Russ Roberts, host of EconTalk and research fellow at Stanford's Hoover Institution, provides valuable insights on key economic concepts for founders. These concepts include opportunity cost, comparative advantage, and emergent order, which help founders make decisions and understand their businesses. Roberts emphasizes the importance of non-financial motivations, such as meaning and a sense of belonging, in creating a company. He also discusses the burden of human nature on capitalism, arguing that self-interested individuals exist in all systems. Roberts explores the desire for admiration and respect in human nature, highlighting the importance of reputation and social standing. He suggests helpful methods for teaching economic concepts, such as using conversation and exploring the implications of ideas. Roberts also discusses the emotional challenges founders face when giving up control of their companies and the unintended consequences they may encounter. Overall, his expertise and insights provide valuable guidance for founders in navigating the economic aspects of entrepreneurship.
Intro
The most profound aspect of the interview with Russ Roberts is his expertise as a research fellow at Stanford's Hoover Institution and author of several books.
Key points from the interview include:
- Russ Roberts is the host of EconTalk and has a deep understanding of economic concepts.
- He is a research fellow at Stanford's Hoover Institution and has written multiple books on the subject.
- The interview will cover a range of economic concepts, providing valuable insights.
What are his thoughts on “meaning, spirituality, or sense of belonging” in regards to creating your own company?
The importance of meaning, spirituality, and a sense of belonging in creating a company:
- Financial motivation is necessary for success, but non-financial motivations are also important.
- An entrepreneur's desire for their deceased father to see their company highlights the emotional aspect of creating a business.
- Making a mark on the world and gaining the respect of loved ones goes beyond monetary considerations.
- Creating a company is a way to contribute to society and make a mark.
- It is relatively easy to create a company in America.
Capitalism bearing the burden of human nature
Capitalism bears the burden of human nature, particularly greed, but it is argued that self-interested individuals exist in all systems, not just capitalism.
- Capitalism is often blamed for human nature, specifically greed.
- However, it is argued that self-interested individuals exist in all systems, not just capitalism.
Why Russ started EconTalk
Russ Roberts started EconTalk because he realized that thousands of people would be interested in what he had to say and wanted to connect with and learn from his audience. The opportunity to consistently attract listeners and the positive feedback he receives from them is why he continues to do the podcast. The host has released close to 700 episodes and is asked to summarize the key concepts discussed in the podcast.
Key economic concepts for founders after 700 EconTalk episodes
The most profound aspect of the text is the discussion of key economic concepts that are useful for startup founders, including opportunity cost, comparative advantage, and emergent order.
- Understanding opportunity cost helps founders recognize the trade-offs involved in their decisions.
- Comparative advantage highlights the importance of outsourcing tasks that are too expensive or time-consuming.
- Emergent order refers to the idea that certain problems can solve themselves without explicit control or intervention.
- These concepts provide valuable insights for founders in making decisions and understanding the dynamics of their businesses.
Helpful methods for teaching economic concepts
Helpful methods for teaching economic concepts include:
- Using conversation, such as podcasts, to replicate thinking processes and enhance retention.
- Exploring the implications and unintended consequences of ideas to provide a deeper understanding.
- Making concepts memorable and engaging through narrative, rhyme, and repetition.
- Conveying the full implications and consequences of economic ideas to ensure a deeper understanding.
"Man naturally desires, not only to be loved, but to be lovely" - Adam Smith in The Theory of Moral Sentiments
Man naturally desires, not only to be loved, but to be lovely - Adam Smith in The Theory of Moral Sentiments.
- Man has an innate desire to be loved and admired by others.
- This desire goes beyond mere affection and extends to wanting to be seen as virtuous and admirable.
- Adam Smith argues that this desire for admiration is a fundamental aspect of human nature.
- This concept has implications for economics and human behavior.
- It highlights the importance of reputation and social standing in society.
- The limitations of human knowledge in designing economic systems are also discussed, referencing a quote from Hayek.
- The book "How Adam Smith Can Change Your Life" is mentioned as a resource for exploring Smith's ideas further.
