Tyler Cowen

Supported by Greenhaven Road Capital, finding value off the beaten path.

Tyler Cowen stopped by EconTalk (for the 11th time!) to talk about his book, Big Business: A Love Letter to an American Anti-Hero. The conversation with Russ Roberts circles the book in a way only Tyler Cowen can. The definition of polymath should be someone who can cite John Rawls and PewDiePie in the same breath.

In talking about how to change poverty, Russ Roberts half-joking says to buy people luggage. The idea being that transaction costs for job changes (see also: Michael Munger) are too damn high.

Cowen suggest enhanced public transit and congestion costs or reduced incentives for things like rural mail delivery. Both Roberts’s and Cowen’s ideas are about frictions. Subsidies reduce fictions for planting one crop instead of another or getting rural mail the ‘last mile’. Removal of subsidies increases frictions and forces a person to find a new way of doing things.

Frictions are something Austen Allred thinks about frequently:

“One of the things I spend most of my time thinking about isn’t the course content but how can I eliminate all the other distractions for people? The first way is making tuition free upfront…how can we take all the distractions away to help someone get from point A to point B? Because we know you can., but lives are complicated and messy.”

Finding solutions to better work is important because work matters. A job is more than a paycheck. “Unemployment is very bad for people,” Cowen says and “most people are happier working.”

Tyler has recommended the work of Brynjolfsson and McAfee in the past, and they note too that work is more than just work. People create friendships, gain skills, and self-fulfillment while on the job. It’s not just a paycheck people get, but intangible and sometimes immeasurable things too.

Solving the ‘job’ of income is like solving the ‘job’ of door-opener by replacing a doorman with an automatic door. The solution only works for the first order principles and neglects everything incremental.

Much of the episode between Cowen and Roberts is about creativity; thinking creatively about new solutions, current situations, and the entire ledger. Cowen says his book is “trying to set the record staring by just looking at the facts.”

One example is social media. Cowen is happy with his use of WhatsApp, blogging, and Twitter because while, “there’s a downside to social media I think the upside is so much greater.”

People are cognitive misers. We assume that all we see is all there is. That’s not the case. The financial sector Cowen says, provides useful services such as capital allocation, yet it’s vilified for a portion of the actions.

In another section Roberts asks if he’d rather be born in the past or the future. “I’d still be okay being born in 1962,” Cowen says, exhibiting a case of the same limited thinking. “I’ll prefer the future but I’m not convinced how long civilization will last. If it’s a uniform distribution across the whole future I’d definitely rather be born in 1962.” Cowen isn’t creative enough about the future—imagining mostly negative outcomes.

A third example of this phenomenon is related to the idea of reference class. People compare in relative, not absolute terms. Joe McLean said that as he advises celebrities and professional athletes, “Every client wants to know what the other guy is saving, not spending.”

Cowen noted, “I think the real weird period was the 1980s and 1990s when everything felt right and orderly. That was an illusion and the bubble has been burst.”

We compare whatever is in-front of us with whatever comes easily to mind. It takes creativity to think about the now in a better light.

You see this with the complaint that we were promised flying cars. That’s the wrong way to think about it. Rory Sutherland writes, “The broken binoculars (of market research & economic logic) assumptions is that the way to improve travel is to make it faster.”

Faster isn’t the only way to make something better. Travel can be slower and be better too. Cruise ships are slower than airplanes yet many people prefer to travel that way.

Even the mundane can be made better by not being faster. Cowen says:

“You can work from the backseat of an Uber and sail on to your flight because pre-check is easy and while you’re waiting for your flight you can read on Kindle. It’s different from a flying car but maybe in some ways it’s better.”

Cowen believes in growth solving, curing, and preventing many problems. One way to grow, the Straussian way when listening to this conversation, is to get creative. It’s new answers like productivity in the backseat of an Uber, wondering why the future won’t be better than the sixties, and how to use social media to better the ledger in our favor as people.

Thanks for reading. If you like these thoughts, you’ll also like this email. It’s weekday mornings, it’s short, and it’s full of stories.

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