Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast.
Speaker 1: I'm Joe Wisenthal, and unfortunately my co host Tracy Alloway
Speaker 1: is out today, but nonetheless we have a great topic
Speaker 1: to go over today. So obviously we've been talking about
Speaker 1: NonStop the crisis that is going on all around the
Speaker 1: world with both the virus and the economic fallout. We've
Speaker 1: been discussing just sort of the incredible speed with which
Speaker 1: everything has changed and shut down and what that means
Speaker 1: for the economic system and the financial system. Today, we're
Speaker 1: gonna try to have a conversation that looks ahead a
Speaker 1: little bit further about sort of what's next, maybe even
Speaker 1: potentially hopeful, I don't know, maybe it'll be a little
Speaker 1: bit hopeful, and about things related to a potential vaccine
Speaker 1: and reopening and how we might get there and what
Speaker 1: lessons we might apply from the past to improve the
Speaker 1: situation that the world is facing today. And the guest
Speaker 1: that I'm going to be speaking with is one that
Speaker 1: we've had on the podcast in the past. He's a
Speaker 1: Bill Janeway. He's a partner and senior advisor Arbert Pinkis.
Speaker 1: He's an economist, a visiting scholar at Cambridge university and
Speaker 1: is a unique perspective as having been both on the
Speaker 1: venture capital side so understanding innovation, as well as the
Speaker 1: sort of academic economic side. So if he can really
Speaker 1: speak to the types of policies and the types of
Speaker 1: conditions that can enable innovation to flourish, and of course
Speaker 1: that's something that we desperately need right now with the
Speaker 1: lack of a vaccine, the lack of testing, its scale
Speaker 1: and so forth. And of course part of this crisis
Speaker 1: has been in part the coordination problem we've seen between
Speaker 1: the government, which is obviously trying to move faster on
Speaker 1: things like testing and developing therapies, and that coordination with
Speaker 1: the private sector that needs some more organizations. So not
Speaker 1: further ado, I want to bring in Bill Janeway. Bill,
Speaker 1: great to have you back on the podcast. Great to
Speaker 1: be back with you. Joe always enjoy it very much.
Speaker 1: So there's obviously numerous aspects of this crisis that the
Speaker 1: world overall is facing to which you can speak, but
Speaker 1: I want to um start off with this question of
Speaker 1: how governments, or how the US government in particular, could
Speaker 1: conceptualize funding and accelerating the process of innovation towards a
Speaker 1: potential vaccine or therapy. And of course in the past
Speaker 1: you've written a lot about the role that government spending
Speaker 1: and sort of pure government spending and research and so
Speaker 1: on has laid in the development of our big tech
Speaker 1: tech industries, particularly Silicon Valley, and how much of that
Speaker 1: came out of Defense Department spending and so forth. Set
Speaker 1: out the big picture of the role that the government
Speaker 1: has to play here in terms of getting more work
Speaker 1: done faster in this area. Well, in a way, this
Speaker 1: is this is a simple one. There's a clear target,
Speaker 1: clear set of targets. One set of targets involved reliable
Speaker 1: and emphasize reliable tests vote for the incidents of the
Speaker 1: disease and in particular tests for the aftermath the potential immunity.
Speaker 1: Both of these require, as usual, multiple efforts by multiple sources,
Speaker 1: funded across the board, with no preference to a particular
Speaker 1: potential source. And given the global nature of this, that
Speaker 1: would argue as well for the MAC some month of
Speaker 1: international collaboration possible, the sort of collaboration that was available
Speaker 1: in World War Two between the US and the UK,
Speaker 1: which radically advanced, for example, the development of radar, and
Speaker 1: which should be readily available today if we had leadership
Speaker 1: that was concerned with international collaboration as a necessary effective
Speaker 1: tool for accelerating the development of the needed tests and
Speaker 1: then beyond that the vaccine. And it's not just lab work.
Speaker 1: This involves clinical trials. It involves the accumulation of lots
Speaker 1: of data from all the sources possible. This is an
Speaker 1: ideal moment for open collaboration. Unfortunately, we seem to be
Speaker 1: somewhat stalled, and in the meantime in a way that
Speaker 1: there are too concerning residences, too concerning echoes about what's
Speaker 1: going on and what's not going on. Specifically in the
Speaker 1: US during this extremely challenging time, we've had the experience
Speaker 1: before of closing down the civilian economy. That's exactly what
Speaker 1: happened in nineteen two in the United States after Pearl Harbor,
Speaker 1: when civilian production in an economy that was much more
Speaker 1: heavily manufacturing and product oriented versus service oriented, where manufacturing
Speaker 1: of civilian goods was radically reduced no automobiles, for example.