Why Russ wrote How Adam Smith Can Change Your Life - https://www.amazon.com/Adam-Smith-Change-Your-Life/dp/1591847958
The book "How Adam Smith Can Change Your Life" aims to highlight the insights and wisdom present in Adam Smith's works, particularly his exploration of self-interest and the virtue of not being greedy. The central idea is that humans naturally desire not only to be loved, but also to be lovely, meaning worthy of respect and honor. Understanding this aspect of human nature can provide insight into people's behavior and motivations. The book challenges the misconception that economics is solely about making money and emphasizes the importance of being virtuous and wise in order to gain love, attention, respect, and honor. It explores how Adam Smith's teachings can be applied to personal and professional life, making it relevant to entrepreneurs and founders.
How EconTalk has changed since the beginning
EconTalk has evolved to include a human element and interviews with people from various fields, not just finance. The show explores ideas outside of traditional economics and provides insights into different aspects of daily life. The name of the show has been considered for a change, but it is a difficult decision due to its popularity.
Steve Adema asks - Russ Roberts has emphasized the limits of "only looking where the light is" when it comes to studying well-being. How can economists incorporate the aspects of well-being that aren't easily quantified?
Economists often focus on measurable aspects of well-being, neglecting those that are difficult to quantify. This narrow focus on quantifiable data can result in neglecting the significance of non-measurable aspects of well-being. To incorporate these unquantifiable aspects, economists may attempt to create variables or surveys to measure them, but this approach has limitations. It is important for economists to recognize the limitations of quantification and consider the broader aspects of well-being that cannot be easily measured.
Warren Buffett's gift to his son
- Warren Buffett gifted his son $80,000-$90,000 worth of Berkshire stock.
- His son had the option to keep the stock or cash it out.
- He chose to cash it out and pursue a career in the music industry.
- The decision's success depends on what is best for the individual.
Founders and unintended consequences
The unintended consequences that founders may face in their journey include losing sight of the original purpose or mission of their company, being influenced by the expectations of investors and others, and struggling with the emotional attachment to their companies. This can lead to a loss of focus and challenges when transitioning to a different role.
The emotional aspect of giving your company away
The emotional aspect of giving your company away is compared to giving up a child for adoption or letting someone else finish writing a book. People generally do not believe that someone else could do a better job with their child or completing their book. The limited creative control and lack of prestige for screenwriters is also discussed as an example. Overall, the idea of giving up control over something you have created is emotionally challenging for most people.
- Founders often have to hand over their "baby" to strangers, such as investors or co-founders, which can be difficult if the relationship doesn't go well.
- Founders struggle with the idea that someone else might have different skills and be better suited for the job.
- The emotional aspect also involves the founder's contentment with the current state of the company versus the pressure to pursue growth.
- Taking on investors brings expectations and the need to dream bigger.
Anthony Y. asks - Has a guest on his show ever made him change his mind on a topic?
Has a guest on his show ever made him change his mind on a topic?
- Rare for a single study to change someone's mind
- Guests have provided new perspectives and insights that influenced his thinking
- Example of learning about uncertainty, randomness, and probability from Nassim Taleb
- Guests have contributed to his understanding of certain topics
- Misconception in economics that if the implications of a model are true, then the assumptions of the model must also be true
- Examples of truck drivers using differential equations and plants turning towards the sun as models, not actual behaviors
- Misconception that robots can understand and behave like humans
- Example of robots not crushing coffee cups
- People often make the mistake of assuming that their economic models accurately capture the real world
- Example of changing his mind about dating apps based on a conversation with a guest
- Used to believe dating apps intentionally gave bad matches, but realized his assumption was flawed and needed more evidence
Has Nassim Taleb convinced him to deadlift?
Nassim Taleb convinced the speaker to try deadlifting after the speaker asked if he still lifts. The speaker had previously done weightlifting and interval training with little improvement in his daily tasks. Taleb suggested that the speaker should have been deadlifting with barbells instead.
- Nassim Taleb convinced the speaker to try deadlifting
- The speaker had previously done weightlifting and interval training with little improvement in his daily tasks
- Taleb suggested that the speaker should have been deadlifting with barbells instead
Russ often quotes David Foster Wallace's speech, “This is Water”. Specifically, he quotes the phrase, “everyone worships.” What does Russ worship?
Russ Roberts often quotes David Foster Wallace's speech, "This is Water," in which Wallace states that "everyone worships." Roberts interprets this as the human desire to be part of something larger than oneself, something transcendent. He believes that people can worship things other than religion, such as sports teams or political parties. However, he acknowledges the potential for self-righteousness and difficulty accepting others' beliefs. Roberts personally identifies as a religious Jew but respects what others worship. He worships human achievements, human dignity, and the appreciation of the great drama of being alive.