the kind of partners they want. All of that is more privacy. There's even data, you've probably read it, that people are having less sex now. This worries me. I think online life is probably partly to blame for there being less sex. Well, it's too easy to stay at home. But keep in mind, that's also more privacy. Less sex equals more privacy. The critics want to have it both ways. It's like, "Oh, the internet, it makes us so lonely," and then, "Oh, the internet, it takes away our privacy." Those two criticisms are somewhat in tension with each other.

But what do you say to that idea more broadly? I remember asking you if perhaps the way to bring an ethos of improving economic growth was to directly make the pursuit of economic growth more palatable, and you were saying that people wouldn't go for that. In fact, they would likely go for something like Mormonism or other religion that promotes hard work and actualizing that through business. But does that make sense in terms of that people can't necessarily handle the truth in some ways, you have to get it through a different means? Or running through your—

That's often the case. So for a long time, this country has had a kind of Protestant ethic of hard work and respect for business success. And that is fading somewhat with secularization, and that worries me. And I'm happy to see Mormonism filling at least one part of that gap. But I believe, you know, most people are simply not going to be Mormons. And we need other religious ideas here to step up to the plate. And give people a more positive sense of business and capitalism. Very often they do, but I think not enough and fewer Americans are going to church.

But why do we need Mormonism? Why couldn't Tyler Cowen and the GMU crew start their own version of the intellectual dark web, but it's all about economic growth and have people sign up for economic growth more directly?

Well, we do the intellectual light web, you could say, and we do present that message to large numbers of people with some success, But you know what? No one approach is ever going to work. I was visiting a Black church a few months ago in Nashville on a Sunday morning. I went to their services and they had a whole part of the service where they asked who in the room was thinking of becoming an entrepreneur. And they had a huge round of applause for those people and told them how great and heroic they were. And I thought that was just wonderful. And I think we can have more of this in America. We have a lot of it right now that people aren't even aware of.— So, you know, the reach of myself and my colleagues is always going to be limited. Religious ideas are the single main way that broad notions get propagated through society, especially in the United States.

In the same way that there's a new social network every 10 years, why aren't there new religious ideas or new religious forks? Why isn't that much more common?

Well, the religions we have, they evolve a great deal. They're highly flexible. There's so many branches of Christianity, and you see big changes. —so a lot of the kind of more upper-class forms of Protestantism today are much weaker than they were 30 or 40 years ago. Actually, some Baptist churches today are now shrinking. And there's just a big ebb and flow. What Catholicism means is very different than what it meant in the 1950s, what Mormonism is. So I think the changes we see tend to occur within denominations or within religions rather than just completely new ones popping into existence. Because there's big startup costs here. It's hard to just show up one day and claim you're the agent of God and have people listen to you. Right, right.

Perhaps even harder to do that than to create the next Google. I'm actually curious to talk about the intersection of capitalism and community because I read the book Tribe, which was about Sebastian Junger, who went to war, and he said that he lost more people outside the military than in it, meaning that in the military, he had a sense of meaning and duty and community and responsibility and people relying on each other. But then when he left, people, you know, he lost more people in the sense that more people committed suicide because they were increasingly isolated because of social media and technology and how capitalism sort of makes everything more abstract and less reliant on each other. What did you think of that critique and how do you respond to it?

Well, capitalism also creates community, right? It gives you the means to do things and meet more people. Civil society in America today is in many regards really quite strong. So I don't view economic growth or capitalism as simply dissolving community. I do think we've had a kind of split in this country where well-educated people are doing much better at producing community and a lot of less educated people seem to be doing worse. And parts of the opioid epidemic have sprung from this. I don't think we really know the answer yet to that problem. I would start by looking at the history of all other communications technologies. Typically, they have some problematic aspects at first, and then they improve. And I think this will also happen with the internet. And over the decades, we will use it more and more to actually fulfill ourselves rather than to just addict ourselves to, say, you know, silly pastimes.

Would you agree with the idea that in the same way that the internet makes smart people smarter and dumb people dumber, Perhaps social media makes lonely people lonelier and people who can make friends have more friends.

That's quite possibly true. And it may, worst of all, take very paranoid people and give them a focus for their paranoia.

Going back to the idea of shareholders versus stakeholders, one of the alternatives to the corporation over time has been the co-op. What are your thoughts about the co-op?

As a structure? Well, co-ops, at least nominally, give consumers control over what happens. But consumers are a large and often quite dispersed group, so the consumers don't always exercise that control. And very often, de facto, it's a manager who controls the co-op, and the consumers are fairly distant, and the co-op ends up somewhat bureaucratized. In most sectors of our economy, co-ops have not thrived. But co-ops and mutuals and related forms, you find them in some places where user control is the main thing. There's nothing stopping anyone who wants to start a mutual-based or co-op social network, social media site to go out there and at least promise users that control. My guess is people are going to find that less attractive than what Facebook does. Facebook is remarkably effective. And of course it is a for-profit company. Held in a fairly concentrated manner, and it has a very long-term perspective. So far, people prefer that service. I think that is highly instructive.

It is interesting, there is a segment of the crypto community that claims that crypto will be the rise of for-profit co-ops. When people talk about decentralization, there are a few things they talk about. One of the things they talk about is governance in terms of who makes decisions. The other thing they talk about is ownership in terms of broadening economic alignment among customers, users users, developers, people who— the company itself. There's a segment of the crypto community that says, hey, decentralizing governance has been a failure to date. Let's focus on decentralizing ownership, thus giving users and consumers more equity in the platforms. And with crypto and blockchain making it easier, reducing the cost of issuing equity, that's a possibility. So you could imagine a world in which Facebook gets even stronger because its users have equity in the platform. What do you think about that concept and the concept of for-profit co-ops in general? They say that co-ops have failed historically because they've been unable to raise money, you know, access the capital markets. But crypto, you could either raise money from the crowd via ICO and then thus give equity in the platform to the users and customers themselves.

