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Thu, 18 Apr 2019 03:00:01 +0000

Ninety-nine percent of commercially traded bananas are just one variety: the Cavendish. (Photo: Moore/Getty)

The banana used to be a luxury good. Now its the most popular fruit in the U.S. and elsewhere. But the production efficiencies that made it so cheap have also made it vulnerable to a deadly fungus that may wipe out the one variety most of us eat. Scientists do have a way to save it but will Big Banana let them?

Listen and subscribe to our podcast at Apple Podcasts, Stitcher, or elsewhere. Below is a transcript of the episode, edited for readability. For more information on the people and ideas in the episode, see the links at the bottom of this post.

* * *

In 1876, the city of Philadelphia commemorated 100 years of American independence with a Centennial Exposition.

Virginia Scott JENKINS: Well, it was a big trade fair. It was like a Worlds Fair. And there was a horticultural exhibit, and they had a banana plant with bananas growing on it.

Thats Virginia Scott Jenkins. Shes a cultural historian and the author of Bananas: An American History.

JENKINS: And they had to put a guard on it because people wanted to pick a leaf, or poke at it. Because people hadnt seen one of these things.

The banana plant and yes, its a plant, technically, not a tree; and the banana is technically a berry anyway, this banana plant had stiff competition for attention at the centennial expo. Also on display were the right arm and flame of the Statue of Liberty, which hadnt yet been erected in New York Harbor. There were the first public demonstrations of the typewriter and of Alexander Graham Bells telephone. And: an appearance by the President of the United States, Ulysses S. Grant. Still, the humble banana plant caused a stir, thanks to its novelty.

JENKINS: Theyre not native to the Americas, at all.

And in North America, bananas werent even possible.

JENKINS: Well, they take about 18 months from sprouting to fruit, and the climate in different ecological zones in the United States, you dont get frost-free that long.

The banana was one of the first fruits cultivated by humans; the earliest written accounts go back to 500 B.C.E., in India. The Americas didnt get the banana til much later although exactly when and how are, like much banana history, disputed facts. But its safe to say that in 1876 in Philadelphia, the banana was still exotic to most Americans.

JENKINS: In the first two-thirds or three-quarters of the 19th century, bananas might come in to an East Coast port on a sailing ship, and then theyd be sold at the port. But they werent generally commercially available anywhere. They were a luxury item. They were very expensive. I found some very interesting menus, for very fancy occasions, that might have bananas on the menu. But they were something that most people had never seen, most people had never tasted.

Even though bananas were by then being grown in Latin America, sailing ships couldnt travel fast enough to reliably keep the fruit from overripening. But then came steamships and railroads.

JENKINS: They would just put huge pieces of ice at each end of a freight car to try to keep the bananas cool.

And by the 1920s, trains started getting mechanical refrigeration; in the 1930s came refrigerated trucks. This new technology had a huge impact on food distribution generally it made possible the modern meat industry, for instance. It also allowed for the bulk importation of bananas to the United States. The variety that Americans came to know and love was the Gros Michel, also known as Big Mike.

JENKINS: And it was a large banana, and it had thick skin, so it didnt bruise easily.

There are more than 1,000 banana varieties in the world. But, Jenkins says:

JENKINS: A lot of other banana varieties dont travel well. Either theyre small, or they have thin skins, or for one reason or another didnt grow well.

In 1900, Americans were eating 15 million bunches of bananas a year. Just a decade later: 40 million. So it was very bad news when a fungus emerged.

JENKINS: Devastating the plantations in Latin America.

This fungus came to be called Panama Disease. It was first noticed in the late 1800s; by the 1950s, it was wiping out the Gros Michel.

JENKINS: What the fruit companies did was, theyd move on to another country and buy up a lot more land, and grow bananas until the disease caught up with them and they had to move on.

But the disease couldnt be outrun. The Gros Michel was doomed.

JENKINS: So they changed to a variety called the Cavendish banana.

The Cavendish was not susceptible to the disease that wiped out the Gros Michel. So the Cavendish is the banana most of us eat today. It accounts for 99 percent of the banana export market. The last Gros Michels in the U.S. were sold in 1965. So our banana is not the same banana our elders ate.

JENKINS: Well, Ive never had a Gros Michel. Im not old enough, so Im not really sure how much difference there was.

Some people who did eat the Gros Michel say it was more delicious than the Cavendish. But the Cavendish has done very well, thank you. It is the most popular fruit in both the U.S. and Europe, even though the vast majority of them must be imported. The E.U. imports around six million tons of Cavendish bananas each year, or 110 bananas per person; the U.S., about 130 bananas per person. Canada beats us both, with 150 bananas. So you can imagine there would be a lot of unhappy people if the banana we all eat were, once again, under existential threat.

Douglas SOUTHGATE: Well, the doomsday scenario is that it wipes out the international banana trade.

Thats right: Panama Disease is back, and this time its come for the Cavendish. Today on Freakonomics Radio: sometimes a banana is just a banana but in this case, its also a symbol of commerce, of political discord, of scientific dilemmas and of course, personal taste:

Andrew BILES: My preference is bananas as they are, or, curiously enough, bananas on toast.

* * *

Why are bananas so popular? Let us count the ways. And full disclosure I say this as someone who, personally, does not love bananas. But I do recognize how appealing they are. Sorry about that. But, seriously, the peel: its got to be part of it. First of all: its bright yellow; its basically an advertisement for itself. Also, Virginia Scott Jenkins notes that the banana first gained popularity around the time people were just starting to learn about germs and food hygiene. One early banana importer called it a fruit in a germ-proof wrapper.

JENKINS: This was something that you could eat on the street and not worry about getting sick from it.

There was also a new awareness around food and nutrition.

JENKINS: People were interested in calories, and this was a good way to get more nutrition and vitamins at the same time.

Still, if you know even a little bit about economics, youd have to think that price must also have something to do with the banana being the most popular fruit in America. And this is where it gets interesting. Picture yourself in a grocery store: you see piles and piles of apples, all different varieties. About 95 percent of the apples eaten in the U.S. are grown in the U.S.; the imports usually just plug a hole at the end of the growing season.

Now check out the pile of bananas. First thing you notice: just the one variety, the Cavendish. And every one of them has been grown, picked, washed, and boxed in another country. Then theyre shipped, still green, in a temperature-controlled environment. At their destination, theyre put in special ripening rooms that provide, among other amenities, the release of gases that trick the banana into thinking its still back home in the tropics. At a temperature of 64 degrees, a banana can be ripened in as little as four days; at 58 degrees, itll take seven days.

Considering all this aftercare, and the fact that theyre all imported, you might expect a banana to be much more expensive than those very American apples. And yet theyre not: bananas are typically less than half the price of apples. In fact, theyre among the cheapest fruits around. How can this be? How did an imported luxury item become a cheap American staple? Well, lets start here:

SOUTHGATE: Its in part a story of economies of scale.

Thats the economist Douglas Southgate, an emeritus professor at Ohio State University. He started studying bananas because:

SOUTHGATE: Well, the short answer is that my wife is from Ecuador, which happens to be the leading exporter of bananas, and has been for the last 65 years. Even though the country is no larger than the state of Colorado.

Bananas are grown in many warm countries around the world, in the eastern and western hemispheres.

SOUTHGATE: Bananas are far and away the most widely traded fruit, fruit or vegetable.

Andrew BILES: Basically, there are 135 countries that grow bananas, and there are 145 million tons of bananas produced every year. Thats about 800 billion bananas.

And thats Andrew Biles, who until recently worked at Chiquita, one of the worlds largest banana companies. His title at Chiquita was C.E.O. of bananas and pineapples seriously, thats the title. As for the bananas:

BILES: In the world, its the fourth most-important crop after rice, wheat, and corn. The economic value generated by the banana industry is some $52 billion. And there are some 400 million people that rely on bananas for a staple food or a staple source of income. There are many countries if they did not have bananas, they would go short of food.

The Cavendish banana accounts for just under 50 percent of global banana production but, again, almost 100 percent of exported bananas. And Ecuador alone accounts for more than a quarter of all Cavendish exports.

SOUTHGATE: If you produce something in very, very large numbers, then you bring down the per-unit or average cost.

For the early American banana companies, the transition from luxury fruit to mass import was a strategic move.

SOUTHGATE: The key to the strategy or to understanding the strategy was to realize that they made more money from having a smaller margin on a much larger volume than they would have had continuing to treat bananas as a luxury item.

And how did they accomplish this? Consider the history of Chiquita.

BILES: Chiquita started way back in the 1800s and was a company that first went public, believe it or not, in 1903.

Back then, it was known as the United Fruit Company. And United Fruit happened to have:

SOUTHGATE: United Fruit happened to have the largest fleet of ships in the Western Hemisphere. Only the U.S. Navy had a larger fleet of ships.

In fact, the Navy would requisition some United ships during World War II. But in peacetime:

SOUTHGATE: Well, they used those fleets to move bananas to the United States very, very efficiently. And as is always the case, or practically always the case, the major beneficiaries of this efficiency were in fact consumers. Prices were slashed, and within a few years, bananas were no longer a luxury item. They were instead a fruit of poor people. The first food that a lot of poor babies ate after weaning were mashed bananas, in the days before canned baby food.

It would be hard to overstate here the role of the United Fruit Company.

BILES: What we have here is a company that did develop over time a significant business and actually created a banana industry.

SOUTHGATE: It was called the Octopus because it had a near-monopoly on production. United Fruit definitely had its tentacles wrapped around this industry.

Most of Uniteds bananas were grown in the Spanish-speaking countries to our south:

SOUTHGATE: Costa Rica, Honduras and other Central American nations happen to be an ideal setting for raising bananas for the U.S. market.

Ideal because of the climate, yes. But also because land and labor were both very, very cheap. So: American consumers were winning; United Fruit was really winning; and what about those Central American countries? Keep in mind they were largely undeveloped at the time.

SOUTHGATE: Foreign companies, led by United Fruit, were willing to make the investment to clear land, put in infrastructure and so forth to start producing bananas on a massive scale for the U.S. market. But only if they were awarded vast tracts of land and largely exempted from taxation. So that gave them the dominant position. Thats what led to banana republics.

Yes, before it was a clothing store, banana republic meant something very different essentially, a fragile country whose economy and, often, political leadership, were propped up by an export crop. And when a banana republic acted against the interests of their banana overlords, things could get ugly. Consider the case of Guatemala in the early 1950s. President Jacobo Arbenz, a former army colonel, was pursuing a land-reform program that would have reclaimed property from the banana companies.

SOUTHGATE: And this angered United Fruit. United Fruit definitely wanted to see Arbenz go.

United Fruit lobbied the U.S. Congress to act against Guatemala and Arbenz was ultimately ousted in a coup led by the C.I.A.

SOUTHGATE: Drawing a simple line of causation United Fruit, U.S. Government overthrow of Guatemala doesnt capture all of what was going on. The U.S. government had other reasons why it was alarmed at some of what Arbenz was doing, apart from the land reform.

Specifically: the American government was worried that Guatemala was sliding toward communism, and an alliance with the Soviet Union. This was a common theme of the Cold War era; were not talking only Guatemala here. In any case, the U.S. overthrow of Guatemala led to destabilization and decades of bloody civil war. United Fruit, meanwhile, continued to tangle with the governments in other banana republics and, ultimately, the U.S. Government as well, which accused United Fruit of monopolistic behavior.

SOUTHGATE: They controlled production and also had an extensive, deep network for distributing bananas from U.S. ports inland. So United Fruit was very much the banana business.

In 1967, United Fruit agreed to reorganize and sell off some of its strategic assets. The Octopus was shrinking. The next blow came from Ecuador.

SOUTHGATE: That was the most important development that ended the Octopuss time. Ecuador does not fit at all into the standard banana-republic narrative.

Land in Ecuador was owned by independent farmers, so it wasnt susceptible to the political and economic exploitation that had worked elsewhere.

SOUTHGATE: By the time the major companies were taking a serious look in Ecuador, most of the good farmland, the prime farmland, was already owned by Ecuadorians. That meant that there were never going to be any extensive concessions and grants of tax exemptions, all those sorts of things.

In the late 1940s, Ecuadors president, Galo Plaza, invested heavily in infrastructure and pest control that benefited the local banana growers.

SOUTHGATE: Here was this important source of supply that came online in a very big way, very quickly, after World War II, and it was a source of supply that was impossible for United Fruit to control. We learned from Ecuador something thats more typical about the role of local entrepreneurs in agricultural trade and development, the contributions that they can make.

Today, no one company comes close to dominating the international banana trade like United Fruit once did. The three biggest banana companies Dole, Del Monte, and Chiquita, Uniteds successor they share around 40 percent of the global export market. So theres more competition than there used to be which, economists would tell you, helps keep prices down. But theres an even more powerful explanation for why bananas are so cheap: standardization.

BILES: So the advantage of having the Cavendish is that it is really a monoculture, that you can actually grow it consistently.

Andrew Biles again, formerly of Chiquita.

BILES: You know that its going to take eight to nine months to come to fruition. And you know how that banana is going to function when its transported in a refrigerated cargo. You know how its going to perform in the ripening rooms in the country of destination, and you know how its going to perform and hold up on the retail shelf.

And its not just that nearly every banana grown for export is a Cavendish; its that every Cavendish banana is genetically the same as the next Cavendish. From a business perspective, thats ideal the ultimate in quality control. From an agricultural perspective, however:

BILES: Theres no diversity, so theres that, each plant is the same, each plant has the same resistance to disease as it spreads.

As youll recall, the Gros Michel banana was wiped out years ago by Panama Disease or, technically, Fusarium wilt. Its caused by a fungus that infects the plants roots and eventually kills the whole plant and leaves the soil unfit for future banana growth. The strain of Panama Disease that killed off the Gros Michel was known as TR1, or Tropical Race 1. Now theres a strain called TR4 thats attacking the Cavendish.

BILES: So, indeed, its fallen victim to almost the same disease as the Gros Michel. So what we see is TR4 start apparently in Indonesia, it spread in the Philippines, its devastated crops there as farmers move to the Mekong Delta or to Myanmar.

And the banana industry is very worried that TR4 will make it to Latin America.

BILES: If you look at the map, its a disease that seems to be spreading west.

* * *

It may sound like a made-up name, but Humpty Doo is a real place a small town in the Northern Territory of Australia. Its hot, wet, and fairly rugged.

James DALE: When we first went onto the plantation, the plantation manager said, You got to be a bit careful working around here. A girl was taken by a crocodile a couple of months ago. We also have a real problem with wild buffalo. But weve managed to work there without losing any of our staff.

Thats James Dale. Hes a plant scientist.

DALE: I work at Queensland University of Technology, in Brisbane, in Australia. I work on bananas.

Dales first job out of grad school was working on a banana disease.

DALE: And it was a disease called bunchy top, and it had a long history in Australia.

Bunchy top was caused by a virus that scientists couldnt find a way to control.

DALE: When the concept of genetic modification came along, and that was sort of, the late 1980’s, we said, Wow, this is going to be absolutely perfect for bananas. And the reason for that is that the bananas that we eat are primarily sterile.

Wild banana seeds are very hard, and so the Cavendish, like other banana varieties that people eat, has essentially been bred into a seedless, sterile condition.

DALE: So crops that don’t have any seeds are extremely difficult to breed conventionally. So the idea of being able to genetically modify them that is, to add additional genes to Cavendish, for instance, which we are interested in, seemed really, really attractive.

Attractive and, for the global banana trade, important. Because the Cavendish, like the Gros Michel before it, has rare attributes.

DALE: Theyre robust. They travel long distances. And there really isnt anything else on the horizon that could now go and replace Cavendish. There is nothing that you could pull out and say, This is going to do what Cavendish did after the last outbreak.

The new strain of Panama Disease emerged in the 1990s.

DALE: And around about 2000, we decided that this disease, Tropical Race 4, was going to be a huge problem, so we set out to look for genes that provide resistance to the disease.

As part of this research, Dale had a former Ph.D. student out collecting wild bananas.

DALE: And this scientist was in Malaysia, and happened to see this patch of bananas, which were growing where everything else had died from Tropical Race 4. So she and her colleagues collected seeds of those bananas and they sent them back to Australia.

James Dale and his team began studying these bananas.

DALE: We said, Okay, lets go and look in the DNA of those resistant ones, and see if we can find the gene that would provide resistance. And we came up with a number of candidates, genes that seemed to be working in the resistant seedlings, but not in the susceptible seedlings. And one of those looked really promising to us. So we took that gene. And by a process known as agrobacterium-mediated transformation, we put it into another terminology embryogenic cells, or embryogenic cell suspensions. And these are we make these cells from Cavendish. They have the ability to regenerate an entire plant from a single cell.

And this leads us back to Humpty Doo, Australia, which had been a fertile site for banana production.

DALE: But because of the Tropical Race 4, its been wiped out.

Which made Humpty Doo the perfect place to hold the worlds first experiment to see whether genetically modified Cavendish bananas could survive Panama Disease. Remember: once Panama Disease has struck, the soil remains contaminated with the fungus.

DALE: So we put this gene into these single cells and grew bananas back.

In 2012, they began field trials that would last a few years, planting both genetically modified and non-G.M. bananas in the Humpty Doo soil. Whatd they find?

DALE: So what we found is and we found a number of things we found that the non-G.M. bananas were between 100 percent and around two-thirds of them were either dead or infected after three years. So the disease was having a pretty big impact.

Okay, thats important to know that Panama Disease was still in the soil. Which meant if a genetically-modified plant survived, it was surviving Panama Disease. So how did the genetically modified plants do? Dale and his team planted six different lines of G.M. Cavendish plants.

DALE: One of those, line three, the gene we put in was R.G.A. 2, so R.G.A. 2, line 3 appeared to be completely immune. At the end of three years, none of the plants were infected at all. So essentially, what weve done is, weve taken a gene from a wild banana that is resistant to Tropical Race 4, and weve taken that one banana gene and weve gone and put it into Cavendish. And by doing that, we have generated resistance to the disease.

This was amazing banana news. R.G.A. 2, line 3 was a clear winner. Some of the other genetic modifications did well too.

DALE: Three of the other lines had relatively high levels of resistance, where there was 20 percent or less plants either infected or dead. Which was, to us, an incredible outcome. Rarely do you get that sort of percentage success in the sorts of things we do. So we were pretty excited about that.

And there was something else to be excited about.

DALE: The other really important thing we found was that the gene that we put in, this R.G.A. 2 gene, not only occurs in these wild bananas, but it also occurs in Cavendish. It just doesn’t work very well. That’s actually really, really important, because there’s a new technology known as gene editing. It’s different to gene modifications. Gene editing is where you can go into the D.N.A. and just tweak genes that are already there. So it’s very, very close to, sort of, natural processes. So thats where we’re now starting to figure out how we can tweak the gene in Cavendish to make them resistant without actually adding any new genes at all.

This type of gene editing is made possible by something known as CRISPR which, as Im sure you know, stands for clustered regularly interspaced short palindromic repeats. We spoke with one of CRISPRs inventors, the biochemist Jennifer Doudna, back in 2017, for an episode called Evolution, Accelerated.

Jennifer DOUDNA: At its core, the CRISPR gene-editing technology is now giving human beings the opportunity to change the course of evolution. And human beings have been affecting evolution for a long time. But now theres a technology that allows very specific changes to be made to DNA that gives us a new level of control.

DALE: CRISPR is terrific, so yes, we are using CRISPR at the moment.

So this would seem to be super-amazing banana news. There are potentially two ways to save the Cavendish from Panama Disease: by using CRISPR to tweak its genetic code or by introducing new, resistant genes from other bananas. Either way, the banana industry must be thrilled by the solutions that James Dale is proposing. Right? We asked Andrew Biles, former C.E.O. of bananas (and pineapples) at Chiquita:

BILES: James Dale, he is working on more of a GM approach, okay. That, of course, is not so acceptable societally. So some people will say, yes, I dont mind genetic modification. Others will say they do.

Indeed, a sizeable fraction of consumers, in the U.S. and especially in Europe, consider genetically modified crops to be risky, despite assurances to the contrary from scientists like James Dale.

DALE: And thats where weve failed. We really havent got the message across. This is one of the most incredibly highly-regulated technologies in the world. So the sorts of things that we go through to demonstrate safety is amazing.

The objection to G.M.O. crops is also curious in light of the fact that traditional plant breeding without which many, many fewer of us would be alive is itself a form of genetic modification. Jennifer Doudna again.

DOUDNA: Its important for people to appreciate that, first of all, that humans have been modifying plants for a long time genetically

DUBNER: Thank goodness.

DOUDNA: for literally thousands of years. Exactly thank goodness. And you realize, Wow, Im glad theres plant breeding. But the way that thats been done traditionally is to use chemicals or even radiation to introduce genetic changes into seeds, and then plant breeders will select for plants that have traits that they want. The opportunity here with gene-editing in plants is to be able to make changes precisely. Not to drag along traits that you dont want.

DALE: Really, the difference between what were doing, and conventional breeding is that they moved thousands of genes at one time, from one banana to another. Were just moving one or two.

Its worth noting nearly every technological advance is greeted with skepticism by at least a small segment of any population. And such skepticism may be magnified when it comes to something youre going to put in your mouth.

SOUTHGATE: A great example for me is pasteurized milk.

The economist Douglas Southgate again.

SOUTHGATE: In the United States and other countries, lots of kids used to die from drinking raw milk raw milk that had been exposed to flies or whatever. Pasteurization came along, that entire source of mortality went away, and yet there were people who swore up and down that they were never going to consume pasteurized milk. They claimed it didnt have the same nutritional properties, didnt taste the same, it was in one way or another undesirable.

There are still some raw-milk advocates; but most people, Southgate says:

SOUTHGATE: Most people ended up drinking pasteurized milk and I just have a hunch that if we produce a substitute for the Cavendish, or if we improve the Cavendish by moving in a gene from some other banana people will have a tough time telling the difference, and the product will win acceptance.

But big companies like Chiquita or, to be fair, most big companies, in any industry, period theyre pretty risk-averse. Honestly, they cant afford to not be. But theres another reason James Dale isnt surprised at Chiquitas resistance to his banana proposals.

DALE: The big banana companies, unfortunately, have had a history of not being terribly innovative. They are much more reactive. They dont run big research and development divisions. Yeah, we talk to them, they take more of a lets just see whats going to happen reaction.

So how does Chiquita see a path forward for the endangered Cavendish banana?

BILES: We believe the path towards this is actually through improving breeding techniques. We feel that the logical first place for us as a leading branded premium quality banana to go is to try and go down, in a very sophisticated, in a very organized, in a very thorough way, the plant-breeding route.

And James Dales response to that?

DALE: There are some exceptionally good breeding programs going on in the world, but you dont end up with Cavendish. You end up with something different to Cavendish. If we want to replace Cavendish with something probably very, very different, well probably get that from the conventional breeding programs.

So if you want to have the Cavendish in the future?

DALE: Hey, if you want to have Cavendish in twenty years time, theyre probably going to be genetically modified, or theyre probably gonna be gene-edited.

That makes it sound as if the Cavendish as we know it may well be headed for extinction, depending on the banana companies decisions and the publics response to genetic modification. So for the billions of people who eat trillions of bananas, a great many of them Cavendish, how panicked should they be?

BILES: We in the industry would say theres no need to panic. The world is not going to run out of bananas.

But what about the Cavendish banana?

BILES: Okay, what were going to have to probably confront is actually having more varieties of bananas available in the future. As we protect the farming of bananas, were going to have to get used to how we can actually grow and commercialize and do the logistics for different bananas.

The prospect of exporting several different kinds of bananas would be an adjustment for the industry, of course. For consumers, less standardization might mean higher prices but the prospect of finding several varieties of banana in a grocery store would hardly be unsettling, considering how many varieties of apples and grapes and citrus fruits are available. But in a world with so many options in most realms, there has been something nice, something unifying, about all of us eating the same banana. No matter how you eat it straight out of the peel; cut up on cereal, if youre feeling a little bit more ambitious. As youll recall, the banana historian Virginia Scott Jenkins told us about researching earlier banana recipes.

JENKINS: I found some very interesting menus, for very fancy occasions, that might have bananas on the menu.

Jenkins has a rather interesting banana recipe of her own, passed on from her mother.

JENKINS: You take a peeled banana, you put mustard on it. You wrap it in a slice of ham, and then you bake it in a cream sauce. And Ive tried it on two husbands and neither of them could eat it. They thought that was just nasty.

* * *

Freakonomics Radio is produced by Stitcher and Dubner Productions. This episode was produced by Greg Rosalsky and Matt Hickey. Our staff also includes Alison Craiglow, Greg Rippin, Harry Huggins, Zack Lapinski, and Corinne Wallace. Our theme song is Mr. Fortune, by the Hitchhikers; all the other music was composed by Luis Guerra.You can subscribe to Freakonomics Radio on Apple Podcasts, Stitcher, or wherever you get your podcasts.

Heres where you can learn more about the people and ideas in this episode:


  • Virginia Scott Jenkins, cultural historian and author.
  • Douglas Southgate, emeritus professor in the Department of Agricultural, Environmental, and Development Economics at Ohio State University.
  • Andrew Biles, former C.E.O. of bananas and pineapples at Chiquita.
  • James Dale, professor of Agricultural Biotechnology at Queensland University of Technology.
  • Jennifer Doudna, professor in the Department of Chemistry and the Department of Molecular and Cell Biology at the University of California, Berkeley.


