In this thought-provoking episode of The Futurist Society, Dr. Awesome welcomes Nobel Prize-winning economist Simon Johnson to explore the future of economics and its impact on society. Professor Johnson, from MIT’s Sloan School of Management, shares insights from his recent work on technological progress and economic disparities. The conversation delves into the challenges of job market polarization, the potential of AI to reshape the workforce, and innovative approaches to creating more good jobs. Johnson also discusses the importance of investment in breakthrough technologies and the concept of a “protopia” – a continuously improving world enabled by responsible innovation.

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The Future of Economics – A Conversation with Nobel Laureate Simon Johnson

Hey everybody. Welcome back to the Futurist Society, where as always, we are talking in the present, but talking about the future. I have a really special guest today, someone whose work I’ve been reading for a long time, and I finally have the opportunity to talk to him: Professor Simon Johnson, who is a Nobel laureate. Congratulations! A recent winner of the Nobel Prize in Economics and a professor at MIT, a place which is just a stone’s throw away from where I live. So thank you so much for joining us, Simon. 

I have so many things I want to talk with you about, but I would be remiss if I did not ask; you won the Nobel Prize, how are you celebrating? Like, are you going to Disney World? Are you popping bottles of champagne? What was the big thing for you?

Who knew, right? It turns out when you win a Nobel prize, everybody you’ve ever worked with or interacted with, pretty much without exception, sends you an email. I read all the emails and I responded to a lot of them, and it’s just a fantastic moment of reconnection. And for me, that’s the core of the celebration. 

Phase two, I have to say, is going to be at MIT. I think we’re all planning a series of amazing parties. I was a grad student there, I came back there quite a long time ago. My career was doing okay, but not great, and it’s the magic sauce of MIT that really has brought me to this point. I want to give that back. I want to share that with the students, who are totally amazing, in the Sloan School, and I want to plan what we do next together because I think I’ve won it pretty young. I’m only 61, I think the average age is about 67. And for me, this is, let’s accelerate and intensify the work that we’re already doing.

I really appreciate the work that you’re doing also. I definitely want to get into that, but I’ve said to people that I’m talking with a Nobel Prize-winning economist and I’m so excited to talk to him, and I interact with a wide variety of people but, for whatever reason, everybody wants to know about tariffs.

Economic Impact of Tariffs

Everything is like kind of filtered through this lens of politics these days. Certainly we have the US election coming up. So, I would be remiss if I did not ask you about how you feel about them, especially considering the fact that a lot of your work deals with political implications and political movements.

So, you know, let’s start there and then let’s go more into the stuff that I want to talk about.

Yeah, fair enough. Good topic. So, as you know, Dr. Awesome, I was previously the Chief Economist at the International Monetary Fund, and I’ve worked on international issues and dimensions of these problems for a long time. 

One thing that I do, and I recommend everybody does, is spend time with experts, people who do analysis, and talk to them and spend time with them when the stakes are not that high. You know, Dwight Eisenhower said his most important job in 1944 was to determine D-Day, go or no go. And the big issue there was the weather. So he said he talked to the weatherman, the meteorologist, every morning, even when they weren’t anywhere near D-Day, because you just want to have a sense of the guy. Is he talking sense? Has he got a calibration on this? 

One thing that I do, and I recommend everybody does, is spend time with experts when the stakes are not that high.

So when you bring up an issue like tariffs, I look around for the analysis done by people I trust. People who’ve done good work, people I know I can rely on. And I’m looking for this in a non-partisan setting and I’m looking for people who can communicate the ideas and get it through clearly, and I can also look at the footnotes. 

Kimberly Clausing, who’s a law professor at UCLA, former US Treasury person, and Mary Lovely, who has a lot of experience. They’re both affiliated now with the Peterson Institute for International Economics, where I spent a lot of time but I’m not affiliated with them now, so it’s not my work I’m pushing on you at all. 

They did this really interesting analysis that shows that if Donald Trump adopts the tariffs that he says he’s going to adopt…I mean, politicians say various things, but he’s got a pretty concrete proposal out there and he calls himself Mr. Tariff. What’s the impact on Americans at different income levels? So it turns out – and this is in the data, this is just a data exercise. We know what people buy. We know what the import content is of what they buy. We know most of the effects of tariffs – as you know, as you push the cost of imported goods that I buy directly, it’s also an input in other things I buy so you’ve got to think through the input output table a little bit. So the analysis that Kim and Mary have, it’s on the website of the Peterson Institute, I recommend everybody look at it. 

It’s really quite striking. I mean, if you do that approach to tariffs, that will be a big hit to the income levels or the effective spending and the standard of living of lower income Americans. And actually it’s very interesting, Dr. Awesome, there’s a bigger impact in dollar terms and percentage terms for lower income people just because of different stuff they buy. You know, let’s call it the Walmart effect or something, I don’t know. But that is, I think, of absolutely fundamental importance.

So the idea that you’re somehow going to boost or help working Americans by slapping these massive tariffs on from the get go – the arithmetic doesn’t work. 

I’ve never been in favor of zero tariffs but slapping these massive tariffs on from the get go – the arithmetic doesn’t work.

Now, I think that you could have a broader conversation about the game theory of the international system. What has China done? How should we react? How do we think about that in an economic sense? How we compete with them, what we allow into our economy, what kind of technology we encourage them to develop, national security features. Now that’s very interesting. 

I’ve never been in favor of zero tariffs or letting the Chinese do everything and so on, for reasons we could talk about. But I think the current moment, with a big tariff proposal on the table – you need to push back on that. The math doesn’t work.

Creating Good Jobs and Economic Growth

I’ve heard it termed as a very expensive way to create jobs. That’s one of the things that I kind of wanted to segue into is that there are different ways of creating jobs. And you talked a little bit about the prosperity gap in different countries on how technology was instituted to create jobs.

And I would want to highlight one of the words that you said, the idea of it being extractive policies versus not. Can you tell us what qualifies as extractive policies, so that we don’t do that in the future with our own economics here in the US?

Absolutely. And so let me link those things up. It’s a very good question. And by the way, I’ve had lots of interviews since I got the Nobel prize and you’re the first person to ask that question. Seriously, it’s a very good linkage that you’re making. 

As you know, I’m a little bit into history. I mean, my study and actually most of my house is filled with history books. I read history and I think we need to learn from history. I don’t think history repeats itself, but I think there are lessons there. 

In the 1950s, there was an idea that you could create more good jobs through protectionism.  In Latin America, for example, Raúl Prebisch is associated with this idea. Sometimes people call it import substitution. The idea is you put up a protective barrier with… tariffs, for example are one way to do it… and then your own industries develop behind that protective wall. 