Well, most crypto ideas haven't really worked yet. Some skeptics would say none of them have worked. I wish those experiments well.. And even if they don't work, maybe they just compete at the fringes and they force better performance from the incumbents. But I think the important point is, you know, from Friedrich Hayek, the economist, what's the best way to run things is a discovery process. And you want as many different players in the process trying to do things different ways. So AltaVista used to do search. Yahoo was a search giant. Uh, obviously that's not the world we live in today. There was MySpace before Facebook. It wasn't nearly as good. Facebook, of course, faces competition with Snap, many other different kinds of services. You know, the future may be a mix of virtual reality, augmented reality, some combination of social media with artificial intelligence. I think probably no one knows what is coming, and very, very few people predicted the mix of stuff we have right now. So keeping that process relatively free and open, I think is the way to go.

The book Nonzero by Robert Wright sort of paints this idea that we've become less violent or had less conflict over time, partially because we've had increasing trade and economic alignment with each other. Why hurt you if it's also going to hurt me? And if that's true, that's a reason why I've been really excited about income share agreements in the sense of having all of us cross-invest in each other. But it sort of begs the question, Why don't we feel we're cross-invested in each other right now? Government takes, or gives us free education, and then takes a percentage of future revenues in the form of taxes. And also, government aligns us, but then also economic growth aligns us too. If you do well and you're in my town, you're going to create more jobs and more money going back to services. So I'm curious what you think of those thoughts.

Well, there are, as you know, many investments, many experiments in cross-investment going on right now. I don't know which of them will work. There is an adverse selection problem that the people who are going to be really successful, maybe they know it and they don't allow in too much cross-investment because they don't want to share their income. You're left holding shares in the relative lemons. I'm not sure how big a problem that will turn out to be. I would stress we already have many ways of cross-investment right now. There's co-authoring things with people. There's doing a podcast together. You tie your reputations together, maybe ever so slightly, but it's a real effect. Being friends with people, having overlapping social networks. If the other person does well, you benefit from that. So we're finding ways of doing it that are not directly financial. And I'm not convinced that the most effective way of cross-investing in other people is to have it be all about explicit finance. So, you know, we know each other a bit. I hope you do very well. Some of that's altruism and friendliness, but some of it's my self-interest. If your podcast has 50x listeners and you have me on next time, that's better for me.

Right. We can only have those types of relationships with, I don't know, hundreds of people, maybe small thousands, but imagine if I could index all of University of Michigan, or I don't know, all of a certain region. Thus be hoping for all of them to do well and maybe even participate, help out more when one of them reaches out. Are you dubious of that idea, cross-investing, changing behavior, or making legible what was once not legible?

Well, I don't know. I don't want to be the naysayer here, but I would stress in the economy as it is, most of the wealth is human capital. If you buy into, say, the S&P 500, you are cross-investing. In a huge chunk of the American population. And it looks indirect, but it's not that different. And there's the world of venture capital, which of course, you are very active in. You're not literally owning a share of the person, but you're like creating a shell around them called a company. And as a venture capitalist, you get part of the profit from that share. And the company, in a sense, very often is the talent of the underlying person or people. And then there are those who have invested in your efforts with Village Global, You have some wonderful investors, and they're believing in you and Ben Casanova, and that's a cross-investment. There are just already a lot of ways to do it now, and I'm very hopeful we'll manage to do it a lot more, but the very explicit forms that people talk about, I'm just not totally sure that's how it's going to develop.

It segues into the question we've been asking is making people corporations. One of the things you talk about from a different lens in the book is how we viewed corporations as people or whether we should view them as people or in what light we should. Or what lens we should do that. What are your thoughts there?

Well, you know, as human beings, we evolved in something like hunter-gatherer society surrounded by other people and animals and no corporations. So somehow our programming is not well oriented toward understanding corporations. And then corporations come along and we tend to think of them and judge them as people. And corporations themselves encourage that. They tell us in their ads, they're our friend. They try to give us warm fuzzy feelings so we're loyal to them. I mean, there's quite a bit of trickery that goes on, of course. And on one hand, it helps us feel at ease with buying the products. That can be highly efficient, but it also means we're inevitably disappointed because we think of them as our friends. They're not our friends, right? They're typically some version of profit-maximizing private sector entities. So we're always pissed off, irritated, disappointed at corporations. That's part of the paradox of the company. For it to survive, we need to think of it as our friend, but then we're always disappointed in our so-called friend.

Zooming out a little bit, central planning fails at the national level in Soviet Russia, in a global competitive ecosystem of nation states. Why do we expect it to succeed in big corporations in a global ecosystem of companies?

Well, big corporations face a profit constraint. They're operating with prices all the time. They have to attract and keep good talent on a daily basis. So there are so many competitive checks on those companies that were not present for, say, the Soviet Union or Albania, which basically could forbid its own people from leaving. So big companies, even small companies, can be highly bureaucratic. That can be a bad thing, but they're much more vital and dynamic and connected to markets than central planners ever were.

Let's dive into Wall Street, which is a big element in your book. What are some of the most common critiques of Wall Street and why are they wrong?