The post The Most Interesting Fruit in the World (Ep. 375) appeared first on Freakonomics.

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Thu, 11 Apr 2019 03:00:19 +0000
The Most Interesting Fruit in the World (Ep. 375)

Spotify has been a savior for record labels like Universal Music Group, which has tripled its value since 2013. Meanwhile, just 28 percent of artists earned money from streaming in 2018.(Photo: Hayward/Getty)

Daniel Ek, a 23-year-old Swede who grew up on pirated music, made the record labels an offer they couldnt refuse: a legal platform to stream all the worlds music. Spotify reversed the labels fortunes, made Ek rich, and thrilled millions of music fans. But what has it done for all those musicians stuck in the long tail?

Listen and subscribe to our podcast at Apple Podcasts, Stitcher, or elsewhere. Below is a transcript of the episode, edited for readability.

For more information on the people and ideas in the episode, see the links at the bottom of this post.

* * *

Over the past year or two, weve done a couple special series of episodes. One was called How to Be Creative; the other was The Secret Life of a C.E.O. You wouldnt think those two themes would intersect all that often. But today, they do in a rare conversation with this man:

Daniel EK: My name is Daniel Ek and Im the C.E.O. and founder of Spotify.

How does Daniel Ek define Spotifys mission?

EK: So the way I think about our mission is to inspire human creativity by enabling a million artists to be able to live off of their art and a billion people to be able to enjoy and be inspired by it.

Spotify, if you dont know, is a Swedish music-streaming service with roughly 100 million paid subscribers. Another 100-million-plus listen free on an ad-supported model. But its the subscribers that drive 90 percent of the companys revenue. Ek co-founded the company in 2006, at age 23. It went public in 2018 and its market cap is now around $25 billion. For a company that doesnt really make anything other than making the connection between a beloved product and people who want to consume that product. The Spotify story is a singular story about the sudden transformation of an old, hidebound industry; its also a story about digital piracy, bandwidth, and of course about creativity; oh, also: its about the future of podcasting. In person, Daniel Ek is mild-mannered and unexcitable; he doesnt soundlike an anarchist. But dont be fooled.

EK: I think we are in the process of creating a more fair and equal music industry than its ever been in the past.

* * *

Depending on your personal perspective, Spotify is either an idealized digital jukebox or, as Radioheads Thom Yorke once put it, the last desperate fart of a dying corpse. Yorke wasnt the only musician to hate on Spotify, especially in its earlier years. The Beatles and Pink Floyd famously kept their music off Spotify, as did some younger musicians:

ABC News anchor: Superstar Taylor Swiftabruptly pulling all her albums from the streaming service Spotify, just days after the release of her hot new album 1989.

Today, Taylor Swift, Pink Floyd, the Beatles, and Radiohead can all be heard on Spotify. The barriers that might have made Spotify seem impossible have mostly been leveled. Primarily by one person: Daniel Ek. He grew up in a working-class neighborhood of Stockholm. These days, he spends about one week a month in New York, but he still lives in Stockholm.

EK: Yeah, and I have two very young kids, so one has just turned four and one is about to turn six.

DUBNER: Youre in the middle of it, arent you?

EK: Im definitely in the middle of it.

One constant throughout Eks life has been music.

EK: My grandfather was an opera singer and my grandmother, she was an actress but also a jazz pianist. So, in my family learning music was almost an essential. It was probably more important than you going to college or university at that level. And in Sweden, we have public music education, so it almost costs nothing to get music education in Sweden and my cousin told me he was way older than me and was like, You should learn how to play the guitar because thats how you get girls.

And I was four or five at the time and definitely didnt realize why that was a big thing. But I really thought he was really cool. So I was like, Okay, well, he must know something, so I learned how to play the guitar. And then about the same time, I got my first computer. And that was a seminal inflection point because I had these two parallel interests that were both formed at a very, very young age.

For a time, Ek thought he might become a full-time musician. But the other interest began to win out.

EK: I think it was 1996 I got broadband Internet. It was like 10 megabits and when you think about it today because it took until maybe two, three years ago until the average person in the U.S. even had that. But I had it in 1997 and

DUBNER: And that was just a Swedish thing.

EK: That was just a Swedish thing, because the Swedes said, Look, we believe everyone should have broadband. Thats going to be a big thing and by the way, well subsidize your P.C. too, and it will cost $500 and you can get state-of-the-art P.C. So I had this virtually new computer which was subsidized by the government. I had this broadband that was subsidized by the government. And I went on the internet obviously all the time. The problem was there wasnt really a lot to do on the internet except reading stuff. So I read a lot of stuff, but it wasnt like the internet had movies for streaming or music or any of that stuff. And on came Napster. And it was a pure epiphany for me because you can search for any kind of music in the world. And within 10, 15 minutes you could have the entire album and you can listen to it, which was amazing.

Napster, which launched in 1999, became the most prominent peer-to-peer file-sharing service. And by peer-to-peer file-sharing service, I mean a piece of software that let a user like Daniel Ek download music files directly from the hard drives of other Napster users all over the world. Which meant that if one person bought a C.D. and copied it onto their hard drive, and shared it on Napster, all of a sudden, an infinite number of people could own it. For free.

One problem: this is an infringement of copyright, and totally illegal. At least in most places. Sweden did not forbid the downloading of pirated content until 2005; the country became an international hub for illegal downloads and even gave rise to a political party, the Pirate Party,that won seats in the European Parliament. I asked Ek whether he had thought about the legality of music piracy.

EK: Yeah, I thought about it. But I was 14. It wasnt like it was a big thing. And since it was so easy to access and the alternative was for me to go out and buy a record with money I didnt have, it was like the only option. So it was this weird thing where you start off with something and all of a sudden, maybe I wanted to listen to Metallicaand all of a sudden realized that this person also hadKing Crimson. Which was like, Oh, holy shit, I didnt know that Metallica was inspired by those guys. And Led Zeppelinand Beatles and all the seminal ones that all of a sudden you start listening to. Or prog music or Jimi Hendrixs entire discography.

It brought me this weird sense of very broad music education and quite eclectic taste, which in turn got me even further into music. I mean, I dont think I would have been that interested in music if it werent for piracy, to be honest, because I come from a working-class family. We couldnt afford all the records that I wanted.

Napster became very large very fast. You might have thought the music industry would see this growth as a natural expression of demand for their product, and try to find a way to exploit that demand. But they didnt see it that way. They saw piracy as nothing but theft. And as the music industry began to go the way of many fading 20th-century industries, they blamed their decline on piracy.

A pair of economists wrote a research paper at the time which found that illegal downloads in fact did almost nothing to affect music sales. They wrote: Our estimates are inconsistent with claims that file-sharing is the primary reason for the decline in music sales. The idea here was that the kind of people who illegally downloaded music werent the kind of people who were going to pay $15 for a C.D. anyway. Daniel Ek certainly wasnt going to pay $15 for one C.D. What he found ludicrous was that the only choice the music industry gave you was $15 for one C.D. versus $0 for all the music in the world.

EK: My view is that the music industry has always been excluding the vast majority of its potential. And what do I mean by that? Well, at the peak of the recorded-music industry, 2001, it was about 200 million people who were participating in the economy, who bought records. So was it 200 million people who were listening to music? No, of course not. That number was in the billions. So, what the music industry did fairly well was they priced a product at a premium for an audience that was willing to pay for it.

But it only captured a very, very small portion of the revenues. What was obvious to me as I started using Napster back in the day, it was just, this is a way better product than going to a record store, there ought to be a way where you can give consumers what they want and at the same time make it work for artists.

DUBNER: As you got to know the record labels over time, years after Napster started, do you think they regretted not having partnered with Napster earlier?

EK: I definitely think so. I mean, in hindsight they probably realized that it was the wrong thing, but they thought by shutting it down that theyve contained the problem and didnt realize that it would just create seven new ones.

The music industry did get Napster shut down, but it had to keep playing whack-a-mole with a bunch of new pirated-music services.

EK: If you think about piracy for music, what it really forced in this first incarnation was the unbundling of the album.

Unbundling the album, that is, into single songs.

EK: So Applethen created a business of that by selling songs for 99 cents.

Apple, by way of iTunes, introduced the world to legal music downloading. It had taken Apple a while, but they finally succeeded in negotiating the rights with record labels. Daniel Ek, meanwhile, was having a lot of success himself.

EK: I started web-design companies, web-hosting companies, and a bunch of different companies.

He actually started doing this work when he was 14. By the time he was 18, he had a couple dozen programmers working for him. He enrolled at the Royal Institute for Technology but only lasted a couple months. Starting and selling internet companies was more fun. Ek was a millionaire by the time he was 23, and he started living like one: a fancy apartment, nightclubs, a red Ferrari.

All this left him flat, and depressed. As hed later tell Forbes magazine: I was deeply uncertain of who I was and who I wanted to be. I really thought I wanted to be a much cooler guy than I was. He moved into a cabin in the woods, back near his family; he played guitar, meditated, and over time thought up the idea for Spotify.

It was very simple, really: an essentially infinite library of all the music in the world, available instantaneously, to anyone with an internet connection. How hard could that be? Ek and his co-founder, Martin Lorentzon, had two fundamental problems to solve: building the technology to allow for the instantaneous streaming of music; and persuading the rights-holders of all the music in the world to go into business with a brand-new company from Sweden a country famous for its music piracy and headed by a man whod grown up on pirated music.

EK: Theres many different pirates, we would put it. Theres the pirates who just religiously feel like everything should be free. We were never that. Sean Parkerdefinitely was never that either.

Sean Parker as in the co-founder of Napster; Parker later provided some venture capital to Spotify.

EK: Theres the other group who just looks at it like, this is the kind of consumer experience that makes sense and thats how the world will look at it.

DUBNER: So then how professional of a pirate were you? What was the highest level of professionalism of piracy you ever accomplished? It was uTorrent, was that the name of the company?

EK: So actually this is probably an unknown part of the story. I wasnt very much at all a professional pirate. At the time as I was thinking about starting Spotify, my co-founder, whos not very technical, said to me, Hey, theres my friend whos asking me about this programmer and he needs some advice. And I was kind of dismissive about the whole idea and then he told me the name of this programmer and this guy was the founder of uTorrent.

This guy was Ludvig Strigeus, and uTorrent was a piece of file-sharing software that was particularly useful for digital piracy.

EK: And hes a legendary engineer and I knew about him from engineering circles as being one of those persons who wins a lot of competitions for being great engineers. And I was like, I have to meet this person. And he had started this thing, just a fun side project, and it was uTorrent and it was growing very massively. We were actually trying to recruit him to come to Spotify. And he was like, Well, I got this thing, uTorrent, and I dont really know what to do with it. So we persuaded him to sell uTorrent to us instead. And the whole idea from the beginning was actually to fold it because we didnt really care about it.

DUBNER: Because by then youre saying you already had a vision of how to make this the legit model work?

EK: Yeah.

Spotify did install Strigeus as a top engineer at Spotify; and they didnt shut down uTorrent they sold it, to BitTorrent, the huge peer-to-peer protocol. I asked Daniel Ek which early task had been harder: building out Spotifys technology or persuading the record companies to let him stream their music.

EK: Well, its hard at different stages. So first, you need to have a really good idea of what it is that youre trying to solve. And in our case it wasnt necessarily that the technology had a worth in and on itself. It was more around, how do we solve a real problem? And I think the problem that we were trying to solve was it needs to feel like you have all your music on your hard drive. So, if you think about that, that means instantaneous. So we probably have to solve that.

It probably means also all the worlds music. Okay, well you have to solve all the rights issues and all of those different things all encompassed in this one thing. So, it was very clear to me that if we could deliver something that felt like you had all the worlds music on your hard drive, it would likely be way better than piracy, which was the dominant force of music consumption at the time.

From the outset, Spotify partnered with the record companies, first in Europe and eventually the U.S. What enticed the labels to participate? Actually, they would have been fools not to. Remember, the music industry was in steep decline thanks to changes in technology, economics, and consumer preferences. As Ek noted earlier, the industrys model had always been inefficient: charging relatively high prices to capture only the top layer of the listening market.Most people got most of their music on the radio, which was free.

Now, before you start feeling too sorry for the record labels, let me say this: in the history of the creative arts, and in the modern history of business generally, it would be hard to find an industry that was sleazier, more exploitative, and more deserving of its comeuppance than the music industry. Through means legal and illegal, from sham contracts and bribes to strong-arming and collusion, the industry had for decades stayed fat by making relatively skinny payments to the people who actually made the music. Their royalty statements were masterpieces of creative accounting. Yes, they did provide venture capital to thousands of musicians with no money, but on the rare occasion when one of those musicians recorded a smash hit, the label made sure to capture most of the profits.

What about the industrys role in discovering new talent? Thats a bit of a myth like saying that publishers discover great authors or NFL coaches discover great quarterbacks. They mainly cherry-pick the talented people whove already worked their way up, and then squeeze out as much juice as possible for their own use. Many industries exploit their labor force, but few had done so with as much vigor as the music industry.

Now that they were starting to go under, Spotify was offering a lifeboat and a fairly luxurious one: 70 percent of streaming revenues and an equity stake in the company. The big record labels Sony, Universal, and Warner were reportedly each given between 4 and 6 percent of Spotifys shares, with a consortium of independent labels getting another 1 percent. When Spotify went public, in 2018, these stakes would be worth billions. The labels would also get to keep drawing down 70 percent of Spotifys revenues, and distributing it to their artists according to their own royalty formulas.

EK: Correct.

DUBNER: So that 70 percent flows then to the rights-holders , which are primarily still the three big music labels.

EK: Yep.

DUBNER: But in terms of the money flowing to the actual creators of the content, thats complicated and problematic. So can you talk about your views on that and how actually involved you are or can be or want to be?

EK: Yeah, sure. Music copyrights generally is probably one of the more complicated areas of both law, just because of how copyright law is treated by society, and then just how it actually works and how it flows down. Its pretty complicated for a lay person to understand. But the best way to start is just taking two steps back.

So, the birth of the music industry, and if you think about the role that everyone had, a record company was both it used to cost a lot of money to make music. A record company could help you by paying for the studio, the studio engineers, all the people to help you record your music. So, that was a pretty big value-add.

The next thing that ended up being a big problem was getting promoted in the U.S. onto thousands of different radio stations. And internationally it was multiplied by 10 times. It was a pretty big thing. And then distribution ended up being very expensive. So why we have major record companies it ended up being easier for them to aggregate around distribution. And thats how they were formed. Thats how they grew to power.

If you look at it right now, some of those things have obviously shifted. So the recording of music ends up becoming fairly cheap today in most instances because anyone can record if they have a laptop and a mic. Distribution also ends up becoming fairly cheap because you can just put your music on Spotify or Apple Musicor any other service virtually free and get distributed.

Now, the flip side of that is the problem of then getting heard ends up becoming harder than ever before.

DUBNER: Because the supply is so much greater.

EK: Yeah. The supply is infinite, so in order to stand out you have to do quite a lot more. And where we have been as an industry just a few years ago was that you couldnt rely on one income stream alone. So even if you felt, Okay, this is digital distribution or streaming and I kind of get that, the truth of the matter is radio certainly here in the U.S. is still a massive, massive force. So you needed to do a lot of radio both for promotion but just generally distribution and even how you did royalty accounting and all those different things was a massive thing. And then physical still matters greatly. Certainly in the middle of the country. So the value-add by record companies is fairly great and is very important certainly as youre thinking about how to get this out.

Now the roles going forward is changing quite dramatically. Youre finding that there are a lot more younger record companies coming out that are formed by maybe being specialists in a certain genre. Theyre now finding equal opportunities to get their music heard. So theyre being distributed via indie labels or they may even go and distribute their record companies through one of the major record companies in order to get the support that theyre getting.

So, the industry is really changing. And were obviously a huge part not so much in the change but just being a participant in that dialogue about where its going, what is the role of a manager, whats the role of a label, whats the role of an agent, whats the role of a publisher. Because all of those roles are now moving along as the industry is becoming more and more digital.

DUBNER: Right. But from what I gather Spotify has little leverage or maybe even interest in, once you turn over the royalty share, in how they distribute it to their artists, correct? You have nothing to do with that, I assume.

EK: We have nothing to do with that. What we are trying to do, however, because this is such a dramatic shift in an economic model for artists, one of the big things was just how do we educate people about this. Because really even the iTunes model was fairly simple. Because Im selling my goods and Im getting X for it. We can argue what X should be, but its really that.

Here with streaming its like Im getting a revenue share of something, and its streaming, and it looks like its a very small number per stream. But what is a million streams? Is a million streams a lot? Is it a little? Is it how should I think about it? That ended up being a very big shift.

DUBNER: Are you saying that independent artists are over time via Spotify gaining leverage in the revenue ecosystem or not really? Because the common complaint is this: Spotify is great for customers.

EK: Right.

DUBNER: Spotify has turned out to be a life-saver for labels. Spotify has been great for Spotify, and for you. And its been great for some musicians. But then there are others who feel that theyre worse off than they would have been. Now, every case is a little bit different. But to those who feel like, Great, Im glad all music is available to everybody all the time and Im glad everybody else is making out well what do you say to those artists, or maybe what do you say to someone whos starting in music now? Can it be a sustainable future for them?

EK: I think we are in the process of creating a more fair and equal music industry than its ever been in the past. Ill take an example, back in 2000, 2001, at the very, very peak of the music industry, peak of C.D., all of those different things. Our estimate is that there were about 20- to maybe 30,000 artists that could live on being recorded music artists. Now, they could be touring, they could be doing other things, and the number could be far greater than that. But there were only 20- or 30,000 that could sustain themselves being that.

Why? Well, because, again the distribution cost so much, which ended up being that theres very few artists that could even get distributed to begin with. And because the costs were fairly high for a person buying the music, you ended up going with what you knew and wouldnt take that much risk on unknown artists.

So, in the world with streaming, whats really interesting is the alternative cost for you to listen to something new is virtually zero. Its just your time. And because of that, you do listen to a lot more music than you did before and you listen to a bigger diversity of artists than you did before which in turn then grows the music industry.

DUBNER: You were saying there were 20, to 30,000 artists that could be supported. Do you know what that number is now?

EK: I dont know what the number is now but its far greater. Even on Spotify itself, its far greater than that.

The economist Alan Krueger taught for years at Princeton and worked in both the Clinton and Obama White Houses. He was also fascinated by the economics of the music industry. Krueger once gave a speech at the Rock and Roll Hall of Fame comparing the music industry to the modern economy at large. In both cases, he argued, most of the earnings were going to fewer and fewer people at the top of the pyramid. Its what some people call a tournament model, where the winners get most, if not all, of the profits.

Krueger died recently at age 58 by suicide. He left behind a book, to be published soon, called Rockonomics. In it, he writes that there are roughly 200,000 professional musicians in the U.S. today, accounting for 0.13 percent of all U.S. workers. That percent has stayed about the same since 1970.And whats the median annual income for these musicians? $20,000.

The argument Daniel Ek is making sounds good in theory that digital distribution should make it easier for lesser-known artists to find listeners and get paid. Remember how Ek defines the Spotify mission:

EK: To inspire human creativity by enabling a million artists to be able to live off of their art.

This was one of the great promises of the digital era that you wouldnt have to be a superstar to make a living. In 2006, the journalist Chris Anderson published an influential book called The Long Tail: Why the Future of Business Is Selling Less of More. Daniel Ek, in a 2010 interview, called The Long Tail his favorite book.

But Alan Kruegers findings dont support the long-tail promise. Social media and algorithm-driven recommendations including Spotifys own playlists seem to magnify the bandwagon effect, whereby popular songs become even more popular by virtue of their popularity. In 2018, Spotifys most-streamed artist was Drake, with 8.2 billion streams. Assuming a typical streaming royalty rate of 0.4 cents per play, thats nearly $33 million going to Drakes camp. But the pyramid is sharp, and things fall off really fast once you go beneath the top.Alan Krueger cites an industry survey which found that just 28 percent of artists earned money from streaming in 2018, with the median amount just $100.

So if you think about the streaming-music revolution as a sort of tournament, lets think about how the various constituencies are making out. Spotify and Daniel Ek are doing very well; so are the companys original funders, who got a huge return on their investment. The record labels have also been big winners: not only did Spotify reinvigorate their industry but it seems to have substantially improved their overall valuations. The Universal Music Group, for instance, which is currently for sale, has recently been valued at more than $30 billion; in 2013, its valuation was just $8.4 billion. Other winners in the Spotify tournament are customers, who get much more music than they used to get for much less money; and the most popular musicians are also winning big.

One constituency thats not obviously sharing in the winnings: the long-tail artists, of which there are many.

DUBNER: So if you werent you, and you were looking at this revolution from the outside, what would you say about the fact that a company like Spotify, which doesnt produce content well, its starting to, more but is essentially a friction-remover and a distributor, is worth more than the entire music industry was about the time of its creation?

EK: Well, I mean I dont want to Im actually very little focused on what a company is worth or isnt, or if thats fair. Theres something called a Wall Street which is really focused on that instead. I dont really focus on that. We at Spotify are interested in is how do we get a music industry which actually participates in all of the income streams?

* * *

Daniel Ek was a teenage entrepreneur; a millionaire in his early twenties; and now, at 36, a billionaire, having built Spotify into a streaming juggernaut that is now worth more than the entire music industry was at the time of Spotifys founding. Spotify is in the news pretty much constantly these days: launching their service in India, filing an antitrust lawsuit in Europe against Apple, claiming that Apples App Store is unfairly favoring its own Apple Music over Spotify. For Ek, the biggest challenge at the moment would seem to be figuring out a way to derive more value more revenue from the massive, sprawling ecosystem of recorded music, an ecosystem whose business evolution has been very slow.

EK: So if you look at say the video industry I say video and I really encompass the entire TV industry, the movie industry, all in video. What I find fascinating is it used to be a conversation where it started off only as paid. Then it added advertising as a component. And then there was a bunch of firms that were only focused on the advertising part of it and then a bunch of firms that were only focused on the subscription income. So, most notable, you had CBSon one end, on the advertising end of the spectrum. You had HBOon the other end of this spectrum, asking for subscription income. And then if you look at it today, the truth of the matter is CBS is about 50/50. So it focuses as much on subscription income as it does on advertising. And HBO still is paid-only. But as an industry, its moving that both of these revenue models are equally important.

And thats my point with the music industry too. My point its like, what would happen to the music industry if you all of a sudden combined the the power of advertising as a revenue model, the power of subscription as a revenue model, the power of a la carte on top of that as a revenue model. The three of them on a base of the three billion people around the world that are interested in music easily, just by virtue of looking at how much time people spend listening to music, ought to be at least multiples greater than what the current music industry is and probably larger than the music industrys ever been.

DUBNER: And you just added 1.3 billion or so in India, yes, potentially?

EK: The Indian music market, whats fascinating to me, is 90 percent of that market is about Bollywood films. And they are throwing off music and thats whats selling in India.

DUBNER: Is it being well-monetized still? I mean people buy it

EK: Its not well-monetized. But the music industry is essentially a byproduct to the film industry, which for me tells a very interesting story, that theres so much development left to do. What would happen if the ecosystem there was healthy? Then people wouldnt think about making music just for movies.

DUBNER: So the India Spotify story could turn out to be exactly the opposite in a way of the American Spotify story, where some people feel here small artists are getting the long tail is so skinny that you cant make a living. And theoretically it may disincentive some people from creating. Maybe theres incentives to join, even the middle of the long tail there would be a step up, yeah?

EK: Yeah. Well, I mean its virtually non-existent. So its in a much earlier development stage than the U.S. music economy.

DUBNER: Let me ask you about consumer surplus, which is something economists love to talk about those rare cases where you get something for much less than youd be willing to pay. So Spotify is, relatively, super cheap, $10 a month for all the music I want. And that $10 would buy two-thirds of one downloaded album. So if you like music enough to buy two-thirds of one album per month, then to get all the music in the world essentially for that same price is ridiculously cheap.

So, Im curious to know two things. What do you know about willingness to pay more? And what do you know, if anything, about the disposable income thats now been captured by consumers by not having to spend more than $10 to consume the universe of music where that disposable income goes, Im curious to have any data on that.

EK: Well, I mean, obviously we agree. We think $10 a month is a very, very cheap and an amazing proposition. But the amount of people who wake up in the morning thinking, Hey, I want to pay $10 a month for music, isnt as great as most people would believe. And we believe that is because not only did piracy exist in a big way just a few years ago, but there are all of these other sources where you can access music very cheaply. Mostly free.

You can go on radio and listen to it, but you can also go on YouTube and you can find the entire archive of music, including all the bootlegs and videos and you can listen to that entirely for free. Thats what were competing against. So in order to do that, you can imagine then its a free product versus one thats $10 a month. Thats a pretty big stretch, certainly, since all of these other things may have other things like convenience in the case of radio, works in your car, works in all those different things. And then, in the case of YouTube, its just, its everything. Its even greater than what Spotifys library is.

So thats where were, from a competitive set, wrestling with. Now obviously as cars get more and more connected, I do think streaming service is a way better user proposition.

DUBNER: Although I did wonder with autonomous vehicles theoretically coming maybe relatively soon.