Now, experience with that in Latin America has been highly disappointing. I mean, we can go through the ups and downs over the decades if you want. But the main problem with protections… Jagdish Bhagwati and Anne Krueger did the really big work on this, by the way and I hope that they will be fully rewarded and recognized by history, and Ann Krueger actually has this pivotal work on rent seeking… what they found is that when you put up those protective barriers, instead of people developing behind them and investing and building a better, stronger company that then launches out to the world, what happens a lot (almost always perhaps) is that you just get this comfortable life where maybe the workers get a bit higher wage, the people who own the capital do well, but it is not a dynamic industry. It doesn’t boost the economy. 

My bumper sticker for this Nobel prize and all the work that I have done and do is more good jobs. That I think is the central thing to focus on. It’s the lens I look through. Every proposal that comes to me, I’m like, where are there more good jobs in this? 

I understand that you protect your sector, your industry, your firm against a little specific bit of Chinese competition. And as I said, sometimes in the global game theory, I might be fine with that. But does a large amount of protectionism, across the board protectionism… Does that lead to more good jobs? Does it give you the dynamic economy? Does it keep you at the technological frontier? Does it allow you to innovate? Does it encourage entrepreneurs? 

I think the answer for modern America is no. The answer in that 19th century America was a little bit different, I agree. 19th century America was a very different place, I don’t think you would recognize it. But in modern America, I think trade policy is incredibly important. I mean, the US Trade Representative sits in the Cabinet for a reason. But I don’t think the driving organizing principle for more good jobs is higher or high tariffs.

What about making more good jobs at a micro level? A lot of the stuff that you work on is public policy that influences policymakers to make more good jobs at a very general national/international level. 

But what distillation of that information can you say to a small business owner that maybe employs 200 people and he’s seeing these technological trade wins that are happening that are extractive? You know, it’s so hard to say no to an AI bot that can remove three people from my payroll, but it might not be the best thing for my employees. How do we, as small business owners, use some of the work that you’ve done to make sure that we are making good jobs for our employees?

Yeah, I think that that’s the absolute key question. So there are two pressures and two extractive mechanisms. 

China runs its economic system in a particular way that basically keeps low skilled workers extremely poor – they’ve not shared in the prosperity. You’ve obviously seen the headlines, you’ve seen the pictures, you might have been to China. But if you look at the data on low skilled workers (to the extent they allow the data out) they have not paid high wages. Their wages have not gone up much. And you can’t get the data now, any Chinese economist who gives you any data or any indication on that will be in serious trouble. So that’s point number one. 

Point number two is, of course, automation. As you said, the AI bots are coming, what are they going to do? I think that the key point is, and this is in some way closely related to a book I did with John Gruber called Jump-Starting America (the book came out in 2019, but I think the points still stand), in this moment, with these forces, more investment in breakthrough technologies is necessary, but not sufficient. You need a commercialization process through which ideas come out of universities, labs, wherever you’re having your general science knowledge creation, and gets connected with the private sector. You create jobs. You keep a lot of those jobs in your local community, maybe around the country. And then you keep at it. 

The history of job study in America argues that that’s what we did very well after World War II. But we took our eye off the ball and forgot about it or didn’t focus it. So we used to spend 2 percent of GDP on R&D. Of late, we’ve spent slightly over 0.6 percent GDP. And so ramping that back up and also placing those investments in different communities around the world.

 More investment in breakthrough technologies is necessary, but not sufficient.

The picture behind you is of the Dome at MIT (which is a fantastic building), close to Kendall Square, which has really gained a huge amount and generated a fantastic number of jobs since I was a graduate student there in the mid to late 1980s. But there are many other parts of the country that have not participated. And why? I mean, if you go through the attributes of those places, the people who live there, their skills, commuting time, cost of real estate and so on, they would be fantastic places. And so we argued for big increase in R&D spending around the country, building more small tech hubs. 

Of course, we’re not trying to create another Silicon Valley. That would be silly. But the idea of distributed innovation for large business and for small business across the entire country, that’s a very American idea. The concentration of invention is a function of the last couple of decades in the digital age, actually. We used to have a lot more distributed invention. So we argued for this. 

The book came out in 2019 and in early 2020 I remember meeting with a senior person on Capitol Hill who said, “Simon, we love your book, but we’re not going to do it because we’ve got lots of other things to do. So sorry about that.” That was the last meeting I had, maybe the last meeting he had, before COVID broke. And so what did COVID teach us? 

Well, apart from the madness of the initial thing, it taught us that science saves you and your society and your economy, not only in the ways that you might anticipate. I invest in science, I get jobs, this kind of mechanism. But also because when there’s a national crisis, you look around and say, okay, what have we got? mRNA vaccines. Okay. You might like them or not, but I think they were incredibly effective, personally. I’ve had six or seven of them. 

That technology came out of a biotech industry, that came out of the human genome project, that couldn’t get funding from the VCs because they liked the idea but they said, this will create general knowledge and we can’t get a return to our investors. Good point. Absolutely fair. So the government put money in. 

You generate general knowledge. You create an industry with roughly 300,000 people working at good wages. And I believe the scientists – I should ask them directly. Maybe they’ll take my call now that I have a Nobel prize – but I believe that it took them 24 hours to 48 hours after they saw the sequencing of the coronavirus, to figure out the structure of the vaccine and then get that whole ball rolling. I mean, that’s incredible! It’s not just a national treasure, I mean, that’s international security right there.

Yeah.

I think we’ve lost track of that, Dr. Awesome, I think we have forgotten that science did not always drive this economy. In fact, Massachusetts Institute of Technology was not founded as a scientific research institute, it was founded as an engineering institute. Very practical, hands on in the 1860s.

America was not at the forefront of science until actually just before and during and after World War II. And then we picked it up because we realized that it was important for jobs and important for national security. And we have dominated the global scientific scene for decades, but we’ve also fallen off our game. 

So the outcome of my COVID story is the CHIPS and Science Act of 2022, which has a lot of our ideas in it from Jump-Starting America. It was supported by 64 or 65 senators, so that’s bipartisan. 36 States, I think, had senators who supported it. Of course, because everybody wants in. 

When we have meetings around the country on that issue, sometimes I’m rushing between Zooms and so on, and I’m like, “Wait a minute, am I meeting Republicans or Democrats?” At the governor level or the governor’s office, if I don’t look it up ahead of time, I can’t figure it out from the conversation. It’s the same language, the same priorities. Everybody wants more good jobs. 

Then the question is, how do you harness technology? How do you stay at the frontier? How do you keep pushing? It’s like a bicycle, right? You’ve got to keep riding the bicycle or it topples over. And I think that to me is your driver and the organizing principle for more good jobs –  in the United States, the most innovative society in the history of humankind.

But remember, we’re only 335 million people or so in a world of 8 billion. Well, that world of 8 billion has got a lot of big problems that we could help them crack. And we can sell our ideas and sell our innovations, which we do to some extent. We could do a lot more of that. That’s an amazing American contribution to world prosperity and peace and everything else.

The Role of Innovation and Technology in Job Creation

Yeah, I want to talk more about that political ideology in just a second, but one thing that I was taking away from a lot of the things that you were saying is that it seems very top down. You know, in the early days of the internet, it felt very bottom up. At least that was what the narrative was, right?

