In this episode of the McKinsey Global Institute’s Forward Thinking podcast, Michael Chui talks to Tyler Cowen, Holbert L. Harris Chair of Economics at George Mason University, who serves as chairman and general director of the Mercatus Center at George Mason University. With colleague Alex Tabarrok, Cowen is coauthor of the popular economics blog Marginal Revolution and cofounder of the online educational platform Marginal Revolution University.
Michael Chui (co-host): Janet, what makes you hopeful about the world?
Janet Bush (co-host): Well, there are so many challenges, but I have been reading about climate change and evolution and it is really interesting that there is already evidence that organisms are changing—evolving—very quickly in response to climate change. Not all of them but a lot of them. So that gives me quite a lot of optimism. But obviously our modern world is incredibly complex, and we talk a lot about that on the podcast. So it would be really great to find out where we can be more hopeful because solutions are actually coming.
Michael Chui: That’s one of the topics that today’s guest thinks a lot about, and his answer is to identify and follow the talent. He also recently coauthored a book about talent, specifically how to identify people who will bring energy, creativity, and care to solving big problems.
Janet Bush: Of course, that is incredibly topical. MGI has recently published a report on human capital and how it is developed in the world of work. So I am fascinated to hear what he has to say.
Michael Chui: Tyler, welcome to the podcast.
Tyler Cowen: Happy to be here, thank you.
Michael Chui: I’d love to start with, how did you end up where you are today? Where’d you grow up? What did you study? What are the things that led you to where you are?
Tyler Cowen: I was born in northern New Jersey, where I grew up. Very early in life, I was a chess player. That shaped how I think a great deal. I quit chess completely at age 15—by 14 figured I wanted to be an economist. And since then I’ve worked on a lot of different projects, not just academic ones. But I think of myself as a creator of ideas in internet space now, most of all.
Michael Chui: You never play chess anymore?
Tyler Cowen: I watch chess, so I love Magnus Carlsen. But, yes, I literally never play chess. It’s an all-or-nothing thing, and by the time you get older it’s better just not to do it, I would say.
Michael Chui: Got it. Why is that?
Tyler Cowen: Well, it’s somewhat addictive, right? If it’s going to be your thing, that’s fine. But my things are economics, and talent, and reading and writing on the internet, and travel, and also food, and I think those are ultimately more rewarding to do. But to watch chess in an open browser window, and devote five to ten minutes a day to watching the game, it’s still a lot of fun, and it’s a nice break from work.
Michael Chui: Fascinating. You mentioned talent. You recently coauthored a book with Daniel Gross entitled Talent: How to Identify Energizers, Creatives, and Winners Around the World. What was the central thesis of this book?
Tyler Cowen: That talent is remarkably important. That we’re doing a poor job, misallocating talent. And there are a variety of ways, outlined in the book, we can do better. This book tries to be “the” talent book: a one-stop shopping guide to how to think about identifying talent.
Michael Chui: What are the macro implications of [the] lack of good matching? Is this a potential for accelerating productivity, for instance?
Tyler Cowen: We have slower economic growth when we don’t match talent well. We have a lower level of per capita income. When a recession comes, as was the case in 2008, labor markets adjust much more slowly. The consequences for human welfare are considerable.
Also, if one thinks about women or minorities, you get persisting injustices because we’re not in every way good at identifying talents in those areas, either. So identifying talent better, it’s one of the most important things we could do. And at a global level, there are billions of people who don’t have the opportunities they could have. Work from a distance is enabling some of that, but all of a sudden there’s a mad scramble on to find all this talent and put it to work.
Michael Chui: There’s this old phrase about talent being highly distributed, but opportunity not being so. Your book is a bit of a how-to book—not a bit, it is a how-to book. How widely do the prescriptions within the book have to be applied in order to achieve matching that’s actually going to matter at a high level?
Tyler Cowen: One lesson of the book is to always consider the context you’re operating in.
The interview questions you should ask in one part of the world, or for one sector, are not always the same you should ask for another sector. But there are some very general principles that mostly hold true. One of them would simply be to engage people conversationally to get them out of the interview mode, to do something other than test for their advance prep, which rapidly becomes boring for everyone.
And, yourself, get used to the notion of being surprised and dealing with different cultures. It could be a different culture in South India, or it could be a different culture in West Virginia. It varies, but to have a greater breadth of mind as an interviewer and be culturally much more open. And that’s good advice for dealing with people just about everywhere.
Michael Chui: That makes tremendous sense. I’m curious, though: you had mentioned previously the challenges that women, and in some cases ethnic minorities, other folks, for whom sometimes in an interview context, latent or other biases might manifest themselves. You also talked, in the book, about structured interviews: ask the same question, have a rubric for scoring them. That in some cases is described as one way to mitigate those types of biases.
