The Not Unreasonable Podcast

Tyler Cowen on Big Business

August 12, 2019 Season 1 Episode 40
The Not Unreasonable Podcast
Tyler Cowen on Big Business
Chapters
The Not Unreasonable Podcast
Tyler Cowen on Big Business
Aug 12, 2019 Season 1 Episode 40
David Wright
Tyler Cowen on Big Business
Show Notes Transcript

Tyler Cowen, professor of economics, blogger at marginalrevolution.com, columnist for Bloomberg, host of Conversations with Tyler and author of numerous books returns to the Not Unreasonable Podcast to talk about his latest book, Big Business: a Love Letter to An American Anti-Hero. 

All too rarely do you get a tour of how incredibly strong the evidence is that everyday truths are what they are: big business actually exists for a reason because it mostly does exactly what we need: provide goods and services at affordable prices with reasonably good service. What's more is that big business is the source of all kinds of benefits to America and to human society generally. It's even better than you think! In the show we cover:
- where businesses fit into the social intuition of the human mind
- similarities between how we treat famous people and big business and what another of Tyler's books, *What Price Fame* can teach us about big business
- What is good management and what effects does management have on employees?
- How the book is an American book and how it is NOT a Chinese book
- Crony capitalism doesn't exist here, but where might it exist in the world?
- Wall Street and Financial Dark Matter
- How Tyler views the firm

All this and much more! See show notes at notunreasoanble.com



David Wright:
0:01
My guest today is Tyler Cowen, Professor of Economics at George Mason University, blogger at marginalrevolution.com, host of the conversations with Tyler Podcast and author of numerous books, the most recent of which is Big Business: A Love Letter to an American Anti-Hero, which we'll be covering today. Tyler, welcome back to the show.
Tyler Cowen:
2:12
My pleasure.
David Wright:
2:13
So, the subtitle of your book gives you away as fighting in big business' corner, but you also use an intellectual alter ego that in a lot of your work named Tyrone. And I think of Tyrone as a clear thinking North Central Jersey working class intellectual insurgent. I love--
Tyler Cowen:
2:28
That's what Tyler is.
David Wright:
2:30
[Laughs ] Well, you're obviously pretty similar people. I love Tyrone. And I love the Tyrone perspective, but I'm wondering if there's as much Tyrone in this book as you normally put in. And maybe there's not really a clear distinction or you're thinking about that explicitly. What does Tyrone think about big business?
Tyler Cowen:
2:46
I think big business is my most straight forward and didactic book. I set out to write it to make it almost deliberately unoriginal. But by the time I finished, I found no one else was saying what I was saying and to me it sounded fresh. So, I would say, look at the facts about big business and simply asking, which of the criticisms are correct and which are incorrect. Many are correct. But overall, I think people are far too down on big business relative to the reality. Now, how does Tyrone fit into the picture? It turns out there's an individual I'm funding through another program of mine called Emergent Ventures, and he has a project where he will be recording people and putting them on YouTube saying the opposite of what they really believe.
David Wright:
3:30
Interesting.
Tyler Cowen:
3:30
It's a kind of test to see, can you articulate the opposing point of view?
David Wright:
3:34
Of course, that's Brian Kaplan's intellectual turing test.
Tyler Cowen:
3:37
That's right or ideological turing test. So, he came in to this very room where we are and he recorded me giving the best possible critiques of big business, big tech in particular. I've promised him exclusive rights on that story or rather Tyrone has. But I would just say this, if you think there's something weird about American life and American political life today, you ought to be worried about everything and big business is such a significant part of society that Tyrone would say it's hard to believe you can let big business off the hook entirely. So, if the world feels ugly, and divided, and stupider, maybe big business has to share part of that blame. That was part of what I've said to this fellow correlation and I hope that video was up on YouTube soon.
David Wright:
4:23
And then we'll put a link up to that. As I was thinking about how you might answer that question, I was thinking to myself of who my equivalent Tyrone would be. I grew up in a small town, manufacturing and farming kind of part of the world in Ontario in Canada. And big business is a very distant thing in that kind of, you know, you have the businesses that employee the people in the town, and there's this kind of other world where, let's say, the smart kid down the street goes to some fancy college and he gets a job, working at some company you've never heard of, which is McKinsey or something you imagine that. The feeling that I would have in those shoes would be maybe one of like a mild resentment of the status differential perhaps, of this person who thinks they're better than the rest of us interjecting our community in our town and going off and doing this other thing, but the same time a little jealousy. And so, there's a mixed feeling there of divorcing that as well from the consumer experience, which is also in some ways kind of ethically or morally benign. You're just buying things that you want and if you don't want, you don't buy them. But for the most part, I feel like for a lot of people in the world, business might be because they don't have a huge presence in some towns, a repudiation of what goes on in those towns because the big business isn't there in s way that you can observe and feel and see other than through the goods. What do you think?
Tyler Cowen:
5:41
That's real Alice Munro territory where you're from. But it's striking to me the way you relate the story. The resentment is toward the individual who was from the town and not toward the shareholders of the company.
David Wright:
5:53
That's right.
Tyler Cowen:
5:53
They are distant and really very hard to imagine. They're not visible.
David Wright:
5:56
You might even realize they don't exist, to you, literally.
Tyler Cowen:
5:58
They could just be state pension funds. They probably are state pension funds. So, I usually believe that most envy is local. It's the people you're connected to. You went to high school with, your brother in-law, your colleague down the office, did they get a bigger raise than you did? And I think with the internet, we're now switching or confusing what is local and what is global? So, distant figures now feel local to the intelligentsia of who are on Twitter. And they're more resentful. There are lower levels of trust. You interact with them all the time, if interact is the correct word. So, you see some left wing or right wing economist on Twitter and you feel they're intellectually or morally bankrupt, because you don't agree with them. You see their evasions, their partisanship. And I think we're losing trust in elites. This is related to Martin Gurri's hypothesis. For this reason, that the world was in a kind of equilibrium. You would resent the local and the distant you ended up ignoring. And now, for a lot of American society or Canadian, the distant feels like the local and we're more full of resentment as a result.
David Wright:
7:08
I know the thought that I was thinking about was where business fits in in, let's call them the social primitives. What are the different relationships a person has? So, you have kids, that's one that's distinct from everything else. You had this nuclear family, which, when you're an adult, it's much more of like a continuum I think from parents to siblings, to other people in your tribe, extended family. There's less of a distinction there. Then, there's a community feeling. And then you have other people from outside the town, people from far away that you don't know and don't talk to and don't relate to, maybe don't even know you. They might not even exist. And business doesn't really fit into one of those categories. There was something else, and I was struck by a quote that, or I don't think you just made reference to a quote which I looked up later at Montesquieu, saying that their commercial culture really changes how we view that other category.