EK: Right.

DUBNER: It does strike me that listening to music in a car is a perfect complementary activity. Because you need to drive, you need to keep your eyes on the road, but your ears are free. I do wonder with autonomous vehicles whether it may actually be harmful to streaming music because now my eyes are free to something that might be more interactive.

EK: Right. I mean, you may be right. I dont know. I think that whats really interesting, however, is that countercultural force right now from people looking into their phones is all of these well-being things, both Googleand Applereleased screen time, which is supposed to restrict your screen time. And we have the Alexain your home, which is another device which youre not supposed to look at, which are all great countercultural reactions to this, watching a screen, which we wouldnt probably have imagined just a few years ago.

DUBNER: Do you have those kind of aspirations for Spotify to get into, health and wellness and hand-holding of various sorts?

EK: Not directly. To the extent that we do something like that, were already very big in terms of meditational music, wellness music, sleep, pink noise, white noise, everything on the spectrum. And now with podcasts obviously on the service too, theres a lot of people who are focused on those things, which Im very excited about.

Spotify has been streaming podcasts for years. But it made news recently by spending a few hundred million dollars to acquire two podcast-production companies, Gimlet and Parcast, and a firm called Anchor thats primarily a podcast technology platform.

EK: Correct.

DUBNER: So, that really changes things in a number of ways. Because you have been successful not being a content creator or producer too much, at least. I guess first question is why, and then the second question is, how will it unfurl?

EK: Right. Well, in the future, I dont think people will make a choice whether theyre subscribing to a music service. We think that theyre making a choice whether they will have an audio service of their choice. It wasnt this well-thought-out master plan. Hey, we need an adjacent business, and we dont know which one it is. It wasnt like that at all.

What actually happened, because Spotify is a platform, was we started seeing in my home country Sweden actually, we started seeing record companies buying podcasts and uploading them to the platform as another revenue opportunity for them to grow. And it resonated really well with listeners. And that was the first step.

And then in Germany, record companies there had massive amounts of rights to audio books, which I wasnt aware of. And they started uploading that to the service and very quickly, we went from no listening to that and now were probably if not the biggest, the second-biggest audio book service in Germany. And this is without our involvement. This just happened by proxy of us being a platform.

So we started seeing it resonating really well into peoples lives, and they thought of Spotify not just as a music service but as a service where they can find audio. And it played really well into our strategy of ubiquity i.e., being on all of these different devices in your home, whether its the Alexas or TV screens or in your cars or whatever as just another source where you could play your audio.

DUBNER: But why do you want to go to the trouble to pay a couple hundred million to buy a firm thats creating it when almost everybody making podcasts would probably willingly have their content on Spotify?

EK: Yeah. Well, the reason why is really twofold. So one is that the format of podcasts, were still very early on into what it will be. If you really think about it, for most people, theres all of these basic things for creators that havent been solved, like how well am I doing. Its not that easy to find out. How am I monetizing the show and the value for advertisers, its just not that easy to find out. And thirdly, what are people saying about my show, feedback. Those are three very elemental things that if you think about it almost all other formats, if youre a journalist today and writing in text, theres ways to solve all three of them. We can already

DUBNER: I mean what youre describing does exist to some degree on Apple Podcasts, which I realize Spotify has a complicated relationship with. But thats also, like Spotify, its a closed ecosystem. Its not part of the web, quite. So if Apple Podcasts data existed in a non-closed environment would that have been enough for Spotify to not need to buy its own firm?

EK: Probably. I mean, in the end I mean its all about solving needs that creators or consumers are having. Thats what were focused on. And if someone had solved that need then obviously there would be less of a reason for us to do anything about it. And you know the same thing, if there was massive amounts of audio-book services in Germany Im sure we wouldnt have been successful.

DUBNER: Can you talk about Spotify customer data? What do you have and what do you do with it?

EK: Well, what we do with it now is very tightly regulated because were originally a European company and in Europe, I believe, five or six years ago there was a new initiative called G.D.P.R.that officially became a law some time April, May I believe last year. And obviously were complying with that. And what it basically says is that all the data that we have around you as a customer, you need to be able to ask us for it and we need to deliver it back to you. You need to have an opportunity for it getting deleted by us.

DUBNER: What are your abilities to monetize that data, though, to third parties?

EK: Well, our ability to monetize it is obviously based on the contract that we have with our users, so obvious things that would be what genre of music are you listening to, whats your age, whats your demographics. And those are things that advertisers can target against.

DUBNER: Right. And how well do you monetize that currently?

EK: You mean if we do monetize it?

DUBNER: Yes. If you do monetize it how well do you

EK: We monetize some of those aspects, of course, like any normal ad platform. Its very important though to note that were not selling any customer data.

DUBNER: Thats what Im asking. So theres ads on the Spotify platform.

EK: Yes.

DUBNER: Youd be fools not to target those to listeners based on their demographics and their listening tendencies.

EK: Of course.

DUBNER: But you do have a lot of data that would be valuable to third parties.

EK: Oh yeah, massive amounts, but not even just for other advertisers. But you can imagine even for the music industry, theres tons of data about how their songs are performing or other peoples songs might be performing that could inform them about what theyre doing. Weve taken the stance that we dont monetize the data itself at all. We dont sell the data.


EK: Well, its an important one for us that users should be able to rely on us my fundamental view is, its their data. If we can use the data in order to make the Spotify experience better, then all good and great. And I think many users would say, Yeah, I agree with that. But because now of G.D.P.R., which I do think is the right step, we can argue about like was it the right implementation of it and all those things. But I do think its great for customers that theres something like G.D.P.R. there. And you can delete the data. You can also say opt out of specific things that we are gathering about you and say, hey I dont want you to know X or Y.

DUBNER: Ive read that you operate your life in a series of five-year commitments. I dont know how finite or real that is, but if it is real

EK: Right.

DUBNER: Where are you now in the five-year cycle, and what happens next?

EK: Its not always been five years, by the way. So, when I started the company, it was a five-year commitment because being 23 at the time, having started lots of different companies before I really wanted to see what would happen if I applied myself to one thing and only one thing and do it for a meaningful amount of time, how far I could get on that problem. And the longest I could imagine spending on anything was five years. So thats how it ended up being five years.

And then when the five years passed, I was 28 so I said, well when 30 so it was a two-year increment. And now I said to myself, just before going public last year, is this what I want to do? And what would happen if I made a 10-year commitment? which felt pretty daunting, and what is it that we would have to do, what does the company have to look like for me to be interested to do this for another 10 years? Well what would my role have to look like in order for me to be interested?

DUBNER: Is that a key component, how interested you can remain I mean it needs to be constantly challenging to you?

EK: Yeah, definitely so. I mean, to be honest, because otherwise if you dont have that passion and you dont feel like youre growing and challenging yourself, someone else will probably do a much better job.

DUBNER: So, where are you right now?

EK: Im in year two now of a 10-year commitment.

DUBNER: So, what did you see in the future of Spotify that you thought was going to be so amazingly, excitingly challenging for 10 years?

EK: Well, theres really two things. The first and more important one is really from the inception of Spotify, the assumption was that we would solve the user problem. I.e., get people to listen in a much better way and then theyll contribute back to the music industry. The core assumption was that the music industry would take care of all the other things how people get signed, how they get heard. And I realized that that just didnt happen.

So, were largely doing business the same way as we were doing 10 years ago. Theres been some evolution of that. But I want to work with the music industry. I was never a disrupter. Thats the big misunderstanding about me. Ive I believe the record companies are important and will be important in the future. But we believe we can be the R&D arm for the music industry, that we can develop better tools and technology to allow them to be more efficient and thereby creating more, better solutions for them and for artists.

DUBNER: Can you give an example of how the efficiency happens?

EK: Well, one of the hardest problems right now for an artist is to get heard. One of the biggest platforms to be heard at would be Spotify, right? Today the primary tool that an artist has to get heard on Spotify besides putting the music on there is getting known by one of our editors. So in a weird way, while we want to democratize music, weve become gatekeepers as well.

So the question is: can we develop tools that enables artists to promote their music more efficiently just by themselves on the platform? And that could be in the form of being able to talk to their existing super fans that are on the platform. It could be in the form of better promotional tools for record companies in how they pitch music and get the music out there.

Spotify having become a gatekeeper whether inadvertently or not is an important point. A song that Spotify adds to one of its playlists will get many more streams than one that doesnt. And streams translate into money for the rights-holders. So having that power is important, especially from a profit-maximizing perspective. If Spotify were primarily concerned with profit-maximizing, it might promote content that is cheaper for Spotify to stream. Maybe its content they produce themselves; or just content that comes with a lower payment rate than others. It may not sound like a big difference to pay a rights-holder 0.4 cents per stream versus 0.3 cents, but if youre talking hundreds of millions or billions of streams, it adds up.

DUBNER: What do you listen to these days?

EK: Music-wise or podcast

DUBNER: Well, both.

EK: So, music-wise Ive been really interested in African music lately. Particularly West African dancehall music has been something thats been pretty cool. We launched in South Africa a year ago. So all of those playlists started bubbling up and theres been a lot of really cool

DUBNER: It must be so cool to launch in a new place as a means for you guys to discover whats the music

EK: Oh yeah, for sure, and theres a lot of things that you just dont even know about. So thats been for me the biggest thing over the last year thats been really interesting.

And then on the podcast side, its such a fascinating format to me. Theres obviously people who can listen to Crimetownor whatever it may be, just to get entertained. For me its more the educational part of it. So it could be a FreakonomicsRadio. Theres one called Invest Like the Bestthats quite interesting and thoughtful about investments and how you do that. I do listen to quite a lot of history podcasts as well. Just to get an hour uninterrupted about a subject. Theres no other format that goes to the same depth as I find that podcasting does.

DUBNER: Are there still holes in the Spotify music library that you really want to fix?

EK: There are. But obviously by now the holes that we have are probably more regional holes than the fact of the big ones. Im sure that there are Garth Brooksbeing probably the best-known example right now. But most of it is really about old music, getting the archives up. Im very proud that we did that deal with the BBCa few years ago where were now bringing the entire archive onto streaming. Same with Deutsche Grammophon, the German equivalents as well.

DUBNER: Would you ever consider in a case like Garth Brooks I mean, Im sure youre going to say no to this, because it would be illegal but would you ever consider saying, Look, were Spotify, were just going to put the music there, and then he will see how well it does. And then the first check gets written. And then that will bring him to the table in a proper way. Would you or did you ever do that?

EK: No. Weve never done that. It goes against the ethos of what it is were trying to do. I mean, again, when we started, that was the modus operandi. There was all these

DUBNER: A sort of terrorism in a way, yeah?

EK: Yeah, a lot of these services, where people just uploaded all the music and then they figured out the problem later on. That was never the approach that we took.

DUBNER: And why was that? I mean, do you consider yourself a particularly ethical person? Is that the way Swedish business is done? Because to be fair, Uberpretty much did that. They would go into cities where they knew that local authorities wouldnt allow them to operate.

EK: Right. Well I dont like to say that were more ethical than other people. It just felt like the right thing to do. And I believed that the problem for the music industry with the past had been just that fact, that it always felt like it was people who wanted to disrupt the existing music industry. I dont believe that the music industry has to be disrupted. I believe it has to be evolved. So we like to work with them as partners. Thats always been our approach. There isnt music on Spotify that the copyright owners havent authorized us.

DUBNER: I have one last question. If you werent doing this now lets just pretend Spotify really hadnt worked, that either the technology or the rights-gathering proved impossible. Youd be doing what now, and where?

EK: If I werent doing this, I would probably do something in health care. And its a weird revelation, if you asked me 10 years ago, I wouldnt have said that. But right now its like I came to that realization because people always said, Oh, Spotify is so amazing, and my response was always, Well, its not saving lives, but its good.

A few years ago I was thinking to myself, Why am I not saving lives, and what would I do if I did that? And I talked about these technology currents, and I think in healthcare a lot of those technology currents are starting to play out. And its not just about the sort of digital part of these things. Its just the advancement in biotech overall, CRISPR, proactive medicine. Its going to be the next decade or two decades, were fundamentally moving from a place where we will look at doctors or the way we treated people like its almost witchcraft two decades from now. Well just know a lot more. And thats fascinating, to think about the implications that that will have economically, because I believe in the end it means that we can spend a lot less of our GDP on healthcare and as a consequence hopefully treat a lot more people.

So yeah, Im really interested in that part, and whats going to happen in that space.

DUBNER: Do you think you will do that, I mean, in eight years? At the end of this 10-year, commitment, youll be only 44.

EK: Right.

DUBNER: Do you think you will try something radically different for you like that?

EK: I hope so. My interests I love music. Its been a passion really since the beginning of my life. And that will always be a passion and always be something that Ill do in some shape or form. But were here a very, very short period of time on Earth. And I feel a tremendous amount of responsibility having you know, its insane that Im 30-plus years old and having had as much fortune as Ive had, so I feel like I need to do a lot more than what Im doing to leave the world a better place than what I entered it.

If you want to learn more about Spotify including how a team of Swedish social scientists tried to reverse-engineer it to see how the platform really works check out a new book called Spotify Teardown: Inside the Black Box of Streaming Music.

* * *

Freakonomics Radiois produced by Stitcher and Dubner Productions. This episode was produced by Matt Frassica. Our staff also includes Alison Craiglow, Greg Rippin, Harry Huggins, Zack Lapinski, Matt Hickey, and Corinne Wallace. Our theme song is Mr. Fortune, by the Hitchhikers; all the other music was composed by Luis Guerra.You can subscribe to Freakonomics Radioon Apple Podcasts, Stitcher, or wherever you get your podcasts.

Heres where you can learn more about the people and ideas in this episode:



  • The Effect of File Sharing on Record Sales: An Empirical Analysis, by Felix OberholzerThu, 04 Apr 2019 03:00:41 +0000
    How Spotify Saved the Music Industry (But Not Necessarily Musicians) (Ep. 374)

    In the U.S., median rent has doubled since the 1990s, outpacing inflation. Politicians and the public think rent control is the solution. Spoiler alert: its not. (Photo: Caelie Frampton)

    As cities become ever-more expensive, politicians and housing advocates keep calling for rent control. Economists think thats a terrible idea. They say it helps a small (albeit noisy) group of renters, but keeps overall rents artificially high by disincentivizing new construction. So what happens next?

    Listen and subscribe to our podcast atApple Podcasts,Stitcher, orelsewhere. Below is a transcript of the episode, edited for readability.

    For more information on the people and ideas in the episode, see the links at the bottom of this post.

    * * *

    Im sure you know this already, but let me say it anyway: cities have become really popular, all over the world. An ever-larger share of the U.S. and global population lives in cities, and that large share is expected to get even larger. As demand for city living grows, the supply of housing often cant keep up. Which results in and you know this too a rise in prices. In the U.S., median rent has doubled since the 1990s, outpacing inflation by quite a bit. In many cities, this makes it hard for people who already live there to stay, and hard for people whod like to move there. Im sure youve heard the horror stories about rents in cities like London and Hong Kong; Seattle and San Francisco, where the median one-bedroom apartment costs about $3,700 a month. The problem is so bad in New York City that it inspired a new political party.

    Jimmy McMILLAN: I represent the Rent Is Too Damn High Party. People are working eight hours a day and forty hours a week and some a third job.

    New York, like many cities, has over time put in place various affordable-housing policies. One time-honored tradition is some form of rent control. That might mean setting a price cap on what a landlord can charge or limiting the amount the rent can be raised. Heres the Stanford economist Rebecca Diamond.

    Rebecca DIAMOND: From an economics point of view, it provides insurance against getting priced out of your neighborhood.

    And rent control seems to be having a moment. It already exists in a number of places.

    DIAMOND: The most expensive cities in the U.S., they almost all have rent control.

    And the appetite is spreading.

    DIAMOND: You see rent control popping up politically when housing prices and rents are going up.

    Among the cities currently considering some form of rent control are Chicago, Philadelphia, Providence, and Denver. Oregon recently became the first state to pass a rent-control bill. A statewide proposition in California failed, but some cities there are moving ahead on their own. A recent report by a consortium of affordable-housing advocates says that if all the proposed rent-control legislation were to pass, nearly one in three American tenants would have some kind of rent protection.

    * * *

    Most economists say that rent control is a bad idea, as is just about any form of price control. They believe that markets work best when supply and demand are allowed to find a natural equilibrium, with price acting as the referee. Heres one such economist.

    GLAESER: My name is Ed Glaeser and I am the Fred and Eleanor Glimp professor of economics at Harvard, where I teach both microeconomic theory and the economics of cities.

    DUBNER: Ed, you have one minute to convince someone that rent control is a terrible idea. Go.

    GLAESER: All right. So, Ive already squandered five of my seconds. Its not particularly fair. Its not a good way of allocating scarce space. Its not a good way of helping the downtrodden. Its a way that freezes a city and stops it from adjusting to changes, a way that freezes people in apartments and stops the motion that is inherent in cities.

    So thats a baseline economic take, at least. Lets try to unravel this issue, starting with a brief history of rent control.

    GLAESER: Rent controls really became ubiquitous in World War II, and the idea here was, the nation was laying down its life to try and bring freedom to the world, and it seemed wrong that some people who were well-placed should earn some form of extra bonuses by being able to raise up rents on people, maybe whose sons and daughters were off fighting for the U.S. elsewhere. And rent control was seen as being a way of, somehow or other, trying to keep America being a bit fairer during World War II. Now, lots of places introduced rent control during this period. After the war, most of them got rid of it because that cause seemed to be a little bit less pressing. But, some cities kept it, and New York, of course, is the most famous place that still has it.

    Glaeser himself grew up in New York.

    GLAESER: I lived in a rent-stabilized unit for the first ten years of my life. I mean something like 72, 74 percent of New York Citys households were renters in those days. And indeed, the mid-1970s was an era in which New York’s housing didnt seem that expensive, affordability just wasn’t the same issue that it was today. Now, flash forward 30 years, the cities have been enormously successful they havent built enough to accommodate the new demand. They risk becoming boutique towns affordable only to the wealthy, and people are desperate to see that those cities dont push out every poor resident, that they dont become monocultures built around the privileged and the rich, and rent control appears to be at least one avenue for doing it. But its a very blunt instrument.

    Just how blunt? There are decades worth of economic research describing the downsides of rent control. The first major paper was written in 1946 by Milton Friedman and George Stigler; heres Friedman:

    Milton FRIEDMAN: Rent control is a law that supposedly is passed to help the people who are in housing. And it does help those who are in current housing. But the effect of rent control is to create scarcity, and to make it difficult for other people to get housing.

    Where did this scarcity come from? For one, developers had less incentive to build new housing if there was a ceiling placed on what they could charge. Friedman also argued that rent control created a haphazard and arbitrary allocation of space. This was echoed in a 1972paper by Edgar Olsen, which found that rent control led to what economists call an overconsumption of housing.

    GLAESER Lets say you rented an apartment in New York in 1955, you had three small kids, you rented a three-bedroom. It was perfectly matched for the needs of you with your kids growing up. They moved out of the house in the early 70s. By the late 80s, maybe your husband or wife actually died and youre living on your own in a three-bedroom apartment in New York. But, my goodness, would you ever move out? Your rent is a fraction of what the market rent is. One of my favorite stories about this and this is quoted by Ken Aulettas The Streets Were Paved with Gold, he cites Nat Sherman, the famous tobacconist to the world, who had this big shop on Fifth Avenue, who said that he pays, I forget what it was.

    DUBNER: $355 a month for a six-room apartment, it says here.

    GLAESER: Isnt that amazing? Keep in mind, its a few decades ago. But its an unbelievable deal. Now, whats outrageous about this is, he then says, I think its fair because I use it so rarely, right? Which means that hes not getting very much value out of it, but the crazy thing about this is, there were lots of New Yorkers who would love to have that apartment and it would get a lot more value out of it.

    In 1997, Ed Glaeser did his own analysis of rent control in New York City, trying to determine just how economically inefficient it was. He and his co-author, Erzo Luttmer, found that this misallocation of bedrooms leads to a loss in welfare which could be well over $500 million annually to the consumers of New York, before we even consider the social losses due to undersupply of housing. Glaesers work has also inspired a new generation of economists to further the literature on rent control.

    DIAMOND: Historically, people relied much more on theory in making their arguments about rent control.

    Thats Rebecca Diamond again. Shes a former student of Ed Glaesers.

    DIAMOND: Because even without a lot of data you can make some pretty simple theoretical predictions about what rent control might do to a housing market.

    But there are some things that theory alone cannot tell you.

    DIAMOND: One of the biggest open questions in the literature of rent control is: what happens to those tenants that get rent control? Really, how much are the renters benefiting, because theyre the potential big winners of rent control. And to measure that, you really need to have data on where everybody lives, and who gets access to rent control, and whether they decide to stay in that rent-controlled apartment or go somewhere else. And traditional data sources that economists work with very rarely track migration of an individual.

    DUBNER: So you recently co-authored with Tim McQuade and Franklin Qian a paper called The Effects of Rent Control Expansion on Tenants, Landlords, and Inequality: Evidence from San Francisco. First, if you would, talk about the data.

    DIAMOND: Yeah, we have some really cool data. So, traditional data sets, you can get things on the distribution of earnings and income, things like that. But you wont also see their migration. So, we have this, you could call, administrative data, which tracks peoples address histories.

    DUBNER: And where did these migratory data come from?

    DIAMOND: We bought them from a company called Infutor. They are a company that works in identity management, So they have this history of addresses for everyone which they collect from a number of different sources and stitch them together, which is very useful for the private sector and firms that need to keep track of up-to-date addresses. But from a research perspective, its super-exciting data because its so big and so detailed.

    Armed with this super-exciting data on individual tenants, Diamond and her fellow researchers set out to measure some of the long-term effects of rent control in San Francisco. They made particular use of a change in the citys rent laws. San Francisco had rent control, but it didnt apply many of the citys smaller apartment buildings.

    DIAMOND: And the exemption was basically thought of as, Well, these are mom-and-pop landlords. They dont have market power. Theyre not corporations. So we dont need to regulate their rents. And then newspapers reported that those smaller multi-family buildings were increasingly purchased by corporate entities, because thats really where you could make your money in the housing market. And that led to a vote in 1994 where everyone in the city got to vote about whether we could remove this small multi-family exemption, and that would then expand rent control, not just to the large multi-family housing stock, but also the small multi-family housing stock. And that, indeed, passed.

    DUBNER: So, youve got this awesome new law awesome for you guys, at least, as researchers that lets you mark before and after. Its a perfect little natural experiment with a control group. And then youve got these wonderful data sets. And then you mash up all of these data together and analyze it and you find the following: your paper concludes that among many things rent control limits renters mobility by 20 percent and lowers displacement from San Francisco, especially for minorities. So lets start with this: what does it mean exactly that renters mobility is lowered by 20 percent, and why is that important?

    DIAMOND: So, we look at whether the renters who get access to rent control choose to remain in their newly rent-controlled apartment. So, we find that they are 20 percent more likely to remain there, relative to our control-group renters who dont get access to rent control.

    DUBNER: So, that seems totally unsurprising, yes?

    DIAMOND: Yes, I more see that result as a validation that our data is good and high-quality and we have some something to work with here.

    DUBNER: Okay. Further, you write that rent control lowers displacement from San Francisco. What does that mean, exactly?

    DIAMOND: So, we can look at not just whether you remain in the actual apartment you lived in when you got access to rent control, but whether you remain in San Francisco as a whole. We find rent control has a dramatic impact on whether you actually live in San Francisco or not. So, it prevents those renters from leaving the city as a whole, which I think from a policy perspective of rent-control advocates, thats one of the goals they talk about as preventing displacement from the city.

    DUBNER: And then you write that, especially for minorities, that displacement is lowered.

    DIAMOND: Right. So, when you look at that first cohort of renters that already lived in the city at the time of rent control, it is definitely helping minorities more. Its preventing displacement of them especially.

    DUBNER: Furthermore, you write that landlords who are susceptible to rent control reduce rental housing supplies by 15 percent either by converting to condos, selling to owner-occupants, or redeveloping buildings. So, now it starts to get a little more complicated. Can you talk about whos now starting to win here and whos starting to lose here?

    DIAMOND: So, obviously, when the landlord is first notified about rent control, he or she can quickly deduce that his or her rental stream is going to be lower than previously expected. And just like any other business owner, they might think about changing their business strategy. So, if renting out their apartments is no longer very profitable, now they may decide, Oh, maybe its worthwhile to convert to condos and sell off the apartments to owner-occupants and that would be a way to recover some of this lost income. Or, another thing they could do is, say, knock down their old building and build some new construction and either sell those as condos or rent them out as apartments.

    Both of those options would avoid them having to pay this tax of rent control, help recoup some of their losses which is good for the landlords, but is going to undermine the goals of rent control because now were going to have less rental housing out there available for rent control.

    So you can start to see how rent control may be accomplishing a narrow, short-term goal making existing housing more affordable for a select group of people at the expense of the long-term goal of making a city more affordable generally.

    DIAMOND: When you pass rent control, the landlords of the property suddenly getting covered by rent control are losing so much money, they no longer really want to rent their apartments out at the prevailing new prices, so they decrease their supply of rental housing to the market. And if theres less supply, thats going to drive up prices.