Speaker 1: At the same time, there was an alternative source of demand,
Speaker 1: namely military demand, which maintained actually reduced unemployment down. I
Speaker 1: think the low point was reached when unemployment to the
Speaker 1: extent that it could be measured at all was an
Speaker 1: o point two percent. So you had a high high
Speaker 1: driven high demand driven ECON to met after closing the
Speaker 1: civilian economy. And the problem then was, and this is
Speaker 1: where we have this kind of ironic curious moment. God knows,
Speaker 1: there's not much demand on the economy. There should be
Speaker 1: an opportunity to allocate resources to the highest priorities, which
Speaker 1: while we are developing the tests and waiting for the vaccine,
Speaker 1: which all serious accounts suggests as at least eighteen to
Speaker 1: twenty four months away, we should not have any shortage
Speaker 1: at all of the kind of protective gear and the
Speaker 1: medical equipment necessary through this interim to make it possible
Speaker 1: to start reopening the Sibol civilian economy sooner. And that's
Speaker 1: where the under incoherence, as cover to Cuomo has been
Speaker 1: putting it. Day after day of having fifty stags competing
Speaker 1: with each other or the needed supplies with the federal
Speaker 1: government playing no role in acquiring and allocating and distributing
Speaker 1: is bizarre. I saw a couple of weeks ago you
Speaker 1: tweeted out and I hadn't realized this that your father
Speaker 1: had actually written a book about the challenges of sort
Speaker 1: of grand scale national procurement during a time of crisis,
Speaker 1: and I think he was talking about the war, but
Speaker 1: sort of layout why this is a difficult problem to
Speaker 1: solve because we do have this sort of bizarre thing
Speaker 1: where you say, oh, states, people see states are competing
Speaker 1: against the federal government. States are competing against each other.
Speaker 1: And it's clear that's sort of like the traditional market
Speaker 1: mechanism for the supply of basic medical goods, whether it's
Speaker 1: and masks, ventilators, other protective gear, is breaking down. So
Speaker 1: talk to me about the sort of inherent challenge of
Speaker 1: crisis time. Uh. Him the reason for revisiting the incoherent
Speaker 1: mess of procurement and allocation in the early days of
Speaker 1: World War two precisely because there shouldn't be anything like
Speaker 1: that problem today. The problem in nineteen even into forty
Speaker 1: three was that you had the army, in the Navy
Speaker 1: at a time, as I say, of maximum full employment
Speaker 1: of all resources, desperately competing for steel and aluminum and copper,
Speaker 1: with the army wanting to build tanks and aircraft in
Speaker 1: the Air Force was part of the army in those days,
Speaker 1: and the Navy wanting to build battleships and aircraft carriers
Speaker 1: and landing craft, and the extreme allocation pressure produced enormous
Speaker 1: political and administrative and bureaucratic challenges in Washington, which were
Speaker 1: only resolved in early nineteen, by which time the supply
Speaker 1: of those resources had been cranked up to an enormous extent.
Speaker 1: Here today we have a much simper problem. First of all,
Speaker 1: god those resources are not fully employed. We have a
Speaker 1: very simple short list of needed products. It's not a
Speaker 1: question of deciding whether we want landing craft or aircraft.
Speaker 1: We know we want masks, we want ventilators, we want
Speaker 1: beyond that reliable test, and it should be possible. This
Speaker 1: is the role where the federal government would clearly, in
Speaker 1: national emergency, have the authority to be the purchaser of
Speaker 1: first resort and then allocate those resources by very simple, available,
Speaker 1: obvious metrics of need, based on number of people in
Speaker 1: the hospital, based on number of people on ventilators. That
Speaker 1: kind of very simple message. This should not be a
Speaker 1: hard problem. And the fact that it is a hard problem,
Speaker 1: it's obviously a hard problem. I think Cuomo said that
Speaker 1: the price of a ventilator had been build it up
Speaker 1: from ten to fifty dollars in the course of a month.