Tyler Cowen:
8:04
That's right.
David Wright:
8:05
So, what do you think about my little categorization of social primitives and this idea that business is kind of weird warping of the other?
Tyler Cowen:
8:11
That makes good sense to me. Business itself is trying to trick us. So, if you go into a Target and you buy something, the cashier is told to smile and be nice to you. I'm not saying they always manage that, but in theory that's how things work at the retail level. And that's triggering our emotions for the people who we're friendly with. You come away with a positive feeling about the company, about the store, about your purchase. There's something illusory about that. Maybe the purchase was entirely fine, but you feel good about things. So, business on one hand is hijacking that intuition, but it's also mobilizing the sense in you that this business is a kind of person to be judged like as a friend. And then it's always going to fall short because they don't care about you the way a friend cares about you. They have a pecuniary motive for caring about you. They may, in fact, be fine upstanding people who want to keep a good reputation, but still you will judge them in a more personal way that actually is rational. And I feel this is a big reason why we're so often disappointed in business. It lets us down all of the time
David Wright:
9:15
In reading the section of the book, it reminded me actually, of famous people. And it seems to me that famous people also live in this kind of weird category of a relationship, it's sort of not, but you know quite a lot about them, and you tend to, who knows, let's grab some qualities onto them which don't exist or do exist and they play that up and they like that. And that helps their fame than the tabloids. You wrote an entire book about fame.
Tyler Cowen:
9:39
What price fame?
David Wright:
9:40
Which I have right here and I read. One of the things you don't do in that book is explicitly talk about what we get from famous people. What do you think about this connection between what a famous person is and how it runs on to us and what businesses do? Is that something that's useful?
Tyler Cowen:
9:57
I think it's quite similar. And many famous people are themselves businesses. So, just last night I was at a big concert. The group playing was Queen.
David Wright:
10:05
Cool.
Tyler Cowen:
10:06
They're very famous with Adam Lambert. And Brian May was there talking to me like I'm his buddy, as if he and I have been together for years. Now, in reality, I've been listening to Brian May and Queen since 1976. So, it's not a completely crazy idea. It was a very good show, but had it been a mediocre show, I would have felt let down by a friend. But, when you say musical groups, especially in the 1970s, a musical group would help you identify who you are or kids who are like goth or alternative or deadhead, it was a kind of space where you would map your own desires and aspirations. So, we use the famous for own purposes in the same way that the famous use us for fame and money. There's something mutually parasitic about that. But at the end of the day, you make a choice to go see Queen or not. It's not cheap. Let me tell you. And there are trade offs. And do I feel right now that our society has too much celebrity fame? I don't actually. Maybe in the 1980s, there was too much mass stupid celebrity fame. But, I think we've moved to this new world of internet fame, which has its own problems, which I think is lack of trust as we discussed a moment ago, but not too much celebrity culture.
David Wright:
11:25
Another parallel between your book on fame and this book on business. Is this idea of people wondering or worrying about moral degradation?
Tyler Cowen:
11:36
Yes.
David Wright:
11:36
I think you make the reference in both books. We definitely do in the book on fame, which Plato worried a lot about the moral degradation of seeking status of fame and of people, I don't remember exactly how it's put, but not seeking truth seeking something else. And Plato also hated commerce.
Tyler Cowen:
11:52
Of course.
David Wright:
11:54
So, at least the enemies was enemies.
Tyler Cowen:
11:55
And he hated literary fame, what's coming from homer or really recited fame. If you think about the 1980s, which I view is the era of the mega celebrity. You have Madonna, Eddie Murphy--
David Wright:
12:08
Michael Jackson.
Tyler Cowen:
12:09
The earlier understanding of Michael Jackson, which was still quite weird what it's become. And you have conservative critics such as Alan Bloom seeing this and just feeling like the world has collapsed. That this has somehow replaced a world of great books and serious movies. Now, the past was never as wonderful as it's made out to be. But, I do think mega level celebrity was excessively stupid at that time and there was something to that criticism.
David Wright:
12:37
And another really important point I think you make in the book is the historical context of fame. Now, we have musicians, and authors, and entertainers, politicians, I suppose that's a carry-over, but fame in the old days looked more militaristic, a little darker. Actually, more violent.
Tyler Cowen:
12:57
And that's the relevant alternative. So would I rather have Eddie Murphy and Sylvester Stallone who does kill people in movies, of course, as opposed to Andrew Jackson who killed a lot of native Americans in real life. Well, I would. So in my view, there is a kind of violent impulse in people, commercial society, partly through its own stupidity, helps tame that somewhat. And things like violent movies and part, they just keep us busy. So there was one study, it looked at when people go see violent movies, are they more or less likely to commit crimes? It turned out they're less likely, but the main effect was simply, it took up a lot of their time. Not completely that it tamed them and made them pussycats but nonetheless, there is something to a brightened circuses idea. And this is voluntary. It's not censorship or forced on people, but it is giving people something else to do. And that's become a bit underrated. And now what we do with the something else is a lot of time on our smartphones. We'll see how that works out. But that's quite a novel development. I think it will turn out to be one of the bigger developments of the last few centuries. In the last 10 years, you watch people walking around, almost everything they do is intermediated through the internet, not everyone, but there's Google maps. You read about the restaurant on Yelp, you text someone, whatever. That's a stunning innovation in human history. And it's very new, less basically 10 years old. And if the iPhone now is what? 11 years old. Well, there's a curve of enough people having smartphones, but we're there now.
David Wright:
14:32
What are the ethics of business? I was thinking about the evolution of having let's say business replaced when we're talking about fame actually replacing the time we spend. But you also make some points in the book about, and I'm wondering about again, this parallel perhaps between the evolution of our morality and are spending more time thinking about famous people, interacting with famous products. And actually, about whether or not business has an influence on the morality as well. Is there an equivalent of some sort and whether it's changing how we think about what we value?