    DUBNER: Okay, so, let me just make sure I have it pretty straight. You find evidence that rent control increases gentrification, one component of which is the displacement of low-income tenants. On the other hand, you also find evidence that low-income people, including minorities at least those who are in rent-controlled units already theyre likely to disproportionately benefit from rent control.

    So, if Im an affordable-housing advocate, I might say, Oh, fine, fancy Stanford professor who Im sure has some kind of great income and/or housing subsidy and/or situation I dont care that some landlords are suffering. I dont care that the policy is having some downstream effects that you dont like. I need to make sure that low-income people arent going to get a rent increase of 50 percent overnight. So, how do you respond to that argument?

    DIAMOND: So, when you think about those initial tenants, thats the best bet youre going to get for the benefits of rent control to low-income tenants: the people that are already in the housing. But even though we find that those tenants are much more likely to stay in their apartment, when we look 10, 15 years later, the share of those 1994 residents that are still there is down to 10 percent or so. So 90 percent of them no longer live in that initial apartment.

    And its that next low-income tenant that wants to live in the city, that low-income tenant is going to have a very hard time finding an affordable option, because now theres going to be less rental housing, the prices that that low-income tenant are going to face when they want to initially move in are going to be higher than they would have been absent rent control.

    DUBNER: Im curious how generalizable you think your findings from San Francisco are for other cities.

    DIAMOND: I would suspect that the actual quantitative loss of rental supply or benefits to the tenant will depend a little bit city to city, but I think the qualitative takeaway that landlords are savvy and are going to work hard to not lose money on their investments, I think is a very general point.

    For economists who already felt confident in the theoretical arguments against rent control, research like Diamonds provides empirical evidence that essentially tells the same story. Yes, there are some winners in rent control; but the losing is more widespread, and longer term. But how about empirical evidence from a reverse angle that is, not when a city adds or expands rent control, like San Francisco did, but when it gets rid of it?

    DIAMOND: So, theres other work by David Autor and coauthors that looks at the removal of rent control in Cambridge, Massachusetts, in 1994.

    By the early 1990s, Cambridge was one of the few remaining rent-control strongholds in Massachusetts. Landlords had been trying to get rid of it for years. But there are a lot fewer landlords than there are tenants, so any attempt to change the local law was voted down. Finally, the rent control opponents had a winning idea: put the issue up on a statewide referendum, where there might be less empathy for all those city dwellers with below-market rents. When the referendum was held, nearly 60 percent of the voters in Cambridge were opposed but, statewide, it passed, and so Cambridge began to deregulate its rents. Years later, a trio of M.I.T. economists examined the effects of removing rent control.

    GLAESER: Okay, so, the classic paper on this has been written by David Autor,Parag Pathak, and Chris Palmer.

    Ed Glaeser again.

    GLAESER: It showed that when units were brought out of rent control, their owners invested in them. So, they upped the quality of the units; there was more of a supply of higher-end housing.

    DIAMOND: They find that the rent-controlled apartments experience a lot of renovation. Landlords renovate a lot, and that drives up the desirability of living in those apartments. Also, they find that that creates spillovers onto the nearby apartment buildings that they themselves weren’t rent-controlled.

    GLAESER: So neighboring apartments became more valued as a result of the end of rent control. And the most recent paper has shown that crime has gone down particularly, street crime has gone down right after the elimination of rent control in Cambridge.

    DIAMOND: So it looked like rent control had negative externalities on the neighborhood.

    So what does economic research tell us about rent control? There are at least two conclusions which, if Im reading it right, sort of work against each other. The first conclusion is that rent control doesnt help many people for very long, in part because it constrains the supply of affordable housing. The second conclusion is that just getting rid of rent control does not, in and of itself, lead to more affordable housing; in fact a deregulated housing market can easily lead to less affordable housing. The Boston-Cambridge area is one of many places experiencing a steep shortage in not just affordable housing but housing overall.

    So even if you accept that rent control is a big contributor to the affordable-housing problem, getting rid of it isnt necessarily a solution. You can see why politicians and policy-makers are confused. In Massachusetts, in fact, theres currently a movement to bring back statewide rent control. And as we mentioned earlier, Massachusetts is not alone.

    DIAMOND: So, we just had this big vote in California about whether we should repeal a statewide law that restricts the scope of rent control in California, and indeed we did not repeal that law.

    DUBNER: So, somebody read your paper.

    DIAMOND: It was interesting to see how our results were used by policy makers and media on both sides of the fight. Because indeed, some of our results are, like, rent control are good, others make them look bad. Youve got to read the whole paper and take it all into account to make a decision, but it was a very policy-relevant paper for that discussion.

    DUBNER: Im curious what you can tell us about the political dimensions of rent control. I may be wrong, but I believe that rent control is generally supported by Democrats and generally opposed by Republicans.

    DIAMOND: I think its a simplification to say all Democrats support rent control. But I think in the short run, you can see the benefits of rent control the tenants right away benefit. Whats much harder to see are these indirect effects that take a long time, and its harder to put your finger on that. The losses are spread everywhere a little bit, and harder to see walking down the street or talking to your constituents.

    GLAESER: There certainly are some poor people who can benefit. And, its a very tangible benefit, right? Its not some complicated thing which requires you to trust in the market. Its just sort of very clear, and if you think that people on the left, many of them just dont trust markets to begin with, then saying theres going to be some negative market effect to them, that sounds like capitalist hocus-pocus, whereas, what they can see right now is that Mrs. Reyess rents wont go up because of their regulation.

    Vicki BEEN: Economists tend to believe their models and say, End of story, and, Believe me, right?

    Thats Vicki Been.

    BEEN: But communities dont necessarily have to believe economists, and so economists need to do a better job of responding to the very real fears that communities have.

    Been used to be commissioner of the New York City Department of Housing Preservation and Development. Now shes a law professor at New York University, and she directs the Furman Center for Real Estate and Urban Policy.

    BEEN: The Furman Center has embarked on a project that we call Not Your Grandmothers Rent Control to try to figure out, if you were starting from scratch, and you were designing the most efficient rent-regulation system, what would that look like?

    * * *

    As weve been hearing, economists are generally opposed to rent control. It rewards some people, but fairly arbitrarily; it punishes many others, and generally doesnt do much to improve overall access to housing. That said, most people dont think like economists, or even believe them. Which is why many politicians and members of the public think rent control is a great idea.

    David EISENBACH: Well, Im in favor of residential rent control and rent regulations.

    Thats David Eisenbach; he teaches history at Columbia University and he recently ran for a citywide office in New York called public advocate. There are in New York City about 3.4 million apartment units, nearly 1 million of which are rent-stabilized. And New Yorks rental market is incredibly expensive as it is in many other cities with regulated rents, like San Francisco. Economists argue that overall high prices are a direct consequence of rent regulation; what does Eisenbach think?

    EISENBACH: I disagree. I mean, there are a lot of reasons why real estate in San Francisco and real estate in New York are high. Blaming it on rent stabilization is definitely not it. The consequences of getting rid of either rent control and/or rent stabilization would be the immediate displacement, of a big portion of the population, and that would just be cruel at this point. I don’t know how anybody could justify even somebody looking at it purely in economic terms how anybody could justify that, just in human terms. Youre going to blame the high rents on rent control? Come on.

    Okay, so Eisenbach does not believe the economic research on rent control. What does he believe in?

    EISENBACH: Well, first and foremost, Im an angry New Yorker who walks around the streets of New York and sees empty storefront after empty storefront, and just feels like my city is dying.

    New Yorks commercial rents have spiked along with its residential rents. And in some parts of Manhattan, as much as 20 percent of the retail space is either vacant or soon to be vacant.

    EISENBACH: And I found out that there is this bill called the Small Business Jobs Survival Act. It was initially submitted back in the 1980s and I figured, why dont I run for office pushing this bill? And so I ran for public advocate on the platform, Were going to pass this bill; its going to save small business in New York City.

    We should say that Eisenbach did not win the election. He came in 13thin a field of 17. But he did get a fair amount of attention for talking about all those empty storefronts, which have upset a lot of people.

    EISENBACH: There are two major provisions of the Small Business Jobs Survival Act. One: it guarantees a 10-year lease renewal offer from the landlord to the tenant for any tenant with a commercial lease in New York City. Number two: if the landlord and tenant cannot come to an agreement, they go to legally binding arbitration, and that arbitrator then will pick a fair market rent, which will then be charged in the next 10-year lease renewal.

    Opponents of this proposal call it commercial rent control.

    EISENBACH: But this bill, the Small Business Jobs Survival Act, is absolutely not rent control. It doesn’t put a limit on how much rent can be charged, which is the very definition of rent control. It’s legally binding arbitration. Much different.

    DUBNER: Are there other cities that have this kind of small-business jobs protection on the real-estate front that works well?

    EISENBACH: Its going to be unique.

    Even though Eisenbach lost his election, he still believes the Small Business Jobs Survival Act may get through New Yorks City Council. I was interested to know what the economists weve been speaking with Rebecca Diamond of Stanford and Ed Glaeser of Harvard what they thought about commercial rent regulation.

    DIAMOND: So, Im also very interested in that, and I also know almost nothing about it. I have never seen any work on it.

    GLAESER: You can easily tell a story where the threat of some form of rent control makes a vacancy problem worse in the short run. So, for example, I dont want to rent right now to a lower-end tenant who could fill my space, because Ill be locked in by the rent-control law and Ive got that tenant forever. So, that means, Im going to really hold out for a blue-chip tenant because I have this threat of this law over my shoulder.

    So, do I think vacant empty storefronts are a problem? Sure. I mean, we can talk about it from a perspective merely as an urbanist, where we think its unattractive to have these things, but Im also disturbed by it as an economist, because someones got space to sell, there are people who want to buy that space. Why isnt the transaction happening, right? Its sort of the market is going awry. And the answer to that of why the market is going awry is not immediately obvious.

    There are of course plenty of theories as to why so many storefronts in New York are vacant. Here again is Vicki Been, the former housing official who studies the real-estate market at NYU.

    BEEN: I think there are a lot of questions about how commercial rent regulation would work and how it might interfere with an efficient market. One concern that I would have right now is, we seem to be in the middle of an upset, of a transition in retail in general, because of the availability of Internet retail. A lot is in flux.

    GLAESER: But there are two points of evidence against that. One of which is that many of these storefronts formerly held services, and I dont think a nail salon has been made obsolete by Amazon just yet. And secondly, the rents, the asking rents, at least according to the most recent Real Estate Board of New York report, in many of these areas are still sky-high. Its not like theres no demand for areas where youre charging $300, $400 per square foot to rent these areas.

    In the long term, all the economic push for both the landlords and the tenants is to get those units occupied and get the rent payments again flowing to the landlord.

    Landlords, whether small or large, are often left out of public discussions about property markets. And if theyre not left out, theyre usually drawn as villains. Vicki Been, in thinking about the project she calls Not Your Grandmothers Rent Control, is trying to change that.

    BEEN: I think the thing that you really need to focus on is: how can I ensure that the landlord is getting a reasonable return, right? Because otherwise, people will take their money and put it elsewhere and you won’t get building. And how can we at the same time try to close some of these avenues that landlords could use to try to escape rent regulation without it becoming a system that’s so weighed down with so many different enforcement challenges that it kind of collapses of its own weight, right?

    You need to pay attention to the different ways in which property owners are making money on the property, so you really need to have a holistic look. At the same time, you need to have very open-eyes view of the kinds of costs that we’re imposing on them.

    Theres one huge cost that drives real-estate prices, whether were talking about rentals or sales, for both commercial and residential buildings.

    BEEN: In New York City, for example, a very high percentage of rent goes for property taxes. So we can’t be saying to landlords, Hey, keep prices down but by the way, your property tax just went up by 10 percent. So we have to recognize that, okay, we as a taxpaying body have an obligation to understand the effect that those increases may have on rents, and we can’t just turn around and say to the landlord, You absorb them, right? Don’t pass them onto the tenant. Because that’s an unsustainable system.

    GLAESER: It’s certainly true that renters implicitly have to pay for property taxes. And it’s not obvious that’s wrong, because the idea of property taxes is they’re paying for city services and renters use city services, too. That’s obviously not wrong.

    DUBNER: So, heres a big question that I really hope you can answer, because Ive wondered this for a long time. Some of the biggest property owners in a city like New York and some of the wealthiest property holders generally are universities, religious institutions, hospitals, and other not-for-profit institutions, which makes them either partially or wholly exempt from paying property taxes. So, Im curious, how does that exemption affect a) the taxes paid by everyone else, and how does that b) ultimately affect housing prices for everyone.

    GLAESER: First of all: clearly, youre right. The government has decided to subsidize certain institutions by enabling them not to pay property taxes. And from a purely accounting point of view, those taxes need to come from somewhere else.

    On the other hand, it is also true that at least some of the institutions that youre talking about have proven to be extraordinarily important for the economic health of the area, right? Were subsidizing the university student, right? Were making it cheaper for them to rent than it would be otherwise. Is that fair? Well, we thought that, somehow or other, it was a good idea to subsidize educational institutions at one point in time. We thought there might be some spillovers from that, some benefits from encouraging people to become educated. But, we should be open to re-investigating that, and anyway, you shouldnt take my word for it, because after all, Im the employee of an educational institution.

    We can ask whether or not the blanket property-tax exemption that we’ve given to religious institutions and educational institutions is appropriate. I mean, that seems like a reasonable question to ask. In the case of religious institutions it in some sense goes back to fundamental issues about separation of church and state in the U.S., but we can still ask this question.

    I would be surprised if we think that changing those tax rates is the number-one step to take to promote affordability in New York City though, relative to bringing more space on market that you can actually build on, changing the regulations. I mean, it seems like that’s not likely to be the case, but it is true that you move stuff to a religious or educational use, in many cases you’re moving away from an owner who would actually build on it. And that’s also correct.

    So what have we learned about housing, especially affordable housing, especially in the most desirable cities? For starters, weve learned that its complicated. Property taxes play a large, underappreciated role in driving up costs, and the tax burden isnt necessarily spread so equitably. Rent regulations, meanwhile, appeal to the public and politicians, but they also create perverse incentives that in the long run work against affordable housing. How about housing vouchers: arent they a more flexible way to subsidize housing?

    BEEN: The advantage of a voucher is, you can go through all of those eligibility requirements and really target the voucher to the families that you think are most in need. And we in New York, and in many other major cities, we have prohibitions against a landlord refusing a tenant because theyre using a voucher rather than earned income.

    But were still getting enormous resistance from landlords, because if you have a federal government that shuts down and isnt paying its voucher payments, and there, the landlord is stuck with that, right? Or if you have a city, like New York City did, that issued vouchers and then changed its mind, and said, Oops, that program is over, then the landlord has a tenant in place who no longer can pay the rent and the landlord has to take them to court and bear the costs of that.

    Meanwhile, the market price of housing in a place like Manhattan lies somewhere between punitive and prohibitive. So if rent control isnt a viable tool in the fight for affordable housing, what is?

    GLAESER: The most natural tool towards affordability is supply, and to make sure that we are making it easy enough to build moderate-cost rental-apartment buildings in these cities.

    Ed Glaeser again.

    GLAESER: Weve used regulations to so restrict our ability to provide affordable housing units that now were at this restricted frozen-in-amber form. In the case of New York gosh, New York is New York. Its hard to imagine how much housing youd really need to sate demand for New York.

    DUBNER: What about Boston, where you live? Boston is facing what it calls a historic housing shortage. The citys growing, not enough housing to match. What do you suggest Boston do to accommodate that surge, other than let the market work its famous magic?

    GLAESER: Look, drive around Boston. It doesnt look overcrowded to me, and I dont think it should look overcrowded to anyone else. Theres a lot of vacant industrial space that could easily house tens of thousands of units. If you made it easy enough to build, Ive got to think that this is a doable problem, at least from an engineering and economics point of view. The politics, of course, are more difficult.

    DUBNER: What, specifically, would need to be done to change it?

    GLAESER: So, the big answer is, you need, as-of-right zoning that enables fairly high-density levels over a fair amount of space. So, currently Bostons zoning plan is highly antiquated. Every project is handled on an ad-hoc basis. Usually, it involves variances that are quite high from the original plan, which means that they are highly subject to judicial challenge. All of that is a recipe for uncertainty and delay and endless community meetings.

    The thing that works best is when you have something where youve decided in advance, This is how much were going to allow to build; there are a couple of simple rules that youve got to follow. Come here, bring your units and make it happen. And thats whats needed. Thats what actually works. Its not something that involves a 10-year negotiation process, but something that says, Here are the rules upfront. Go to it.

    It should be noted that not all U.S. cities impose the same level of red tape you see in Boston and New York and San Francisco.

    GLAESER: If you want to look for affordability, the American Sunbelt is pretty great. The Atlantas, the Houstons, the Dallases, the places that just have made it very easy to build over the last 40 years you want to ask why Atlanta, Dallas, Houston, Phoenix each added a million people between 2000 and 2010 as metro areas, its because they make it astonishingly easy to build. And you can go and you can buy a great-looking house for a fraction of what youd pay in New York in these places.

    We dont have an affordable housing crisis in the U.S. nationally. We have lots of affordable housing in places with names like Atlanta, but just not in New York City.

    Many European cities, meanwhile, are more like New York in fact, exaggerated versions of New York.

    GLAESER: Much of Europe is quite restrictive in your cities, but Im much more comfortable about the idea that much of central Paris is patrimony of the world that needs to be protected.

    While policies vary from city to city and country to country, almost all major European cities have rent control.

    GLAESER: Sweden, of course, is the place where Assar Lindbeck, the famous economist and although he was market-oriented, he certainly skewed to the left Assar famously said that, short of bombing, I know of no way to destroy a city that was more effective than rent control, and he certainly had Stockholm in mind.

    Tommy ANDERSSON: Right now, there are around 10 million people living in Sweden. Around 550,000 of these people were standing in a queue waiting for an apartment in Stockholm. That is 5 percent of the Swedish population.

    Thats the economist Tommy Andersson.

    ANDERSSON: I am a professor at Lund University, which is located in the south of Sweden. I focus on an area called market design.

    Sweden has nationwide rent control.

    ANDERSSON: The rental system in Sweden is based on collective bargaining. So according to the Swedish law, there is a union called the Swedish Union of Tenants and their job is essentially to negotiate the rents for tenants. And its based on something which is called the utility value, which essentially means that if you have two comparable apartments, they should have the same rents. Another objective that they have is that they should keep the rents low. The rents cannot be increased by too much.

    If youve been listening closely, it may not surprise you to learn that this system has led to a housing shortage.

    ANDERSSON: Because people will not invest in new buildings unless they can get good returns. So if you look at this report written by the National Board of Housing, Building, and Planning from 2016, they estimated that Sweden needs around 440,000 new homes before 2020.

    And thats not going to happen. This shortage is what can lead to long lines to get an apartment, especially in the more desirable places. How long do you have to wait in Stockholm?

    ANDERSSON: You have to wait for 10 or 20 or even 30 years to get an apartment right now, if you would sign up today.

    What if you dont want to wait 10 or 20 or 30 years for an apartment?

    ANDERSSON: So, there are no official figures because its a black market. But its clear that there exists a black market. You can get an apartment in several different ways. So one of them is essentially to buy contract with black money. You can also bribe someone in charge of allocating available apartments to get the better position in the queue. And another thing which is popular is these fake swaps. So, youre allowed by law to swap apartments with other persons. So youre just pretending that you are swapping apartments, but essentially youre not.

    In the old days what I had heard and I must stress that I dont have any scientific evidence of this but apparently, black contracts used to cost around 10 percent of the market value. But in recent years it has actually grown to say 20 percent of the market value of the apartment. So its expensive to buy a black contract. You know, its always a risk to be involved in this business because even if you paid the money, its not clear that you will get the apartment simply because, I mean, there are criminal gangs involved in this as well.

    That doesnt sound like what the designers of the Swedish rental system were going for. But the housing market in Stockholm is so bad that even business leaders there have risen up in protest.

    ANDERSSON: The C.E.O. and the founder of Spotify, in 2016, he wrote an open letter to the people of Sweden saying that unless you solve this housing situation in Stockholm, Spotify may consider moving its headquarters out of Stockholm simply because we cannot find housing for our future employees.

    If policy makers cant figure out smarter ways to encourage more affordable housing, you can expect to see this kind of scenario playing out in cities all over the world.

    * * *

    Freakonomics Radiois produced by Stitcher and Dubner Productions. This episode was produced byZack Lapinski.Our staff also includesAlison Craiglow,Greg Rippin,Harry Huggins, Matt Hickey andCorinne Wallace. Our theme song is Mr. Fortune, by the Hitchhikers; all the other music was composed byLuis Guerra. You can subscribe toFreakonomics RadioonApple Podcasts,Stitcher, orwherever you get your podcasts.

    Heres where you can learn more about the people and ideas in this episode:


    • Rebecca Diamond, Associate Professor of Economics at Stanford Graduate School of Business.
    • David Eisenbach, history lecturer at Columbia University.
    • Vicki Been, former commissioner of theNew York City Department of Housing Preservation and Development andlaw professor at theNew York University School of Law.
    • Ed Glaeser, Fred and Eleanor Glimp Professor of Economics atHarvard University.
    • Tommy Andersson, economics professor at Lund University.


    The post Why Rent Control Doesnt Work (Ep. 373) appeared first on Freakonomics.

    [ + ]
    Thu, 28 Mar 2019 03:00:26 +0000
    Why Rent Control Doesnt Work (Ep. 373)

    Angela Duckworth and Stephen Dubner listen to Rossinis LItaliana in Algeri, an opera that may owe its remarkable creativity to Napoleons invasion of Italy. (Photo: Lucy Sutton)

    What your disgust level says about your politics, how Napoleon influenced opera, why New York Citys subways may finally run on time, and more. Five compelling guests tell Stephen Dubner, co-host Angela Duckworth, and fact-checker Jody Avirgan lots of things they didnt know.

    Listen and subscribe to our podcast at Apple Podcasts, Stitcher, or elsewhere. Below is a transcript of the episode, edited for readability. For more information on the people and ideas in the episode, see the links at the bottom of this post.

    * * *

    Todays episode is a special live installment of Freakonomics Radio. Youll hear about New York Citys subway system and the man whos trying to fix it. Youll hear about the relationship between Napoleon and music and the relationship between politics and disgust, which is not as obvious as you might think. If youd like to attend a future taping of Freakonomics Radio Live, wed love to have you. We have upcoming shows in San Francisco on May 16th, Los Angeles on May 18, Philadelphia on June 6, London on September 6, and in Chicago on September 26th. For details, visit freakonomics.com/live.

    Stephen J. DUBNER: Good evening. I’m Stephen Dubner and this is Freakonomics Radio Live, coming to you tonight from City Winery in New York City. As you know, Freakonomics Radio is typically a studio show based on lots of forethought and research and extensive interviews. In this live show, we throw all that out the window. No forethought whatsoever. Joining me tonight as co-host, would you please welcome the University of Pennsylvania psychology professor Angela Duckworth. Angela, if you don’t know, is the author of the longtime bestseller Grit: The Power of Passion and Perseverance. She’s also C.E.O. of Character Lab and one of the founders of Behavior Change For Good. Angela, what else are you up to?

    Angela DUCKWORTH: Through Character Lab, I’m hoping to quadruple the amount of behavioral science that’s done on kids and how they grow up to thrive. So we’ve been doing okay, but I think we should have more science so that we can have more to talk about on Freakonomics.

    DUBNER: Excellent. So as you know, we play here a game called Tell Me Something I Don’t Know. We bring guests onstage to tell us some interesting fact or idea or story. You and I will poke and prod them as much as we’d like. Then later on, our live audience will pick a winner. The criteria are very simple. No. 1, did they tell us something we truly did not know? No. 2, was it truly worth knowing? And No. 3, was it demonstrably true? Which is important. And to help with the demonstrably true part, would you please welcome our real-time fact checker. He’s the host and producer of ESPN’s 30 for 30 podcasts. Jody Avirgan. Hey, Jody.

    Jody AVIRGAN: Hello, Stephen.

    DUBNER: Something I learned about you very recently, Jody, is you have a young daughter who has become an Internet phenomenon.

    AVIRGAN: Well, she had a moment as an Internet phenomenon, actually, a photo I took of my daughter went viral. It was a photo we took of her after she’d eaten pizza for the first time. The audience is seeing it right now. She went to this sort of blissful state with pizza sauce all over her face. And I put it out into the world, and it went nuts. I checked this morning. Fifteen million people have seen this photo off of my Twitter account, and then it got ripped on to all of the meme accounts, and people were sending us examples of it being used in random Czechoslovakian advertisements. And the morning shows were asking us to come on. And we kind of just laid low. But yeah, it was kind of wild ride.

    DUBNER: All right, Jody, I’m glad to hear that your daughter is meme-worthy. I’m glad that you are here tonight to be our fact checker. Our first guest, would you please give a warm welcome. He is president of the New York City Transit Authority. Andy Byford. Andy, welcome to the show. Now, the audience this puzzles me.

    DUCKWORTH: Theyre happy!

    DUBNER: Here’s what we know about you so far. You are president of the Transit Authority, which means that you essentially run the subways and buses. Correct?

    Andy BYFORD: That’s correct.