Speaker 1: This is interesting. So just in theory, what we're seeing
Speaker 1: right now is not, in your view, something inherent to
Speaker 1: crisis that, even though it's chaotic, even with our federal system,
Speaker 1: even with unclear or ambiguous models about how many ventilators
Speaker 1: states will need and so forth, this should be in
Speaker 1: theory doable with a sort of normal, with a federal
Speaker 1: coordinated response. When things get really incoherent, when you have
Speaker 1: a four problem with respect to allocation, that's when you
Speaker 1: have equally legitimate claims for scarce resources. Well, here we
Speaker 1: have a very short list of unequivocally legit them. It
Speaker 1: claims against a vast reservoir of resources. Not I don't
Speaker 1: mean the resources of personnel in hospitals. I mean the
Speaker 1: research and development resources that can be devoted and and
Speaker 1: and those resources are and I would come back to this,
Speaker 1: Unlike World War Two, with the exception of our unique
Speaker 1: relationship with the UK, those resources are global. Everybody has
Speaker 1: the same incentive to produce reliable tests for the virus
Speaker 1: and for the antibodies that are generated in response to
Speaker 1: the virus, and for a vaccine. And it should not
Speaker 1: be I mean this is if I may say so,
Speaker 1: what the World Health Organization was created to help coordinate,
Speaker 1: it should be possible subject to focusing on the proven
Speaker 1: ways of demonstrating efficacy and safety, efficacy for testing and
Speaker 1: safety for metical not just vaccine, but also any kind
Speaker 1: of anti viral medicine pharmaceutical. We know how to do that,
Speaker 1: and we've done that. It does take time, and that's
Speaker 1: why having this capacity for managing a gradual, graded reopening,
Speaker 1: and and the fact that the US is somewhat certainly
Speaker 1: behind East Asia, it's enormously useful. I have just looking
Speaker 1: at this concern and Singapore that has been a bounce
Speaker 1: back of the virus UH and as it's been said,
Speaker 1: the world in its different national ways is going to
Speaker 1: be playing whackamo. Do we need to think of this
Speaker 1: as an annual injection like the conventional influenza virus or
Speaker 1: is it like polio where you do get lifetime immunity.
Speaker 1: Nobody knows the answer to that. So on the one hand, yes,
Speaker 1: there's no question that the proper public sector government response
Speaker 1: for this kind of challenge is read the money as
Speaker 1: broadly as possible to with many candidates, as many flowers
Speaker 1: take root and start to blow as possible and recognize
Speaker 1: that hoping for shortcuts can be extremely dangerous. Right, let's
Speaker 1: talk about this was a little bit more specificity. So
Speaker 1: you obviously have lots of different pharmaceutical players who have
Speaker 1: begun the race so to speak, to search for a vaccine. Whoever,
Speaker 1: in theory finds an effective vaccine and proves it can
Speaker 1: expect perhaps to reap a pretty big financial windfall. Most
Speaker 1: companies will probably lose the race, maybe one maybe I
Speaker 1: don't know, maybe too, but most companies aren't going to
Speaker 1: make money, and so they'll have invested all of this
Speaker 1: uh money up front for a long shot ticket that
Speaker 1: will probably end up costing them financially in the future.
Speaker 1: So strictly speaking, how do you go about allocating funds
Speaker 1: in a way such that there is a prize so
Speaker 1: to speak, to the entity that gets there first, but
Speaker 1: that also doesn't create you know, that creates enough incentive
Speaker 1: for lots of different players to sort of enter the
Speaker 1: race that most of them will lo well compared to
Speaker 1: the amount of funding that's going out to try to
Speaker 1: keep the civilian economy as I call it, the private
Speaker 1: sector a lot through this process. Given the fact that
Speaker 1: there isn't the military the broad military demand to maintain
Speaker 1: full employment. Given the scale of that funding government underwriting
Speaker 1: of research efforts, you would expect to see the most
Speaker 1: productive research efforts coming out of collaborations between academic research
Speaker 1: labs and pharmaceutical companies with capacity for toxico bology and
Speaker 1: testing and dealing with the FDA. Every major research university
Speaker 1: with a strong biomedical base is collaborating with as many
Speaker 1: partners as it can find. Government underwriting of that research
Speaker 1: as a public good, regardless of who find stuff. Producing
Speaker 1: the vaccine seems to me is a political flash economic
Speaker 1: no brainer that the flip side is no rent seeking,
Speaker 1: no profiteering when the output of that public good reaches
Speaker 1: what in America we have we call the healthcare market,
Speaker 1: rather than more generally the clinic broadly defined across the world.
Speaker 1: This gets to an interesting question, rent seeking profiteering Should
Speaker 1: there be some sort of windfall for the winning team,
Speaker 1: so to speak, Well, they're almost certainly will be. I
Speaker 1: noticed that somebody was commenting that everybody was on the
Speaker 1: list of this American revival as a and council, except
Speaker 1: except Martin Shrekley, who I think is still in Channel.