Well, simply the notion that it's big and that it's out of control and that it doesn't do anything useful. Uh, there's like a big emotional dump we put on Wall Street because it is often blamed for the financial crisis. And a lot of what it does simply isn't very well understood. Now Wall Street has many parts, but I would start with the general point that the wealthier your society becomes, the bigger your financial sector has to be because the financial sector manages your wealth. It intermediates it and it takes savings and it converts them into investment. I don't think American banks and mortgage intermediaries always have done a good job of that. But for the world as a whole, we have one of the very best financial sectors, but it gets bigger all the time is the result mainly of increasing wealth, which is a good thing. The financial sector as a percentage of wealth has not budged much from taking a 2% cut of what is going on. Finance gives us venture capital, which has driven a lot of the innovation of the last few decades. Finance gives us private equity, which has restructured a lot of companies, made them more efficient. We have a banking system, a payment system. Finance is also a way that America projects its power across the world. Finance does a great deal for us. It's not all well understood, and I don't think every part of it is entirely productive, but I do think the financial sector actually is underrated.

Have you changed your mind on this? I remember maybe, I don't know if it was 10 years ago or 15 years ago, you wrote about that it was somewhat of a loss to society that the best and the brightest were going into Wall Street. Feel free to push back on that.

Well, I'm not sure the best and brightest are going into Wall Street. I thought the best and brightest were going to the Bay Area to do tech more and more.

Now you could debate that. Right. I mean, that's true.

Are we worried that so many smart people become professional chess players? Well, what else could they have done? Are they very smart? Yes. Do we really know they could have been wonderful Nobel Prize-winning scientists? I don't think we know. So I don't think we have a good handle on the opportunity costs of finance. But if you in any way favor the notion of America being a global leader and linchpin of the world economy, America, and in particular New York, does need to be a world financial center. And to the extent talent is helping to build that up, I think there's a very high return from that. At the margin, could we kick out one smart kid and send him to Caltech to study chemistry?, and we'd be better off maybe. But as a whole, I don't want to dismantle that structure.

Take something like currency trading, which I think is a few trillion-dollar industry, and I think there are other subsegments of finance like it.

Is that good for the world? I think some of it is wasteful, but it is good for the world that we have floating exchange rates. We've tried systems of fixed exchange rates. They tend to break down. Governments are not able to maintain those pegs. A floating rate means that people will trade it. It seems to me the best of a bunch of highly imperfect alternatives. The trading volumes are just enormous, but the actual quantities of real resources invested in trading, it's a very small percentage of GDP. It's not like we're taking a huge chunk of our economy and flushing it down the ocean.

Where have the risks shifted since the financial crisis? Is it to emerging market governments, or where?

Opinions differ. In my view, it is emerging markets, possibly China. Right now, Turkey is perhaps the single riskiest place as we are speaking. I know some highly intelligent people who think corporate debt is the main source of risk. I just don't really see the case there, but I don't dismiss their view just because I disagree with it. Argentina is another possibility. Some people say Pakistan, though I think the IMF will patch that one up just fine.

So what do you see the biggest risks from a macro perspective then here?

Well, for the world, I think it's China, that China since 1979 has not had a serious protracted downturn. They have high levels of debt. I'm not making any specific prediction, but I simply worry that at some point they will have that downturn and they could have serious problems with capital flight, collapsing currency and debt. And they're a bit holding the whole thing together with capital controls. And we don't understand Chinese politics very well and how the country would operate if you couldn't buy off dissident interest groups with side payments stemming out of the, say, 6% to 7% growth. That to me is by far the biggest risk. I would say it's not well understood and beware of anyone making highly specific predictions about it.

Is the best defense of the finance industry or Wall Street general that making more money is good for economic growth? Basically, and facilitating transactions across— they help huge companies IPO and get more liquidity. What is the best defense?

I think that's part of the best defense of finance. But in general, the best defense is, well, I've saved some money and I need help deciding what to do with those savings, and different institutions compete to help me, whether it be banks, mutual funds, venture capitalists. Again, it's a highly imperfect process. There is a fair degree of ripoffs involved in many cases. But if you look overall at America's record in, say, mobilizing innovation, having well-managed companies, allocating capital to the better-managed companies so they can grow, very, very likely that we have the best record in the world at that.

What do you say to the critique that these banks are sort of like casinos in some sense, and that they don't take a risk, that they're fine either way, but that the everyday people do, and that they don't have skin in the game. Go back to shareholder versus stakeholder alignment.

I'm not sure I follow. It's that the banks don't have skin in the game, or— Yeah, that they're fine either way.

Either they can get bailed out, or it's the everyday American people that are taking the risk.

Well, I'm sympathetic to ideas of say clawing back bonuses of CEOs whose banks have failed. And even if you need to do a bailout for political or macro reasons, that we should penalize the banks more and maybe penalize bondholders also. I agree with that in some form. But keep in mind, you know, when we had the financial crisis, banks lost a lot of value and lost a lot of money. It's not that they were completely insulated from the consequences of their decisions.

Let's talk about CEO pay because you write about this a bit. You would put it around 7.5 out of 10. So you're relatively happy with CEO pay. So why is it okay that CEO pay has been rising pretty dramatically over the last 50 years or so?

Because CEOs are worth it. Great CEOs are hard to find. They can make all the difference between a company being a major star and being mediocre. And it's a bit like, say, stars in the NBA. Everyone's chasing after stars. A lot of players are talented, but not stars. So a lot of times you do overpay. Did the New York Knicks overpay for Carmelo Anthony? Yes, they did. So you definitely find overpaid CEOs, but for CEOs as a whole, I think if anything, the evidence shows they're slightly underpaid. Like if a youngish CEO dies suddenly, uh, value of the company goes down quite a bit. And it seems CEOs are paid somewhat less than the value they bring to companies. But again, admitting that many particular ones are overpaid.

It's not a Tyler Cowen, Erik Thornberg podcast if I don't have a couple NBA questions. So you set me up. I brought it up on purpose. Exactly. So one question I'm thinking about is why can't LeBron James go out and start his own NBA? Get some of the players, start his own NBA, and they run the league instead of the owners of the basketball teams?