    DUBNER: And most of these people, including myself we ride your subways and buses. And yet, when you walked in, they applauded. Which to me, seems paradoxical. So by what magic has Andy Byford won over the transit riders of New York City?

    BYFORD: A British accent goes a long way.

    DUCKWORTH: It really does.

    BYFORD: Its British charm.

    DUBNER: And I understand you come from a transit family. Correct? Third generation?

    BYFORD: I do. My granddad drove a bus through the Blitz, actually, through the Blitz. I ride the subway or the bus into work every day. I have never owned a car in my life. I probably never will. I rely on public transit and I believe in it. I’ve also failed my driving test twice.

    DUBNER: So, compared to the Blitz, and buildings being crumbled in the streets, I guess the New York City subways are easy.

    BYFORD: Oh, piece of cake. Absolutely, yeah. We have a long way to go. But it is improving. And what I wanted to do tonight is just talk about what we’re doing to make it better.

    DUBNER: Let’s start with a little history. Obviously, New York is one of the older subways I guess London is the oldest in the world.

    BYFORD: London dates back to 1863, our subway is 1904. Coming here, the challenge is the same, but it is exponentially bigger. Interestingly, I’d say 15 to 20 years ago, the London Underground was in a similar state to that in which we find ourselves here in New York today. Stations looking a bit shoddy, unreliable signaling, tired vehicles, lack of funding. Sustained funding has transformed the Tube. That’s what we need here today. And a focus on basics. That’s what I want to talk about.

    DUBNER: I love that we’re getting applause for infrastructure funding. We’ve never had that before. So the New York City subway, as I understand it, has the worst on-time performance of any major transit system in the world. Is that accurate, first of all?

    BYFORD: We certainly are nowhere near where we need to be. In January of 2018, our on-time performance admittedly it was a bad month but it was a woeful 58, just over 58 percent. Through relentless focus on basics and substantial investment, a year later we’ve got it up to just over 76 percent

    DUBNER: Now, to be fair, New Yorks subways generally get people where theyre going. They can be slow and crowded and unpleasant on occasion but theyre also transporting how many million people a day?

    BYFORD: Well, for the whole of transit, it’s 8 million people. It’s made up of 5.7 million people on the subway, 2.3 million on the buses. And on a good day, going from the Bronx down to Manhattan, where I work, southern tip of Manhattan, that train hammered down the express line. You try doing that in a cab, and you try doing that for $2.75, you’re not going to do it.

    DUBNER: Right. When I think of New York, I think that one reason it was able to grow into the city it did was because it had subways early, and so it was able to move people around a lot, underground, without tying things up. The downside of that is it was an old system, and therefore I gather like any old system hard to retrofit, right? So can you just kind of set the scene for us, in terms of how good, I guess, the bones still are, and assuming they are good enough to upgrade as you’d like, what are the impediments to the higher speed, the fewer delays, etc.?

    BYFORD: So, I think it’s fundamentally, the system does have good bones. And lets look at the positives. We do have express tracks. We do have a lot of stations. We have the most stations in the world. We have 472 stations. So, we’re starting from a good basis. But on a less-positive side, for various reasons, primarily lack of investment crippling lack of investment over the past few decades, the subway has been allowed to degrade, to the point that now we really struggle with on-time performance, because of lack of two things: one, lack of service reliability; and two, a crippling lack of capacity.

    DUBNER: Can you point some fingers, please? If your chief argument is that funding is necessary for maintenance of an expensive and complicated system which seems obvious where is it, has it been a lack of funding? Has it been poor spending? Is it the typical political hide-and-seek games, where the money is diverted? And I would like you to name some names, with email addresses, please.

    BYFORD: So, I think one of the lessons that constantly gets learned in transit is, you cannot stop investing in maintenance and what’s called state of good repair. People point to the subway system in Washington, D.C., WMATA. That was built in, I believe it was 1976. It’s really groovy, it’s a very sort of nice system.

    AVIRGAN: Usually on fire, though.

    BYFORD: Well, that’s the thing. People in D.C. it stands for Washington Metropolitan Area Transit Authority I’m told people say it stands for We Make A Town Afraid. That’s a bad place to be. Why? Because it was a new system, you can put it off. Politicians can put off the investment, because it works perfectly fine. So to your question, here, much the same. Politicians have lots of draws on their time. You’ve got to sort the roads out, you’ve got to sort out education, youve got to sort out hospitals. And for various reasons, this has snuck up on us. And you see this slow but incessant, relentless decline in terms of service reliability. The city’s population has grown. The infrastructure has got older, the pressure on it has got higher, the funding in real terms has dropped. And that’s why we’re in the state that we’re in.

    If what Byford is saying here about infrastructure and maintenance warms your heart, check out Freakonomics Radio episode no. 263. Its called In Praise of Maintenance. Okay, back to Andy Byford.

    BYFORD: So, let me tell you what were doing about it. The city and the state have jointly funded what’s called the Subway Action Plan. So its installing what we call continuously welded rail better rail that is less prone to rail defects. It’s about fixing leaks. It’s about renewing components. It’s about unblocking drains. So it’s really about fixing those elements that were allowed to degrade on the existing system.

    To me on arrival, what was missing was the complementary part which is, you must get your operational disciplines right. So when I came here, it drove me crazy, as a railway man of 30 years experience, that you see trains sit in the platform, you all see it, doors open, close, open, close, open, close. Can we please get going?

    There were speed restrictions that were not necessary speed restrictions went in initially, for a valid reason, that either the track had a defect years ago, or because we had trains that were made of wood years ago, or didn’t have such strong brakes. Those speed restrictions are no longer necessary. We had what are called signal-grade timers that were put in for a safety reason, but they’ve been allowed to fall out of calibration.

    DUBNER: So you’re saying, even when the equipment is capable and the tracks are fine

    BYFORD: It’s not properly calibrated. So that was my suspicion. Obviously, you listen to the customers, but you also look at data. What was it about 2012, suddenly the delays went exponentially up? That’s when we started putting in those signal-grade timers. They were wrongly calibrated. So we have set up a team called the SPEED Team. It stands for Subway Performance Evaluation and Education Development, because we love acronyms, right? We subscribe to the PUMA initiative at New York City Transit Authority. You know what PUMA stands for?

    DUCKWORTH: I don’t.

    BYFORD: Please Use More Acronyms. So we set this team up to cover, on a specialized train, every inch of New York City Transit’s 600 track miles. They drive at the signal at the speed that it should be set for. And if the train gets automatically stopped, then the signal is wrongly calibrated. So, so far, we have identified 320 such signals that are wrongly calibrated, and we’re working our way through correcting them.

    AVIRGAN: Can I just clarify one thing? You’re saying that the only way to test a signal is to take a train and drive it as fast as possible at the signal and see what happens?

    BYFORD: Well, just for the benefit of everyone listening on the radio this fact checker is actually on his third bottle of beer. But just to clarify, to put everyone’s mind to rest when I say drive the train at it, obviously it’s for the speed limit that should be, the signal should clear at that speed.

    AVIRGAN: But you need a full train to test that one signal?

    BYFORD: No, this is an empty train. This is an empty train. These are qualified people.

    DUBNER: I believe Jody’s question is, isn’t there software or something that does that?

    BYFORD: No, I want to test the reality. So, these people, qualified people

    DUCKWORTH: Oh, you definitely want to test it with an actual train.

    BYFORD: and if that signal, the signal plate, says that signal should clear at 15 miles per hour, but it’s actually what we call tripping the station, stopping it at a lesser speed, then it’s wrongly calibrated.

    DUBNER: Can I can I ask a funding question? So there is as I understand it, a relatively new congestion surcharge on taxis and car services. And now, there is talk of another congestion fee for vehicles entering certain parts of Manhattan, which is what we more typically think of as a congestion fee. That money, we’re told, is directed to the subways. So: how much money will there be? Is it really coming to you? What is the money going toward? Etc.

    BYFORD: First of all, the for-hire vehicle surcharge, the one that you just described, and that will now start to see a flow of funding come towards dedicated funding coming towards transit, which I very much welcome, because the one thing, working in transit, that really cripples you, is stop-start funding. You can’t plan unless every year you’re thinking, well, what are we going to get this year? That’s no way to run a business. I need to be able to plan with certainty.

    The real game changer will be made major, sustainable, affordable, long-term sources of funding. And one of those suggested is a congestion charge. Because it does two things. One, it cuts congestion. And the other half of my focus is of course buses, which have the lowest speed of any North American bus system. Why? It’s nothing to do with my operators, the buses can’t levitate. They’re stuck in traffic.

    DUCKWORTH: Not yet.

    BYFORD: We’re working on that, by the way. But they’re hopelessly stuck in traffic. So what it gives you is, less traffic, but the traffic that does come in, pay a fee, and that fee must be lock-boxed, ring-fenced, cannot be siphoned off anywhere else, guaranteed go into funding.

    DUBNER: What’s your annual budget now, and what do you want, let’s say, two, five years from now?

    BYFORD: So, at the moment, the operating budget of New York City Transit is around $8 billion. So it’s a big chunk of cash, but bear in mind this is a huge system, in that we run thousands of services 24/7, which is another reason this is a tricky system to upgrade, because no one wants their lines shut down while we upgrade.

    DUBNER: It’s like the 24-hour diner, and you always wonder, when do they clean out the fryer? Thats what I wonder about you.

    DUCKWORTH: Never.

    BYFORD: I’ve often wondered that. That’s my next challenge. I’ve often wondered that. So, what we really need is to bite the bullet. And I’m saying, with the right funding, sustainable funding, we can turn this system around. No more tweaking. Let’s totally re-signal the network. Let’s make the system fully accessible. We can’t be proud of this system unless and until it is fully accessible to all New Yorkers. Let’s sort out the bus network. Let’s modernize the prevailing mindset, the bureaucracy of the transit network.

    So, some specifics: within the first five years, properly funded, we can re-signal five lines. In the next five years, for a total of 10, we can modernize 11 of the lines. In that 10 years, completely modernize 300 stations. We can make 180 stations accessible within that time frame. I’d need, we’ve calculated, $40 billion over those 10 years. Can we really not afford $4 billion a year, maybe two from the state, one from the city, $500 million from Washington, D.C., $500 million maybe we could find it in Transit.

    We can move from state of emergency to state of the art within just 10 years. If we don’t do this plan, all that will happen is, the infrastructure will get even older, the population will grow even bigger, and the pressure on it will grow harder. But guess what? The price will go up. So now’s the time to bite the bullet.

    DUBNER: Jody Avirgan, we heard a lot of interesting ideas, some statistics, massive optimism, and, I would say, energy, which I admire.

    DUCKWORTH: Charm and charisma. And grit.

    DUBNER: A lot of grit.

    AVIRGAN: I want to talk specifically about one thing, which is, you said there is a lack of capacity. Are you running, at any given time, the maximum number of trains that could be on the system at that time?

    BYFORD: No, we’re not. No. And that is, again, something that we are in the process of addressing. A classic example of that would be the L line, because that line is one of the two that has communications-based train-control, modern signaling, that currently runs 20 trains per hour. After the upgrade, we’ll be able to run more trains because we’re providing more power. The signaling system can handle it. There’s not enough power. Which is ridiculous. So we’re addressing that.

    DUBNER: Andy Byford, thank you so much for coming on our show. Would you please welcome our next guest. She is an economic historian at N.Y.U. She studies creativity and innovation. Her name is Petra Moser. Petra. How are you?

    Petra MOSER: Great.

    DUBNER: Good. You teach quite nearby at N.Y.U. How did you get here tonight?

    MOSER: Subway.

    DUBNER: And it worked.

    MOSER: It did.

    DUBNER: What do you have for us tonight, Petra?

    MOSER: So, I wanted to ask you whether you might know: how did Napoleon influence music?

    DUBNER: How did Napoleon influence music? Angie Duckworth, do you have any thoughts?

    DUCKWORTH: Did he commission a special piece for Josephine?

    MOSER: I don’t know that.

    DUCKWORTH: Thats not the answer then.

    MOSER: No, thats not the answer. You got to be a little bit more creative. You got to think a little bit out of the box.

    DUBNER: Did it have to do with war-making?

    MOSER: Yes.

    DUCKWORTH: Did he conquer a nation and then have the musical traditions blend together

    MOSER: No.

    DUCKWORTH: I was so close.

    MOSER: It was good. If we put the two of you together, we’re actually getting somewhere.

    DUBNER: Since we’re not going to get there on our own, why don’t you tell us?

    MOSER: So, Napoleon started his Italian campaign at the end of the 18th century. And he won Lombardy and Venetia, which are two states in Italy. These states, by 1801 were under French control, and they got all the French laws, including copyright. But Italy did not have copyrights. So now in Italy, you have two sets of states. They have the same language, they have similar culture. They both get flooded with Napoleon, with the soldiers, with everything, with the gambling, all of that. But only two states have copyrights for the next 20 years.

    So now we can actually look what that does to music. Because now we have these two states where composers own what they produce, what they create, and what we wanted to see is whether, once you give an artist an intellectual property right, whether that actually makes them produce more and whether it makes them produce better stuff.

    DUBNER: What was your measure for quality?

    MOSER: Opera is really great. You can quantify both quantity and quality. So quantity is fairly easy. It’s really helpful that opera is a public art form.

    DUCKWORTH: You can count the number of operas.

    MOSER: Exactly. So, it’s public. So you can count it. But then, the other thing is that lots of people really love opera and they write everything about opera. So we have lots of people who just say, Oh, this was a really notable performance, there are tons of people at this performance. People were streaming at the doors. And there’s a record of that. So we know which were the hits. Then another measure of quality is whether we still play something today. So if something still plays at the Met today, or whether it’s still available on Amazon today, whether people want to buy it.

    DUBNER: But wouldn’t that be directly following on from whether they were popular or not, is that not the same thing?

    MOSER: There’s some endogeneity there. So, if something is popular now, then it may be more

    DUCKWORTH: How about how many stars it gets on Amazon? Is that part of the academic scholarship?

    MOSER: Not in this paper.

    DUBNER: So I’m not surprised that an economic historian would want to understand the innovation impact of copyright, because copyright and patent we know there’s a lot of debate over how strong it needs to be to encourage the right amount of innovation, without overprotecting, etc. Did you go looking for opera first? Did you go looking for Napoleon? Did you go looking for old copyright law?

    MOSER: No. So, I’ve done a lot of work on patents. And when you do the same thing over and over and over again, you just get bored. And I sang a lot as a kid, and I was trying to sing opera in college, and then I took economics at the same time, and I liked that better.

    DUBNER: Do you have an example for us of an opera that was composed during that era, in one of those states that you said Lombardy and Venetia, you said?

    MOSER: Yeah, so we have a Rossini opera, LItaliana in Algeri, which I think would be a nice one.

    DUBNER: Let’s hear some. Petra, you’re welcome to join in, if you’d like.

    MOSER: If you will, I will too.

    Let me break in here to say I chose not to sing that night, because I wasnt warmed up.

    DUBNER: Okay, so tell us a bit about this Rossini piece, and how it’s an example of the phenomenon that you’ve measured.

    MOSER: Rossini was a very peculiar character, as many of these composers. He was also poor. And so he is a good example of the way in which copyright influences composers. So, he really responded to what people paid him. So, we have records of him saying to the theater managers, Look, you are not paying me enough, so I’m just going to give you the same stuff over and over and over again. I just take this aria, and I’ve changed a little bit, and that’s it. And that’s precisely what we think is not novelty what we think is not creativity. But when he actually got enough money, then he would really make something that was better.

    DUCKWORTH: So what’s really interesting about that is that creativity, most people think of as being intrinsically rewarding, right? And in fact, people think that when you pay, you actually decrease the intrinsic amount of it. No?

    MOSER: This completely fits economics. He is poor. His mother and father were itinerant musicians. So he didn’t come in saying, Oh, I’m just gonna do this for fun. So he did it, in part, to make money. So, suppose, say, a composer today needs $2,000 to live. And say before copyright, you get like just $1,000 per opera. And now with copyright, because they have to pay you for repeat performances, you get $2,000. So now he only has to write one opera instead of two. That gives him the freedom to do precisely what he wants to do. So we actually see this in Rossini and other people, that they make things more complicated, they play around with things and he now has more time and he has more freedom. So it’s a wealth effect.

    DUBNER: I’m curious where you land on issues of copyright and patent ownership, in a world that’s obviously gotten a lot more complicated. And what your position is on the optimal copyright policy.

    MOSER: Having basic copyright protection is important for two reasons. The first one is that it gives people an incentive to produce better work, but then the other one is if you actually make art something that people can make money off, you also change the type of person who can become an artist.

    So we see this actually with 19th-century novelists. Before copyrights were really a thing, the only people who would write were people who, when we matched them with their parents’ wealth records, they were actually just wealthy thered be men and women, but they would both be wealthy. Once you have stronger copyrights in England, then, when you look again at the parents of the people who would become writers and become novelists, now all of a sudden we have people from humbler backgrounds.

    DUBNER: Petra, thank you so much for playing with us. Our next guest is a psychology professor at Cornell who studies how people make moral and ethical judgments. Would you please welcome David Pizarro. Hi David, what do you have for us tonight?

    David PIZARRO: Suppose that you walked into a public restroom, and there’s

    DUBNER: Whatever comes next is not good.

    PIZARRO: And there’s just a mess, an un-flushed toilet. How disgusted would you be? Say, 10, really, really, really disgusted. Zero, wouldn’t bother you.

    DUBNER: This one goes to 11, I’m gonna say.

    DUCKWORTH: Depends on what’s in the toilet. As low as 5, as high as 10.

    AVIRGAN: I’d probably be in the 3 to 6 range.

    DUBNER: Really?

    AVIRGAN: I’ve seen some stuff.

    PIZARRO: My follow-up is, what do you think this has to do with who you voted for in the last election, say the Presidential election?

    DUBNER: And do you study disgust?

    PIZARRO: I do study disgust. I’m really easily disgusted. So it’s a difficult thing to do, but that’s what grad students are for.

    DUBNER: All right. So the the example you’re using is an unflushed toilet. Could you use a different example?

    PIZARRO: One of my favorite examples, actually: how disgusted would you be if you took a sip of a soda can and realized it wasn’t yours? It was a stranger’s?

    DUCKWORTH: Zero. I ate food backstage that literally

    DUBNER: My plate, actually.

    DUCKWORTH: Yes, and I didn’t even know whose it was.

    DUBNER: I’m glad you brought that up, because I thought that was really strange. So you’re looking at how the emotion is disgust an emotion, by the way?

    PIZARRO: Yeah, most people call it an emotion. I mean, there’s some debate, because it seems a little different from the other emotions, because it’s so reflexive. But I think most people who study disgust would call it an emotion.

    DUBNER: But what you’re getting at is, your research is about the relationship between disgust and political affiliation?

    PIZARRO: That’s right, political orientation. So, how conservative or liberal are you on the spectrum? And what we’ve found the more disgusted you were, the more likely you were to say you were conservative. We’ve now looked at this across different countries, in different languages. We keep finding this relationship. The more easily disgusted people say they are, the more likely they are to be toward the right of the scale, less easily disgusted, toward the left.

    DUBNER: Let me ask you: so theres a question we came across in a series we’ve been doing on creativity, and especially if you’re in the creative arts, the political orientation is way, way left. That led to conversations about, is there something about creativity in the arts that is correlated with liberalism? Because if you think of liberalism as essentially wanting to change the state of the thing, and conservatism as an attitude toward traditionalism, I’m curious whether you have anything to say about the mechanism by which that kind of relationship may exist.

    PIZARRO: Yeah, that’s been the most interesting question to us, because if you just demonstrate a relationship, that doesn’t get at the heart of the question. The question was what is the nature of this relationship? So one way to ask that is, what part of conservatism is really being captured by this? And so in looking at various measures, what we see is exactly what you said, Stephen. It’s the traditionalism aspect. Keeping things the way they are. So the old ways of doing things are good, don’t do the new things.

    This shows up in other ways that you could ask the question. So one of the big findings in personality psychology is the dimension called openness to experience people who are more liberal are very high in openness to experience. They may want to try out new things. People who are more conservative are very low in openness to experience. So you can see disgust as one of those emotions that’s kind of like, Well, I have a set level. How risky do I want to behave for a reward? So do I try a new food?

    DUCKWORTH: So is it true, then, that picky eaters and hypochondriacs are more likely to be politically conservative?

    PIZARRO: I don’t know the answer to picky eaters. That’s a very good question.

    DUCKWORTH: That would be your prediction maybe, right?

    PIZARRO: It would be the prediction. Although, whenever I talk about this stuff, I always want to point out that this isn’t it’s not as if how grossed out you are is 100 percent predictive. About between 3 and 10 percent of why you might be liberal or conservative seems to be captured by disgust measures.

    DUBNER: Hey, something I’ve wondered about a long time is, the people who care for sick people, lets say, I’m astonished that they’re able to do it so well and regularly, et cetera. And I often wonder, is that acclimation, or is it a trait?

    PIZARRO: That’s a really good question, And in fact, Angela’s colleague at Pennsylvania, Paul Rozin, one of the pioneers who studied this, did a study looking at first-year med students asking this question, trying to see, if you ask a bunch of questions like the ones I asked you, in general how easily disgusted are you in everyday life, and you get a score so if we asked everybody here, there’d be a nice normal distribution. Some people are really easily, some people are not.

    He was asking those questions of incoming med students, and what he found was that most students were like the rest of the population coming in. After a year of medical school, when as you might know, you have to poke into bodies, and you get used to bodily fluids and all that stuff they were less disgusted when it came to that stuff. But not in general they were still disgusted by all the other stuff, but they acclimated. So the answer to your question is, we’re really good at acclimating to specific things. Anybody who’s a parent knows you get used to certain things.

    DUBNER: Jody Avirgan, David Pizarro has been telling us about the politics of disgust, which are really interesting, and lead to a lot of interesting thoughts and questions. Anything factual we should know?

    AVIRGAN: This isn’t exactly a fact check. But I do want to go back to how you actually measure disgust. You ask people about hypothetical scenarios, and ask them to rate how disgusted they were. Do you trust that?

    PIZARRO: Thats one way. Other people have done the work of correlating

    AVIRGAN: Of actually disgusting people in real time love it.

    PIZARRO: Of actually disgusting people. So they’ve brought people into the lab and they’ve asked them to do really gross but safe things. So, would you eat a piece of chocolate shaped like dog poop?


    DUBNER: I think Angela’s answer says less about her liberalism than about her chocolate attitude.

    PIZARRO: That may be right. And that’s why it’s a noisy measure.

    DUBNER: Exactly. David Pizarro, thank you so much. I really enjoyed having you here.

    * * *

    DUBNER: Our next guest is the commissioner of the New York City Department of Transportation. Please welcome Polly Trottenberg. Polly, nice to have you here.

    Polly TROTTENBERG: Thanks for having me.

    DUBNER: First of all, tell us what the New York City Department of Transportation is and does, and how it differs from Andy Byford’s New York City Transit Authority please.

    TROTTENBERG: It’s a good question. Andy and I work together a lot, but New York City Department of Transportation, we’re responsible for roads, bridges, bike lanes, ferries, bike share, car share.

    DUBNER: Before we get into what you’re working on and what you’re going to tell us, Andy began by describing the general state of transit. What about your overall view what are the big problems, and how many different dimensions do they exist on?

    TROTTENBERG: We actually have a different kind of challenge for a lot of my infrastructure, which is, it’s kind of a fun challenge. The city is growing in leaps and bounds. New York City now, population 8.6 million people, the highest it has been in the city’s history. Sixty-two million tourists last year. Incredible economic activity. Construction. And then of course, we have things like Uber and Lyft and Amazon, and Fresh Direct, which have just filled our streets, and made an incredible competition for space.

    Side note: Fresh Direct is an online grocery-delivery company in New York. Theyre famous for having their trucks idle on the streets for hours. But one other thing they do is they rate their fruit on a five-star scale. So whatever fruit has five stars this week maybe its pixie tangerines or red plumcots you know itll be at peak flavor. Its a smart system, and I wish this practice would spread; just thought you might like to know.

    TROTTENBERG: Meanwhile, a new generation that’s not so car-centric. They like transit, they want to ride bikes. They maybe want to ride scooters. There’s a big competition now, at least in my world, for street space.

    DUBNER: So, what do you have for us tonight specifically, then?

    TROTTENBERG: Well, when you build a bike lane on an avenue in New York City, what happens?

    DUBNER: Youre asking about safety? Are you asking about congestion? Are you asking about density, speed, or whatnot?

    TROTTENBERG: So, I mean all of the above. There’s a traditional view, when people who maybe aren’t cyclists think about bike lanes, they focus on the traffic elements of it. But there are actually a whole lot of other elements that come in when you put in a bike lane.

    DUBNER: So, I do know that when you add a lane to a highway, let’s say, it actually doesn’t ease congestion because it draws demand, right?

    TROTTENBERG: Induced demand is the phrase youre looking for.

    DUBNER: Right. So is it the case that when you subtract a lane of car traffic and replace it with a bike lane, that actually it does not cause car congestion problems?