And yet you suggest that maybe those aren’t necessarily the best things, as you talk about being open to surprise and asking these conversational types of questions. How do you think about those two things—this idea that there are bureaucratic ways to address these types of long-term biases, as well as your ideas around how to have a conversation that creates surprise?
Tyler Cowen: Bureaucracy is inevitable, especially when you’re hiring large numbers of people. Very often you need a standardized process. It’s not even a matter of choice. But, that said, when you have one, whether you like it or not, you end up selecting for credentials.
For my heart surgeon, I actually want credentials. But for a lot of opportunities, credentials may be overrated, especially at a global level. At the margin, Daniel and I advocate that people attach more weight to unstructured interactions.
For a lot of opportunities, credentials may be overrated, especially at a global level.
It may even just be how you chat with someone in the three minutes before the structured interview starts. Or maybe you met them some other time at a conference, and you have memories of a highly unstructured interaction. We both think the unstructured interactions are so much more informative.
And, especially for leadership positions, or more important positions, that what you really want to do is develop an understanding of, when the person is simply talking about things, what is their level of detail? What is their degree of enthusiasm? How well do they understand the social hierarchies they’re somehow engaged with?
It could be their model train hobby, but you will learn more than if you simply flatly, mechanically ask them, “Could you please tell us about a mistake you made at an earlier job?” Everyone is ready for that question. Everyone has their little anecdote that makes them look self-critical but not too terrible. It’s fine to ask it, but you’re just not going to learn that much, and mainly you’re testing for prep.
Michael Chui: If you do have these insights you didn’t expect, necessarily, and in many cases you have multiple interviewers, how do you calibrate that all together as you’re making a hiring decision—this candidate versus that candidate? What’s the “team” way that you integrate these insights?
Tyler Cowen: Again, it depends a great deal on the structure of the interaction. If it’s venture capital, I’m very much a fan of the model not to look for consensus, but if there’s one person who is extremely enthusiastic to go ahead and fund the project. You’re looking for “tells” so to speak. Maybe only 2 percent of your investments will go very well, but that means you have to take a lot of chances.
Now, if you’re trying to hire, say, a CFO for a reasonably large corporation, that is not the correct way to do it. What you want is someone who is extremely conscientious and who actually will be trusted by a lot of other members in the organization. In that case you probably would go for a more consensus approach.
But what I see in labor markets is more and more sectors are taking on properties of the venture capital approach, where a relatively smaller percentage of the employees add more and more of the value. And at the margin, people ought to be nudged in the direction of greater risk-taking, less bureaucratization, realizing that not everyone should have a veto in your interview process, and that some people will, ex ante, have to be taught to accept the idea that someone they objected to maybe is going to be hired anyway. To preinvest in trust is really the thing you need to do in those circumstances.
Michael Chui: Preinvest in trust in the interviewers, or the hiring group, in order to say, “Look, I wouldn’t have picked that person as my number one choice, but someone thought that was a terrific person, let’s bring them on, take on that risk”?
Tyler Cowen: And to say to someone with trust, “Well, I understand your objection to this candidate, but we see the upside, and we’re going to take a chance in this case,” and not have the trust within the organization be broken. That’s something you have to do preemptively.
If you just wait until the last minute and then upset everyone by picking a candidate some of them don’t like, probably it won’t go that well, even if the candidate is perfectly fine. So preexisting investments in trust, trustworthiness, and also building out your “soft network” of contacts so your institution has the opportunity to take a lot more chances—those are the things that institutions need to do.
Michael Chui: Your coauthor is a venture capitalist. There are different asset classes, and their portfolios are constructed differently. You have index funds, and then you have VC funds, where one in ten is outright success, and the others all are failures. Are you suggesting that in the spectrum of hiring decisions, we ought to move towards higher levels of risk in general, in organizations as you’ve observed them?
Tyler Cowen: With caveats. Again, I don’t want my heart surgeon to be hired on that basis. But do I see the world as a whole as becoming more like tech, needing to look more for globalized talent, seeing a relatively smaller percentage of top workers adding a higher percentage of the value? That is absolutely the world I observe. Again, with qualifications—context always matters. But, yes, on average.
Michael Chui: You’d also authored a book, as we talk about a smaller number of people—and my colleagues have observed that, too, from a consulting perspective, creating more of the value within an organization—your book entitled Average Is Over.
It suggests that, in fact—and, again, you should tell me if I’m misreading it—that in fact you will have these superstars, and others have observed this as well, of course. And then, arguably, some of the average, the middle, might be hollowed out. Is that our future in the labor market?