Well, the players are not around for very long. And a lot of them are in the league for just 2 or 3 years, or even less than that. And the star players don't have enough capital until basically they're close to retirement. And a lot of their extra income is in the form of endorsements anyway. So I think it's just easier for them to have a separately managed league and to have owners. And if they're a big star, they get their big payday, you know, say from shoe companies. And advertisements, and they seem just fine with that. And the players who are going to wash out in a year and a half, like, why should they be the equity holders? That doesn't make any sense.

If you could change anything about how the NBA is run as a business or the governance of the NBA to make it more fair, to more fairly reflect the value that is being created, how might you do that?

Well, I would like to see fewer regular season games. I know why they do what they do. Obviously they can sell them for money, but it wears too much on the players. Injuries have too much of a role. I would like to see a variety of careers last longer. So just for myself as a product user, I'd like to see a season of 60 games. I mean, this year it's incredible. It's the most boring second half of an NBA season I've seen in my whole life. Right now there is no storyline I care about. Maybe the playoffs will be awesome. But we're all treading water. Talk to me till you're blue in the face about the 8th seed in the Eastern Conference, right? To me, it's a total snoozer.

Right, right. Do you have the Bucks coming out in the East? I suppose I do.

And you know, all year long I've been predicting Golden State, but I think they're quite vulnerable and I'm not so sure anymore. And the idea of something like the Bucks beat Denver would not shock me. Golden State has not really quite gotten it all together.

Perhaps they're like Facebook in that maybe they'll be disrupted soon.

Even a mediocre team might take them out in some kind of fluke series. Wow.

One thing I have a question about the NBA business is why can't sort of by popular demand we change the ownership, specifically Jim Dolan and the Knicks?

Well, a lot of these teams, most of them are held through publicly traded corporations. So you can buy them out if you want to. I'm not sure it's worth your while, but keep in mind, running a basketball team well is not very easy. On average, half the teams in a given year don't do very well. I don't think there's any silver bullet for how to make a team better in most cases. I'm glad the Clippers got rid of Donald Sterling. I'm glad the Washington Wizards got rid of Abe Pollin. That was the low-hanging fruit. From here on out, it's mostly professionals, and all the teams are upgrading their data analytics. It is harder and harder to just walk in and turn around one of these organizations.

One thing I am thinking about is this quote, I think it was Mike D'Antoni's cousin, who was coaching for the NBA for almost 20 years, and he was saying in his last year, he really realized that 3s are worth more than 2s, 50% more, and that changed. That was the secret hidden in plain sight. I am curious if there are any other secrets hidden in plain sight in basketball or in other areas of our lives that we will find out after 15 to 20 years of of doing something one way?

Well, in basketball, the idea that you should invest more in good trainers, good medical staff— teams have already been doing this, but I think that was somewhat of a secret for many clubs until recently. In life, I think becoming a good writer— I know that sounds like a cliché, but most people underinvest in that. It's a very high return. It's actually fun to do, and you become a much better thinker. So, I think that's one of the free lunches still out there for many people.

Yes. And, and, uh, do you have any advice on becoming a better writer besides the obvious, putting your time every day?

Uh, put in time every day and have a good system for feedback, typically other people who are close to you. There may be a way to do it online also, but I think for most people you can just ask your friends and family.

Zooming back out, I want to touch on the, the CEO, uh, pay point or even the MBA star pay point. On equality. You know, Paul Graham had this essay a few years ago on inequality that he got roasted for, basically saying there's sort of this paradox where, where when a startup does incredibly well and brings a lot of innovation to market, that increases income inequality. And so to some extent, we should celebrate that increase in income inequality. How should we think about, you know, rising inequality, the good kind of inequality, the bad kind of inequality, and how do we think about messaging that to people? Is that another example where people sort of have to— can't believe the truth on its face, sort of have to believe in another idea that will make them swallow the outcome better?

I think intellectuals can't believe the truth on its face, but most of the American people have no problem with it. Most Americans do not greatly resent billionaires or Bill Gates or Jeff Bezos. They're fine with it. They do feel the system is failing them, perhaps not giving them a good enough job or a good enough wage profile., but they do not think Bill Gates is taking that from them. I would toss the inequality concept and just look at income growth for lower-income individuals. How well is that doing? I agree that the record there is very mixed, but the billionaires, if anything, are somewhat contributing to income growth for lower-income individuals.

Going back to the community point, increasing isolation, you bring up filter bubbles, you bring up tribalism. Is the answer in some sense integration in terms of Trump supporters should spend time with non-Trump supporters, different races should spend time with each other, just sort of getting outside of our bubbles and forcefully integrating, or is that overstated?

I've seen some studies showing when you get outside your bubble and meet with other people, sometimes you get more upset, at least on social media. Now, I haven't read— studied those papers closely, but I wouldn't just assume that's the solution. I'm not convinced that right now the problem is as bad as most people think. I think our whole politics is being turned upside down. The internet is one factor behind that, but by no means the only. And there's actually a lot of flux and useful discourse. Social media help us get to the truth more quickly. I know that sounds like heresy. You get a lot of junk and crap and, you know, stalking and attacks on people. But just figuring things out. Smart people together on social media are remarkably good at figuring out the truth. And the idea that, well, not everything about how things used to be run is going to stay the same, I'm okay with that. So, you know, we will see how this develops. Yes, I don't like our current president, but I'm not convinced we're headed for some kind of massive train wreck. I think this is how most of American politics has been. Pretty chaotic and highly volatile. We got lulled to sleep by the 1980s and '90s. This is just like, hey, welcome back to normal reality.

When you think of things like democracy, when you think of things like how decisions are made in business, when you think of— we're talking about ISAs, people potentially going public and putting their decisions up to their shareholders, what is your framework for when you believe in the wisdom of crowds versus when you don't?