    TROTTENBERG: I’m happy to say, if you take out that lane but you redesign the street at the same time, you make the traffic move in a more orderly way, you put in turn lanes, and you change the signaling, you can keep the traffic speed some cases better, and a lot of cases sort of the same, while also adding in a safe space for cyclists. And just one of the statistics, where we put in bike lanes, we see huge safety improvements, not only for cyclists, who we consider a vulnerable population on the street, but for pedestrians and for motorists too, because it calms the traffic and it organizes it better.

    DUBNER: I love the way that you frame the problem, which is that there’s a competition for a resource, and the resource is space street space, lane space, and so on. One thing that I’m curious on your position in terms of congestion in New York City, I believe that 97 percent of New York street parking is free. Transportation scholars have found that an enormous amount of congestion in New York, and other places that offer free parking, is caused by cars cruising around looking for a parking spot. So economists think this is idiotic, that you’ve got something of value this parking space that you’re charging zero for, especially when it has so many negative externalities causing congestion for everybody else, pollution, etc. So, have you thought about eliminating or severely limiting free street parking, as a means to address congestion generally in New York City?

    TROTTENBERG: Obviously from the economist’s point of view, it’s the same problem, both the parking and the road space, which is, it’s a scarce resource and demand greatly exceeds supply. We should price it. It’s a perfectly logical economic place to be. It is an impossible political place to be.

    DUCKWORTH: Nobody wants to give up their free parking.

    TROTTENBERG: The politics of parking has been, certainly for me, one of the most eye-opening parts of my job. It is something that is very intensely debated. We have, over the time that I’ve been in this job for five years, we have modestly raised parking rates. We have added in, in some places, bike share and car share, we’ve taken some of those spaces and repurposed them for uses that are more shared. But it’s certainly been a slow process.

    DUCKWORTH: Is that because of the endowment effect, that now that people already have their free parking. I mean, hard to get, but free parking. You just can’t take it away.

    TROTTENBERG: Yes. It’s not complicated.

    DUCKWORTH: Can I ask you are somebody who has a really hard job

    TROTTENBERG: And a lot of grit.

    DUCKWORTH: Well, that is where I was going. A lot of grit. And I wanted to know how you got into this. I mean, I don’t know if you were a little girl and said, I’m going to be the commissioner of the New York City Department of Transportation.


    DUCKWORTH: So could you just share a little bit of the story? How did you get into this calling?

    TROTTENBERG: I went to college here in New York, back in what we would say were the bad old days, when the city was experiencing a lot of difficulties, a lot of crime, a lot of disinvestment. And I just got very interested in urban policy and transportation policy. And one of the great success stories of New York again, why my streets are so full, why Andy’s subways are so full we took a city where there had been disinvestment, and we really turned it around. At one time, the Williamsburg Bridge was shut down because it was coming to pieces. Now we really invest in our bridges and our roads. So I think being part of that process and now, today we have bikes and scooters, and Uber and Lyft, and all these other really exciting changes.

    DUCKWORTH: Does the bike lane innovation actually improve physical health? Because one of the other major trends over the last 50 years is that we just sit around all the time.

    TROTTENBERG: If you think about cycling as a mode, it is an inexpensive mode to own and operate. And for us to provide for. I mean, basically it’s paint. It emits no carbon, burns no fuel. It gets you moving, it’s physical exercise. It connects you to your city. Of course, it is terrific for general individual health, public health, and the health of the city.

    DUCKWORTH: Is there any evidence of that? I’m wondering whether when you put in a new bike lane, there is any measure that the physical health of, I dont know, that community, that neighborhood has that might be very difficult to quantify, but it would be very exciting if you could.

    TROTTENBERG: Well, we’re going to be looking at the long term health statistics. Anecdotally, we see evidence that it is getting people moving, particularly kids. But I don’t know, maybe Jody will dig up some some better numbers than I have.

    DUBNER: If you were able to start from scratch, would you have streets on a grid system? Because one thing that a grid does is it encourages speed, because it’s wide open, straight.

    TROTTENBERG: There’s a wonderful book written just recently about how the grid came about in New York City. And it was sort of a bunch of half-drunken foreign guys who threw it together a little haphazardly, when you read the book, it’s very surprising. When I’m in other cities where they have less of a grid and for example, they have alleyways. I like to joke, I have alley envy. Because here in New York without those alleys, there are no places for the garbage trucks and the deliveries and the utility poles. Everything has to happen on those same streets where the cars are traveling, the buses are traveling, the bikes are traveling, and the pedestrians are traveling. So no, I think there are places where a grid is very efficient, but I would design it very differently.

    DUBNER: Jody Avirgan, Polly Trottenberg has been telling us about the roads primarily, and other things in her purview. Did you find anything that needs flagging?

    AVIRGAN: Angela, to your question about effects on public health, there was one study from the Mailman School here at Columbia University. It tries to measure the effect of a bike lane on an increase in the probability of riding a bike, and then quantify the effect on health, and reduced pollution, and then measures that against other public-health measures. And the conclusion is that investments in bike lanes are more cost-effective than the majority of preventative approaches used today, so well see. That’s one study.

    DUBNER: Polly Trottenberg, thank you so much for joining us tonight. It is time I’m so sad to say for tonight’s final guest. She is a professor of mechanical engineering at the University of Pittsburgh. Would you please welcome Katherine Hornbostel. Katherine, it is nice to have you. You are our last guest tonight, so make it good. What do you have for us?

    Katherine HORNBOSTEL: All right. No pressure. So, if I handed you a bucket filled with water and laundry detergent, and asked you to tackle global warming, what would you do?

    DUBNER: Oh, that’s so easy.

    DUCKWORTH: You would wash something.

    DUBNER: I would make a giant bubble bath and I would invite

    DUCKWORTH: With laundry detergent.

    DUBNER: Hey, don’t yuck my yum. I would make a giant bubble bath, and I would invite the climate lions and the climate lambs to lie down together in the bubble bath and relax, and proceed to have an empirical, sane conversation about the best ways to address climate change. That’s what I would do with a big bucket of soapy water.

    HORNBOSTEL: I really like that approach.

    DUBNER: Are we done here? Is that the answer?

    DUCKWORTH: That’s exactly what she was gonna recommend.

    HORNBOSTEL: I can’t say I wrote about that approach in my paper. Do you have any other suggestions?

    DUCKWORTH: I don’t really know what’s in laundry detergent can you give me a hint?

    HORNBOSTEL: Yes, so I’m actually talking about the active ingredient sodium carbonate. I don’t know if that helps.

    DUCKWORTH: Sodium carbonate. Is that baking soda?

    HORNBOSTEL: Very similar.

    DUBNER: Would you wash the sky?

    HORNBOSTEL: Not quite what would I be wash are you saying, like, throw a bubble bath in the air?

    DUBNER: Like one of those geo-engineering schemes that run a giant hose into the stratosphere and spray out some benign material that refracts sunlight, that kind of thing?

    HORNBOSTEL: Not quite. That is a very creative approach. So, I’ll give you guys a little bit of a hint: I’m going to send you to a coal power plant with this bucket of water and detergent.

    DUCKWORTH: So, what is the specific, I guess, byproduct or whatever, of coal burning, that’s bad and then maybe we’ll be a little closer.

    HORNBOSTEL: There are a lot of things that come off of coal that are bad. Some of them, thankfully, we already have regulations against things like SOx and NOx. They already scrub a lot of the crap that comes off of coal plants.

    DUBNER: Can you give the full name of SOx and NOx, please?

    HORNBOSTEL: So, sulfur oxides and nitrous oxides. Gaseous compounds that are bad for the environment.

    DUBNER: Because we all thought it was a Dr. Seuss story.

    DUCKWORTH: I was like, That is so cute! Why would we want to legislate against them?

    HORNBOSTEL: So, carbon dioxide is the other obvious one, that there are no regulations for, currently, for coal plants.

    DUBNER: Are some of the emissions in a coal plant, do they react in some way, negatively, I guess, with sodium carbonate? Is that the idea?

    HORNBOSTEL: You’re on the right track, you’re getting very close.

    DUBNER: So I don’t think we’re going to get closer without a mechanical engineering degree, which you do have.

    HORNBOSTEL: So, this particular combination water and sodium carbonate if you dissolve it in water, can react with carbon dioxide and extract it from a gas stream coming off a coal plant. And the really interesting thing that I’ve studied is that if you put these chemicals into little capsules that look like caviar, you can actually pack them into a reactor, attach it to a power plant, and selectively take out the carbon dioxide that’s being released from the exhaust.

    DUBNER: So you’re describing a form of carbon capture, correct?

    HORNBOSTEL: Yes. It is a carbon-capture technology.

    DUBNER: What stage is it in? Are you one of the inventors of said technology?

    HORNBOSTEL: Yes, I was on a team at a national lab from the D.O.E. that invented and studied this technology. It’s been demonstrated at a lab scale. Currently we’re looking for partners to adopt it. Not at a power-plant scale yet, but at smaller scales to test out and figure out the kinks and try to scale it up.

    DUBNER: And what you’re describing, there is obviously chemical reactions here. But is it essentially a filter?

    HORNBOSTEL: It’s a good question. It’s not exactly a filter I guess you could think of it from a big picture standpoint as a filter, though. So you’re sending the nasty gas from a power plant through it, it selectively takes out carbon dioxide. At some point it reaches capacity. And then you have to de-sorb or remove the CO2 from the full solution.

    DUBNER: And how do you do that?

    HORNBOSTEL: So, usually you have to heat up steam and send it through these capsules, and it’ll take the carbon dioxide back out. And then you pressurize it and put it underground.

    DUBNER: Okay. So, it’s carbon capture, you bury the carbon underground, which some people have big concerns about there. What’s your level of concern on that?

    HORNBOSTEL: I think that’s very safe, if you it’s actually being done already in a lot of places it’s fairly safe and there’s a lot of science to back up the fact that it’s not going to leak out or cause problems, if you

    DUCKWORTH: Does it just stay there forever?

    HORNBOSTEL: Really, if you find the right formations that’s kind of beyond my research area, but the scientists on that side are pretty confident you can store a lot of carbon dioxide underground. Just the sheer magnitude of carbon dioxide emissions requires that we put it underground at this point.

    DUBNER: So the unit or machine that you’re talking about, what do you call it?

    HORNBOSTEL: So I guess I would call it a reactor. So, it’s basically a giant vat filled with this solution that will react with carbon dioxide to hold it, until you need to release it and store it.

    DUBNER: So, I can’t tell whether it’s because you cleverly began the conversation by talking about laundry detergent. Was it as simple, really, as just getting something kind of like laundry detergent and figuring out how that responded to these carbon emissions?

    HORNBOSTEL: Yeah I mean, so it is simple compared to other technologies for carbon capture. By putting them in small capsules, what you’re essentially doing is raising the surface area. So imagine a big vat filled with caviar. You have a very large surface area of contact between the liquid in those capsules and then the gas flowing through, which really allows you to use these very simple ingredients, instead of a very tricky or corrosive solvent instead.

    DUCKWORTH: So you said laundry detergent is a lot like baking soda. Now, this might be a digression, Stephen, but since I have a mechanical engineering professor is that little box of baking soda that I have in my refrigerator, is it really absorbing the odors?

    DUBNER: I love how she can tell us about carbon capture, and this is the tough question for her.

    DUCKWORTH: This is the most important question of the evening.

    HORNBOSTEL: The more degrees you get, the farther removed you are from practical solutions to things like that. So, sodium carbonate reacts with carbon dioxide. It actually forms baking soda. So that is the reaction that is the product of this reaction. I guess to emphasize here is that both the initial chemical and the final product are both very safe, very cheap, very abundant.

    DUCKWORTH: I have to ask this question: this is such a simple, elegant, commonsense, straightforward, hiding-in-plain sight was your team composed mostly of women?

    HORNBOSTEL: We had a very good proportion of women on my team.

    DUCKWORTH: Just a hypothesis.

    DUBNER: So, when I hear the words safe, cheap, and abundant, it does sound literally too good to be true. So let’s pretend that you were not involved with this project at all. But you knew about it, and you knew all the other competing carbon-capture systems that are being developed and funded and so on. What would you put the odds of this project succeeding I’m not saying as the only carbon capture solution, but as a significant one?

    HORNBOSTEL: So, I’m very confident that it could work if we invested and did it. Confidence in terms of whether or not this will be the winning technology lower, much lower, just because there are a lot of technologies out there for carbon capture, there’s a lot of competition, there are some others that are much more mature than ours.

    DUBNER: Does it have a name?

    HORNBOSTEL: We call it M.E.C.S. It’s an acronym so, Micro-Encapsulated Carbonate Solution.

    DUBNER: Do you think we could crowdsource a better

    HORNBOSTEL: I just call them capsules, but I’m open to suggestions.

    DUBNER: I like the caviar idea.

    HORNBOSTEL: Carbon-Capture Caviar.

    DUBNER: Carbon-Capture Caviar.

    DUCKWORTH: Oh, I like that.

    DUBNER: It says here you invented something else a few years back called the Pump2Baby Bottle.

    HORNBOSTEL: I didn’t expect you to bring that little curveball up. Yes. So I had twins when I was in grad school. I was pumping for them. And they did not nurse well, and so I invented this little hack where you can actually feed your babies breast milk as you’re pumping it. So you attach it to any breast pump, as you’re pumping the milk, the baby starts drinking it.

    DUCKWORTH: That is genius. Did you patent it? Did you make a lot of money?

    HORNBOSTEL: In the process of patent prosecution right now. Filed for patent, working on it.

    DUBNER: Congratulations.

    DUCKWORTH: If you are not jumping up and down with excitement about it, then you have not nursed a child or pumped.

    DUBNER: Yes, I haven’t. I’m gonna confess right now. Hey, Katherine Hornbostel, thank you so much for telling us something we didn’t know. And can we get one more hand here for all our guests please. It is time now for our live audience to pick a winner. Obviously, all our guests have come here in the spirit of inquiry and information-sharing so we shouldnt reduce this thing to a horse race but well, this is America, and we really like to know who wins. Whos it going to be?

    • Andy Byford, with How to Fix New York City’s Subways,
    • Petra Moser, with Napoleon’s Copyright Legacy,
    • David Pizarro, with The Politics of Disgust,
    • Polly Trottenberg, with How to Fix New York City’s Roads, or
    • Katherine Hornbostel, with How to Launder Your Carbon.

    DUBNER: Our grand prize winner tonight we had a dead tie. So thank you so much to both Andy Byford and Petra Moser, for telling us about fixing New York City subways and Napoleon’s copyright legacy. To commemorate your victories, you will each receive this Certificate of Impressive Knowledge. And it reads, I, Stephen Dubner, in consultation with Angela Duckworth and Jody Avirgan, do solemnly swear that both Andy Byford and Petra Moser told us something we did not know. And for that we are eternally grateful. Thank you so much. That’s our show for tonight. I hope we told you something you did not know. Huge thanks to Jody and Angela, to our guests, and thanks especially to you for coming to play Tell Me Something

    AUDIENCE: I Don’t Know!

    DUBNER: Thank you very much.

    Freakonomics Radio is produced by Stitcher and Dubner Productions. Our staff includes Alison Craiglow, Greg Rippin, Harry Huggins, Zack Lapinski, and Corinne Wallace; we had help this week from Morgan Levey, David Herman, and Dan Dzula. Our theme song is Mr. Fortune, by the Hitchhikers; all the other music was composed by Luis Guerra. You can subscribe to Freakonomics Radio on Apple Podcasts, Stitcher, or wherever you get your podcasts.

    Heres where you can learn more about the people and ideas in this episode:




    The post Freakonomics Radio Live: Would You Eat a Piece of Chocolate Shaped Like Dog Poop? (Ep. 372) appeared first on Freakonomics.

    [ + ]
    Thu, 21 Mar 2019 03:00:28 +0000
    Freakonomics Radio Live: Would You Eat a Piece of Chocolate Shaped Like Dog Poop? (Ep. 372)

    The all-star food writer Kenji LThu, 14 Mar 2019 03:00:13 +0000
    Why You Shouldnt Open a Restaurant (Ep. 347 Update)

    Gary Cohn was leaving the number two position at Goldman Sachs when he met with Donald Trump. But was this Wall Street veteran ready for the challenges of Pennsylvania Avenue? (Photo: Pool/Getty)

    For years, Gary Cohn thought hed be the next C.E.O. of Goldman Sachs. Instead, he became the adult in the room in a chaotic administration. Cohn talks about the fights he won, the fights he lost, and the fights he was no longer willing to have. Also: why he and Trump are still on speaking terms even after he reportedly called the president a professional liar.

    Listen and subscribe to our podcast at Apple Podcasts, Stitcher, or elsewhere. Below is a transcript of the episode, edited for readability. For more information on the people and ideas in the episode, see the links at the bottom of this post.

    * * *

    Stephen J. DUBNER: So your life story, I guess, is pretty remarkable.

    Gary COHN: Thank you.

    DUBNER: You were not destined for

    COHN: For Wall Street.

    DUBNER: For Wall Street.

    COHN: Any street.

    Gary Cohn was born in 1960 in the suburbs of Cleveland. He had severe dyslexia and was a terrible student. As a consequence, he bounced from school to school. If there were an award for least likely to succeed, Cohn might have qualified. His parents were worried he wouldnt make it through high school. His grandparents ran an electrical-contracting business, where Gary worked after school. He was a whiz with inventory and anything else numerical.

    COHN: As the rest of the world was telling me, You’re going to be a disaster, you’re a failure, maybe you’ll be lucky to drive a truck, my grandparents who I really admired, who’d built the family business they kept saying, You’re going to be fine. And they were great people in my life, really influential.

    Cohn did make it through high school, and college at American University, where he programmed computers and became obsessed with the financial markets. But back home in Cleveland, the best he could do was a sales job in the home-products division of U.S. Steel. On a work trip to New York, he stopped in at the commodities exchange, hoping to somehow land a job there. He hitched a ride to the airport with a stranger a guy whod just been put in charge of the new options-trading desk at his brokerage firm. He admitted to Cohn he didnt know anything about options. Cohn replied that he knew everything about them. Which was a lie. But it got Cohn an interview, several days later. By then, it was no longer a lie: Cohn had read the definitive book on options trading four times over an act of extreme stamina for a dyslexic. He got the job. Several years later, in 1990, Cohn was hired by Goldman Sachs. He wound up working at Goldman for 27 years, the last 10 as president and C.O.O. But it was the job he took in early 2017 that would make Gary Cohn a household name: director of the National Economic Council under President Trump. How did a Wall Street rationalist deal with a Fifth Avenue hyperbolist?

    COHN: I treated the President of the United States the way I would have liked to have been treated. That’s how I dealt with him.

    * * *

    I spoke with Gary Cohn the first week in March. It was starting to look like the trade war between the U.S. and China might be moving toward a peaceful conclusion although, that hasnt happened yet. Also: thered been yet another report of behavior unbecoming the President of the United States this time, a New Yorkerpiece alleging that in 2017, Donald Trump had instructed Gary Cohn to get the Justice Department to block a media deal that Trump disliked. Cohn reportedly told chief of staff John Kelly, Dont you fing dare call the Justice Department. We are not going to do business that way.

    DUBNER: Have you communicated with the President since you left the White House?

    Gary COHN: Yes.

    DUBNER: Can you tell us anything about that?

    COHN: We have a very amicable relationship. We usually talk about the economy. Sometimes about personnel. We’ve talked about personnel, and when he’s had to fill a job or two, I’ve talked to him.

    DUBNER: I’m a little surprised to hear that you’re on such good terms with the President still, mostly because I read Fear by Bob Woodward. And you’re kind of the star of that book, or one of the stars of that book. The most famous story concerns you removing a letter that somebody drafted for the President to sign, a letter to the President of South Korea that would have terminated KORUS, the U.S.-Korea Free Trade Agreement. So let’s hear your version of that. Is the reporting in Fear essentially true, and did you participate?

    COHN: I’m not going to comment on that.

    DUBNER: Do you want to comment on whether you participated in the writing of the book. Did you talk to Woodward or

    COHN: I’m not going to comment. I’ve said all I’m going to say on the Woodward book. And as far as I’m concerned, it’s sort of come and gone.

    For the record, heres what Cohn had to say when Fear was published: This book does not accurately portray my experience at the White House. I am proud of my service in the Trump Administration, and I continue to support the President and his economic agenda. But, also for the record: in Fear, Cohn calls Trump a professional liar. And in a meeting over steel tariffs, which Cohn vehemently opposed, heres what he reportedly told Trump and Peter Navarro, the Presidents favorite economist. If you just shut the f up and listen, you might learn something. So how can it be that Cohn and the President are still on speaking terms?

    COHN: I think the President is about results, and when he looks back at our time together, I was part of a team that got a lot done. We got tax reform done.

    It also says something about the kind of businessman Cohn was: a team player, and not a backstabber; eager to debate the facts but quick to forget a fight; and a man who exercised substantial patience. At Goldman Sachs, he was heir apparent to the C.E.O., Lloyd Blankfein, for many years.

    COHN: So the story is: when I was asked by Lloyd and the board to become president, chief operating officer, Lloyd called me and Jon Winkelried into a room. We were co-s at the time and said, Guys, will you give me two years? I got to know you’re committed for two years. And I said, Lloyd, I’ll give you two. Two’s not hard. But youve got to understand, I think these are seven-to-10-year jobs. I don’t think these are lifetime jobs.

    DUBNER: And you did it for 10, correct?

    COHN: I did it for over 10. And literally at seven years, I started getting a little antsy. Lloyd, at that point, ended up getting sick. And I wasn’t going to rattle the boat or rock the boat at all in year seven or eight, or maybe it was eight, nine

    DUBNER: He was treated for cancer. I don’t know if you were technically acting C.E.O. but you were essentially

    COHN: I did whatever I did to protect the firm. I went when I needed to go, I did what I needed to go. And to me the most important thing for Lloyd was for him to get healthy. We had worked together our whole life. But at that point, I was letting the board know that I wasn’t going to be here forever. So I sat down, and I made it clear that I would be gone by the end of the year.

    DUBNER: Oh, regardless?

    COHN: Yeah, I was going. And the Trump thing was pure lucky coincidence.

    We should note two things here. The first is that Gary Cohn is a registered Democrat although, to be fair, a Goldman Sachs Democrat isnt exactly an Elizabeth Warren Democrat. Cohn did make a lot ofcampaign contributions to Democrats over the years, but also to lots of Republicans, including a political action committee called Every Republican Is Crucial. The second thing to note is that Donald Trump was the sort of businessman, prone as he was to bankruptcy and hyperbole, that Goldman Sachs avoided doing business with.According toWilliam Cohan, whos written a definitive history of the firm, Goldman determined never to do business with Trump and conveyed that message to its new recruits. Keep in mind this is the same Goldman Sachs that until recently was happy to do bond deals with the government of Venezuela. In any case, by the fall of 2016, Trump had emerged as the Republicans nominee for President.

    COHN: So if you remember, after the convention in Cleveland, the first debate in September at Hofstra was supposed to be an economic debate. And remember, the operative word there is supposed to.

    Thats when Cohn got a phone call from Jared Kushner, Trumps son-in-law and adviser.

    COHN: And said, Hey, we’re preparing the nominee for the economic debate at Hofstra. Can I come in and talk to you about what’s going on in the U.S. economy? We had a mutual friend.

    DUBNER: And what was your initial response to whatever the Trump economic ideas were at that point?

    COHN: I clearly support deregulation. I clearly support lower taxes on corporate repatriation, redoing the tax system. So there were a lot of big, high-level things I supported on the economic side.

    TRUMP: You are going to approve one of the biggest tax increases in history. You are going to drive business out. Your regulations are a disaster. And by the way, my tax cut is the biggest since Ronald Reagan.

    DUBNER: Then on the other hand, there was trade and tariffs and immigration and so on.

    TRUMP: NAFTA is the worst trade deal, maybe ever signed anywhere.

    COHN: On the flip side there were things that I support on Hillary Clinton’s side, and things that I didn’t support on Hillary’s side. And it was interesting, when Jared called, I walked down three offices to the chief of staff of the executive office of Goldman, John Rogers, a political veteran, and I said, Hey, John, should I meet with him? And he’s like, He’s the Republican nominee. If the Democratic nominee called you’d meet with her too right? I go, Yeah. Okay. So go meet with him.

    DUBNER: Were you not put off at all by the fact that he was considered by a lot of people to be, whatever adjective you want to use I mean, the most anomalous major party candidate we’ve had probably ever.

    COHN: But he was still the nominee.

    DUBNER: Right.

    COHN: He was still the Republican nominee for president.

    DUBNER: But I’m asking you if you were put off as you reputationally, for Gary Cohn or for Goldman whether that was a consideration.

    COHN: And that’s why I went, and I asked John Rogers who really is one the most astute political guys I knew had been in and around Washington forever, been in the Treasury, been in the White House. I said John, should I do this? He goes, What are you asking me? Of course you’re going to do this. If any nominee for president calls you from one of the major parties you’re going to meet with them. And I didn’t meet with him. I met with his advisers.

    Once Trump was elected, Cohn did meet with him. The meeting went very well even though Cohn is what Trump calls a globalist, a believer in free, fair, and open trade. Trump had essentially run against that position. But Cohns views on deregulation and tax reform especially lowering the corporate rate they were exactly what Trump wanted to hear. Cohn also tried to pitch Trump on preparing for the huge disruption that automation will bring to labor markets; and the need to maintain a strong flow of immigrants.