Tyler Cowen: I would put it this way: for the world as a whole, income inequality has been falling fairly radically. So many parts of the world that were quite poor now have quite a few well-to-do people, or middle class, or even the poor people are just much better off—not living off a dollar a day, but actually subsisting in some meaningful way.
To the extent one cares about income inequality, that is going down, and that is good news. It is nonetheless the case, as you indicate, that within organizations, or in many cases within countries or within particular regions, income inequality is going up.
For instance, the very-best-selling author J. K. Rowling: she will be making more relative to the average author than might have been the case 30 or 40 years ago. We have this weird duality: inequality going up in some ways, down in others.
I don’t think it’s a perfectly ideal picture, but if you’re managing an organization, it’s one you need to be realistic about, and to maximize value for the world, you do in fact want to hire the most talented people. You’re not doing the world a favor by leaving them out there, doing something less valuable than what they could be doing.
Michael Chui: That absolutely makes sense from a corporate leader standpoint. If you put on your social welfare hat, how do you think about the evolution of labor forces? Again, as you said, on a global basis, we have many people who are no longer living in poverty, which is an amazing development. And, as you’ve described, economic growth as being an imperative for the species, I guess.
But you do see these localized places where there are folks you could argue are being left behind, even if they’re experiencing some growth in incomes over time. Any reflections? Thoughts? Sources of optimism? Or maybe that’s just the way the world is?
Tyler Cowen: I think it’s perfectly fair to argue that our government, or other governments, should take actions they’re not currently taking. I don’t have all the answers there. Some policy moves, to me, seem quite easy and obvious, like Medicaid expansion in more states. Most states have done it, some states haven’t, the ones that haven’t could do it—it’s very simple. It would just take one signing of the pen. We know how the program works. But if you’re asking, well, how do we get many fewer Americans to take opioids, again, whatever we should do, it seems to me far less simple. And we could make a lot of progress in those areas, but I don’t necessarily think I know how.
Michael Chui: Got it. Let me ask another question. You’ve also written about “excess credentialism.” You and others have talked about the fact that more and more occupations now have a four-year degree requirement, which doesn’t necessarily make sense in terms of the skills that somebody needs to have. Others have suggested we need to move more towards a skills-based labor market, basically reforming the credentials so that they’re more closely related to the skills necessary in a job. I’d love to get your reflections. Is that a possible path forward, in terms of being able to better match, in addition to being able to interview better?
Tyler Cowen: There’s one simple move that the state of Maryland has taken, and other states have not yet followed suit. But that is to take literally thousands of state government jobs that do not in any obvious way seem to require a college degree—it could even be, you know, a toll taker—and abolish the requirement for a college degree.
Now, that’s a simple step. It’s not going to solve all the problem, or even 3 percent of it. But it’s clearly a no-brainer once you think about it. We should start with the no-brainers, teach people that there’s nothing sacred about a four-year college degree. Have employers in some cases take more chances on, say, people who were formerly incarcerated, or maybe mothers who left the labor force or who didn’t finish college.
There’s an awful lot of talent in those individuals, but we keep on asking for more and more credentials. My father ran a chamber of commerce very successfully. He had no college degree. That’s unthinkable today. It was one of, I think, the ten largest chambers in the United States. He barely got through high school, was nonetheless charismatic, maybe irregular in some ways—he never did his homework. But the things he was good at he was very good at. And it’s harder to be like that today.
Michael Chui: How did this happen?
Tyler Cowen: It was all the good people who did it, not the bad people. College overall is a good thing. It’s great if people can go to a good college, get through college. But the cumulative effect of everyone moving in that direction has been excess stratification, too much credentialism, caring about college for its own sake, too much homework.
High school is too much something about how to get into a college. And I think the whole system now is just fundamentally offtrack. It’s not about curiosity and learning; it’s about the next set of hurdles. But at the end of the whole thing, we’re never quite sure what the goal really is anymore.
Michael Chui: Let’s pull on this thread about talent development. Actually, some of MGI’s research on human capital finds that human capital is about two-thirds of the wealth of an average individual, and that work experience, the skills you derive past your formal education, contribute about half that value across a number of different countries that were studied. To what degree can talent, as you are screening for and trying to match better, be something that one develops over time?
Tyler Cowen: Talent requires development. If all you end up with is what you start out with, you’re not going to be good, really, at anything.
One of our main problems is too many people, too quickly, get on tracks that are rather flat, that don’t have much of a potential upward curve. And this, in turn, gets capitalized into individual expectations. People think of themselves as not better than something, they think of themselves as people maybe who never would start a business, or who never would be very successful, or who never would do better than how their parents did.