Tyler Cowen:
15:11
If we focus on contemporary America today, I see two main ethics of business. One is you build a big successful company, you care a great deal about your reputation. You may not be a better person than anyone else, but the market constrains you. You're very careful not to have negative publicity. You want to sell to as many customers as possible. So you encourage a notion of tolerance and diversity. You want to hire as much talent as possible. So you encourage a notion of inclusiveness. And this is mostly a very positive social force and you make things, maybe you innovate, you give people jobs, that's a great deal. Then, there's another kind of business where in essence, people get together and they learn how to cooperate to screw over others. I don't think this is as common as sometimes alleged, but there are many, many examples. Herbal supplements, penis enlargers. You can decide how much of legitimate commerce might fall under this rubric. And there, the ability of modernity to build so much cooperation becomes a negative because it's cooperation to screw other people over. It seems to me in contemporary America, the first kind of good cooperative business is far more significant than the second, but we need to recognize both exists. Then, maybe there's a third type, which is sort of a basically honest business, but always you have parts of it at the margin looking to break various laws or at the margin not help a consumer or grab something they shouldn't. There's plenty of that too. I think often the owners are trying to constrain that and it's the employees who are the fraudulent ones. There was a recent story trying to estimate when you have people deliver food to you, like Uber Eats and other food delivery services, how often does the driver take some of the food and just eat it? People disagrees to the number, but the candidate estimate seemed pretty high to me.
David Wright:
17:09
Really?
Tyler Cowen:
17:10
Yes.
David Wright:
17:10
Interesting. I couldn't imagine doing that myself, but I'm a far far away from a food delivery person.
Tyler Cowen:
17:17
Some of it is, the people may be hungry and they feel they can take a bite and no one will notice. But some of it is a weird kind of exertion of power or saying it kind of fu-- to the system or just some wish to feel alive by doing something outside of the rules. It's also part of human nature. It's not the same as dishonesty. It's something like in some way you need to recognize and if not quite validate, come up with a way of tolerating a limited amount of it.
David Wright:
17:44
I wonder on that idea how much of that is a slippery slope, because once you give it a rush breaking rules, it seems to me that you might just break bigger and bigger ones.
Tyler Cowen:
17:53
And you need to break bigger and bigger ones.
David Wright:
17:55
I suppose. To get the same high.
Tyler Cowen:
17:58
That's right.
David Wright:
17:59
For the most part though, I think that and this is the point you make in the book that organizations actually, it could be argued, impose or encourage moral progress, ethical progress. Make the point in the book about gay rights for example in organizations. And actually, they can lead a lot of the rest of society and things that ultimately the rest of society, it does catch up with.
Tyler Cowen:
18:19
It made it feel normal to people. So, in the supreme court ruled in favor of gay marriage, people are like, big business had recognized this years ago. Maybe we should just get on with things and see this as a beneficial development, which is what happened.
David Wright:
18:33
Is that a necessary component of business? I'm thinking too, as I was reading that late 19th century, there was a lot of things, at least as legend has, I haven't studied that period myself all that closely, but the bad things are going on in businesses and exploitation of workers and that kind of thing led to the progressive movement. Was it different then or was there an even earlier period that was even worse and actually, the ethical progress of business has always been up into the right?
Tyler Cowen:
18:58
I don't think tolerance is a necessary condition of business. I think you have ethnically or racially or religiously torn societies or in some cases business or some businesses decide to take one side rather than another. So, like in Northern Ireland, you would still have, I believe, Protestant and Catholic funeral parlors and this makes those divisions and turn more focal. That is a possible equilibrium. You see it in a number of historical cases. A lot of Jim Crow in the south was due to government laws, but a lot of it was due to business also. So, in Los Angeles government, Jim Crow laws were not nearly as strong as in the south, but there was still a fair amount of business enforced segregation. If you're asking me about America 2019, I think those cases are relatively rare and the positive cases are much more frequent. But again, my book is not an apology for business at all matters. It's saying, let's look at the facts. The facts show there are plenty of cases where businesses are racially divisive, Northern Ireland, one example there. But even there, it's a mixed set of effects because the Republic of Ireland becoming wealthier has led to a diminution of tension and violence. So it's not that in those cases the business are purely negative, it's just you see both effects.
David Wright:
20:18
Just out of general curiosity, is that something you see as a very important, and maybe this ties into your last book as well? The improvement in economic well-being and wealth, necessarily diminishes tensions and just makes people happier. And that's just going to happen. Going to make places better like that.
Tyler Cowen:
20:38
I don't want to say necessarily. So, I know the histories of England and the Dutch Republic and so on. But on the other hand, you need to recognize that in the early 19th century, the German city states and principalities are not so wealthy. They're not wonderfully tolerant places, but they're better than what they ended up being say in 1939. And along the way, Germany becomes a nation state. It's a lot more wealthier. It has the resources to do some terrible things. And that was driven by the Nazi party, not by business. But nonetheless, you needed a commercialized society to carry out that particular kind of slaughter and intolerance. So again, I think you always need to see both sides and look at the ledger and consider like when and where are you talking about.
David Wright:
21:23
One other I think area where ethics is basically an under appreciated point and I'm so happy to see that you made it in the book, no doubt related to your work with a lot of tech startup firms and interacting with those people is that ethics interacts with business by inspiring its people.
Tyler Cowen:
21:40
That's right.
David Wright:
21:40
And I've noticed this myself in hiring, retaining talent and trying to build businesses where you only get the best people if they're inspired to join your firm. And inspiration often takes on a moral or ethical component to it.
Tyler Cowen:
21:54
And we're speaking here, at the Mercatus Center where we have a lot of talent. We have a sense of being on a mission to improve discourse about economic topics that motivates people. It helps us attract talent to the extent we become worse at that. It's harder to attract talent. And that's often overlooked in discussions of business ethics.
David Wright:
22:13
It feels to me maybe that that is changing a bit. I don't know why I think that maybe I'm just becoming more aware of it as I get older, but I wonder how much business was mission-driven in the past? Any sense of that?
Tyler Cowen:
22:28
There was a phenomenally strong sense of ethical mission in American businesses, especially in the Midwest throughout the 20th century. It was very modest. It wasn't always trumpeted. There, of course, was not any internet, but it was deeply internalized and very strongly felt and they propelled this country to many great achievements. But I think this renewed sense of mission for employees, it stems from income inequality, oddly enough. So, income inequality for labor is a sign that talent is quite scarce for whatever reason. And when talent is scarce, for one thing, talent's already earning a lot of money, and they want something other than money and it's hard to attract people. So, you build a mission into the enterprise. I think there's a lot of cases where businesses may start approaching mission somewhat even cynically like, oh, we just want to make more money. But over time they do it. They start believing it. It becomes sincere. It's a kind of artificially manufactured true sincerity and the final equilibrium.
David Wright:
23:25
Well, if the weighted average of the sentiment of all your employees in a certain direction, the firm will move in that direction.
Tyler Cowen:
23:30
And over time, you'll attract bosses who are in accord with that, possibly even shareholders. And this to me is really a striking development, but the link to income inequality I think is not typically recognized.