    According to the Woodward book Fear, Trump was so enthusiastic about Gary Cohn that he offered him a number of jobs then and there: deputy secretary of defense; director of national intelligence; secretary of energy; director of the Office of Management and Budget. You know what? Trump finally said. I hired the wrong guy for treasury secretary. You would be the best treasury secretary.

    This must have been a bit awkward: as Woodward reports, Trumps pick for treasury secretary was also in the room Steve Mnuchin, another Goldman Sachs alum. Cohn didnt accept any post at the meeting. But some time afterward, he was offered the role formally known as Assistant to the President for Economic Policy and Director of the National Economic Council. By this time, remember, Cohn was already on the way out at Goldman Sachs.

    COHN: The meeting with Donald Trump happened after I’d already made my decision. So I was in motion.

    DUBNER: Did anyone say to you, however, Gary, this president is anomalous, and he is a human third rail, and what are you thinking about? Did anyone say that to you?

    COHN: Of course.

    DUBNER: And what did you say?

    COHN: I said, The President of the United States has asked me to work for him. I am going to go in and serve and do the best I can for my country. Remember, I am taking an oath to the Constitution of the United States to protect and defend, not an oath to the President of the United States. And I am going to go serve the people of the United States.

    The Trump White House turned out to be stranger than Cohn, or anyone, could have imagined.

    COHN: The White House in itself is an amazing organization in many ways. It’s the craziest organization under any presidency, and it’s an amazing organization under any presidency.

    Under Trump, workflow was unpredictable. Protocol was ignored. Turnover was endemic. People started calling Gary Cohn the adult in the room: disciplined, focused, and most of all dedicated to tax reform, a goal he shared with the President. Even if their numbers didnt line up.

    COHN: This is not a secret that at one point he wanted a 15 percent corporate tax rate. And I just told him a 15 percent corporate tax rate will not work.

    DUBNER: Will not work will not raise enough money, or politically?

    COHN: It just a) politically and b) algebraic. I mean, when you start understanding the numbers of what a 15 percent tax rate means, we’d have to manipulate so many other things in the code. So, I personally would have settled for 25. The corporates would have settled for 25.

    He then said, Okay. I could live with 20. But if you and he was talking to Mnuchin and I at the time, he said, If you guys start at 20, you’ll end up going higher. I know you. I know you can’t negotiate that well. I said, If we start at 20, we’ll end up at 20, we’ll hold it. We’ll hold it. And we were holding 20. He was the one that kept willing he was willing to go higher.

    DUBNER: So what did it end up, 22?

    COHN: Twenty-one. Yeah, 21.

    Cohn also helped manage the political process, making sure the Presidents habit of insulting people via Twitter didnt undermine Congressional support for the tax plan.

    COHN: When we were really working taxes hard, there was no way I could deal with the president going after any one of those Republican senators I need every one of their votes. I don’t have a spare.

    DUBNER: So did you steal his phone? What did you do?

    COHN: No, no, no. We and Secretary Mnuchin and others, we kept reminding him. That was one of the reasons that we didn’t do anything in tariffs in the first year, is because a lot of our marginal voters are free-traders. And we didn’t want to give anyone an excuse to hold up a tax vote because they were going to retaliate on trade in the tax vote.

    While putting together the tax plan, just eight months into Trumps term, came a white nationalist rally in Charlottesville, Virginia.

    MARCHERS: Anti-white, anti-white, anti-white.

    MARCHERS: Jews will not replace us. Jews will not replace us.

    There were counter demonstrations as well, and violence. Trumps response is now infamous.

    TRUMP: You had some very bad people in that group. But you also had people that were very fine people, on both sides.

    And it did nothing to ease the tension; Gary Cohn, by the way, is Jewish.

    DUBNER: From what I’ve read, you were ready to resign then, and kind of had to be talked out of it. You were talked out of it.

    COHN: Yeah, we had had two or three, I would say, very intense, very open, very honest discussions. And it boiled down to the president asking me, as his leader of tax reform in the White House and the person that he felt could help him get it done, to please stay on through tax reform.

    DUBNER: All right.

    COHN: And I did agree to that.

    Trump signed into law the Tax Cuts and Jobs Act of 2017 on Dec. 22 of that year. It got through Congress without a single Democratic vote. In addition to lowering the corporate rate, it also incentivized U.S. firms to repatriate money theyd parked overseas, and to invest some of that money here. It also lowered personal tax rates across the board, including a dip at the highest income level. The Joint Committee on Taxationprojects the new tax law will be very generous to the very wealthy. But Cohn who is himself very, very wealthy he argues with that perception. Indeed, some of the new provisions hurt high earners: a lower cap on the the mortgage-interest deduction and a new $10,000 cap on the State and Local Tax Deduction, or SALT, which is especially punitive to high earners living in high-tax states states, by the way, that did not vote for Trump in 2016.

    COHN: There was a very big tech company in California I was at two weeks ago, where all the senior management was bitching at me because how much their taxes are going up. I said, Please tell Nancy Pelosi, because she was the first one that came out and said this was a tax cut for the rich. Well, it was not a tax cut for the rich in San Francisco and it was not a tax cut for the rich in New York City or in Illinois. One of the ways that we made the tax tables work, and we pushed money down into lower-income brackets, is you have to find revenue. We found revenue in this deduction, which if you see who it affects, the vast majority of the people it affects are the high-income earners.

    DUBNER: Big question: it’s been a while now, too early for big macro results, but how do you think your tax plan is working so far?

    COHN: I’m glad you say that, that it’s too early, because it’s amazing how everyone wants to take a 10-year tax plan and judge it after one year. We talked about increasing economic growth by one percent. And I think in essence we did that in the first year. We went from sort of two to sub-two percent to three and just below three-percent growth. We finally have real wage growth, wage growth in excess of inflation in the United States. It’s still not as high as we’d like to see it. We’re seeing job creation. We’re seeing movement in the labor force. And I do think that we’ve seen that disposable income in the system.

    So when you look at corporate earnings and you look at what’s going on in the stock market, a lot of that’s being driven by excess disposable income because of the tax rates. And I will be happy to be criticized if I’m wrong in the tax system, but we won’t know for five-plus years. We gave companies 100 percent of capital-expenditure expensing for the first five years, trying to get companies to make a long-term investment in the U.S. economy. And all we’re hearing right now is how U.S. companies aren’t paying taxes because they’re using that opportunity to invest in capital to manage their tax rate down. That is going to pay dividends for the next 20, 30 years.

    * * *

    Gary Cohn spent 27 years at Goldman Sachs, the massive investment bank and financial-services company. He never got the C.E.O. job he thought hed get, but you probably shouldnt feel too sorry for him. In 2007 alone, the first year of the financial crisis, Cohns compensation was$72.5 million. $72.5 million. In 2007. Goldman came through the crisis relatively well because of what came to be called the big short, a bet against the mortgage market whose collapse left so many other firms, and individuals, in big trouble.

    DUBNER: Goldman hedged itself really well and really smartly. But for the average, let’s say, American voter, they look at Goldman and say What are the goods and services that they provide? What value are they to me and why is a Gary Cohn, why is he making $72.5 million that year when the U.S. economy, the global economy, were starting to totally crater? And many people really do think of Goldman as the giant vampire squid sucking the lifeblood out of anything that they can. So persuade me that the activities of a firm like Goldman are not essentially rent-seeking, and that the profits of such activities are not out of line with how we generally think of a society like ours, which creates opportunity for all.

    COHN: I completely understand the question. I’m not offended. You can see I get the question completely. The service we provide, and we are in the service industry, no different than other services that people pay for. And we are a service economy. We’re in the service of giving advice, intermediating, providing liquidity. And that’s what people were willing to pay for. And when we talk about that rent-seeking, it’s interesting because you even said it yourself in asking the question. The vast majority of the time we’re selling a bond. So on one hand, we’re representing Venezuela selling the bond, on the other hand, we’re finding buyers. So we literally have to do both sides of the transaction. And we are not taking a principal position in there. We are finding a buyer that will buy a Venezuelan bond at a certain interest rate. We’re talking to the Venezuelan Central Bank or the Treasury saying what rate will you issue at, and trying to find a meeting of the minds. And getting paid a fee in the middle which is fully disclosed to both the buyer and seller to do that.

    DUBNER: We should say in that one case, Goldman may have been the last party to have been paid by the NicolThu, 07 Mar 2019 23:00:43 +0000
    A Free-Trade Democrat in the Trump White House (Ep. 371)

    Great athletes arent just great at the physical stuff. Theyve also learned how to handle pressure, overcome fear, and stay focused. Heres the good news: you dont have to be an athlete to use what they know. (Part of The Hidden Side of Sports series.)

    To find out more, check out the podcast from which this hour was drawn: Think Like a Winner.

    The post Season 8, Episode 27 appeared first on Freakonomics.

    [ + ]
    Thu, 07 Mar 2019 04:00:01 +0000
    Season 8, Episode 27

    Inventor James Dyson built 5,127 prototypes before he succeeded in revolutionizing the vacuum cleaner. (Photo: Bruno Vincent/Getty)

    The road to success is paved with failure, so you might as well learn to do it right. (Ep. 5 of theHow to Be Creative series.)

    Listen and subscribe to our podcast at Apple Podcasts, Stitcher, or elsewhere. Below is a transcript of the episode, edited for readability. For more information on the people and ideas in the episode, see the links at the bottom of this post.

    * * *

    In our How to Be Creative series, weve talked to artists, scientists, inventors, and others about their creative process; about having good ideas and, even more important, how to execute those ideas. Today, well hear about a part of the creative process that everyone can relate to even if you dont think of yourself as a creative person. This is something we all do, probably more than wed like to admit; its something that almost no one enjoys; but its an inevitable, and absolutely essential, component of any success. Im going to let you figure out what it is. Dont worry, it wont take long. Lets start back in the late 1980s. A young physicist named Saul Perlmutter, at the University of California-Berkeley, was looking around for a good research project.

    Saul PERLMUTTER: And at that time I was lucky enough to come across the possibility that we could go back and make a measurement that people had wanted to do ever since the times of Einstein and Hubble, which was the measurement of how much the universe has been slowing down in its expansion over its lifetime.

    Ever since Einstein theorized it, and Edwin Hubble observed it, everyone knew the universe was expanding. But another thing everyone knew was that all the matter in the universe all the galaxies and nebulae and stars and planets and moons and comets and asteroids all the stuff in the universe has gravitational attraction. So physicists assumed that, eventually, that gravitational attraction would slow down the expansion of the universe. For a physicist, understanding this dynamic was itself an attraction.

    PERLMUTTER: If you could measure how much it was slowing, it would tell you a couple really amazing things. Like, first of all, you could find out: is it slowing enough so someday it could come to a halt and then collapse? And this was just before the millennium, so we thought we could walk around with those signs saying The universe is coming to an end. But if we found out that it wasn’t, then we would have shown that the universe will last forever. And also we would have shown that we live in an infinite universe. It just seemed like, whatever we found would be a great story, and wed love to know the answer.

    Stephen DUBNER: I have to say, I think the latter headline is much more exciting, personally not just because of infinity and because long-lasting but it’s optimistic, yes?

    PERLMUTTER: Yeah, I think that’s right. You start getting a little personally invested in our universe even though we’re talking about billions of years from now. We sort of would like it to go on, you know.

    So you can see why itd be valuable to measure the rate of the universes expansion. But conducting this sort of measurement even for an astrophysicist is, well, its hard. Saul Perlmutter had an idea. It involved measuring the light coming off of supernovas. But they had to be a particular kind of supernova. And they had to be very far away.

    PERLMUTTER: We needed to find these very distant ones because we want to look way back in history. And the further away you look in astronomy, the further back in time you’re getting to see, because it’s taking light that time to travel to you from those very, very distant locations. We needed to look some, three, four, five billion years back in time for us to be able to see the slowing effects that we thought we were trying to track.

    Given the specificity of what they needed, and the overall degree of difficulty, Perlmutter know the project would take some time.

    PERLMUTTER: We wrote the original proposals saying that we did not expect to be able to find the 30-some-odd supernovae that we would need to make those measurements in anything less than three years. And we thought this was going to be like a long three-year project.

    Perlmutter and his team built a tool for this project: a new kind of high-resolution, wide-field digital camera that could be attached to the big telescopes you find in observatories. Now all they had to do was get some time on one of those big observatory telescopes.

    PERLMUTTER: Telescope time on these biggest telescopes in the world is really precious.

    One observatory, in Australia, was open to a deal.

    PERLMUTTER: And we traded the use of that camera for 12-and-a-half nights of telescope time. And so you’re doing everything you can to try to find the time that you’ll need to make the measurements you want. In those 12-and-a-half nights, we got two-and-half nights of good weather.

    Two-and-a-half nights of useful telescope time, over three years. Remember, they needed to find 30-some-odd supernovas to make their measurements. So how many did they find?

    PERLMUTTER: At the end of three years, we had not yet found a single supernova.

    So, picture that. You started with a quest, a creative scientific idea. Drawing on all the knowledge youve amassed over time, and all the knowledge amassed by earlier generations, you formulate a plan of attack. You write the grant proposals; you get the grant. You invent a special tool to facilitate your plan, and use that tool as leverage to gain access to an even more important tool. Youve done everything possible, and youve done everything right. But you know what? You still failed.

    PERLMUTTER: At the end of three years, we had not yet found a single supernova.

    The failure of Perlmutters team was compounded by the fact that there was another team of physicists out there, working on the same problem, using the same technique.

    PERLMUTTER: Which meant that we were going to the same telescopes and using the same instruments, and so we passed each other in the airports, you know, going back and forth.

    The rivalry was not all that friendly.

    PERLMUTTER: It was highly secretive between each other in general. I’d say the competition with each other was a big deal but it’s nothing like the competition with the ways in which the universe is trying to give you a hard time.

    A hard time meaning instruments breaking; the night sky being cloudy.

    PERLMUTTER: It was so hard to get these whole sequence of observations to work in a given semester that had to all run like clockwork. And if anything went wrong, the whole thing would fall apart.

    The overall challenge was so difficult, the chance of failure so strong, that Perlmutters team and the rival team, led by the astrophysicist Brian Schmidt, would in fact help each other out.

    PERLMUTTER: So there were several occasions where our sequence was about to fall apart and the other team would help. So one time we took some observations for that team and similarly there was one time where the other team traded night with us at a telescope so that we could keep our time sequence working.

    Years of effort; years of difficulty and uncertainty; years of failure. But in the end, a breakthrough: Perlmutters team found the supernovas they were looking for; they were able to get enough observations to take their measurements; and those measurements led them to a surprising result: the expansion of the universe was not slowing down; in fact, it was speeding up. Saul Perlmutters team wrote up its findings and, in 2011, was awarded the Nobel Prize in Physics which they shared, by the way, with the other team. The lesson for Perlmutter in all this?

    PERLMUTTER: One thing that’s really interesting that it’s important for people to hear sometimes is that a really tough, challenging problem is worth spending a lot of time on, and that you can be learning a lot while you’re trying to get there.

    In other words: failure is an inevitable component of success. So in order to bring your creative project to a happy place, youd better learn to handle failure well or even better, as Perlmutter suggests, handle it productively. After all, failure provides data: this doesnt work, that didnt work, that didnt work. Great! Now you can cross all those off the list. So what does work?

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    This is not the first time weve discussed failure on this program. Episode No. 169, from 2014, was called Failure Is Your Friend. Episode No. 42, back in 2011, was called The Upside of Quitting, and it looked at failure as a signal that it might be time to just move on. But that calculus is very, very tricky: what if you quit too soon? What if all your failures are an unavoidable desert you need to trek through in order to make it to the promised land? In todays show, we look at the relationship between failure and creativity.

    Dean SIMONTON: The number one thing in my view is that people who don’t understand creativity, who are looking at it from the outside, don’t really appreciate how much you have to fail.

    Dean Simontonis a University of California psychologist whos spent decades studying creative genius.

    SIMONTON: How many revisions this has to go through. How many masterpieces you put out there, and nobody even buys a copy. Maybe your mom does, whatever. But the failure rate is just horrendous, even for the creative geniuses.

    Which genius does Simonton pick as the most successful hitmaker of all time?

    SIMONTON: That’s Mozart. And he’s about 60 to 70 percent success rate. Well, you turn it upside down, and that’s a 30 to 40 percent failure rate.

    On the other hand, considerToni Basil. Or Nena. Or the Baha Men. Who? Yes, exactly. Toni Basil brought the world Mickey. Nena gave us 99 Luftballons The Baha Men? How could you forget Who Let the Dogs Out?

    The Baha Men, Nena, and Toni Basil were some of the biggest one-hit wonders in modern history. Which puts their failure rates a lot higher than Mozarts. But what happens when you do succeed? Success can raise expectations to a level thats crippling. The novelist Jennifer Egan had been writing for a couple decades when she had a breakout hit withA Visit From the Goon Squad which produced, among other things, a Pulitzer Prize. And the book after that?

    Jennifer EGAN: I sort of finally got into my new book and at first I was actually having a great time with it. It was really going well, I felt. And I was excited. And then things started to feel rockier and I really started to have serious doubts about whether I could actually pull it off at all. And then, I have to say, I kind of flipped out. I plunged into a state of despair over my work. And I really thought maybe my career was over, that maybe I was kind of ruined by all of this.

    DUBNER: Was the problem expectation, then? Was that the barrier?

    EGAN: I think the problem was that I actually was struggling with my book because every book is a struggle, especially if you’re pushing yourself. And at a certain point I started thinking about how I would be perceived if the book sucked. And it’s never good to be looking at yourself from the outside in. It’s very difficult to engage creatively when when you know, mean and horrible commentary is flowing through one’s mind. In retrospect, I thought, I was really an abusive boss. I was a boss who was telling her employee, namely me, that I was worthless. And it’s really hard to work in those conditions.

    Nico MUHLY: I’m enormously self-critical. I begin and end each day with a litany of things that I consider failures and shortcomings.

    Nico Muhly is a composer, the youngest ever to get a commission from the Metropolitan Opera.

    MUHLY: Back in the day, it was a combination of self-flagellation and complete emotional neutrality. So, it was like I hated it, but I didn’t care. I didn’t feel anything, like I made this huge opera and I thought it was really good. But literally the sense of achievement was akin to like a successful morning of errands or like I went to the dry cleaner and bought dog food.

    That began to change when Muhly started on a new medication.

    MUHLY: I had a really dark like mental-health journey involving the wrong medication which I assumed wasn’t having a bearing on my artistic output, which of course it was. But the big change in the last three years is that I’m finally able to see some pieces as the end of the sentence of that conversation. So, it’s not, I could do better next time. It’s not, I can’t believe I didn’t do better this last time. And the difference is insane, to have written pieces now where I’m not in a state of constant self-flagellation. I think the first piece I wrote in my new and improved version was this mass called Spiral Mass. I can hear it and enjoy it and think that that was, you know, better than three minutes of silence.

    Its a fairly obvious fact that outsiders often overlook when they think about a creative lifestyle, and how cool it must be. In most cases, you are both creator and critic, boss and employee. Since many people who have a boss do not like their boss, it might seem incredibly attractive to be your own. But do you really want to be your own boss? Do you have the discipline to keep your projects on track? Do you have the temperament to drive yourself? Do you have the requisite paranoia?

    John HODGMAN: I am a person for whom being creative is terrifying.

    John Hodgmanhas done a lot of creative work over the years, most of it somewhere on the humor spectrum.

    HODGMAN: It is the most rewarding thing that I can do. But it is a constant struggle with a very clear feeling that I am out of gas every day, every day. And that I will not be able to support myself or my family, because I have now finally run out of ideas, for sure, this time, I mean it. I started writing jokes for the Internet morphed into writing humor for books, morphed into doing T.V. on The Daily Show with Jon Stewart, morphed into doing some ads for Apple Computer that gave me some acting opportunities, and all of these, I just sort of jumped from job to job very happily and very luckily, in no small part because it allowed everything to feel a little bit like a hobby. And at no point was I ever putting all of my eggs, say, into writing books, because my fear was, if I run out of gas on that, then I’m done.

    If I lose the ability to write a book which sounds irrational, but it is a true fear that I have in fact, today I have it then I can always fall back on the podcast, or I can always fall back on going out and touring my imitation stand-up comedy, or I can always try to get more work as an actor. It’s not even a fear. It is a certainty that I’m done, that I have no further ideas, and trick my brain into providing ideas again, because they’re in there. I’m 47 years old and I’ve been doing this this and only this, whatever this is now for 21 years.

    DUBNER: And that’s not enough of a track record to persuade yourself that there will be 21 more?

    HODGMAN: I figured out, sort of rationally, that I have enough data to support the suggestion that I will be able to continue. But even though I understand it rationally, in a deep part of me, I am certain it is done.

    Don HAHN: I was lucky early in my life to have some successes in my 30s with Roger Rabbit and Lion King and Beauty and the Beast.

    Don Hahn is a Hollywood producer.

    HAHN: And 15 or 20 years after that, you start second-guessing yourself. And start saying, Have I lost what I had back then? Then you lose the process because then you don’t start. You just don’t start because you’re afraid that somebody is going to say, Well, Don was really great back when he was 30 years old, but boy has he lost it, you know? Those are really hard times to get over because they’re a crisis of confidence.

    So how do you quiet those voices of disapproval voices that are often imagined, either your own or someone elses?

    EGAN: It took a while. It was like a year and a half of that.

    Jennifer Egan, remember, was stuck on her post-Pulitzer novel. Her solution was just to keep plowing through.

    EGAN: I kept working through it because one thing I really know is that, you know, you can work through anything. I think we we think we are more fragile as artists than we really are. One thing that kind of helped me get through it psychologically was that I finally thought, winning a Pulitzer Prize shouldn’t ruin anyone. I mean, if I really can’t write another good book because of winning that, I was done.

    HODGMAN: The only reason I’m terrified now is because I’m not actively working on it today, but when I get down into it line-by-line, something clicks, something comes together.

    John Hodgman also finds the only solution for fearing the work is doing the work.

    HODGMAN: It also helps to be in the shower. I remember back in early 2009 I was invited to do some comedy at the Radio and Television Correspondents Awards Dinner, which is sort of the junior-league White House Correspondents Dinner. The tradition was, the comedian would do comedy and the president would be there and say some words as well. This was a stunning invitation for me to receive. I had only been on The Daily Show for a couple of years. And of course, I had to say yes, even though I had no idea what sort of comedy I could do, on that stage, for then-newly-inaugurated President Barack Obama, whom I liked, but also who had no track record as a president to even make jokes about. And I really was frozen for a long time as I tried to think up jokes, to tell.

    And then I was in the shower and I remembered, just sort of talking out loud to myself, I remembered that on a different radio show Wait Wait, Don’t Tell Me Peter Sagal had asked Barack Obama, who was a guest on the show at the time when he was a Senator, Is it true that you saw Leonard Nimoy in the streets of Chicago, and did you flash him the Vulcan salute? And Barack Obama confirmed that this was true. And I remembered that Barack Obama had been making jokes regarding dilithium crystals and Jor-El, the parent of Kal-El, who of course is better known as Clark Kent/Superman. And I’m like, Oh, right. There’s a reason I like this guy. He’s a nerd. Yeah. Or is he a nerd? Or is it all an act?

    And I realized in that moment in the shower what my preoccupation was what I wanted to know was, are you really a nerd, or are you faking it? Which, I realized in that moment, was sort of the question that everyone on all political sides were asking about Barack Obama. Are you for real? Of course, we remember a lot of people who did not like Barack Obama asking him if he was a real U.S. citizen, asking him if he wasn’t secretly a Muslim, or an alien, or whatever it was. We forget, there were a lot of people on the left-leaning wing of the spectrum who didn’t trust that he was a real liberal, and there was so much about him that was unknown. And for me, I had a genuine question to ask, Are you really a nerd?, that could serve as a metaphor for asking, Who are you, and what kind of leap of faith are we taking with you?

    Hearing Hodgman describe this you may be thinking: wait a minute; you were asked to do comedy; is this nerd thing funny?

    HODGMAN What’s more important than funny, when you’re creating comedy, is: what are you genuinely curious about? What are you genuinely feeling? Even the most absurd fake facts that I wrote for The Daily Show had to resonate around an ounce of truth. So tuning into that what am I thinking about knowing what you know, or knowing what’s going on in the back of your head, is kind of the hardest part. And once you get that out of there, suddenly for me, it all floods out from there.

    * * *

    Failure is such an obvious component of any success that it probably keeps a lot of people from trying things they should. Thats a shame. Teresa Amabile is a social psychologist at the Harvard Business School who studies creativity, especially in work settings.

    AMABILE: If people have a growth mindset, they believe, I can always get smarter, I can always get better at something, and I’m not going to get better unless I try things that are hard, and sometimes that means I’m going to fail at something, but who cares?

    But a lot of people do care. For a lot of people, failure hurts; and it hurts to have other people witness your failures. So who are these people who dont care? Where does that come from?

    AMABILE: Partly that’s a trait. But it’s something that can be changed. Parents can talk to their kids about it and we can certainly do that as as managers of ourselves. Look, I know that this is a stretch for me. I’ve been asked to take on this project but Im going to go for it. And if it doesn’t work out that well, I will have learned how I can do better next time.

    James DYSON: I had to build 5,127 prototypes. So 5,126 failures.