And once you’re in these what I call “psychological traps,” it’s oddly hard to get out of them. External forces can do it—you could meet a mentor, you could have a formative experience at college—but most people actually don’t get out of them. And I don’t think we think carefully or explicitly enough of how can we bend upwards everyone’s what I call “aspiration curve” so they can strive for higher and better things.
Michael Chui: That actually tracks very well with the MGI research, too, which shows that those who have moved up, say, income quintiles, for instance, are typically those who have changed roles to ones where new skills were necessary. And that’s what helps build them. You mentioned mentors. What are the types of catalytic events or contexts that encourage or allow people to make those jumps or change their aspirations, as you said?
Tyler Cowen: I think for many young people in particular, one of the best things you can do for them is just to send them to an event. But send them to an event that has some top talent in whatever is the field they care about. They may not get one-to-one time with that talent, but they will absorb the energy of that talent, they’ll see how that person presents, how they carry themselves, what kind of charisma they have. The idea of top talent will become emotionally vivid to them.
Just sending people to events is one thing. Better yet, if the person can get a mentor, that’s harder. It’s costlier, but that’s better yet. And if the person can get a small group of peers who work on a similar problem, I call this the “small group theory.” The Beatles are a classic example of this. They all loved music, they worked together, they made each other much, much better. [In] the tech world you see so many examples of this—small groups of programmers, or people with a start-up working together.
So more mentors, more small groups, and more people going to events and just seeing how good the really good people are.
Michael Chui: What events do you send people who are interested in economics to?
Tyler Cowen: There is a young woman, I believe she’s 17 years old, she wanted to go to a biomedical conference in Belgium. I’m not sure she literally didn’t have the money, but she’s the daughter of immigrant parents. I had the sense they were not a very wealthy family. For the monetary constraint there to be eased, my program, called Emergent Ventures, we just sent her enough money to go and take the trip. And hang out with top biomedical scientists, and just see them.
That, to me, is more important than whatever factually she might have learned at the conference. So I do a great deal of that with my own programs, just send young people places, pay for it, make it easy for them.
Michael Chui: What is Emergent Ventures?
Tyler Cowen: Emergent Ventures is a program I founded four years ago. It is an attempt to de-bureaucratize philanthropy. There’s an application page, it’s online, you can Google right to it, it’s basically one page, it never asks where you went to school, no CV is required, there are no letters of recommendation.
It’s basically, “Write something for me and tell me what you’re up to,” and I see if someone can impress me. And, if so, there’s then a Zoom call, which may or may not go well, and possibly awards. That’s Emergent Ventures. We operate at 2 percent of overhead, which is far less than most of the rest of philanthropy.
Michael Chui: And how would you describe the degree of success you’ve had with it?
Tyler Cowen: It is not for me to judge. I find it enormously exciting. A lot of our winners are still very young. This young woman who went to Belgium, we cannot yet judge her a success or failure.
Someone emailed me this morning, someone I had forgotten about. He says, “Thank you for having taken a chance on me. We’ve now raised $27 million.” And I hadn’t heard from him. Sometimes it’s the people you never hear from who are doing the best, and he’s doing fantastically well. There’s a nonprofit we initially funded called Recidiviz, which has been very successful in getting people out of jail during COVID times. That’s a nonprofit.
There’s a testing company called Curative that, at its peak, was doing about 11, 12 percent of all U.S. testing for COVID. They got their start with money from us. Many other examples. We have a whole branch of it now called Emergent Ventures India, which is solely India focused. It is run by an Indian woman, not by me. But I just went to India, to our meet-up event, and met everyone, thought they were phenomenal.
Michael Chui: What’s the market failure, or philanthropic market failure, that Emergent Ventures is addressing? Is it just the bureaucracy of applying for funding?
Tyler Cowen: It’s hard to apply for small grants. If you’re very young, maybe you don’t even think of applying, or there’s not a simple way your application actually will be processed and taken seriously. But you have foundations with very large staffs, people not wanting to fire their staffs, they get captured by their staffs, they’re friendly with them, so they don’t really take many chances.
They want projects whose outputs can be easily measured across a short to medium run. Those may be good projects. I’m not against measuring value created. But at the same time, it leaves holes for weirder, younger, smaller requests that Emergent Ventures tries to pick up.
Michael Chui: Do we need more of this?
Tyler Cowen: We need more of this, absolutely. The good news is that a lot of philanthropies actually have copied Emergent Ventures. A lot of these effective altruist givers, the way they’ve set up their giving, heavier reliance on scouts, minimum of bureaucracy, quick decision, low overhead, willingness to take chances. It is being copied and it’s spreading, and I find this very heartening.