David Wright:
23:41
That's interesting. And are CEO's different then? Because if you need to have this mission for the firm to-- So, let's put to one side the cynical CEO or leader. Do you have a different kind of CEO than you've had in the past who can generate a mission or inspire people to follow a mission?
Tyler Cowen:
24:02
John Mackey at Whole Foods would be a good example of that. So many vegetarians and vegans are loyal to Whole Foods because it goes out of its way to give you those offerings. Even though the net effect of Whole Foods may be, well, people buy and consume more meat, it's a very attractive supermarket. They have dry-age beef. Safeway does not have dry-aged beef. I think there's a big difference between consumer facing firms and business to business firms. And the consumer facing firms have a whole series of public relations issues that business to business firms usually do not. And I think with the Internet, you have in a sense more business to customer facing activity than you used to and reputations online and social media scandals or praise. And that's made a big difference.
David Wright:
24:53
I wonder, I think that's probably the case that it's easier actually to get access to the customers at scale. Now, with the smartphone revolution, as you're pointing out, you can publish an app, you can instantly connect with, millions and millions of people or as before it was pretty hard to do that.
Tyler Cowen:
25:06
Or even if you're just a third party seller on Amazon, you have 17 used books in your closet and each one is worth 70 bucks and you put them on Amazon, and that's your job number four. You may not be reaching a whole lot of people, but that was not at all possible until recently.
David Wright:
25:21
You speak it in the book about the changes in CEO compensation. And so the question that you ask in the book and answer is whether CEOs are overpaid. And part of the answer includes a description of kind of how CEO ship has changed. So maybe talk a bit about your thoughts on whether CEOs are overpaid.
Tyler Cowen:
25:39
Well, the main way CEOs are paid at the top level is with equity and options. And that's to incentivize people. That makes perfect sense. But that means if the stock market does well, CEOs are paid more. And that's exactly what we see in the data. The stock market and CEO pay, rise more or less than lockstep. I'm not in the book trying to argue that's necessarily moral, but it's not mysterious. It's not based on ripping anyone off. It's a pretty natural process of supply, demand and incentives. It's the main argument I make. I also point out, being a good CEO is a lot harder than it used to be. You now need to do much more with government relations. You need to know much more about the law and lawsuits. The chance that you in some way manage or oversee a global supply chain is much higher than it used to be. The knowledge you need there, the expertise, the ability to ask probing questions, very hard to come by. Public Relations, being on TV, interacting with social media, all of those are relatively new frontiers in American business that were not a concern as much say in in 1955. Just knowing tech, almost every business interacts with tech.
David Wright:
26:53
Software.
Tyler Cowen:
26:53
But most businesses are not themselves tech. So say you're running an oil company and you need to make tech decisions all of a sudden. I'm not saying you're choosing the technology, but again, you need to ask the right questions the right people and understand the reports being given back to you. So there's been a significant upgrade in the skills required and I think that's another reason why the pay has gone up.
David Wright:
27:14
I think managing technology is a distinct skill. It really is. I published an episode, I don't know when it's going to be published relative to this one. I am from the insurance industry and the insurance industry has a very, very difficult relationship with technology. It's a necessary component, but a lot of firms really struggle with it. I like to joke that the insurance policy management systems business, the customer satisfaction rate is zero. I think that that is primarily because we haven't come to terms with how to actually manage a software project in any kind of and I think that that's not an unusual thing. The unusual thing about the insurance business is that there are a lot of other barriers to entry that insulate the insurance industry from the attack of the software companies to displace them. There are companies that are turning as good at it, persist. And that's probably a lot of pockets of the economy. They're going to be like that or a software, Marc Andreessen, a guest on your podcast, I think a couple times, talks about it eating the world. And I think some of these parts of the economy are going to be pretty hard to crack. And the result of that actually is quite a lot of pain for the people in the industries themselves because they don't have the right kind of organization to succeed.
Tyler Cowen:
28:26
The same is true of universities, which tend to be fairly bureaucratic, but they need more and better tech all the time. They don't have the cultural dynamic to necessarily be good at it. Think tanks, research centers, many nonprofits, very similar issues. They're not at the point where they're choosing CEOs on the basis of how well do those people grasp tech. But you wonder if someday at some point more of them might get there.
David Wright:
28:50
Well, and something is true to the extent that companies that don't pursue it fail. Somebody else is going to show up with a new company and a mission and better at software and boot them out.
Tyler Cowen:
29:01
That's right.
David Wright:
29:02
Well, you make reference quite a lot and I really thought this was interesting to some literature on managerial quality. Now, in this case, in talking about the difference, how management quality matters to firms and software isn't a part of this, maybe not yet to the survey that I could tell, but maybe talk a bit about Bloom's work and what you think of that.
Tyler Cowen:
29:25
Nicholas Bloom, John Van Reenen and some other researchers have gone out and tried to discover what are the determinants of why some firms are more productive than others. Even within a country, within a sector, it's pretty common for the higher productivity firms to be two or three times more productive than the lower firms. It's a big difference.
David Wright:
29:43
That's a massive.
Tyler Cowen:
29:44
And that's what the same typically, physical technologies at their disposal. And they find that trust and ability to delegate in a decentralized fashion and have subordinates having the ability to make decisions without always getting permission, is a common feature of high productivity firms. And you find it much less so in low trust environments and also low trust countries where things are more rigid and stratified. And if you want something done, it just doesn't happen because there are all these bottlenecks and permission isn't granted. And the people who are the bottlenecks that don't really know much about the individual cases and everything, gets frozen up, everyone becomes frustrated. The level of trust falls all the more. And to build in that culture into a company at so many different decision nodes, that you have trust or reasonable degree of decentralization, but still actual controls against fraud. And then like, it's just very, very hard to do. And it's one of the things about the contemporary world of big business. We as Americans often take for granted, but it's really quite miraculous. And what good companies do, Walmart, Amazon, what they have achieved, to me it's just phenomenal and underappreciated.
David Wright:
30:53
Is that something that you've had an experience with yourself? The organizational structure of your world's a little bit different than it is for most, but is that something that happens in academia? Does management matter in academia?
Tyler Cowen:
31:04
Management matters a great deal. It affects who are the people you hire. And again, we're at Mercatus, it's a research center. We have more than 150 employees. That's far from enormous. But I actually think 50 employees is a breakthrough point. When you pass 50, you enter some new world that is strange and mysterious where not everything is right before your eyes. And maybe 150 is more like 100,000 than it is like 20. And one faces that all the time. That things happen in a decentralized fashion, and you need to have a good culture and good incentives built in. And those complementing each other and your choice of personnel fitting into the same culture and incentives, again, it's never easy.