    James Dyson is the British engineer best known for having revolutionized the vacuum cleaner.

    DYSON: And just when you’ve had enough, and you think you’re never going to get the answer, that’s the point where you must try even harder. Because that’s the point where everybody else gave up. So you must go through that pain barrier in order to succeed. I would say that for an engineer or someone developing technology, it’s really a life of failure. And you have to get used to that. Because your successes are pretty rare. But it’s not an unhappy life, I mean failure isn’t something that makes you unhappy. It makes you even more curious as to how to overcome the problem. And in order to fail, you have to experiment and experimenting is exciting. Even if it doesn’t work. In fact it’s almost slightly disappointing when it does work. Because you’ve then done it and that’s the end of that one, and then you’ve got to get on to something else.

    RESNICK: So as you’re building things, you have one idea in mind.

    Mitch Resnick runs a project called Lifelong Kindergarten at the M.I.T. Media Lab.

    RESNICK: But then it works a little differently than you expect and that gives you a new idea and you start making adjustments. And I do think the most creative and the most enjoyable experiences come when you’re involved in that process at the intersection of making and playing, where you’re constantly experimenting, iterating, trying new things, refining. And I think it’s true that in today’s society oftentimes kids aren’t given enough opportunities for tinkering. They’re given fully made things that they just use, or they’re given instructions exactly how to do things. So I really do think we need to give them the tools, materials, and support where they can tinker, experiment, and iterate constantly trying new things. That’s the way they’re going to best develop as creative thinkers and be ready to thrive in a society that’s going to demand and require creative thinking more than ever before.

    Theres one word that Resnick does not use to describe this iterative process: failure. He feels the negative connotation is just too strong.

    RESNICK: Clearly things go wrong, things go unexpectedly all of the time, but you should become accustomed that. Don’t see it as a problem but see it as something of an opportunity. It’s really important to create environments where kids feel safe to take the risks, because when things do go wrong, if someone says, Hey, you know, that’s no good, why’d you ever try that?, they won’t take risks again. So we have to make sure to create environments where kids are encouraged and feel safe to take risks, to have things go wrong but then be able to recover and to take it in new directions.

    The ability to recognize when somethings failing, or at least foundering, is important in the creative arts as well. Maybe youve had success doing one thing for a long time. But tastes change; technologies change. And the thing youve been doing even if you keep improving its just not connecting the same way.

    Conan O’BRIEN: Fourscore and seven years ago our fathers brought forth on this continent a nation conceived in liberty and dedicated to the proposition that all men are created equal.

    Conan OBrien is a history nerd; maybe hell become a U.S. ambassador someday.

    O’BRIEN: I’d like to know what it pays. I’d like to know what kind of ambassadorial residence I would have. Am I really free to commit crimes in those countries?

    In the meantime, hes still a late-night TV talk-show host, which hes been doing for more than a quarter of a century. But recently he made a change.

    O’BRIEN: The story there is I realized a couple of years ago that I’m killing time at half an hour. When I first got the gig it was, you fill an hour because it’s this precious hour that needs to be filled and it’s all how you do it creatively. But over time you’re starting to say and my next guest, and my next guest And that felt artificial to me. And it felt like it didn’t fit this new world we’re in.

    And so he reformatted his show, which is called Conan. Its now 30 minutes instead of 60. He also did away with the stream of celebrity guests that march through most talk shows. Instead, hes focusing on the comic pieces that have driven his massive online numbers.

    O’BRIEN: We have YouTube videos that have had 70 million views. But no one’s watching the whole show. Other than my parents, no one is watching the show from 11 to 12. But there’s a whole generation of people that don’t watch anything like that.

    There is another creative medium where taste changes so aggressively, so ethereally, that trying to outthink your audience, or the market, may drive you mad.

    Jorinde VOIGT: I’m Jorinde Voigt. I’m an artist.

    Jorinde Voigt, who lives in Berlin, has become quite successful: her paintings sell for a lot of money and theyre in the permanent collections of the Pompidou in Paris, the British Museum in London, the Museum of Modern Art in New York. But she doesnt like this kind of success as a measuring stick.

    VOIGT: It’s not about failing or winning, it’s just about being and doing. Failure is always part of it. To accept it and take it as part of a reason to do something new.

    Theres one form of failure that Voigt celebrates

    VOIGT: Of course you could say a picture fails if it’s not sold. For a gallery it might be like that, for me not. I’m always happy when I get a picture back. Really! I mean really, because I’m it’s also weird to sell the works all the time.

    DUBNER: Yeah, is that right?

    VOIGT: Yeah. It’s not made for selling. You made it because you want to know something. Yeah? And it’s ready, and you know something, then you don’t need it anymore and you are able to sell it.

    I like Jorinde Voigts attitude: the failure of a painting to sell is actually a success because she gets to have the painting back. How you think about a failure, or what other people might consider a failure, says a lot about who you are as a creative, and as a person. Also as a brother.

    Mark DUPLASS: This is Mark Duplass. I am a filmmaker.

    Duplass and his brother Jay Duplass have been working together, extraordinarily closely, since they were kids. They wrote a book about it, called Like Brothers.

    DUPLASS: Yeah, I mean the biggest failure we had in our career was making this feature film Vince Del Rio for about $70,000, that turned out terribly and we never even finished it. And then a couple of weeks later we turned around and we spent $3 making a short film in our kitchen and that was our first movie that went to Sundance. So we very quickly realized that being professional and making a movie for a lot of money does not mean it’s going to be a good movie. But staying near and dear to your anxieties, your fallibilities, your vulnerabilities, staying close to that conversation you had at 2:00 a.m. with your sibling or loved one or friend, where you were giggling with shame or crying about something that was so personal to you you think no one could understand it. As soon as you go into that stuff, I think that’s where you win.

    The Duplass brothers over the years built an unusual and unusually robust career, making films and TV shows together. They wrote and directed together sometimes inseparably. In the beginning, Mark did a lot more acting but eventually Jay was doing a lot too most notably in Transparent. They made the films Cyrus; Jeff, Who Lives at Home, and they made the H.B.O. series Togetherness. That show was all-consuming:

    DUPLASS: Yeah, we wrote, produced, and directed every episode of that series like idiots. And the main issue is that we had completely lost our desire to hang out with each other because we were essentially hanging out together 13 hours a day working. And we weren’t spending any time together as brothers and friends. And we always promised ourselves we would keep an eye on that, on that work and personal balance.

    Theyd had two successful seasons with H.B.O.

    DUPLASS: And we were in the middle of writing season 3.

    But there was a shakeup at H.B.O.

    DUPLASS: And we got the news that we were going to be canceled, and neither of us wanted to be the first one to speak and we were both scared about how relieved we were as opposed to actually emotionally crushed and didn’t want to admit it to each other. And once we did it felt amazing. We realized that there was no way we were going to cancel Togetherness ourselves. There was no way, the situation was too good. The money was too good. The creative opportunity was too good. People were loving the show. We were going to go and drive that thing until it killed us. We had to actually have it taken away from us and that began the new phase of of Jay’s and my relationship.

    So for the first time in forever, Mark and Jay Duplass werent really a team anymore. It was a sort of failure.

    DUPLASS: And we both felt a little bad about it and both felt a little excited about it. And it’s been really healthy for us in the long run. I mean, I’ll be honest with you, there was a lot of tears and a lot of heartbreak on both of our parts. And there are times when I wake up and I miss so desperately the way it felt when Jay and I were 23 and 27 just moving through the world as one being. But we’re also aware that that was of a time and a place, when our life was a unilateral thing, and we can’t really get that back and we have to redefine what that thing is now for us.

    DUBNER: Does the collaboration feel a little bit like a phantom limb that, like, Whoa I’m used to this working this way. And I guess another way of asking the same question is does it feel like something that you want or need to get back to or that you’re kind of happily or resignedly or just organically getting to a new phase and you’re willing to take it as it comes?

    DUPLASS: It doesn’t feel dissimilar to a really amicable breakup, and I would liken it to a couple that breaks up because one wants to have kids and the other one doesn’t. They still very clearly love each other but they have different views of the future and they would miss each other desperately but also know that it doesn’t work right now if they were to do that. Right. And so that’s very similar to the way Jay and I are. There’s actually kind of a working rhythm that we have developed into where my brain is this very firework-y, loud, explosive place where ideas tend to come whether I want them or not.

    DUBNER: You’re the barfer, correct?

    DUPLASS: Yes I’m the barfer, and they’re noisy and they are at times quite annoying to Jay because he can’t get the space to incubate his really well-crafted, quiet, thoughtful, soulful ideas. At the same time, Jay can be really annoying to me because I’m ready to go. My fireworks are going off and he’s holding me back because he’s like trying to do his thing and so we had to get honest with each other and be like, Uh-oh, we might be creatively bad for each other right now. And this is just one rhythm and one phase we’re in.

    And God knows what’s going to happen a year or two from now. We might listen to this podcast and be like, Whoa, you were totally wrong you just needed six months away and then you’ll be fine. But you know, he’d be the first one to admit he feels like an albatross to my rhythms at certain times. It’s really good for us. But the phantom limb thing is I would say very, very accurate. I can go make a project on my own. I can literally hear what Jay is saying to me without him saying it because I know what he would say. And I can get a lot of his feedback.

    DUBNER: So who needs him?

    DUPLASS: And yeah who needs him, yeah? And then the other element is that we have been able to take some of the lessons we’ve learned as collaborators and collaborate with other people and make those collaborations pretty successful too. Because I will say this to anyone out there, if there is anyone in the world who is interested in collaborating with Jay Duplass, there is no greater, more self-aware, sweeter, more generous collaborator in the fing universe.

    DUBNER: Would he say the same about you roughly? Slightly different adjectives maybe.

    DUPLASS: I think he would use different adjectives. I think what he would say I know what he would say. He would say that there is no more generous collaborator than Mark. There’s no one who is willing to drown himself while holding you above water so you can achieve your glory than Mark, which is you know something else I’m working on in therapy too but, you know. That’s a whole other podcast.

    Thanks to Mark Duplass and everyone else whos shared their ideas, their fears, their advice in this How to Be Creative series. If you want to hear some of the full interviews from the series, check out Stitcher Premium youll find my full conversations with Jennifer Egan, Conan OBrien, and Wynton Marsalis.

    * * *

    Freakonomics Radiois produced by Stitcher and Dubner Productions. This episode was produced byMatt Frassica,with help fromStephanie TamandHarry Huggins. Our staff also includesAlison Craiglow,Greg Rippin,Zack Lapinski, andCorinne Wallace. We had help this week fromAndi Kristins. Our theme song is Mr. Fortune, by the Hitchhikers; all the other music was composed byLuis Guerra. You can subscribe toFreakonomics RadioonApple Podcasts,Stitcher, orwherever you get your podcasts.

    Heres where you can learn more about the people and ideas in this episode:




    The post How to Fail Like a Pro (Ep. 370) appeared first on Freakonomics.

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    Thu, 28 Feb 2019 16:56:34 +0000
    How to Fail Like a Pro (Ep. 370)

    A few years ago, we made a podcast episode with Al Roth, the Stanford economist whose work on market design and matchmaking won him a Nobel Prize. His most eye-catching work involves a system to increase the supply of kidney donors (and, more important, kidney recipients).

    We followed up that episode with another one, the following year, that told the story of a man named Ned Brooks who was so inspired by Roth’s work that he decided to become a kidney donor himself a “non-directed” donor, meaning his kidney could go to anyone in need (as opposed to a directed donation to a relative or friend) and could therefore trigger a much larger chain of kidney donation.

    More than a few times, we’ve heard from others who have been similarly inspired by Roth (and, now, by Brooks too). Here’s the latest, which we wanted to share with you. It began with an e-mail sent on Feb. 18 by a man named Steve Tucker:


    I wanted you to know that I am doing it. I am donating a kidney as a good Samaritan non-directed donor. It is happening tomorrow, Feb. 19th, at Virginia Mason Hospital, in Seattle. And I am doing it largely because of you.

    I had been considering donating a kidney for years. It is one of those things that you consider doing and usually never get around to actually doing. But just considering doing it made me feel like a better person, and for a long time, that was good enough. After hearing your podcast, I decided it was time, and I started making inquiries.

    That was almost two years ago. It took me that long to get all my ducks in a row and get my year set up so that I could do this. Today, I found out that my donation triggered another one too, and a lady from Barrow, Alaska, is going to get a kidney from an acquaintance of my recipient. That made me very happy.

    Anyhow, I dont think I would have ever made the call if I hadnt learned about the National Kidney Registry from your podcast. Thanks for getting me off the stick.

    I am an engineer on tugboats that sail out of Seattle, and much of my job consists of pretty mindless work, by myself, in an engine room. You keep me company down there on long watches up and down the coast.

    Tomorrow is the big day. Wish me luck, and thanks again.

    Steve Tucker

    Indeed, Tucker wrote again on Feb. 22:

    The fellow on the left is Douglas Crist, from Bainbridge Island, Washington. He will be keeping my left kidney warm for me, hopefully for about 30 years.

    The nice lady on the right is Wendy Johnson. She tried to donate to Doug, but was not a match. By signing up for a paired-kidney exchange, she got Doug paired up with me. I was a non-directed, altruistic donor. Wendy’s kidney will be going to a lady from Barrow, Alaska, on Tuesday of next week.

    That’s me in the middle, by the way. The operation happened at Virginia Mason Hospital in Seattle. We were all able to meet two days after the surgery.

    Doug and I are both doing great. The doctors called my kidney The Beast, because it had three arteries and two ureters. (Tri-Power with Dual Exhaust, one of the surgeons said.) It took them 6- 1/2 hours to get it out of me and get everything spliced up to where it could be hooked up to Doug. They said it was a “real pisser!”

    This all happened because of your show, episode 209. Thank you for that. You do good work.

    Our role in all this is of course minimal. All thanks goes to people like Steve Tucker, Ned Brooks, Al Roth, and everyone else who steps up to save the lives of strangers. That said, it is incredibly gratifying to play a tiny role in connecting good people with good information and if that is the only function this entire Freakonomics enterprise ever accomplishes, it will to me have been well worth it.

    The post Another Kidney-Donation Story to Make You Smile appeared first on Freakonomics.

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    Thu, 28 Feb 2019 04:00:52 +0000
    Another Kidney-Donation Story to Make You Smile

    Pablo Picasso drew hundreds of preparatory sketches before even starting to paint Les Demoiselles dAvignon. (Photo: Steven Zucker/flickr)

    Whether youre building a business or a cathedral, execution is everything. We ask artists, scientists, and inventors how they turned ideas into reality. And we find out why its so hard for a group to get things done and what you can do about it. (Ep. 4 of the How to Be Creative series.)

    Listen and subscribe to our podcast at Apple Podcasts, Stitcher, or elsewhere. Below is a transcript of the episode, edited for readability. For more information on the people and ideas in the episode, see the links at the bottom of this post.

    * * *

    Jessica O. MATTHEWS: So, I’m at Harvard, undergrad, I think it’s the end of my sophomore year, and I’m taking this course called Idea Translation: Effecting Change Through Art and Science.

    Thats Jessica O. Matthews. And this class was back in 2008.

    MATTHEWS: And I had heard from people that they gave you some money to do some cool stuff and that unlike most universities, they wouldn’t own the cool thing that you did. And I was like, Okay, I like doing cool stuff and I like inventing, let’s see what happens.

    Stephen J. DUBNER: But we should say, you were not an engineer or an engineer wannabe.

    MATTHEWS: Well, I was studying psychology and economics. I grew up wanting to be an inventor. My father is a businessman. My sister, who had been at Harvard for two years before me, she actually was studying film, but she told my dad, my Nigerian dad, that she was studying economics.

    DUBNER: I dont blame her.

    MATTHEWS: So two years pass and she graduates and we hear visual and environmental studies and my dad almost has a heart attack in the graduation stadium. And I’m sitting there just like, All right dad, I’ll add economics. So, I’m taking this course and I remembered thinking back to when I was 17, when I was in Nigeria and I was at my aunt’s wedding. And, as expected, we lost power. As expected, we brought in a diesel generator. And the fumes were so bad. And my cousins, who were in their 20s at the time, they were just like, Don’t worry, you’ll get used to it.

    And that’s what shook me. I was like, Don’t worry, I’ll get used to it? And I was like, Okay, that’s a problem for the people in my family, that’s a problem for people in the world. You have 1.3 billion people around the world who still, to this day, they don’t have reliable access to electricity. When the sun goes down, that’s often the end of their day. And that’s a travesty.

    So Matthews, faced with a classroom assignment to invent something that would effect change through art and science she thought about this problem, and she thought about a creative way to address it.

    MATTHEWS: And I observed my cousins showing passion and showing excitement when they were playing soccer, right? So this is where the psychology comes in. And the same cousins that were saying, Don’t worry, you get used to it, had all these highfalutin, delusional ideas about what they could do on the soccer pitch that they just couldn’t do. They were not as good as Pele in any single way, but they would tell you they were. And this is how you need to be attacking life. I want to invent something, not something that would solve the energy problem but that would address it in a manner that would inspire people to be part of the movement toward solving it.

    The invention she came up with was ingenious: a soccer ball that captures the kinetic energy that builds up as its being kicked and turns it into enough electrical energy to power a reading light. She called her electric soccer ball the Soccket. It won some fans in very high places:

    Barack OBAMA: Some of you saw the Soccket, the soccer ball that we were kicking around that generates electricity as its kicked. I dont want to get too technical, but I thought it was pretty cool.

    After the Soccket came a jump rope that used the same technology. Matthews finished her undergrad degree and got an M.B.A., also at Harvard. And she started a company, based in Harlem, called Uncharted Power. The soccer ball and the jump rope didnt turn out to be durable enough. But Matthews has raised $7 million in venture capital and is pushing her company to work on a larger scale: the electrical grid itself.

    MATTHEWS: Our platform is called M.O.R.E. That stands for motion-based off-grid renewable energy. And it’s a platform that basically leverages our innovations in energy generation, energy transmission, and energy storage to offer what we like to call convenient energy.

    One advantage of convenient energy, theoretically at least, is that it is decentralized, and therefore would not require the massive capital investments that power plants traditionally need. How well will Jessica Matthewss idea actually work? Its hard to say and Matthews wouldnt get into the details of Uncharted Powers technology and implementation. So why am I telling you this story? Because its a story about the power of a good idea and I think youd agree that turning kinetic energy thats fun to generate into electricity is a good idea. But really why Im telling you this story is to point out that a good idea is worth nothing without great execution. Thats where Jessica Matthews stands right now, and she knows it.

    MATTHEWS: I think ideas are great. But in a weird way it’s almost like they’re meaningless if they don’t actually make a difference in our lives. So I had to figure out execution because how can I go to my cousins and be like, Oh, I have this cool idea for an energy-generating soccer ball and then two weeks later they’re like, Hey how’s it going? I’m like, Oh, I just have more ideas. They’d be like, What? Shut up. Stop coming here and telling us dumb stuff, Jessica. So I had to come back and be like, Here’s the prototype. What do you think? Everyone is going to be motivated by different things but I’m the kind of inventor that’s looking to make whatever amount of time we have on this world better. And so execution has always been part of it.

    * * *

    Walter Isaacson has written biographies of some of the most creative people in history: Leonardo da Vinci, Benjamin Franklin, Albert Einstein and Steve Jobs

    Walter ISAACSON: Who, in his first stint at Apple, was such a perfectionist that he holds up shipping the original Macintosh because he doesn’t think the circuit board inside is pretty enough. Even though nobody will ever see it. And after a while, he gets fired from Apple because he’s such a perfectionist. And he would say, Well, real artists sign their work, meaning they have to wait until they are perfect before they ship. When he comes back to Apple at the end of the 1990’s, they give him a new motto, which is, Real artists ship.

    But how do you ship your work? How do artists and scientists and inventors and other creative people turn the sparks flying around in their heads into something they can share with the world?

    Margaret GELLER: Well, one of the difficult things of course is moving projects forward. There’s a big difference between the idea and execution.

    Thats the pioneering astrophysicist Margaret Geller.

    GELLER: And sometimes, you know, you start to do something, and nature just doesn’t conform. And you wonder, why me? And after the fact it’s fun, but it’s not so much fun while you’re doing it. It’s often very slow, it takes a long time, a lot of it is drudgery. It’s not as though you have an idea and tomorrow you write a paper and you submit it to the journal, and it’s done. And I think it’s the same with art and with writing.

    Now, there are exceptions to prove every rule. The writer Michael Lewis, for instance. Among his books are The Big Short, Moneyball, and The Undoing Project. Even when he writes about complicated topics, Lewiss writing is extraordinarily pleasurable and easy to read. So I once asked Lewis it cant be so pleasurable and easy to write, can it?

    Michael LEWIS: Yes. It is pleasurable and easy. I hate to ruin your punchline, but actually what is hard for me is figuring out in the beginning what I want to say. I spend a lot of time gathering material and organizing the material before I sit down to write. Id say three-quarters of the time is that. When the actual writing starts, its, for me, fun. Its just fun. I mean, its fun and hard, but if its hard, its hard in a fun way. And people like my wife, who has walked in on me while Im writing I write with headphones on that just plays on a loop the same playlist that Ive built for whatever book Im writing. And I cease to hear anything in the world outside of what Im doing. And apparently Im sitting there laughing the whole time. And I think basically what Im doing is laughing at my own jokes, but I wasnt even aware of that. But people like my kids and my wife say that, Youre sitting at your desk laughing all the time.

    Okay, so lets set Michael Lewis aside. Hes his own category: the untortured artist. Lets look at a project that was so difficult to execute that its creator did not finish it in his lifetime. And which is still being worked on today, nearly a century after his death. If youve ever been to Barcelona, you already know what Im talking about: the Sagrada Familia church, designed by Antoni Gaudi, among the worlds best-known architects today. Who, during his lifetime, was a troublemaker.

    Gijs Van HENSBERGEN: He was someone who was very loath to follow the kind of textbook, standard way.

    Gijs van Hensbergen is a Dutch art historian whos written a biography of Gaudi. Hes also, interestingly, a certified suckling-pig specialist.

    VAN HENSBERGEN: Yes. I trained to write a cookery book, in fact. And using food as a way of understanding a different culture. So I went to train in Segovia, in the center of Spain, just north of Madrid, as a suckling pig chef.

    All right, lets get back to Gaudi, the man behind the unfinished masterpiece in Barcelona.

    VAN HENSBERGEN: He was someone who was prepared not to just go down the orthodox route of what his teachers were saying. And in fact, once somebody asked him who influenced you most, and he said, Well, I probably learned more from watching my father making boilers than I ever learned at architecture school.

    He was born in 1852 and grew up in a rural area outside of Barcelona.

    VAN HENSBERGEN: As a child, he suffered badly from kind of a youthful version of arthritis. And so as a kid, he couldn’t always go to school, and his father who was a boilermaker for making the stills for brandy distilling would take him out to the workshop, out in the country.

    He was enthralled by the exotic look of buildings around the world.

    VAN HENSBERGEN: It was also for his generation, the first generation that could actually just look at photographs and see photographs of buildings all over the world. And he spent all his free time in the library just going through magazines and looking at photographs of buildings.

    He was also enthralled by nature.

    VAN HENSBERGEN: The little details of shells, the way the wind blew, the way that trees grow, the kind of magical Fibonacci sequences that appear in sunflower heads. And all these things, he’s instinctively, but very empirically, noticing, and would reappear in his buildings and his building techniques later on.

    Gaudi studied architecture formally in Barcelona but was unimpressed by the orthodoxy of his teachers. It bored him. When he started getting commissions for houses and apartment buildings and parks he was relentlessly experimental. His traditional elements were exotic, his modern elements phantasmagorical. Gaudi was also an oddball: a hermit, a celibate, and something of a despot. Hed show up at a building site in the morning and order the contractors to demolish what theyd built the day before, so that he could redesign it. Meanwhile, in the rural Catalonia where hed grown up there was a massive economic disruption caused by phylloxera, a disease that ruined the grapevines that were the source of many farmers income.

    VAN HENSBERGEN: Once the vines started being attacked, and people lost their vines and they lost their livelihoods, came flooding into the cities. And it meant that there was massive, massive social pressure from a predominantly illiterate working class, which would fill the factories. And massive overcrowding, and the working classes felt that they were being abused. But particularly with the Church, they felt that sometimes the Church was misusing its so-called charity, looking after them but actually in a sense controlling them.

    The Catholic Church was looking to rehabilitate its relationship with these newly urban parishioners. So it decided to build a huge church in a working-class part of Barcelona. It would be dedicated to the Holy Family the Sagrada Familia because, after all, Joseph was a carpenter.

    VAN HENSBERGEN: The Holy Family could act as a model, that the working man their handicraft or whatever should be something that is respected.

    Gaudi himself was a very conservative Catholic; his feelings for the Church and for Jesus ran deep and pure.

    VAN HENSBERGEN: Right at the heart of his belief system was this idea that Christ’s suffering is something that we understand only through our own suffering, and that his ultimate generosity of course was to die for us.

    When Gaudi received the commission to build the Sagrada Familia, after the original architect resigned from the project, he was only in his early thirties.

    VAN HENSBERGEN: And I think Gaud
    A Good Idea Is Not Good Enough (Ep. 369)
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