A small business owner could get a food truck, put their ads on Google, make a really slick website. And they could 10x their business, right? And that I would consider to be, maybe not the same definition of a good job, but certainly a better job than they initially intended. 

And now it doesn’t feel like that. It feels like that power is concentrated in the hands of a few different people. And the narrative has changed. 

So how do you view that and how do we get back to that?

That’s a very good point. Yeah. So sometimes people like to call this permissionless innovation. I think that’s a good term for it. So it’s not just go ahead, you can invent stuff, but it’s actually you’re empowered to invent. You can get capital. You can grow fast. Like you said, you can fail, but you fail fast and then you go on to the next thing. 

It does create better jobs. I mean, look, the ultimate test of a better job is does somebody take it. Because they only take it when it’s better than the other job they had. I’m not fussy, I want people to have free choice and people to have the financial security to make responsible choices for themselves and their family. So absolutely, let’s go for it. 

On the digital business side, or digital tech, I completely agree that concentrated power is a big issue. And Daron Acemoglu, my co-winner and long time co-author, and I wrote Power and Progress: Our Thousand-Year Struggle Over Technology and Prosperity, precisely to confront that and to talk about excessive concentration and why it’s bad for innovation, why it’s bad for lots of things like democracy. 

That is a good point and a good observation, what you said. There’s a defense and there’s an offense part to what I guess my message is.

The defense part is related to what you’re saying, which is don’t let the guys get too big. As AI comes, we need AI to be in a format and at a price point where it’s enabling permissionless innovation as opposed to OpenAI owns all the good stuff. I think everybody gets that but the details that are not trivial. 

The offense side is: Alright, so there’s tons of money going into AI. Love it. Fine. Work it out… Or actually, maybe we should tilt that towards pro-work AI. I hope we’ll talk about that… but what about biomanufacturing? What about semiconductors? What about quantum? What about critical materials? What about clean energy? They don’t have the same spontaneous, rapid development right now because they don’t have the same amount of capital going in. And some of those problems are amenable to government action.

I don’t think the government is innovating. I can promise you the government does not write good software. Government contractors don’t write good software – it turns out it’s actually sometimes worse. But the government could put money into basic science. 

NIH? My God. I mean, the idea that you could create and build and sustain something like National Institutes of Health. I mean, if you show that to any human, scientist or non-scientist, a hundred years ago or any time since there have been humans, they would have said, “Wow”. 

So more of that, I would say, Dr. Awesome. More of the wows and do it in the US because we’ve got what it takes to do it for ourselves and for the world. We can and we have. And we can sustain and we can build a competitive position based on that.

I love that term, permissionless innovation. 

The Future of Work and AI’s Impact

I just feel like, now, I don’t know if AI is going to go the way of permissionless innovation or if it’s going to become concentrated in the hands of a few. I look at the barriers like compute power, just infrastructure, and those are some big barriers that mean a small time person may not be able to enter into the field. But then I also see just the expertise of tailoring that AI to a business. Like for example, if you have a small medical practice, you could have an AI that is geared towards your business, so there might be some middle level opportunity in that. 

But as we zoom out to what you were saying about the different technology sectors – like biotech, there’s so much regulation and stuff for like a small person to get into biotech. I’m in that space. I’m in the medical space, and I see a lot of these biotech companies and they have to go through years and years of losing money before you can really even get into that. Like really, other than a handful of people, who is able to do that? It’s not like somebody creating a new website in their garage and they’re able to leverage that into Amazon.

I guess my question to you with all of that is, are the cards stacked against smaller businesses? Are there more incentives for larger shareholders and owners to have a competitive advantage? And if so, is the work that you’re doing at shaping the future of work, is that going to lead us out of this?

Great question. So let me break my answer down to maybe two pieces. 

About eight years ago, a former student of mine, a mid-career executive, Jonathan Ruane walked into my office said, “You know, we should do a course at MIT Sloan on Artificial Intelligence.” And I’m like, “Really? I’ve got kind of a full plate and I don’t know if I got the bandwidth.” And he’s like, “No, it’s going to be big.” And he talked me into it and we’ve been running that course for a long time and learned a lot. The students have really helped us learn and so on. And I have learned to be very modest in my understanding and to reserve the right to change my opinion tomorrow. 

I’m not sure how long it will take for this podcast to come out – historians will go back and check when we had the conversation relative to when it gets published. But I think based on what we know now, you’re right about foundational models. They’re highly concentrated, extremely expensive, ridiculous amounts of capital, massive barriers to entry. 

But presumably, Dr. Awesome, we’re going to have some sort of stack develop, right? And that stack will have other pieces. Like you said, the tailoring to a particular medical office, that’s going to be very valuable to that medical office. And then the key question is going to be, in the stack who gets to extract the value because they’ve got monopoly power. 

We are talking in the fall of 2024, and there’s no legislation currently on Capitol Hill about this. But there are people having conversations in private about, do you want the companies that own the large cloud services and therefore the data to be driving AI? Are there market structure interventions that are appropriate here? 

This is not about breaking people up for the sake of it. This is about, as you said, releasing more permissionless innovation, but also allowing value to flow up the stack –  whatever that stack is going to look like.

I think that is in play. And I think the way you framed it as small business opportunities is the right way to play. I’m a professor of entrepreneurship, by the way, at Sloan. And people often say to me, “Well, that’s weird. You’re a former Chief Economist at the IMF and a Professor of Entrepreneurship. What’s that about?” Well, duh. I mean, if you don’t have entrepreneurship, what have you got in your macroeconomy? I’ve never understood that compartmentalization. 

So onto biotech and medical. Here, I think we have some potentially slightly different problems, but you tell me because you know more about this than I do. But I think this is the valley of death: the financing, the hard tech piece, who has access to capital. 

My colleague and co-author Jon Gruber, with whom I wrote Jump-Starting America, likes to say, “If a venture capitalist said I’ve got one hit out of ten in my portfolio, it’s a mega hit. Everyone’s like, oh, wow, what a genius, let’s call Andreessen Horowitz or whatever. If the government says I’ve got one failure in my portfolio of ten, people are like, okay, Solyndra, let’s have the inquiry. Let’s drag people through…” 

I mean, who has the deep pockets, Dr. Awesome? Who can take the risk? Who can put it in a portfolio?

My brilliant colleague, Andrew Lo, (who I hope everyone’s already heard of) had some really good ideas for stimulating investment and spreading innovation opportunities across the biotech sector. So Andrew is a finance professor and he’s like, let’s take a portfolio approach and let’s sell that to the private sector. Let’s raise money through the markets, essentially, for a portfolio. I think it’s very clever, it democratizes and, as long as you’re buying relatively uncorrelated risks, it’s a very sensible portfolio approach. 