Michael Chui: So the EA [effective altruism] folks also are known for doing lots of analysis about benefits and all these discussions about what discount rate you should use and all these sorts of things. How does that square with this idea of quick decisions for small amounts?
Is it that an EA practitioner would say, “Look, these are the areas in which I want to fund, and if someone applies for a small grant, a young person with a small grant, I’m just going to go for it because I know that that’s a place that needs more innovation”?
Tyler Cowen: I like what they do, but my approach is somewhat different from theirs. As I understand what they do, they first identify key areas that they think are super important. It could be antimalaria, it could be bed nets, it could be limiting evil AI from taking over the world. And then you look for people in those areas.
I’m not opposed to that, but it’s not what I do. I’m much more “person first.” I’m willing to consider, not any area—it ought to feel important—but I view it as more an investment in the person, and I have, I think, more faith that the person’s own understanding of what’s important will very often be better than mine. That would be the difference.
Michael Chui: VCs describe this, sometimes, as “funding the team,” right?
Tyler Cowen: And that’s how I view it, yes. And they’re somewhat more—I don’t mean to speak for them, but to me they look like more “funding the area.” “Because we’ve decided, well, animal welfare is important, or this is important.” And I’m not even saying I disagree with all of their rankings. I just think it’s so hard to find people who will succeed at all that it’s a luxury I feel I don’t quite have.
I want to go first with the successful people, and they have a whole career of doing great things, and they may get to these other areas later on. But I want to start with elevating the success first, not the area.
Michael Chui: What is it you’re looking for?
Tyler Cowen: Curiosity, enthusiasm, caring about things, a sense of self-potency, being different, maybe being someone who cannot fund themselves through ordinary mechanisms.
I just had a call with an individual in Mexico who is creating videos in Spanish to explain economics to other people in Mexico. We will be funding him at some level. And he’s just out there, you know? No formal affiliation, really; no one else to support him. He’s worked very hard so far. I’m not sure he can make this sustainable—in a way, I’m pretty skeptical. But I see the fire in the belly, and I think he’ll do good things in some way. And to give him a vote of confidence and some actual support, I’m all for it.
Michael Chui: Let’s swing from the opposite side of the spectrum, from individuals who have great promise to these broader ideas. In a blog post, you described “state-capacity libertarianism” and contrasted it with another, somewhat similar view. What is it?
Tyler Cowen: I would put it simply for those of you not familiar with all the arcane terms. I’m a big believer in capitalism, but I’m also a big believer that government needs to get some things right for capitalism and democracy to continue. And one of those things is to protect us against pandemics, another is national defense, another would be some version of a social welfare state so that people feel safe enough that they have a stake in the system and that they will continue to support capitalism and democracy.
So my term “state-capacity libertarianism,” it’s beyond awkward. I never thought it would take off as a term. It’s simply to express [that] “we need these two sides of the coin: a government that is efficacious on some basic issues, but also capitalism and democracy.” And that’s the core of my, what you might call, political worldview. It’s not linked to any party or any specific movement, but that’s what I think is important.
Michael Chui: The “state capacity” part is interesting, I think you described it as “higher-quality governance and government.” Question one is, is that currently a challenge? And two is, how do you achieve that?
Tyler Cowen: It’s always a challenge. I actually think American state capacity right now is a bit higher than many people think. We just did Operation Warp Speed, which was amazing, and it was the government that did it, in conjunction with the private sector, as was appropriate. But I recall in April of 2020 reading experts in the New York Times saying, “At the soonest, a vaccine will be four years.” And Operation Warp Speed did it basically in less than a year.
If you look at the war on terror, we made some enormous mistakes. But if you simply ask the question, “Have we stopped large-scale attacks on domestic U.S. soil?,” we have done that, often by cutting off flows of money. And we could have done that without all of the mistakes.
Our government still can get some things right. It’s not impossible, it’s not utopian. I just want, at the margin, that they do more of that and less of the nonsense where, say, the CDC “takes the lead” by banning all tests for COVID until they develop and send out their own. An enormous mistake at the time. But I know we can do better. We do better all the time.
Michael Chui: I’m curious—you talk about talent, and we talk about government and governance. To what extent do the lessons that you’ve drawn about matching, finding talent, apply in the public sphere?
Tyler Cowen: I worry that we don’t have enough talent in government, in some key ways. I think we have more talent than a lot of people realize. But especially at the state and local level, as the opportunities in the private sector become more lucrative, I think it’s just less frequently the case that the smartest person in town is the mayor than might have been the case 50 or 60 years ago.