Speaker 1: He is. Yeah, I've read that he petitioned for a
Speaker 1: release so that he could get to work on the wires. Yeah,
Speaker 1: that's just what we need. So, you know, the US
Speaker 1: is I think it's fair to say unique in not
Speaker 1: having effective limits on prices for pharmaceuticals. This is a
Speaker 1: case where clearly I can't remember, be very interesting to
Speaker 1: go back and look at how were the Stalk and
Speaker 1: Saban vaccines brought to market? In other words, under what regime? Uh,
Speaker 1: they were developed in academic labs, but they were produced
Speaker 1: at scale, distributed globally, still being distributed globally. But when
Speaker 1: I was a kid and got the vaccine, and which
Speaker 1: was you know, I'm old enough to have remembered the
Speaker 1: horrors of the summers of the nineteen fifties and had
Speaker 1: friends who had polio. You know, I don't think anybody
Speaker 1: wrote a check to pay for getting the sugar cube.
Speaker 1: It was distributed free. But on the other hand, costs
Speaker 1: were clearly covered by those who were producing the vaccine.
Speaker 1: There's an awful lot of relevance of history available for
Speaker 1: any one of these crises. You just have to have
Speaker 1: an interest and attention. Similarly to people who produced the
Speaker 1: anti virals that have managed to allow people to live
Speaker 1: with age, even if not be cured of it. And
Speaker 1: this is something Tony Faucci probably knows more about than
Speaker 1: anybody else alive. Made decent return on their capital, but
Speaker 1: I've seen no suggestion that they have profiteered off it.
Speaker 1: It does mean that there's a role not just for
Speaker 1: government funding of this kind of R and D, both
Speaker 1: tests and vaccine for the public good, but there's a
Speaker 1: role in ensuring that the surplus generated is properly shared
Speaker 1: between consumers and producers. In the meantime, while we're waiting this,
Speaker 1: your view would be anyone in the ideal scenario, anyone
Speaker 1: who is sort of on some sort of reasonable path
Speaker 1: or some sort of like, you know, a plausible um
Speaker 1: player to find a vaccine should more or less get
Speaker 1: a blank check. Yeah. I think it's well known who
Speaker 1: has the capacity for real research in this area. But
Speaker 1: as I say, it is international and it's global. It's
Speaker 1: entirely possible the Chinese will come up with a vaccine
Speaker 1: before anybody else because they were the first ones to
Speaker 1: decode the genetics of the vices of the virus. I
Speaker 1: think that it is hard for me to imagine the
Speaker 1: pressure over the next twelve months for international collaboration at
Speaker 1: least UH a minimum favoritism UH for particular potential providers
Speaker 1: of what's desperately needed. M let's talk about the macroeconomics
Speaker 1: for a minute. So we are seeing this extraordinary shutdown
Speaker 1: of the civilian economy, as you put it. Part of
Speaker 1: that was mandated. So of course, in UH most cities
Speaker 1: and basically most cities and most states around the country
Speaker 1: and around the world, there's been some level of government
Speaker 1: requirement that say, Okay, we're gonna shut restaurants and bars
Speaker 1: and schools any place where lots of people congregate, but
Speaker 1: there was no like sort of mandate to shut the
Speaker 1: economy overall. Nonetheless, between the shutdown of a major sector
Speaker 1: of the economy and the spillover effects in the fear
Speaker 1: and so forth, we've seen now a sort of de
Speaker 1: facto shutdown the entire civilian economy, which is leading to
Speaker 1: the first acute economic crisis since the Great Depression. And
Speaker 1: there's hopes that maybe when the virate, when the health
Speaker 1: crisis has slowed down, that a lot of people will
Speaker 1: come back to work, but so far that's just hopes.
Speaker 1: At this point furthermore, and you know there is a
Speaker 1: consensus at least and I don't know if the policy
Speaker 1: is actually caught up to the scale necessary. I don't
Speaker 1: think anyone has. They were going to need um fiscal
Speaker 1: spending and that has to be a major part of
Speaker 1: the equation to get the economy running again. How should
Speaker 1: governments be thinking about the challenge of what it will
Speaker 1: take to actually return people to um sort of pre
Speaker 1: crisis levels of activity. First of all, Joe, you've got
Speaker 1: two very very different models available. Unfortunately, the US has
Speaker 1: taken the least efficient approach to trying to maintain the
Speaker 1: living standards of the life chances of people through this crisis.