Well, the government can do that too. The government has deep pockets. I mean, in our book, we argued that the government should put a lot more money into tech and then use a structure like the Alaska Permanent Fund. Where oil royalties go to this fund that gives out (you can call it universal basic income if you want) cash to every Alaskan resident every year. 

That’s what I would do. I would have a big tech fund go crazy with the investments. Plan on losing on many of them, but that the home runs are going to pay for it, and then give that cash to Americans. Cash, Dr. Awesome, cash. 

Cash transfers on the basis of where society is invested. By the way, the Alaska Permanent Fund doesn’t pay the same every year. They have an endowment so they buffer it a bit, but if they do better on oil and so on, then they pay you more.

That’s kind of like the NIH model, right? Like, they just fund all of these different experiments in the hopes that something will become a benefit.

Yes, but where’s the upside for the taxpayer? When’s the last time you got a check from an NIH? You didn’t.

I mean, the benefit is that we have the technology to get through the COVID pandemic. It’s not a financial incentive, but it’s certainly a health incentive.

Yes. And so totally very important. And that’s my headline as well. However, my friend, Jon Gruber, again, who’s one of the world’s leading health economists, also points out that in the health sector, the major payer is insurance companies and the government through Medicare and Medicaid. And globally you have to negotiate much lower prices. We don’t get the big financial rewards through the health innovation just because of the structure of how health works and how it’s paid for. That’s not to say we shouldn’t do it. I think we should do more of it for the reason you said.  

But in all other sectors you don’t have that. Health is unique in having that structure of who pays. So take the NIH thing. Do it for all other sectors. Yes, do the portfolio, absolutely. 

The problem also, Dr. Awesome, as you know, is that the traditional way that economists thought about upside is to say, well, your economy will grow, people will have more income (corporate and personal) and they’ll pay more tax. Well, the problem is we’ve allowed our global companies in particular… and maybe some of our rich people as well, but definitely global companies, to structure their international operations in a way that it completely legitimately minimizes or reduces their tax to zero. 

Okay, so where’s my dividend? Where is the cash back to the American people? So then, if you’re somebody who does not live in Kendall Square, or maybe you live in Kendall Square and you’re annoyed by the gentrification or whatever, or you live in Worcester or Fall River or Providence, or nowhere near Massachusetts… Rhode Island, you’re saying, well, put all this money into NIH, or other efforts… semiconductor, we’re putting a lot of money in chips and science puts a lot of money into semiconductors… where’s my payoff? Where’s the good job for me? Where’s the connection? And I think we should address that. And I think it would be much more compelling if people were getting a check every year from the National Innovation Fund of the United States of America.

Yeah, I mean, there are so many different permutations of how this could all play out, but kudos to you for highlighting the fact that we have a problem with this.

Income Inequality and Job Market Polarization

One of the things that I just wanted to come back to is one of the problems that you talked about in your book, which is the stratification or polarization of different income groups, different education groups. Like the graph where it shows how educated men are increasing and non-educated men are decreasing with their prospects. 

Do you think that that is a trend that has caused our current political polarization, or do you think that they’re independent of each other?

So the figure to which you’re referring is a figure that was created by David Autor, who’s our co-director of Shaping the Future of Work. David is a brilliant economist. In my point about you’d find the really smart analysts and listen to them all the time and then pay attention when it really matters – David is my go-to guy on this. 

So two things, or maybe three, we know at this point. First of all, we know what you’ve just said, which is that real weekly earnings for men with a lot of education are much higher than they were in the 1960s. But for men without much education, who didn’t go to college or didn’t finish high school, their earnings are about the same or maybe a little bit lower. For women, it’s a little less dramatic, but it’s also the case that there’s been a growing dispersion. That’s point number one. 

In terms of what we know about what’s causing that, well, it’s a combination of automation, new digital technology and the way it’s deployed, globalization, and the decline of trade unions. People often separate this out and they argue about the weightings. I think, in our book, we said maybe 70 percent automation. Remember that digital technology not only creates office automation and factory floor automation, it is a big part of how and why we have cheap telecommunications and cheap transportation. So it’s also affected globalization. There’s a direct and indirect effect. 

So what David’s work shows is that this gap grew consistently until COVID. David has got some other work… I’m not sure if it’s been published yet and you should also be careful about unpublished work, but I think I believe in it… which shows that during COVID lower skilled people, less educated people actually experienced an increase in their wages relative to other people – the ones who were working.

Which is very interesting, and it’s not necessarily what you would think happened. The plausible explanation that David Autor has put forward, I believe, is that… economists like to talk about job matching, like, do I have a job that matches my abilities? Am I as productive as I could be in that job or in that match? And therefore, do I have as high pay as I could? Because COVID shut down so many things, people got dislodged, for example, from the restaurant business. They had to go find some new match, for example, in a delivery activity. I mean, that’s not the only one, but that’s an obvious one. And what appears to have happened is that mashing processes closed the gap between the high end and the low end by some significant fraction – we’ll see where it ends up, but it might be 20%, it might be a 30 percent closing. So that’s good news. 

The Future of Work and AI’s Impact

The question, of course, now is what happens next, because AI is arriving. 

The big issue that we work on at Shaping the Future of Work is, is AI going to be another extreme and, we would say, excessive automation technology? Let’s just fire a lot of people, replace them with an algorithm. Or is it something that enhances the productivity of less educated workers, workers who didn’t go to college? 

That choice we think is going to be seen through the lens of labor market outcomes, extremely consequential for who wins and who loses. So AI is an amazing opportunity – yes. A tremendous potential risk also. 

Then you say, well, who’s driving this? Who’s driving the industry? What are the priorities? What are their investors looking for? And so on. And unfortunately, it’s too much of the excessive automation. 

I understand Elon Musk’s recent demonstration of robot taxis was not that well received and people think he’s further from it than he says. But the vision that he’s presenting is that you don’t need an Uber driver, you’re just going to ride a robot taxi. 

Now, I’m not opposed to driverless cars necessarily, once they’re proven and safe and so on and so forth. A lot of people die every year on the roads due to human error and tiredness and so on. But it’s about pace, right? If you wipe out the jobs very quickly and don’t generate new tasks for humans – and those new tasks have to be highly productive and well compensated, this is again straight out of David Autor’s work – then you’ve got a problem. 

We’re always creating new tasks. We’re always creating things that humans didn’t do before, but we’ve got to pick up the pace given what’s happening with AI. And if there is a massive acceleration of this extreme and excessive automation, we’ve got a problem.

Yeah. The reason why I was bringing politics into it is because one of the things that you talked about in the book is that you have this technological progress and it leads to these disparities and then the system comes crashing down. And I would prefer the system to not come crashing down. 

I would want to have less polarization and more togetherness, not only in our country but across the world. So, if we fix the polarization because of the income stratification, do you think that that’s going to fix the other polarizations that we’re experiencing?

Okay. So I missed that part of the question – I haven’t slept much since getting the prize.

Oh, no worries.