I think senators are pretty talented. Our bureaucracy is full of talent, the Fed, Treasury in particular, but all over.
Michael Chui: Do we just need to pay more?
Tyler Cowen: Paying more helps, but I don’t think that’s the full solution. There’s something about prestige, and status, and social stratification, and even the mating and dating markets where the whole thing has to operate in sync. It’s related to how to get more people to be scientists.
I think simply doubling the wage for people who do nuclear physics—not saying it’s a bad idea, but that alone doesn’t do it. It’s like, what TV shows do people watch when they’re eight or nine, where they think, “Maybe I want to be a scientist”? How do their parents react when they say, “Maybe I want to be a scientist”? Who are the mentors available in their high school, and so on?
It’s really quite systemic, and it requires a lot of complementary pieces. There’s not a single magic bullet. But the fact is, in the past, in some ways, we did better than we do now, and we can do better again. It’s not utopian—it is possible.
Michael Chui: You’re so prolific, you do so many different things, and one of the things that you do is you have your own podcast, which is great, Conversations with Tyler. Quite famously, you had a recent episode in which you had Marc Andreessen, the noted venture capitalist, on. You were talking with him about crypto. Even in your latest book, you had mentioned you don’t share others’ degree of enthusiasm for crypto. You had asked Marc for different use cases of where these decentralized cryptography-enhanced technologies would be superior to other ways of doing things, whether it’s paying for podcasts or what have you. I’d love to ask you: what are your views on these types of distributed ledger, crypto, blockchain, et cetera?
Tyler Cowen: I consider myself a crypto hopeful but not a crypto convert. I think there’s a good chance a lot of these ideas will work out. If it’s Web 3.0, in particular, I view Web 3.0 as a new way of defining property rights for something like virtual worlds, or new worlds we would create on the internet in some fashion.
I think there’s a reasonable chance that 50 years from now, they will just obviously be a big deal. Now, again, I’m not a convert, but people got so upset at Marc’s answer. They said, “Well, Marc didn’t really have a convincing, specific comeback.”
I would just say this: if you go back to 1992, me, you, Marc, anyone, and someone says, “What’s the internet going to be good for?,” I don’t actually think a totally convincing answer would be that easy. And if you tried to make money off the internet in 1992, I’m not really sure what you should do. There’s not a Google or Facebook to put your money in.
Possibly Web 3.0 right now is in a similar position. I think people should be supportive, but critical in a way that leads to improvement. What you see on social media, there’s boosters. OK, that’s inevitable. But then people who are so viciously negative on Web 3.0, or [on] anyone who supports it, or in this case Marc, I think that’s utterly unjustified.
They don’t understand how venture capital works. You take a lot of chances. The talent of the people who work on Web 3.0 is really very impressive. It doesn’t mean they will succeed, but if you just ask, “What’s the stuff drawing really talented people?,” I have my own short list, but Web 3.0 and crypto definitely are on it. Doesn’t mean I’m convinced they’ll work—I’m not.
Michael Chui: I think Marc was actually writing the Mosaic browser back in ’92, or right around that time. [laughs] So he was busy—
Tyler Cowen: Maybe, yes. [laughs]
Michael Chui: —busy at that time. What’s on that short list of things that you might be hopeful for? Or not yet a convert?
Tyler Cowen: Here’s two things where I observe massive talent inflows, and I would say I’m more than hopeful on them. The first is computational biology. The number of young people I meet who say “I want to do computational biology” to me is utterly overwhelming. Now, I don’t think I have the technical expertise to evaluate computational biology. But, man, you look at how much smarts and effort it’s attracting, I’m super bullish on it, more as a judge of character than anything. I’m more optimistic on that than crypto, I would say.
And then the other thing that’s attracting talent in intellectual life is effective altruism. Which, as I said before, it’s not exactly my view. I agree with a lot of it, I don’t agree with all of it. But if I just look, if I meet a smart young person who wants to do ideas, be a public intellectual, it’s stunning to me how often that person is into effective altruism. I just think you have to take that seriously. Again, you don’t have to agree with all of it. But to wake up in the morning and say, “This is what the smart people are doing. I should in some way be relating to this that is constructive, and not just whining about it because it doesn’t pick up on all of my hobbyhorses.”
Those are the three areas where I see massive inflows of talent: crypto, computational biology, effective altruism.
Michael Chui: On computational biology, we had Jennifer Doudna [on] our premiere episode. I asked her what someone who’s interested in these topics should study in college. And to my surprise she said computer science. She actually said—
Tyler Cowen: That’s a great answer.