Sometimes crowds are smarter, other times they're not. Again, it gets back to this point of needing experimentation. So we've had an ongoing experiment in the United States, publicly held firms versus privately held firms. And more and more companies are opting to be privately held and not trading in the public markets. Either they feel too much pressure for quarterly earnings, or they think they're getting better management, being subject to less public scrutiny. I take the results of that experiment very seriously. I don't think we'll get that result forever, but that's what we're seeing right now. We need to think more carefully, why is it so costly to be a publicly traded corporation? How can we fix that?

Let's get into politics. That's something you talk quite a bit about. Is the massive amount spent on corporate lobbying a good thing? Thinking about things like ISPs, net neutrality, —numerous other topics. How should we think about that?

Well, you used the phrase massive amount. I'm not sure I would use that phrase. As a share of GDP, what companies spend on politics is remarkably small relative to how much is at stake. If you look at the actual federal budget, most of it is not controlled or allocated by companies. It is mostly following the wishes of voters for Social Security, Medicare, Medicaid, National defense, of course, there's interest on the debt. A lot of discretionary spending is not mainly in the service of corporate interests. Now, some of it is, like the Export-Import Bank or Small Business Administration, but to me, it's remarkable that the actual influence on companies on so much of policy is way, way smaller than many people think.

You wrote about how Citizens United actually decreased the amount of corporate power in politics. Yes, but you need a caveat there.

Corporations as formal institutions probably have less influence. Private individuals who maybe earned money through companies maybe have more influence, but there's a longstanding body of literature in political science that campaign finance matters far less than people think. This is one of the great sibyllines of our time, that money controls politics. It is a much overrated proposition. When you consult the research literature, support for it simply is not there. It is, yes, absolutely true in particular instances, and often those are bad cases.

Those instances like farming was one example? Farming is one example.

We pay over $20 billion in farm subsidies. It is mostly crony capitalism. It's a bad policy. Economists left and right typically oppose it. It's actually not a huge sum, $20 billion. I know it sounds like a lot, but these days, small share of the federal budget, and it's one of the more obvious examples. I think most crony capitalism is bad and wrong, and we should get rid of it, but I think it's a convenient target, and people are overstating how much of it we've got.

Do you worry that concentrated economic power tends towards political control, or you think it's overstated? Well, again, it depends on context.

If you look at some data, like amount of money spent on political lobbying or number of visits to the previous White House. I think Google came in as the number one company on those metrics. It's not entirely transparent what Google is getting in return, and if people have some concern, I think that's justified. Uh, but another way to look at it is Google is a highly valuable, highly vulnerable company, and in part they're trying to protect their situation. Is Google getting, say, too many Pentagon contracts? Very hard for an outsider to judge, but Google also does very valuable work for the Pentagon. I think it's a legitimate concern, but it is very far from my main worry about the United States.

Do you think businesses, corporations should be able to fire people for their beliefs or statements? James Damore was one of the examples, but there was the Mozilla one who expressed anti-gay marriage. Expressed pro-life, pro-choice have been fired. What are your thoughts there?

Well, companies currently have the right to do that. I feel they should have that right, but I would stress two points. First, such firings are often imprudent. And second, such firings are often a response to fear of litigation, that if Google had kept James Damore around, that people could sue them for creating a hostile workplace environment. So I feel we need to change the laws that make it so easy to sue your employer in this fashion, and then fewer of those individuals would be fired. So I don't feel that all is well in that situation, but I think the law is a bigger problem than the companies.

Who's more powerful, Mark Zuckerberg or Jeff Bezos or Donald Trump?

Well, it depends what you mean by power. If you mean power to coerce others, clearly it's Donald Trump. Donald Trump has upended our trade and immigration laws and regulations, mostly for the worse, in my opinion. He has cut off a great deal of trade. He has led to some, like children, being forcibly separated from their parents and maybe never reunited. It's hard for me to think of anything Jeff Bezos or Mark Zuckerberg have done that is even remotely comparable to that.

In the sense of if they were optimizing for power, would Mark Zuckerberg rather be him or rather be Donald Trump? I'm curious if that's different from the Robert Barons or Mark Zuckerbergs of 30 years ago.

Well, people use the word power in so many different ways. I'm not sure how to answer the question. If you run and control a highly successful company, you can direct a lot of resources. You could say that's a form of power, but you're very constrained by your users, your competitors, your customers. What you're trying to do is make your enterprise bigger and better and have greater splendor. And most of that is a significant positive. Facebook is investing a lot in artificial intelligence, in virtual reality. They made mobile advertising work. They made their page much better over time and more useful. So, we don't know if all their bets will pay off, but you know, the power of Facebook is largely a power to try to do things that will make us better off. I'm not saying they always succeed.

I mean, go back to the inequality thing for a second, or even the small business, medium business. Think for a second. The crypto community, or some segment, believes that if you are able to decentralize ownership, rather, you know, give your users equity in the companies, this might actually lead to a rise in small and medium businesses because presumably you have some reduction of costs if you're also giving up equity, and the margins would be better for these small and medium businesses relative to bigger businesses. Do you think we should care about sort of the, I guess, the Gini coefficient of business size or size of business, small, medium versus bigger businesses?

I don't think we should care per se, but overall, big business tends to be more honest than smaller business. It pays better wages. It's more likely to give you benefits. That doesn't mean we should just expand big business without limit, but a lot of the valid criticisms against business, they apply more to small than big business in many instances.

And would your take be that often are, are intense to regulate big business backfires, even makes big business stronger than it was before?