David Wright:
31:48
It amazes me how actually and in my career as a manager of people, which I am, how hard it is to create continuous cohesion, social cohesion, among people. And one of the parts about your book that I was so happy to see it, and I was looking for it, and I would have asked you all about it on the podcast, we didn't say it. But how much actually more cohesive corporate life, business life is than home life. It's hard to maintain good relationships with people.
Tyler Cowen:
32:18
It is.
David Wright:
32:18
If you're thrust into, let's say, a family with somebody you don't like, it's not going to go well.
Tyler Cowen:
32:23
Or even if it's someone you do like or love, that in some ways raises the stakes and it makes certain kinds of cooperation harder because there's so much on the line. And one thing business does for us, it gives us another sphere of life that is somewhat of a respite and in escape even, and just a balancing, and a diversification. And that too is often neglected.
David Wright:
32:44
And coming back to Montesquieu's quote, where he makes the observation that commercial life promotes social cohesion. Now, I believe his observation was about day to day life outside of business. What do you think? So two possible ways this could work. One, because we trade with each other and we interact with a shopkeeper, we don't know and we can buy things and that goes pretty well. That's going to change how we think about people generally. Or I go to work every day and I work with these people and it goes very well and that's a more intimate interactions that also is pretty benign. That adjusts my default mode of interaction with people generally. I don't think he was going for the second one, but I think that's pretty important too.
Tyler Cowen:
33:26
When it comes to Montesquieu in particular, I think he was highly influenced by the French religious wars of the 16th century and conflicts which came even after that running up through his own time. And I think he was in essence saying, we can simply have civil peace through commerce. We're not going to kill each other. We will be a nation and you will wake up in the morning and not be afraid that someone will come to kill you because of your belief in God or may be lack thereof. And we now take that for granted. But again, throughout much of human history, that has been up for grabs. And it does seem commerce has had a role in that. That again, businesses simply wanting a stable environment and the ability to make profit, we let the margin, want religious tolerance in most cases, under most configurations of a reasonable equilibrium rather than taking one side in the religious wars.
David Wright:
34:19
Do you feel like life inside of a well-functioning company, will it influence your life outside of it?
Tyler Cowen:
34:25
It ought to. So, you learn more about cooperating, you interact with other smart people. Just the notion of making sure everyone is on the same page. You have to learn that again, again and again every day. Even if you're very successful or you're a CEO, you never have to stop learning that. That to me is one of the most striking features about any business. How much you're never done learning, the need to keep everyone on the same page. And surely, that's valuable experience for home life. It's hard to prove, but it would be shocking to me if it weren't. I also like to think people take some of their home life successes into the workplace, like how to listen, how to compromise, when to just admit you're wrong. Maybe you're right and just even if you don't admit you're wrong, don't insist that you're right all the time. Useful lesson in both spheres of life, in my view,
David Wright:
35:12
I think all the time about actually, how difficult it is to effectively manage conflict in individuals. And what I see, I don't know what the right way to put it is. It's almost an unfortunate necessity that you have to have empathy in those situations because you see literature sometimes or see maybe it's just dumb ideas posted around out there that CEO's are psychopaths.
Tyler Cowen:
35:39
That paper was retracted by the way. No one knows it.
David Wright:
35:42
That's right. I get part of that sentiment, in many ways it would be easier to deal with complaints. And this person said this, and I want more money, and to just actually not care about somebody's feelings, would certainly lessen the burden on the manager in question across the table from that person. But, the problem is that would be easier on the manager, it would be much harder on the people. And the people need something much more than simply an answer. Although, you can see how the hardened kind of old school, they call it manager, just bit of an asshole could emerge because engaging emotionally with people is real hard work. Like really hard work. And being able to do that while at the same time delivering difficult messages.
Tyler Cowen:
36:36
Setting expectations.
David Wright:
36:37
Resetting them.
Tyler Cowen:
36:39
Companies need to develop methods where not every interaction is emotionally exhausting. But counterintuitively, the way they often do that is to have some particular interactions which are emotionally exhausting. The difficult meeting where you tell someone what they need to do better or where they stand or does someone comes to you with a problem and emotional energy is scarce and it scarce in the corporation as well.
David Wright:
37:07
So, I'm going to come down to my first Straussian reading of this book. I've got a few of these to get through. Hopefully, we get to them all. So, one of them is that actually business is not just an important part of our life, but it's an essential component of real social cohesion. And I wonder how much of keeping of a few different comments and points in the book. It was Montesquieu quote talking about commercial culture. There's this idea that businesses are more highly functional in terms of Inter-relational and how families often fall apart. My experience with families is they're all messed up. Like every single family that I've ever seen or heard or come across. And always have people who don't get along and they are far below any threshold of functionality that would work in a business. And so, business winds ends up being an unnecessary part to actually a functional society from a social standpoint. What do you think about that reading?
Tyler Cowen:
38:01
Is that even a Straussian in reading?
David Wright:
38:03
I don't know. You don't mention it. Well, where you don't say in the book is you don't say, if we didn't have business everything would fall apart. And so, it's more of a description of what's going on as opposed to a prognosis of what the social implications would be of a deteriorating business environment outside of business.
Tyler Cowen:
38:20
I would say this about my book. It's not really a comparative analysis of say business versus socialism or business versus communism. And there are, of course, I'm neither a socialist nor communist. It's more like a field guide to birds. It's a series of facts. So, you can look up a topic and just see like, what are the facts on this topic? And some of them actually reflect poorly on business. But again, I think relative to what people believe about love birds, America's big companies, the reality is more positive. But I'm not trying to compare it to some other way we might do things. And I think a number of the readers have misunderstood that side of the book. It's a bird's manual.
David Wright:
39:02
So, the Straussian part then is that there's an implicit threat where, you might be saying all birds are, I'm not sure how to map the metaphor. So, I'm not even bother trying. But, if we got rid of this thing that I'm describing here, it's a big deal. And maybe it's not all that deep of a reading. But, I think that there's in the backlash of business, you're describing a lot of components of why business is good, but I think there's a social influence the business has, which is bigger than any one of the component parts, I guess is what I'm getting at.