Michael Chui: — “Look, if you’re going to do biology, you need to actually understand how to do computer science.” And that was super interesting. Let me return to crypto just for another moment. You said “hopeful but not yet a convert.” What would make you a convert?
Tyler Cowen: If I saw actual marketplace products. Not just a crypto product to support some other part of the crypto space, but something that I would want to use, not because I think it’s cool—and I do—but because I actually say when I wire money to Mexico, “Rather than going to Western Union, might I use crypto?,” that day could come. But it is not here right now. And that would make me a convert. It’s possible, but I am still waiting.
Michael Chui: Do you think it will be in remittances or payments? Is that where you’re most hopeful? Or—?
Tyler Cowen: A while back Larry Summers asked me what I thought was the most likely major breakthrough for crypto, and I said, “remittances slash payments.” I think I would stick with that answer, but I’m quite sure that I don’t know. It’s like asking me about the internet in 1992. My answer, had I been asked, probably would have been quite poor. It just seems to me there’s a lot of money on the table, a lot of waste, a lot of room for disruption. But we’ll see.
Michael Chui: Got it. You mentioned effective altruism. Just a few years ago, you coauthored an article with Patrick Collison, who’s the co-founder of Stripe but also involved in the EA community, entitled, “We Need a New Science of Progress,” “progress” being “the combination of economic, technological, scientific, cultural, and organizational advancement.” How is that going? Are there progress studies now?
Tyler Cowen: I am very excited by the progress of progress studies, so to speak. Patrick and I called for more people to study economic growth, to study how to improve science. There are now multiple institutions out there studying, or in some cases even lobbying, as to how to improve science, with concrete policy recommendations, and talented people working on staff and producing actual outputs, and I’m thrilled to see this as a reality.
Areas like, how should the NIH be run? Three years ago, it was very hard to find anything intelligent on that question from any point of view. Now it’s a very live, active public debate.
Should we change the NSF? You know, the new part we attached to the NIH, should it be run more or less along DARPA principles? I would say yes, but again, the point is not that I have all the answers. But we now have a very live and vivid, active public debate, and I think we’re going to see a lot of improvement. And some of that has come from progress studies.
Michael Chui: We had Alec Stapp on recently as well.
Tyler Cowen: He’s an Emergent Ventures winner, by the way. We were the first funder of his Institute for Progress. And Alec was formerly a student of mine. He’s great.
Michael Chui: What about in academia? Are there progress studies being pursued, other than, of course, your own work?
Tyler Cowen: Heidi Williams at Stanford would be one example. But I would say this: there’s been plenty of progress studies for decades, indeed centuries. It’s just way too small a part of the whole puzzle. Take two very simple questions in economics: first, why did the East Asian economies grow so much? And, second, why did the West have an Industrial Revolution?
Whatever you think the answers are, in my view those should be 10 or 15 percent of the entire curriculum. They’re the most important questions. As it stands now, I’m not sure they’re 1 percent. They could be 1 percent, and still there’d be a lot of papers in those areas. Clearly there are.
But at the same time, in terms of where we devote our attention, what we actually debate, it’s way undervalued, questions like that. Or just how to improve science. The economics of science is still not yet a large field. It is growing quickly, but it should be, in my opinion, one of the top fields. It’s right now not in the top 30.
Michael Chui: Let me take things in a different tack. You do so many things: you’re a university professor. You’ve blogged every day for how many years?
Tyler Cowen: Oh, it will be 20 years, I think, within a week? I’m not sure, but it’s closing in on 20 years.
Michael Chui: Almost the anniversary. You do other writing. You’re a columnist. You run Emergent Ventures. A question that often comes up is how do you do all that? What are your time management tricks?
Tyler Cowen: I don’t think I have many “tricks.” Our child is grown. You could call that a trick, but that’s obvious. I barely watch television—that’s another obvious trick. The most important things I usually do first thing in the morning. I would say I work very steadily. I’m never burning the midnight oil, I’m never scrambling to make a deadline, never working at 3 a.m. Go to bed every night by 11:30, wake up around 7, and, just at a super-steady pace, try to always be ahead of things. I’m not sure that works for everyone, but it’s what I’ve done. And I don’t really think it’s tricks—I think it’s common sense.
Michael Chui: I think a lot of people would love to go to bed at that time, and wake up, and work a little every day. And yet you seem to do more. Is there anything else?
Tyler Cowen: But I don’t work “a little” every day. I work the whole day, the whole night. In that sense, the work doesn’t stop. And I don’t have a social life that differs from my work life. I’m very often out with people, talking with people, socializing with people. But it’s not separate from my work, so the two happen together.