That’s like the key question that you just posed. In our view, and I think a lot of people agree or maybe even said this before us, job market polarization feeds directly into political polarization. 

It’s not the only thing, but it’s a very important part – some people feel left behind and some communities have definitely been left behind. And that makes you frustrated and angry. And the American dream or promise or whatever you want to call it is not the same as it was in the 1950s and 60s. When it wasn’t perfect, let’s face it, not everybody participated, but it was much better than it was now. 

Shaping the Future of Work initiative is definitely directly trying to target that job market polarization through the lens of not refusing or declining or trying to turn back technological change – because that’s impossible and a fool’s errand – but to try and redirect it towards more of this pro-worker AI. 

Now, if we’re successful, I think that would be very good for people’s incomes and a great thing for society. And I think it would have good global implications. But will that necessarily depolarize us? I’m not sure. 

In physics, as you know, people talk about hysteresis effects and it happens in economics all the time, just because you go into a problem one way doesn’t mean that by fixing what sent you into the problem you’re going to come out of the problem, you may need something else to bring you out. And we’re not there yet. 

So I honestly don’t think I can answer the question fully and truthfully. But, I think, unless and until you address the job market polarization and prevent AI from exacerbating it, everything else you do is going to be, you know, deck chairs on the Titanic stuff.

Unless and until you address the job market polarization and prevent AI from exacerbating it, everything else you do is going to be deck chairs on the Titanic stuff.

I am very appreciative of the fact that you are able to take a step back and say that we don’t have an answer for that. I was hoping that you did, but I wasn’t expecting it. So at least, you know, we can try our best and ensure that the best outcome happens. At least for the incomes because I think that even that step would be significant for a lot of people. 

Yeah, so I’ve been, I’ve been around economic policy in many different country situations for more than 30 years. And what I’ve learned, Dr. Awesome, is you should have a vision of what you want the outcome to be. And it’s a complete vision, and a vision with all the bits interrelated is good. But you should also be realistic and realize that, you know, two steps forward, one step back sometimes works.

So I would say my experience with policy, again many different cultures and countries, is when you put forward a proposal… when I was at the IMF, after the IMF, before the IMF… the answer is always no, until somebody calls you up at eight o’clock one day and says, “All right, Simon, we’re doing what you recommended tomorrow morning. What’s the plan?” So if you don’t have a plan…

That’s not any different in the hospital setting either. I can tell you that’s very similar in my world as well.

Exactly. It’s not a macroeconomic statement at all, I think we have these views of the world and we have these mental models and we’re stuck with them. And then all of a sudden, the people in charge are like, all right, that’s not working and we’re in big trouble. We need to, you know, break the glass or whatever the metaphor is. 

But my point is what you want to have at that moment is a plan that’s not on paper… I mean, it could be on paper, but it’s not something you just thought up… it’s something you’ve been hammering out with people you trust and people with data and people who are skeptical. You’ve been hammering it out for days or weeks or probably months and years. And as a result, you actually have a plan that is plausible and feasible. 

I think there’s an old military saying along the lines of plans are worthless, but planning is everything. And what I interpret that to mean is, that process of thinking out the pieces and how they fit together in an interactive way with other people, that’s the basis for decision-making under pressure and seizing opportunities. 

You know, I’m an immigrant to the United States. I worked long and hard to become an American citizen. I’m super lucky that I’m here and I like American politics. Okay, at the moment I’m a little stressed by it, but in general, I think we’re very good… we get things wrong, we’re often late and then we fix the problem. And I think it is that ‘can do’, “let’s fix it” that’s got us out of a lot of scrapes in the past. And I believe in mean reversion as a deep social, psychological, historical tendency. And I think we will mean revert to be problem solvers once again.

That’s great, I love that optimism. I would use your words and say that I’m a techno optimist. I think that the best is yet to come for humanity. 

Shaping the Future of Work Initiative

Tell us a little bit about your vision at the Shaping the Future of Work initiative that you have at MIT because I’m sure that people want to know how you want the future of work to look like.

If your initiative is shaping it, what is the Michelangelo’s David within the marble that you’re shooting for? Like if you could have a microphone to all the business leaders in America and guide them through the coming change to be as beneficial to their workers as possible, what would that look like?

So I have a speech on my shelf over here in my home office from a leading American engineer manager of the 1920s. And in this speech, he says the reason America is great… and America, of course, had just discovered that it was great. I mean, it was a process of some decades. Before a little bit and during and definitely after World War I that they realized that they were the world’s leading industrial power and this meant something. And it took them a little bit longer to figure out the full implications of that. But this chap said (and we quote this in the book Power and Progress) that the reason America is great is because we treat our workers well, we pay them good money, they’re highly productive, and they keep on coming to America. 

You know, America was not built on skilled labor or people with college degrees. On the Statue of Liberty, it doesn’t say send me more of your PhD students, does it? It says send us the hungry, you know, the people who want to be free.

The American economic miracle (I feel comfortable to call it that) of the late 19th and early 20th century was to take those unskilled workers, put them in factories and other places, make them productive, pay them higher pay. Oh, and yes, trade unions played a role there, by the way, let’s not forget that. That’s your middle class after World War II. And I think treating people as a resource to be developed rather than as a cost to be minimized is of fundamental importance.

I think the shift in economic and business thinking after, roughly speaking, the 1970s… it’s a pendulum, right? I mean, pendulum swing. What can you do? But it swung too far the other way. It swung too much towards fire the workers, run a chainsaw through our organization. 

Wasn’t Jack Welsh called ‘Neutron Jack’ or something? Didn’t he have some name like that?

I don’t know. 

It’s a refreshing to hear what you said about it being a pathway to making your workers more productive like that. That really hit home for me. So I really appreciate that. 

The Power of History in Economic Understanding

There are so many other things that I want to talk with you about, but I want to be respectful of your time as well. 

How did you get into this? It feels like such a very specific avenue, trying to figure out the economics of the disparities of prosperity. So can you just let us know how you started getting interested in this and what your motivation was?

Yeah, it’s a question I’ve been asked quite a lot in the last few days and I have never thought about it too much. Of course, you do remember vivid moments –  I think about the first time I went to Calcutta (as it was then called)… you know, you look at that and you think this is a different world. 

I was very lucky to go to University of Oxford. I had a Marxist tutor and in Oxford you get a lot of intense interaction. And this tutor, whose name was Andrew Glynn, taught us Neoclassical economics (and he taught it well), but he emphasized, this is an analytical tool, it’s not the causal structure of the world. That’s about power. He didn’t, by the way, try to make us into Marxists either. Which is good, because I’m not a Marxist. But he did understand and think a lot about power. 

When I came to MIT in 1985, it was very mathematical. Oxford was a liberal arts, political economy type of education – write essays. MIT was math, it was problem sets. It was incredibly difficult for me to make that transition. 

I will not say, and I’m sure they will not say, that I was a star student. But I did… on the basis of working with some pretty intense, brilliant people like Rudy Dornbush and Stan Fisher, who’d done a lot of great work thinking about these issues around the world… I did well enough to get a postdoctoral fellowship at Harvard in 1989. 