There are many regulations. European privacy law, GDPR, would be an example where to meet the requirements of that law, it requires big investments and a significant staff of lawyers and a lot of due caution. And yes, companies such as Facebook really can do that. They don't like spending the money, but there's no doubt they can afford it. And potential upstart rivals either don't have the money or never come about or exist in the first place. So that kind of regulation, it probably does dig in the incumbents somewhat, and I don't think it's given Europeans much more in the way of privacy.

Why is the anti-big-business narrative stronger in some locations than in others? Like, why is it so strong in Europe, for example?

Well, even in Europe, I think it's only strong in some places. But Europe has a history from fascism and World War II of experiencing a particular kind of privacy violation. I think they're misguided in directing that fear at the big tech companies, but they, in particular the Germans, do have some attitudes that most Americans do not. And there is a historical reason for that. And also, those are not European companies. There's some resentment. There's simply desire to tax those companies for revenue, seeing it as a free lunch. I worry greatly about the future of Europe. If Europe does not have a more dynamic tech scene, and say 70 years from now, most of an economy is in some way tech, what does the future of Europe look like? I think they should be much, much more worried about that than what kind of box you have to click on to consent when you visit a new website. I think it's a really quite insane inversion of correct priorities.

You've talked about how when it comes to Silicon Valley, the critique you are sympathetic to is about privacy. What are other critiques, maybe it's related to Wall Street or related to politics or related to big business in general that you think are valid or even underrated?

Well, I think a lot of trading on Wall Street is not very socially productive. I don't think there's any simple way you can come along and get rid of the unproductive trading. And keep the productive capital allocation. I think you could say the same about higher education. A lot of what goes on in the classroom is a kind of unproductive competition to get the highest grade or curry the greatest favor with the professor at the expense of someone else. A lot of that is unproductive, but I think you need to look at the institution as a whole. The best, most creative, innovative universities often actually tend to have more of that kind of zero-sum competition, and it's part of the package. So the financial sector, we need to keep that in mind, but I do think we need to be aware that a financial sector needs to be well-capitalized. That does require a considerable degree of regulation to make sure taxpayers are not always on the hook, or that our macroeconomy is not falling apart by a lot of institutional failures, as it was on the verge of doing in 2008. Government does need an active role there. I don't think we should be shy about admitting that.

What is that role, and what would your advice be on the Wall Street regulation? Do you side with Volcker? Who do you side with, or what are your proposals?

The people who favor high capital regulations for many kinds of financial firms as a cushion, and then who strongly support the Federal Reserve acting as quickly and decisively as possible when a crisis comes along, If you recall 2008, you had a bunch of governors sitting around the table, fretting that maybe inflation would be too high, when they should have been playing the role of fireman. Eventually, they came around, and I hope next time we've learned that lesson, but we don't need to figure out some new problem. We just need to know next time, like, "Hey, it's time to play fireman, not inflation fighter." We have that knowledge now.

Do you worry that quantitative easing, too much of it will come back to bite us, or do you think this is the new normal for central bank balance sheets?

I think it's the new normal. Having a large balance sheet for your central bank has been normal in other parts of the world for a long time. I don't see the incredible risk involved. It's mostly safe assets. The central bank can shed assets if it wants to. I don't see any particular reason why it has to, but as those investments mature, they can decide not to reinvest, and that will lead to the balance sheet shrinking. Once the Fed realized what was going on, it did a reasonably good job of putting out the fire. The idea that somehow we've painted ourselves into some weird destructive corner, you hear this argument all the time, but the evidence for it just really has never come to pass. Keep in mind, interest rates have been falling on average since the 1920s in inflation-adjusted terms so that we have low interest rates today. I get it's not ideal for every investor, but it's not as unusual as people think. It's the long-run trend.

How would Adam Smith respond to this book?

I think Adam Smith would agree with most of the book. I've been influenced greatly by reading and rereading Adam Smith. Smith himself was fairly cynical about the motives of business people. I think that's often correct. There's quite a bit of dishonesty in business. But I think it's about the same as the amount of dishonesty not in business. Just take a simple comparison. If you go to match.com, how much dishonesty is in those profiles compared, say, to the dishonesty of the company match.com itself? Well, it seems to me the company is way, way more honest than the people using the service.

It is interesting. The CEO of BlackRock in his last investor letter talked about purpose and profit. That's not something you're used to hearing, you know, from someone like that. Do you think that is something to be cynical of, or do you think that there will be an increasing, you know, sort of increased social responsibility of business, or at least discussion about that?

The most successful companies believe in something other than just profit. They believe in some kind of higher mission and purpose. Are some of the people involved being cynical? Of course. Are many of the others involved actually believing in the higher purpose? Absolutely. People in the major tech companies have mostly correctly thought they're ushering in a new age for the world where people are more interconnected and more informed, and academia and science are more powerful because of what they're doing. Mostly, they're correct, and that has motivated them in addition to having a whole bunch of cynical people involved.

What would Tyrone Cowen respond to this about, your alternative identity?

Well, Tyrone would point out to Tyler that he himself has never started a business. And I think he would tell Tyler to get to a venture capital firm and think about doing something else for a living. Tyler would respond that he is an individual, you know, it's his own business. And he has a kind of personal pond of things he does, which are now actually relatively large in scope. But I think that's what Tyrone would say.

Well, in fairness, Tyler has started Emergent Ventures, which is his own form of venture capital.

Yes, that's a charitable fund based on the notion that philanthropy should not involve fixed costs or staff costs. There should be one layer of scrutiny, one person deciding, and that person deciding, who is me, should be willing to take a lot of risks with the money.

Maybe you're 6 months into that, I don't know if you're a year into that. What's sort of the biggest learning since starting Emergent Ventures, or most surprising outcome?