Michael Chui: You often talk about practice, this idea of asking somebody, “What are the equivalents for doing scales for musicians?” I once heard from the basketball coach Bob Knight, “You know, the best conditioning is playing basketball. Well, why would you do something else?” To what extent is practice—should you do practice that’s different than the actual thing you’re trying to get better at? Or should you just do more of what you’re trying to get better at?
Tyler Cowen: Maybe both. I can tell you what I do for practice: I write every single day. I try to talk to smart people analytically every single day, don’t quite manage that. I try to read books and sometimes difficult material almost every single day. And I try to do some physical exercise every single day. It seems to me those help me a lot. Again, I’m not saying it’s “the” formula for everyone. Now, are those the things I’m doing? I don’t know, I just do it and it seems good.
Michael Chui: Very good. All right, if you don’t mind, instead of underrated/overrated, we’ll do a lightning round, a little bit—
Tyler Cowen: Absolutely. I’m ready.
Michael Chui: —more unconstrained. OK, here we go. Number one: what’s your favorite source for finding new things to read?
Tyler Cowen: People email me about books, or review copies arrive on my doorstep. On a typical weekday, it’s not surprising if I have five review copies, and typically from presses that would publish the more serious works of interest to me. And every day I discover new books, and, occasionally, on Twitter.
Michael Chui: How long does it take for you to read a book?
Tyler Cowen: It really depends on the book. I’m not an especially fast reader of fiction. But nonfiction, it’s common I read a few books a day. I just read very fast. I was born a hyperlexic—that’s one of my blessings. And it gets back to time management. If you can read much faster than comparably educated people, it’s a big advantage. And I’ve always had that advantage. Through nothing I’ve ever did, it just was automatically the case.
Michael Chui: Who is your hero?
Tyler Cowen: I don’t know that I have a hero. I think people are more good than bad, and most people have quite a bit of good in them. But I don’t think I have a specific hero.
Michael Chui: If you could live in a place other than Northern Virginia, where would it be?
Tyler Cowen: It depends what level of income you’re giving me. For living, I love Berlin, I love London, and I like to think I would love New York City, but I’m pretty sure I would hate it. So I’ll say Berlin and London. But London I would need to be earning well, or it’s just no fun. Berlin is fun at any income level, pretty much, as long as you manage it all.
Michael Chui: It’s getting more expensive is my understanding, though.
Tyler Cowen: True, but from a very low base. Oh, I love Los Angeles also. You’re a bit isolated out there, but I think it’s America’s best city: the best food, the best climate, the best scenery, the best comedy scene, an incredible music scene, excellent art museums, so many different parts of town to go to. That makes the list as well.
Michael Chui: Difficult traffic, though. What’s your favorite dish at a restaurant?
Tyler Cowen: My favorite cuisines are real Mexican food, Szechuan food, Indian regional cuisine, so those are by far my favorites.
Michael Chui: What’s your current go-to interview question?
Tyler Cowen: I don’t have one anymore. It used to be, “What are your open browser tabs at the moment?” But now too many people are gaming that because they’ve heard about it. One that’s very good for leaders is, “How ambitious are you?” But it’s not for general use. But it still works very well.
What I like to do most of all now is just get the person talking about a book, movie, TV show that they are passionate about and see what their understanding is of the social characters and their relationships in that tale. It’s not like a single question, but it’s a single thing to do. And that’s what I’m most enamored of in the moment.
Get more and better mentors, no matter what your station in life is, and your mentors can be younger than you.
Michael Chui: If you weren’t doing what you are nowadays, professionally, what would you be doing?
Tyler Cowen: I’m doing a whole bunch of different things today professionally. So, in that sense, the alternatives I’m doing, right? Could I imagine a career in publishing in some way? Well, yes, but I publish a blog, and I write for Bloomberg. I have a career in publishing. I don’t know what to say. I don’t think there’s many things I would be good at, and the ones I am, I’m trying to do.
Michael Chui: How do you think this interview is going?
Tyler Cowen: It’s been a lot of fun for me. And I think, for McKinsey people, they’re getting a very different sense than corporatized approaches to interviewing—but I think the world is ready for that.
Michael Chui: And what’s one piece of advice you’d have for listeners of this podcast?
Tyler Cowen: There are two pieces of advice I have for almost everyone; most other advice is context-specific. But I would say, “Get more and better mentors, no matter what your station in life is, and your mentors can be younger than you.” And “Work on improving the quality of your small groups, your small groups of peers that you trade ideas with, and exchange ideas, or you’re on WhatsApp together, or you go out for beers, or whatever it is you do. Improve the quality of your small groups, ever and always.”
Michael Chui: Tyler Cowen, thanks for sharing with us.
Tyler Cowen: Michael, thank you very much.