To get that fellowship, I said, I’d like to work on inflation (inflation was a big issue in the 1980s around the world) emerging now in the Soviet Union – 1989. Well, you know, sometimes you get lucky and the Berlin Wall fell. Actually, before the Berlin Wall fell, I went to Poland and I met people in the first solidarity government and people working with them and I managed to find a role there. So I worked for that government, which was trying to exit the disaster of Soviet communism that had been imposed on their country and find their way to freedom and prosperity. That was a massive eye-opener. 

Then I worked a lot in other parts of Eastern Europe and also the former Soviet Union. I spent a lot of time in Russia and even more time in Ukraine. And I became during the 1990s frustrated with the fact that the standard economics toolkit I’d learned was not very effective, or not as effective as I thought it should be, in the post communist transition.

So I started to be interested in corruption, unofficial economy… you know, there were lots of entrepreneurs, but they couldn’t get going. They couldn’t generate businesses. Why? What’s the problem here? Regulation, for example. Credit. 

And then I met, Daron Acemoglu at a seminar at MIT and we got to talking. And he’s like, well, you know, we have this view of what colonialism might have done, but we need to make a big breakthrough, and we need to figure out something that affected colonial strategy, and we have no idea what it is. When you find a brilliant person who you believe in who has a clear statement of the problem, what I say is, “I’m all in, I’ll go find that for you.” Which is sort of like chasing the Holy Grail, actually. 

I didn’t have tenure. It took me six months, tons of blind alleys. Lots of things I would bring to Daron and he’d say, “No, Simon, come on, let’s get serious.” Then finally, I found this idea that the mortality of Europeans in 1800, before the germ theory of disease and before they understood mosquitoes, this was massively differential across different parts of the world. And this affected how they saw opportunities for themselves, because you know, these are pretty greedy people, right? But also where they’re willing to go and what they built. This is the whole, did you build extractive institutions or relatively inclusive institutions? 

Indigenous people everywhere were hammered, let’s be very clear. But in terms of what happened in places, you got very different outcomes based on that European strategy. This is the paper that won the Nobel Prize, as far as I’m concerned. 

Then, once we’d kicked that door open.. and by the way, that paper was very controversial. I may tell the story one day, it almost didn’t get published. But a lot of people liked it, a lot of good people. And we’re like, you know, there’s a bunch of related ideas here. Once we’re in through that door, wow, let’s, let’s understand more deeply. 

I think we’ve written 20 papers about this and we’re continuing to write papers about this. And that’s what the book, Power and Progress… there’s a direct line from that seminal paper and that moment. I mean, from my perspective, it was a discovery, which doesn’t happen very often in economics. 

That’s the only time I’ve had anything close to a discovery. Economics is not a discovery based science. But we discovered that this differential mortality for Europeans (not for local people), had this big, we argued and other people believe, causal effect. 

In retrospect, I was knocking on that door and coming at it and understanding it. And it’s that, chance favors the prepared mind. So meeting Daron – a very compelling person with a very powerful, direct, simple vision of the world –  when you work on it with him, it becomes all consuming.

So it was luck, but we were ready for luck. I was ready for luck and I understood it when it slapped me in the face. And I recommend everybody pursue some version of that.

I really appreciate hearing the story of how you got here and I really do feel like a lot of the work that you did in that seminal paper that you won the Nobel Prize for is so applicable to today with all the different power concentrations that we’re seeing. So kudos to you for applying it…

Kudos to the people who came after us. In retrospect… and this wasn’t clear to me, by the way, for a long time. By 2012 or 2015, I was looking at Google citations on Google Scholar and like, Oh, people are taking this seriously and people are doing deep dives into particular countries, particular histories. Melissa Dell on Peru, Lakshmi Iyer on India… they’re very, very deep histories done with careful data and econometrics. And you’re like, wow, I understand what happened to these places now, and what’s happening today. And yes, that is consistent with our big picture view.

Any big picture view is going to have some shorthands and some summary terms, but these (Melissa and Lakshmi in particular, but there are many others) dug so deep. That’s when I’m like, oh, when we opened that door, a lot of younger economists realized that… obviously there’s always been history and there’s always been economic history, but the reason we studied history of the 1840s was to understand the 1840s. Now we were understanding history, thinking about history, and measuring history to understand something about the present. There’s no predestination. You can escape debt, you can escape legacies, but it’s not easy. 

I also had this experience with the IMF where you’re on the front lines, talking to lots of governments and trying to help them get to better places. And I understand not everybody likes the IMF, but I’ve always felt that everything we did was pushing in the right direction. But if you don’t understand the constraints, the history. So, where did this come from? Why do you have this level of concentration in the supermarket sector? Or whatever it is. If you don’t know that, you don’t have the full picture, and your ability to design or propose or advise on potential solutions is hampered by such a lack of understanding.

Yeah, I agree with that. And coming back to the idea of everything building on itself, I do appreciate a little bit of the guidance that this paper gives us in current times, because it’s a guidance that’s coming from a place of relative objectivity. 

I know that there’s always some subjectivity in economics. I saw your Squawk Box interview the other day and they were hammering you on subjectivity and economics, but at least it’s a science, right? You’re giving some guidance from data.

I don’t know whether or not it’s a science. It depends how you define science. 

We are looking at the data. We are testing hypotheses. We are putting our cards on the table. Other people can come along and run the same regressions. They can challenge the data. I mean, this is all part and parcel of it. 

Ideas do change, this was part of what we talked about on Squawk Box. And I think they should change when the data changes, when you see new experiences, when you understand things differently. I don’t think that’s actually unique to economics or unique to science. I think that is essential to the progress of human knowledge. No lens of the world, no theory, no understanding… well, almost none… lasts forever, right? We’re always adding, modifying, adjusting. 

And I think Dr. Awesome, in the age of AI, it’s very important to say these things out loud to each other and to remind ourselves. I fundamentally believe that while AI can become a useful tool, if we give up our human agency and our ability to innovate and the ability to be crazy and the ability to step out of the box… I mean, I think I’m an outsider and I think our team was a team of outsiders, and people can decide for themselves whether or not that’s true. We were not completing the next word in an email based on all the emails people had ever written, or a bigger version of that. No, we were connecting dots that were out there that people had not previously connected. I understand AI can advise on folding proteins and so on, but I don’t think that AI is going to replace human ingenuity, human creativity, our ability to solve problems. And I don’t think it’s going to prevent us from damaging and destroying ourselves. I think this is in human hands and delegating to the machines excessively would be a mistake, because we need to have these conversations and confront these realities all the time if we are to have a better, more stable, more prosperous, more shared, prosperous world.

I don’t think that AI is going to replace human ingenuity, human creativity, our ability to solve problems. And I don’t think it’s going to prevent us from damaging and destroying ourselves. I think this is in human hands and delegating to the machines excessively would be a mistake.