One thing I've learned with Emergent Ventures is how much often the certification or the psychological boost can be more important than the money, how readily you can create a network of people helping each other and how powerful that is. And the money is a necessary signal or stand-in. And of course, some people really just do need the money to do what they're doing. But how it's a complex bundle of like image formation and marketing and creating a network and a kind of synthetic synergistic coming together of all those factors at the same time. That's what possibly makes that grant-giving venture and also a lot of venture capital work.

I'm curious how you think Peter Thiel would respond or read this book. I'm also curious how you think of the Peter Thiel line about, or interpret the line about how he's pro-innovation, which is zero to one, whereas globalization is horizontal And sometimes takes away from innovation and thus is more perhaps sympathetic to us renegotiating our trade deals. I know there's a few points in there, but how would you respond to those?

I think Peter will tell me what he thinks when I see him. I'm reluctant to speak for him in the meantime. My guess is that I have a more optimistic overall take on business than he would, but again, I really don't mean that to be me speaking for Peter.

What about on the international trade for people who are sympathetic with Trump trying to renegotiate our Chinese or deal with China. Do you sympathize with that?

I do, actually. I think Trump has used poor means, and it's chaotic and poorly organized, and it's unlikely to end well. But just in principle and on paper, I think a lot of what Trump has been saying is correct. And the rest of the world has come around in large part to agree with Trump, though they would never admit that. So I get what Trump is doing. But that said, his skills of execution and alliance building and credibility building are so weak, I strongly fear it will be counterproductive.

But can you unpack exactly what he was correct— or spot what he was correct on?

The extent to which China is engaging in unfair trade practices, violating the spirit of WTO even when following the letter, massive espionage and IP violations, and simply having no intent to ever really live by those rules. On all of those points, I think Trump is more correct than were most other people before Trump came along. But that said, I don't think the current trade war is going very well. Like an example that was given, Trump is trying to get Europe not to use Huawei 5G. And I completely agree with him. But the Europeans, they don't quite say this, their attitude is a bit like, "Well, if we drop it, you might come back in a month and say, "Things have changed for you, because you're not reliable, you're not predictable, and we don't want to be alone out there on that platform as the ones who dropped China when you ran back into China's arms." I fully grasp why they have that fear. Trump is not predictable or reliable enough to his own allies. Right.

If you could wave a wand, how would you redefine the business of academia and of research so that it brings out best outcomes?

Universities are too bureaucratic. They have too many layers of administration. They have taken on too many non-academic, non-teaching, non-research functions. And for odd reasons, which I don't quite understand, individual schools are not sufficiently willing to experiment. There's a few different kinds of schools, like the teaching school, the big state school, the elite research school. And within categories, everyone's a conformist. So I think that's quite bad. I don't know how to fix it. I think we need to have serious experimentations moving away from the tenure system. The difference between how adjuncts and tenured professors are treated is too large. We need greater flexibility of roles, tenure clocks for women. Fixing our immigration system, I think, could help our universities a lot, both more students and better professors and researchers. So those are a bunch of things I would do, but I know I don't have the main answers. It again gets back to this point of experimentation.

What do you think about this sort of Yuval Harari idea that we can somehow have an AI-driven communism or socialism in the future because we'll have these big databases that can make decisions across a mass population, whereas in the past, the most ethical thing— liberal democracy, the most ethical thing was also the most efficient in terms of price discovery, in terms of information, but now that they're in these centralized databases, maybe, you know, to each according to his needs, we can thus better assess people's needs and distribute in a central planning type way. What do you say to that idea?

Well, right now, AI cannot cultivate a garden. It has a hard time sometimes setting up the pieces on a chessboard, even though it can play chess remarkably well. It cannot run a single company. It cannot, say, raise a child. It's not close to being able to do most of those things. The idea that AI could run an economy, I strongly believe we are very, very far away from that point.

Could you see it in the future?

Probably in some future that's so different, I don't even recognize it. It is interesting.

I want to go back to this idea of the future. You wrote in the book Stubborn Attachments, one of the conceits or innovations that was that you said we should value future lives as much as current lives. One thing I've had trouble wrapping my head around is, in some sense, it's always the future. There is always a future, so taking now is always taking from someone in the future. How should we think about that concept in terms of time?

Well, I think the best we can do for the future is to build healthy and flexible institutions with some integrity, and do have an underlying rate of growth in our economy, say, you know, 3% would maybe is the maximum we could manage in this country and keep it that and become wealthier and have stronger science and greater ability to solve problems like climate change or an asteroid destroying the earth. And it seems to me that's entirely possible. It's not our priority right now. At times we approach doing it. Our government policies are aimed at many other values and many other ends. When I think it should be, you know, as I say in the book, growth and human rights, nothing else.

One of the reasons why you've been pushing back on, say, universal basic income is because you believe that people find meaning in work, work makes us better people, and it's better if people work. What do you say to the idea that people can find meaning in different ways? For example, I could be hosting a podcast and not being paid for it, or writing poems, or doing all sorts of art projects, Is it only work for money that counts as work? Or mainly, what do you say to that idea?

Not only work for money, but there's plenty of data on people who suddenly retire. Maybe they have to retire. It used to be in universities, you had to retire at age 70. Those people generally were not happier or more productive. Now, did some of them create better lives by writing poems and riding horses? And organizing the local glee club, yes. But most of them, I think, were less happy and had a weaker sense of purpose. I worry also with universal guaranteed income, we'll end up cutting off immigration into this country. People don't like paying out money to foreigners, whether rightly or not. And the kind of welfare system you have, it's a kind of ad to potential immigrants. Like, what awaits them when they get to your country? And I think guaranteed income is sending exactly the wrong message.

And what about criticism to businesses around— maybe it's multinationals, or it's businesses that don't— that affect the places in which they reside, but don't suffer the costs of being in those cities because those people might be somewhere else. What do you think about location as it relates to big business?