Tyler Cowen:
39:37
That's right. I think that's true. And I think there's the broader question, should we give big business in America higher or lower status? And just recently, I saw that Tucker Carlson was giving a talk to a conservative group. And the title of the talk was Big Business is the Enemy of Your Family. I didn't hear the talk, but I have a sense of what he might have argued. I hear Bernie Sanders, Elizabeth Warren, again making anti-business comments. Donald Trump is more complex, but he's very willing to go after CEOs or businesses that do not support him. He can be quite negative about. It's the personalization of what business is, which maybe is more dangerous than people who attack it on a more abstract level. So, it seems to me we have become too cynical and untrusting of business in a way that will backfire. And the goal of my book is to give big business higher status in American society as distinct from some policy change. So, like I actually think, we might have cut the corporate income tax rate too low to 21%, maybe I would've caught it to 24% instead. So you can read my book and agree with everything in there and still think in some ways maybe we should treat business more harshly. You could say, Tyler wrote this great book about business. Business is strong and productive and wonderful. It can stand a bit more regulations or climate change. May or may not be true, but it would not be an illogical inference from my arguments.
David Wright:
41:11
One thing too that is important about business and comes out in the book is how different it is here in the United States than there is elsewhere. And you're talking about political bashing of business. I imagine that happens a lot more elsewhere. But it kind of actually tying back into the findings from the Blum papers perhaps, is that it really is better here business. And should we be worried about turning into a different country of some sort?
Tyler Cowen:
41:38
A Pakistan friend of mine had a very perceptive comment. He said, "Tyler, I love your book, but I'm worried about how they will read it in China. They will read it as a defense of the large state-owned enterprises, which is what they should be moving away from." He added. And that's true. That may be in fact, they're reading in China and that would be a mistake. But I'm struck, if you look at say French top businesses that all of them started before the late 1970s. There were no new businesses on that French list. Other countries, the record may be more positive in Europe. Asia, obviously, they're either very new or they renew rebirth of something very old, but in essence they're like a new business. And that's not the case in the United States.
David Wright:
42:29
Why not?
Tyler Cowen:
42:30
Some of it is our facility in tech, we have less labor regulation. We have a much larger home market, stronger work ethic, very different sense of what people should aspire to. Maybe that would be the reason number one
David Wright:
42:44
It seems by healthier in some ways are actually a bit more indifferent relationship between large firms and government where it seems to me a lot more protectionism and smaller countries. And one of the things I was wondering about is whether this relationship between business friendly and larger, and business. I have to make a distinction I suppose between market friendly and business friendly. When the market's good, because the market is what generates these businesses. But, being business friendly, it could mean coddling the business, protecting the business that's not actually good for the market or for consumers.
Tyler Cowen:
43:21
The idea of national champions is harmful. And I think in so many smaller countries, you've had the political leaders and the business leaders, they all went to the same high school. They know each other. There's something incestuous there. You look at the United States, it's so large. So Mark Zuckerberg's upbringing and the upbringing of the major politicians in Washington, they're really almost completely unconnected. Now, I think Zuckerberg and Kushner, they both went to Harvard, not in the same year, but like around the same time. And not that there's no connections. But even within the elite, for the most part, people did not grow up knowing each other. And you compare that to, say Austria or most other European countries, France is highly centered in Paris, very different story. You have more centers of independent thought creativity, others less of a sense of we're just going to sit down at a table and work out some arrangement here because we already know and trust each other.
David Wright:
44:19
So actually, I'll ask the question first. Is there a gap on, I call it a per capita incidents of big business between America and other countries in the world?
Tyler Cowen:
44:30
America and China now stand out for having very large companies globally successful. Chinese are starting to become globally successful, that will continue. And everyone else is far, far behind. I suspect in due time, India will join that club and it will be three. The most successful German companies are at great danger from Chinese competition. They are, if anything in defensive mode. And I don't see any European nation remotely in the same league. The notion that the number one contender is United Kingdom, maybe soon to be Great Britain, maybe soon to be England doing Brexit, good for them. But the fact that they're next in line for global fame is highly worrying for the rest of the world.
David Wright:
45:16
How about Asia? Japan, South Korea, Singapore.
Tyler Cowen:
45:19
Again, it differs country by country. Japan has a serious shortage of creative new firms comparable to Toyota or the old Sony, which is now actually mainly an insurance company, I believe. South Korea has strong recent performers, but they are far too concentrated and they're leading tribal conglomerates. So, they are vulnerable but have a great recent track record. And Samsung is a phenomenal exporter. My car is a Hyundai and so on. Singapore is doing it by importing multinationals. That's worked well for them and they're very small. It's probably their optimal strategy. So, I would just say country by country, but Japan's champions are stagnant and South Korea's are only a few. And it's I think 50 million people in South Korea. Their ability to diversify is probably going to be somewhat limited for a while to come. The population may even be shrinking. They have, I believe, the lowest birth rate in the world right now or close to it. It's half of replacement.
David Wright:
46:26
You're bringing it up pretty succinctly there, but that was my second reading of the book, which is this very American book. And that's depressing where it seems to me, if you're anywhere else in the world, and we can talk about China in a second, you're thinking to yourself, well, that's great, that big business is good. But what does that going to be for me? Like what does that mean for me in Switzerland or Poland or Ghana or something. It's depressing.
Tyler Cowen:
46:54
It's a very patriotic book. That's one of the Straussian readings. Maybe is even thumbing its nose a bit at foreigners, but I think an implied message is be friendlier to your multinational enterprises. They can do a great deal for your nation as they have done in many countries around the world, most obviously Singapore, but much of East Asia, including parts of China and not embrace this. India is the country that probably needs that lesson more than any other. They're one of the most hostile to outside business, including American big business.
David Wright:
47:26
Is it simply policy or is there something else about being large that allows the growth of big business?
Tyler Cowen:
47:32
I think the policy and the other features of being large are the same fact described in two different ways. So, India has a longstanding history of in some ways allowing in foreign quote unquote invaders, but then turning them into something Indian. But, because of that history, because of the history of colonialism, they are very prickly about open signs of foreign business. Like say Walmart, simply having retail stores with a Walmart sign on the store big and obvious, the way that in Mexico, no one really worries about. So everything is cumbersome in India. And they have so many religions, states, languages, different customs, casts that it's a society of multiplicity and diversity in any case. And American business is not really built for that particular kind of diversity. It's built for large markets that you can move into very rapidly. Whereas, you take Mexico, well, there are multiple languages but Spanish is a kind of ruling language for commerce in different parts of Mexico. The state governments differ a great deal in terms of rules of law and how they treat their drug gangs and so on. But there is a kind of Mexican business model you can just put into Mexico and let it rip and Walmart has done that. And India will never be like that.