Yeah. I think that we’ll get there. Like I said, I’m an optimist and I think that that’s going to happen. But let’s talk a little bit more about about optimism. The second question of the three that I ask all my guests is, where do you see your field in 10 years?

And specifically for you, I would wonder with Shaping the Future of Work, where do you see the future of work in 10 years? Are we going to be in a 4-hour work week? Are we going to be living the good life, as you would say, just kind of having our robots do everything. What do you think it’s going to look like?

Well, John Maynard Keynes predicted that in the 1920s and he was a brilliant economist – it didn’t quite work out. 

I also, by the way, have had a lot of experience with a role in which you had to make economic forecasts at the IMF. The three golden rules…you may know these already… One is when you give a number, don’t give a date. The second is when you give a date, don’t give a number. And the third one is, when you turn out to be right, don’t look surprised. 

So, who knows? I have no idea. And anybody who studies history… study history, learn history, and think about how different the world is today than 10 years, 20 years, 200 years back. You’re not going to pick that one up.

Science Fiction and Economic Futures

Well, what do you hope?

No, hold on. I think the question, Dr. Awesome, is which Neal Stephenson novel will we live in? Is it Snow Crash? Which is one of my favorite books. I have all of my science fiction books by the way on my shelves…

Oh, my God. I love science fiction. I wish we could have just talked for an hour about science fiction.

I’ll send you my six-page recommendations of science fiction.

Oh, my God. I love that. Thank you so much!

I rank my science fiction. I do a top ten thing in my science fiction, and I go back and re-evaluate every year. Because science fiction writers have to give you the whole picture. Economists are tinkering around the edges, and we’re trying to be reasonable.

You know, if I say things that are too wild, people are going to say, “Well, I know he has a Nobel Prize, but that was really wild.” Right? So I’m constrained, even in this conversation, by my thoughts about what I can sell to people. Science fiction writers, people like Kim Stanley Robinson, or Jodie Taylor, or Connie Willis or Neil Stephenson are not so constrained. Or Isaac Asimov. In fact, they need to give you a complete, internally consistent picture. 

So, Snow Crash, if your readers haven’t read it, I highly recommend it. In fact, I do tell most of my audiences, after you hear me speak, if you’re only going to read one book, read my book, it’s called Power and Progress. But, seriously, you should also read The Diamond Age. I don’t know if you’ve read that one.

I haven’t read that one.

Yeah, so before cell phones, before digital technology was spreading in this current, very decentralized way, Neil Stephenson imagined a world in which barriers to education come down massively because young underprivileged people… I mean, in his story, it’s young Chinese women, but you can imagine playing out different ways… they have access to knowledge and can learn and teach themselves things. So all of the standard barriers that generate a lot of oppression and prevent people from having opportunity, they melt away in that world. 

I mean, it’s Neil Stephenson, so it gets complicated. But, you know, are we empowering young people? Are we breaking down the barriers? Are we increasing opportunity? Or are we creating a society in which only a few people get access to what matters? 

When I came to the US in 1985, there were about 100 million fewer Americans than there are now. The number of places in Ivy League schools (and I have to include MIT in that. Not saying we’re Ivy League, but you get the point), in elite private colleges, is about the same. 

There are some universities, that I will not name, where legacies are now 40 percent of the undergraduates. And so you have to ask the question… okay, so these people have massive endowments, I mean, tens of billions of dollars. They’re educating the children of the children of the children of the children who went there. And it’s partly because we allow them these tax breaks, and we claim there’s a social impact. Really? I mean, how is that at all consistent with being a tax-exempt organization? 

Look what I say to my colleagues at MIT, and they listen… Sally Kornbluth, who’s the president of MIT, is an absolutely fantastic leader in these difficult days. I think MIT has a great tradition of confronting the world’s hard problems and finding practical solutions. It’s the engineering school thing. And so what I hope for Shaping the Future of Work in 10 years, is that we will still continue to be at the forefront, with our colleagues and with other people, and it’ll be a big dense field of people hammering out the same questions that you and I have gone through today.

In fact, it wouldn’t surprise me if this conversation remains relevant 10 years from now. Hopefully, people will look back at it and say, “Yeah. You know, they weren’t right about everything and the world has changed a bit, but we still will push, push, push.”

You never solve the problem completely. You’re never done with the hard work. In fact, all you can do is do the work, solve the problem, figure out how to push things in the right direction.

I really hope you’re right. I really think that’s going to be an interesting future to live in. 

So last question.  We’re in this age of unparalleled exponential change, technological progress, scientific advancement – other than this field, what are you interested in? Which is a little bit difficult because I feel like economics is such a catch-all field, especially if you’re looking into these technological advancements on a regular basis.

I’m a surgeon I’m operating so biotech I feel is too close, but I cannot get enough of humanoid robots. I’m watching every single YouTube video of like how far they’re advancing even though it’s not my own field. Anytime I see a humanoid robot article, like I’m very interested in it. 

As a Nobel Prize Laureate, you have such a wide variety of things that are probably of interest to you, but outside of your own field, what is it that most interests you that you just can’t get enough of?

Well, I’m interested in everything. 

It’s a tough question for you specifically.

Well, spending 40 years at MIT, you learn to listen to everybody and to take them seriously. And if their ideas are neatly packaged, it just means they’re probably even more compelling. And I do spend a lot of time with colleagues trying to understand, where is the scientific frontier? Where could we get the jobs? What kinds of investments could be made? Government? Private? What’s the strategy? 

I mean, that’s a big part of what I do with Liz Reynolds, for example, who’s a fantastic colleague at MIT, who formerly worked in the White House on these problems. And Brian Deese, who’s an innovation fellow at MIT. And a whole suite of other people. David Goldston, from the MIT DC office, is brilliant on this. 

But I’m going to pick one. I’m going to go long, but I’m not going to give you a date. Okay. On one thing, Dr. Awesome, biomanufacturing. 

Biomanufacturing: A Potential Economic Game-Changer

A lot of times when you say that people say, okay, manufacturing replacement organs or things. No, I’m talking about decentralized manufacturing of everything using biological methods. 

Think craft breweries, for example, as the forerunner of this. Obviously that’s just one thing, but craft breweries are, I think, a great innovation –  allowing a lot of creativity and allowing a lot of that creativity to take place all across the country. And there are good jobs in craft breweries. As opposed to or in contrast with only having… I’m not knocking traditional big, brands, but if that was all we had, I think the beer scene is less attractive, less enriching and there are fewer jobs, right? 

So how do we get biomanufacturing across the valley of death in a way that is helpful in the good times and essential in the bad times?

We’re in fall of 2024. We’re looking at these horrible hurricanes that have hit North Carolina and also Florida, and the struggle to bring in supplies and the fact that logistics are very challenging. We’re looking at islands in the Caribbean that have got some food riots – Martinique, as we speak, has got a really difficult situation because it’s so expensive to import things. And by the way, there’s a lot of market power among the supermarket sector that’s controlled by people who descended from the people who own plantations. 