Well, I'm not sure what example you have in mind. I think we could have a better harmonized international tax system for multinationals. There's too much location for reasons of tax arbitrage. That's hard to fix, but I doubt if we're even at a local optimum, much less a global optimum. Poorer countries should have less regulation on multinationals. They need the investment more, and they should be willing to tolerate lower levels of safety. I think that's actually the correct outcome, though it's often heavily criticized.

I want to name a person I want to ask how you think they respond to the book or where you think the crux of disagreement you might have with them. One is Elizabeth Anderson.

Oh, well, I wrote a comment on her paper on corporations. I think it's on my homepage. Her initial draft argued that working for a company was like living under communism, that you just had no rights and the company could tell you what to do like a brutal dictator would. And that's very wrong. I mean, most companies work really hard to give their employees a pleasant, comfortable, creative work environment. I'm not saying they all do, and a lot of companies just go out of business, but I don't think she really understands the benefits of competition. But she has a whole book talking about how companies rob freedom from their workers. I think that's a very wrong perspective.

How about David Graeber?

David Graeber wrote a book called Bullshit Jobs. He's an academic, and if you're looking for some bullshit jobs, you can find them in the academy. There is too much bureaucratization. Yes, some jobs are bullshit jobs, but this notion that most people out there are just not producing anything, it's simply not true. There's a lot of service sector jobs he criticizes, like people doing communications and PR. I think he just doesn't understand that they're important for a lot of companies. And I'm sure you hire people to serve these functions at Village Global and you get what it is they do for you. And he's just saying, well, so many of these people are worthless. And yes, there are some bad ones, but you know, they're not basically bullshit functions. So I think he's way off and far too critical of the world of work.

Did you find him accurate on debt? That's a complicated book.

An interesting book. All of his books are interesting. He has a lot of assertions about the origins of debt and the origins of money, which might be true, but are not really validated. And they're presented as here's how it is. So I would call it interesting speculation, not to be dismissed, but don't think it's for real either.

Would that be your same criticism of Yuval Harari's work on the future, that at best interesting speculation?

I think he is too speculative, yes. And there are too many claims floating around at once and too many of them are not pinned down. How about Nicholas Carr? I debated him once. You know, he's the fellow who thinks Google is making us stupid. And I asked him, "Well, when you learned you were debating me, did you Google to see who I was?" And he kind of sheepishly admitted he did. It's like, "Well, did that make you stupider?" I think Google is a huge advance for science and for learning. It's not a perfect service, but no, I don't think the internet is making us stupider.

Have you followed Jaron Lanier's work or Tristan Harris's work?

Uh, Lanier, yes. Uh, the second name, no.

Okay. How about Lanier?

I would like to see more backed empirical claims by studies. He's become very critical of the internet. He has a kitchen sink approach of throwing a lot of criticisms at the reader, but which of those are really empirically valid and which not, I would like to see greater care taken.

As I told you, I read this George Gilder book. Summarized thesis is wealth is knowledge. The main difference between our age and the Stone Age is the increase in knowledge that makes economic growth learning, and through every business sort of falsifiable test of an entrepreneurial idea, guaranteeing outcomes, i.e., by the government prohibits learning. Is that a rallying cry you resonate with and something that could spark mainstream appreciation for economic growth?

Well, I'm not sure what is meant by that. I mean, the general notion that we should subsidize learning, education, and science, I would agree, provided we can do it in a not too politicized manner, and I do think that's possible. That's the point I would stress, but there's a lot of abstract ideas floating around in the quotation you gave me.

How do you compare bureaucracy in government versus bureaucracy in big business?

Well, sometimes it can be worse in big business, right? Business builds large structures, maybe they need to be large, but some parts of the federal government you can deal with fairly easily. So the cliché that bureaucracy is always worse in government, I don't think that's true. I mean, let's be honest. What's the next book? Ah, the next book. I'm still thinking about what the next book will be. You know, like, for the last some number of weeks, I've been between books for the first time in 20 years. Uh, there will be a next book, and I will start it the day after I am finished doing media for the current book. The schedule of what I'm going to do looks already so brutish, I'm not sure exactly when that will be.

Right. Do you have a topic in mind yet or a theme or unclear? I do, but it's secret. Ah, okay. But you will like it.

Let me promise you that. Perfect.

Perfect. When people talk about late-stage capitalism or post-capitalism, what are they talking about?

People mean different things, but it's often a Marxist idea that there are stages of history and capitalism is something temporary to be superseded by what follows. That's not my point of view. I think capitalism will always evolve, but it is likely to stay private ownership of capital goods, actively traded amongst investors. So I don't think there is a post-capitalism that's anything other than collapse, most likely. Capitalism will not be obsolete. At some point, however, it will be gone, and that will be a sad day.

To end on a more uplifting note, what is one thing people can do after reading your book? To express their appreciation of big business or to fully appreciate it?

Well, to find a job they love if they can, to realize what is going on behind the scenes every time they spend money on something they enjoy, and just to realize the incentive in the media is to overly publicize the negative. So next time they see a story about big business, yes, a lot of the negative stories are true, but a lot of them also are very exaggerated. And to keep in mind all of those facts.

To that end, are you okay with the business of media being fully privatized?

You know, in the UK, BBC has worked fine. I don't want that model in the United States. And now we have more media choice now than we've ever had before because of the internet. People don't always like competition. It means a lot more crazy views, a lot more offensive views. A lot of that I don't like myself. Ultimately, I am willing to live with that trade-off.

Tyler Cowen, the book is Big Business: A Love Letter to an American Antihero. Buy the book, read the book, and I hope it changes the conversation on our appreciation of business and capitalism. Tyler, thank you so much for a great conversation.

Thank you so much, Eric. Take care.

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