David Wright:
48:52
It doesn't have a cohesive domestic market. It seems to me that that's an important part. You can rely on your domestic market. There are no barriers to trade internally that allows you to get big. And the export driven model was maybe a bit of repudiation of that 20 years ago. But, since then not very good for big business anyway and since new businesses have turned up.
Tyler Cowen:
49:12
It's stunning to me how quickly China has built a coherent internal market. 15 years ago, there was a saying that it's easier for Shanghai to sell to Africa than to Beijing. It's clearly not true right now, although they're doing great in Africa to be clear. But the extent to which Chinese big business has made China a single internal market. Again, Tibet in the Northwest beside, has been one of the most impressive things about Chinese economic growth. In addition, to just rising wages, GDP and all that movement into the cities, everyone knows that story, but the internal market becoming a single thing has just been astonishing and positive.
David Wright:
49:49
So, how about an analysis of China, compared to America and maybe other places, the idea of crony capitalism, which is discussed in the book and obviously, rejected in the book. We're going to come to that as well. But, I'm curious about whether crony capitalism exists anywhere in the form that people are worried about, the business controls to government. It seems to me that the reverse is actually what tends to happen. Is there such a thing as actual crony capitalism as it exists in the minds of its, I don't know, I guess its proponents, not proponents but as warriors?
Tyler Cowen:
50:17
Well, there's a lot of different countries in the world and I'm reluctant to make any claims about all of them. If you look say at China, it seems to me the state-owned enterprises more and more over time are becoming a truly dominant interest group behind the Communist Party itself, which, of course, is in charge. And they are somewhat close to the classic model of crony capitalism. If you look say at Russia, I don't feel I understand their political economy very well. But, it's sometimes remarked Russia has a whole bunch of billionaires and no millionaires and that's unhealthy. And the oligarchs and Putin interact in some mysterious fashion or I think they're more worried about him than he is about them. But in some way, they constrain what he does and what happens there. A lot of Western Europe is more crony capitalist, I think, than the United States. We have a tradition of populism and also federalism being stronger in the US, means often it's the most negative state about big business that gets its way for the whole nation. So, I would just say there's a lot of diversity. You need to look at every single case. But especially for the United States, the pure model of crony capitalism, I think is far overrated. Business is really not running the show. Maybe, the healthcare sector would be our worst case of that. So, if you look at hospitals and what people call big Pharma, on a wide range of issues, they have too much influence. And that makes many things much too expensive for American healthcare consumers. And that's somewhat the model of crony capitalism. Not true for most other American sectors. But again, I always say, look for the cross-sectional variation.
David Wright:
52:00
In healthcare, at least, is mediated through a populist sentiment, which is we want more healthcare.
Tyler Cowen:
52:07
We want more. We don't have want to pay for it. We don't want to wait for it. And then you have the suppliers who are happy to take the money and that toxic interaction. And then, Americans in general, they just spend more on consumption than anywhere else in the world I know of certainly more than western Europe. And our healthcare expenditures being higher or roughly in proportion to our consumption expenditures being higher on a lot of things. Even like snowmobiles.
David Wright:
52:31
How about finance? Wall Street, also another section in the book. The criticism of finance that I found most compelling, though, I don't completely buy it, but it is little. You do make the observation that the old revolving door between Wall Street and government. Does finance have a different kind of crony capitalism?
Tyler Cowen:
52:53
I think finance is again, quite different. To me, what's special about finance is first, we have deposit insurance. Second, we probably should have deposit insurance. But that means there's a bailout waiting at the end of the story, no matter what. You may not like it, but it's a fact for now. That means ex ante if you do a bail out, again, you may not like that either, but you're choosing to bail out early or late, it's not an option of no bail out. And people haven't faced that reality. So, you can criticize the ex ante bail outs for being unfair. Of course, they were unfair. Should mortgage holders have received debt relief? You could make that argument. But at the end of the day, the ex ante bail out saves you a lot of money on the exports bail out. And by the way, in 1929, it didn't go that well either. So the outcomes there will never be fair. They'll always be a kind of crony capitalist outcome, but actually mediated through the populist demand to keep your checking account intact. I view that more as the citizenry getting its way. People want deposit insurance, it's fine. But you end up as a hostage and the financial sector is its own hostage and they are remarkably good at using their position as a hostage to say, look, if you don't help us, this will be terrible for you. And I think again, the criticisms there are largely correct. The broader context is not understood and the broader benefits of our financial system are rarely articulated. So, they're not wrecking our world. American finance is pretty good actually, at reallocating capital to new and growing sectors. Probably the best financial sector in the world for that particular activity. It's not the best financial sector in the world for say, making payments, we're quite behind. Whether it's retail payments or making a bank transfer, we have a lot to learn even from western Europe and have had so for a long time.
David Wright:
54:53
What is the financial dark matter hypothesis?
Tyler Cowen:
54:57
As you all know, there's a big debate about the trade deficit. America's running a large trade deficit, a trade deficit from China. But to some extent, and we don't know how much that is offset by the fact that American multinationals in Europe and other places, they're more productive than other companies. So we're earning back some of that trade deficit, not in the form of monetary flows, but the value of those companies, of those outlets, of those chains is quite high. And we're not sure how much. Here's like an example to make that concrete. Let's say China totally opened up to Facebook and Google and the other American tech companies. Those are services. We're not going to export something that gets put on a boat, but you could imagine a Facebook branch in China that would in essence sell ads to Chinese people. It would be in Chinese economic statistics. Those bought and sold ads, but it would mean Facebook is a more valuable company and there's unobserved net asset value there that America as a whole is in some way enjoying. That's dark matter. People disagree how big it is. It's bigger than zero for sure. It makes our trade deficit less of a problem. Japan as a nation likely has significant dark matter. So, their fiscal situation, some of the numbers, they look quite dire. I'm not saying there's no problem, but when you count in Japanese dark matter, there's at least a stronger case for optimism and you start understanding why it is. Markets are willing to lend to the Japanese government at near zero rates of interest. Their net asset position is much better than say the flows of their budget deficit are lacking.
David Wright:
56:38
In the conversation about dark matter in the book, which I thought was such an interesting idea. I wasn't aware of the literature from, as you mentioned in the mid 2000s on it. But you make mention of an incredible report, an idea, which only pops up here in the book, which I think is a big one out of intangible capital. And so really important part of business life generally ended up building great businesses. And another way of putting it is the reason why the American firms overseas do better than the domestic firms there is, they have more intangible capital. We're tying in again the Blum papers on important part of tangible capital being management expertise.
Tyler Cowen:
57:17
And expertise and using information technology. That's right.