But if you could make things in situ at a smaller scale, but at a price point that’s competitive with mass production – that’s your permissionless innovation kind of frame.

Now, we’re not there yet and there’s a whole stack to be evolved and so on and so forth. And I think the private sector is hesitating because it’s the same problem with the human genome project – who’s going to gain? If we make some advances, great. But general knowledge, who gains? It’s society, not the VC fund. 

That’s true. And I’m not telling anyone that they should waste their money, private capital or investors money. But I think there’s an emerging… I’m also not saying by the way that I can give you the five things to buy or invest in or whatever… but there’s a space there, Dr. Awesome, that’s extremely interesting, very open. And there’s people at MIT pushing this, and there’s people at other places too, and there are conversations in Washington, and there’s a national security angle because the military would like to be able to manufacture things in situ in lots of distributed places.

To me, this has the feel of something that can be transformational over some period of time. But I’m not going to give you a date! So that’s the best I can do.

If you could make things in situ at a smaller scale, but at a price point that’s competitive with mass production – that’s your permissionless innovation kind of frame.

No, that’s totally fine. It’s just an interesting thought experiment, because I see those baby steps that you’re talking about. In medicine, we’re drawing patients blood and we’re making biologics out of it. In agriculture, we’re talking about vertical farming. A lot of these like, you know, biomanufacturing baby steps.

I see the trend that you’re talking about. And it’s honestly never something I had ever thought about before.

Yeah. So from a climate change perspective, anything that reduces transportation costs – good. Anything that lowers the carbon footprint of anything we’re doing in the food chain – good. That’s what I mean by like stuff that’s good in the good times… climate change is not a good thing, but you know what I mean… it’s like something that’s good for us at this moment but also building a capacity.

During COVID, I spent all my time helping people in nursing homes, schools, childcare, assisted living, and other places, access testing and figure out how to use testing and then get other resources. That’s not something I was trained to do. It’s something I was prepared to do. But I had some brilliant colleagues at MIT and I was able to help them organize and do that. And also I know how to pitch state and federal government for money to back that stuff up. 

But what we did then was scramble to assemble the pieces of our normal economy that were still viable under COVID. There was a mix and match thing going on. The more diverse, innovative and productive capacity you have close to where the problem occurs, the more resilience you have. That’s not a theorem, right? That’s just me trying to find the right words. 

But if you have to bring all your PPE in from China, which we also did, by the way, we helped some people do that. Well, you remember how that was difficult, right? And by the way we were super lucky that the Chinese were willing to sell us PPE, because at our moment of most intense need, they were actually having a bit of a lull in COVID. If they hadn’t had that lull, where would we have got the face masks that we bought in April and May 2020? 

The problem is… I’m an economist. It’s called a dismal science for a reason… nobody wants to pay for excess capacity that they don’t use or don’t need today. You don’t want to stockpile things because if you stockpile things, by the time you need them, they’re all out of date. 

What you need is a resilience capacity. Doing things that are valuable to you today before you have a problem. And then you need human capital and leadership and entrepreneurial ability and some other stuff, that does the recombination in the crisis, the mix and match. 

I worked with some utterly brilliant people I’d never met before. And it was incredibly hard. And those people, many of them doctors, from the medical profession… I mean, I would like to say it was an honor and a pleasure to work with them. It was certainly an honor but nothing was pleasurable about that.

You know, on the entrepreneurship thing, I have a brilliant colleague, Bill Aulet, who has a 28 or something step process for building your company. I told him I’ve never got past step three. Step three is listen to the customer. All I did was listen to these people. I’m like, okay, they need this. I have no idea where to get it. That’s your holy grail thing. Let me go find the testing and oh, do we also need swabs and test tubes? Well, I’ve no idea what those look like. Let me make some calls and mobilize some people and figure out who can help us solve the problem. 

Solving the problems of people you believe in, Dr. Awesome, in the good times and being there and listening to them and going all in in the bad times –  that’s what I have attempted to do and that’s what I plan to do going forward.

That is really profound. As you were talking, so many of my gears were turning on just different applications of some of the wisdom that you’ve shared today. 

Thank you so much for joining us! I’m sure that all of our listeners were very interested in what you had to say. 

Go out and buy his book. I’m telling you, it’s a good one. It’s something that is really, really interesting. And, other than that, I do want to know about your science fiction recommendations – so after we’re finished with this conversation, I’m going to get those from you. 

But as always to everybody that is tuning in on a regular basis, please like and subscribe. And for those of you guys who are checking us out on a weekly basis, as always, I will see you again in the future. 

Thanks, everybody!

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About Simon Johnson

Simon Johnson, Economist

SIMON JOHNSON is the Ronald A. Kurtz (1954) Professor of Entrepreneurship at the MIT Sloan School of Management, where he is head of the Global Economics and Management group. In 2007-08 he was chief economist at the International Monetary Fund, and he currently co-chairs the CFA Institute Systemic Risk Council. In February 2021, Johnson joined the board of directors of Fannie Mae.

In 2024, Johnson, Daron Acemoglu, and James A. Robinson were awarded the Nobel Memorial Prize in Economic Sciences for their comparative studies in prosperity between nations.

Johnson’s most recent book, with Daron Acemoglu, Power and Progress: Our 1000-Year Struggle Over Technology and Prosperity, explores the history and economics of major technological transformations up to and including the latest developments in Artificial Intelligence.

His previous book, with Jonathan Gruber, Jump-Starting America: How Breakthrough Science Can Revive Economic Growth and the American Dream, explained how to create millions of good new jobs around the U.S., through renewed public investment in research and development. This proposal attracted bipartisan support.

Johnson was previously a senior fellow at the Peterson Institute for International Economics in Washington, D.C., a cofounder of BaselineScenario.com, a member of the Congressional Budget Office’s Panel of Economic Advisors, and a member of the Federal Deposit Insurance Corporation’s Systemic Resolution Advisory Committee. From July 2014 to early 2017, Johnson was a member of the Financial Research Advisory Committee of the U.S. Treasury’s Office of Financial Research (OFR), within which he chaired the Global Vulnerabilities Working Group.

“The Quiet Coup” received over a million views when it appeared in The Atlantic in early 2009. His book 13 Bankers: the Wall Street Takeover and the Next Financial Meltdown (with James Kwak), was an immediate bestseller and has become one of the mostly highly regarded books on the financial crisis. Their follow-up book on U.S. fiscal policy, White House Burning: The Founding Fathers, Our National Debt, and Why It Matters for You, won praise across the political spectrum. Johnson’s academic research papers on long-term economic development, corporate finance, political economy, and public health are widely cited.

“For his articulate and outspoken support for public policies to end too-big-to-fail”, Johnson was named a Main Street Hero by the Independent Community Bankers of America (ICBA) in 2013.

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By: The Futurist Society