David Wright:
57:20
And software. I know because you pointed out to me through your blog of the literal intangible capital as it's come out. Look by Westlake, and who is the other author? I forgot the other author. But capitalism without capital--
Tyler Cowen:
57:36
Correct. Great book.
David Wright:
57:37
It is a great book, where they talk a lot about the intangible capital is a bigger part of business today. The part of that book that I found least convincing was their observations on managerial quality. And Blum's paper I think actually helps fill that gap for me where, I think stronger evidence a little bit on how manager-- In the original research on capitalism without capital, they referenced some studies and I've forgotten the names of the authors there. But their main piece of evidence for improving the managerial productivity was spending on consultants or something like that?
Tyler Cowen:
58:16
I would almost use that as a negative.
David Wright:
58:19
Maybe. That's right. And I have similar reaction. I see where they're going with it though, where obviously, because there's an urge there. We want to improve on this so we're going to pay people to help us get better at things. And I think that the competitiveness, this ties back to this idea of America being kind of special here, where there's a competitiveness that firms here can sustain the other firms, and other societies really can't. And it does come down to intangible capital. Do you agree with that?
Tyler Cowen:
58:53
I agree with that. It's very hard to study intangible capital because we don't have good ways of measuring it. We have total logical ways. You can look at companies that seem to have few physical assets and see their market valuation. But I'm not sure that will be predictively useful. So, I think some key issues in industrial organization, they're just harder to test. I think there's something about American business culture that is special and longstanding and it may even tie into American notions of religion and also being a nation of immigrants, but that's speculation. I think also the ability of other countries to compete on the grounds of using information technology, they're probably catching up to the United States. The paper on that by Blum and others is now a number of years old. And I don't feel we're losing any ground. It's great if other countries are catching up to us. That's good for everyone or even the European Union, the best western European companies, they're quite impressive in terms of productivity, even if they're old, they've managed to stay competitive. And why is that? There seems to be something special about European cultural capital but I find people underrate when they talk about euro sclerosis, youth unemployment, all that's true. High debt. But the companies have something special that's intangible capital that comes from this long standing heritage of European civilization. And it's an underrated strength of the EU that is present in these stocks but you don't see in the flows.
David Wright:
60:26
I'm happy you brought the idea there because as I was reading this and waiting for intangible capital pop up in the book. It occurred to me that this is actually, it might be Straussian reading of your entire body of work, which is a study of different kinds of intangible capital. If you think about and I've read a few of your books now, I don't think I've gotten to all of them, but often it's about an observation of something intangible, usually a social kind of phenomenon as it influences economic life and economic activity. And obviously, the economy is a bunch of people. And so there's a lot of society embedded in the economy, but we measure a certain amount of it, but quite a lot of it is important too. That sociology-psychology. But the part where I think that you come in is, it's actually economy as well. What do you think about Straussian reading of Tyler Cowen?
Tyler Cowen:
61:14
Well, I fully agree, but it's not even Straussian reading because I have one book creative destruction, which makes this point explicit when it talks about ethos, which is the central idea in that book. So, I think you're completely on target, but I'll plead non Straussianism there.
David Wright:
61:29
Okay, fine. That's no problem. Close on actually talking about the definition of the firm. And this is another part where intangible capital didn't emerge in what you were discussing. You disagree with the standard or, at least, you defer a little bit in the standard reading of what a firm is, although maybe you've changed your mind and once did agree with the traditional definition.
Tyler Cowen:
61:54
I once agreed with Coase and Williamson and now I don't.
David Wright:
61:57
And what is Coase and Williamson's view of the firm?
Tyler Cowen:
62:00
Ronald Coase is a famous 1937 article, long time ago. Oliver Williamson did his work in the 70s but they argue that the essence of a firm is to reduce transactions costs. So, if there's something you want to buy, some way you want to deal with people, by bringing it into your firm, you will make those costs lower. Now, I would agree that is often the case, but it seems to me there are significant and indeed essential parts of firms that raise transactions costs, not lower them. There may be other benefits from doing so, but I give the following simple comparison. Say, you want to buy a new computer, what is easier? Doing one click on Amazon and having it delivered, that's outside the firm, or working through the purchasing department of the business you happened to be in, and getting them to send a new computer to your office? Now, we all know the former is easier, may not be cheaper, but it has lower transactions costs. And once you see that as a regularly recurring choice, I view a business as a clump or collection of assets that makes sense to be together for legal, reputational, and ethos reasons. But, a big part of that clump is going to mean higher transactions costs, just as families can be higher transactions costs than just going out with your friends, but they bring you higher rewards. But to just say, oh, you want to spend time with people and you create a family, lower your transactions costs. It's not how it works. Like many things are easier in your family. Oh, can you scratch my back? Probably easier question to ask a spouse than a friend. But there's so much about a family that has a lot of bargaining and inconvenience and I think view the firm in the same way. It's both raising and lowering transactions costs. The essence of a firm is something else. It's why you collect all these assets together.
David Wright:
63:50
I think of it in my firm when we buy a computer, and this is something, I think, I deal with all the time, where it is, one way more, we pick a different model than you would pick for reasons that the firm has, I guess, the IT department, they know what they're doing. I'm not criticizing them, if they're listening to this. I don't understand what their priorities are.
Tyler Cowen:
64:14
And it may not be what you want.
David Wright:
64:16
But it's got the security software on it. It's got certain ports and things that they need to be able to access. There's often, I say software difference, but there's some hardware differences too. And so this comes back to this idea of intangible capital. They're embedded in the firm. There's these policies and procedures that exists to ensure that I don't screw up on behalf of the firm and I delegate that thinking to somebody else. Now, it would be cheaper for me to go out and buy something, I guess, it will satisfy my needs, but I don't know all of the firm's needs that sit behind me. And so there's this kind of we have this set of practices that, some people make a decision on it, but not everybody knows the whole thing. This accumulation of behaviors, I suppose, that nobody's created, but that exists and is pretty productive or achieves the aims of the firm.
Tyler Cowen:
65:11
That's right. The habits and rituals and practices, it's not a simple, simply correct definition of the firm, but it's a better starting point than transactions costs.
David Wright:
65:22
We'll close. Where can we get the book, Tyler? Anything else you want to say about the book?
Tyler Cowen:
65:27
Big Business: A Love Letter to an American Anti-Hero. You can buy it through any number of big businesses. Amazon, Barnes & Noble, independent books, salaries, which might be smaller in mid-size businesses. There are many other places. You can use Google being other search engines to tell you how to get the book. Thank you all for listening. And thank you, David, for being actually, my favorite interviewer of me.
David Wright:
65:52
Thank you very much, Tyler. I appreciate your time.
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