Speaker 1: The Germans, who had already proven their model in two
Speaker 1: thousand and eight, and not and interestingly enough, the British,
Speaker 1: who kind of you know, see themselves as sitting between
Speaker 1: the Germans they projected as partners and the US when
Speaker 1: they aspire to have a special relationship with have actually
Speaker 1: followed the Germans. The Germans of what the Germans did
Speaker 1: and what they had prepared for doing because of their
Speaker 1: deep commitment to quote the social market economy was basically
Speaker 1: to pay companies to keep people on the payroll not
Speaker 1: to lay or furlough off their workforces, meaning that as
Speaker 1: and when, whether it was the global financial crisis or
Speaker 1: whether it's the coronavirus pandemic, when the threat retreats, they
Speaker 1: don't have to go through an enormously inefficient process of
Speaker 1: rehiring a workforce which undoubtedly will not be the same
Speaker 1: workforce that they have let go. The British have done
Speaker 1: the same thing. We have done the least efficient possible
Speaker 1: pseudo fix of indeed effectively mandating any employer in the
Speaker 1: private sector or for that matter, the public sector, to
Speaker 1: lay off as many people as they want, giving those
Speaker 1: people access to a very inefficient, as different state by
Speaker 1: state unemployment insurance system which is overwhelmed right now, and
Speaker 1: on the other hand, providing these law of these loans
Speaker 1: to small business to the banking system. I mean, it's
Speaker 1: as if we're we've we've learned nothing about how would
Speaker 1: you have an I R S there who has everybody's
Speaker 1: Social Security number which is their tax I d uh?
Speaker 1: And how and and provide refunds to tens of millions
Speaker 1: of people every year. Why that was not invoked. I
Speaker 1: think there's probably a certain sense this is speculation. The
Speaker 1: I R S it's have been so radically underfunded for
Speaker 1: thirty or forty years that the notion that it actually
Speaker 1: could play a really useful, an efficient role in keeping
Speaker 1: this economy ticking over while it's in suspended animation was just,
Speaker 1: I guess, an nethema to a sufficient number of people
Speaker 1: in Washington. But it's it's, it's it's a it's a
Speaker 1: great shame, it's a great waste in the US. Coming
Speaker 1: back up will be less efficient as a result. I
Speaker 1: don't think there's any concern about whether there will be demand.
Speaker 1: The problem of reopening the economy. The problem of reopening
Speaker 1: the economy is actually to take go back to a
Speaker 1: different experience from World War Two. The problem of reopening
Speaker 1: the economy is somewhat like the challenge of in nineteen
Speaker 1: should stings from an economy driven by military demands back
Speaker 1: to an economy driven by the ferry the radically different
Speaker 1: patterns of civilian demands. Right, They're the crucial need that
Speaker 1: was provided by very effective modes of financing the war
Speaker 1: through a set of techniques that endowed both consumers and
Speaker 1: business with the liquidity, the cash they needed to go
Speaker 1: through the transition to shift jobs, but above all to
Speaker 1: shift production. We shifted years into, of course, the great
Speaker 1: post war booth. Do we have the tools for measuring
Speaker 1: the instapable imbalances that are going to emerge as demand
Speaker 1: sector by spector for goods and services picks up when
Speaker 1: supply will be lagging because of the need, the unfortunate
Speaker 1: need which leave them posed on ourselves. A business hiring
Speaker 1: new workforces to provide the services and products that that
Speaker 1: they exist, that they have existed to deliver it um
Speaker 1: and he is able to be nimble about identifying pockets
Speaker 1: hot spots if you like to use the pandemic language,
Speaker 1: hot spots of inflationary pressure and uh and and respond
Speaker 1: to them during a very delicate process of bringing back
Speaker 1: online the supply that has been closed off. That's going
Speaker 1: to be a real challenge, right, I mean, we did
Speaker 1: this so I'm part of the Cares Act, which everyone
Speaker 1: agrees um was completely insufficient and already some of the
Speaker 1: funding is completely tapped out, even though it's still desperately needed.
Speaker 1: Part of the bill that was passed at the end
Speaker 1: of Merge was kind of premise down what Germany and
Speaker 1: the UK are doing in terms of grants or loans
Speaker 1: to small business that could be turned into grants if
Speaker 1: they kept people on payroll. But in terms of maintaining
Speaker 1: the productive capacity of the economy, in terms of being
Speaker 1: able to go back to something that we had, it
Speaker 1: seems like we should have just done that on a
Speaker 1: much bigger scale, and not just limited it to small businesses,
Speaker 1: but done everything we can, and not through the banks,
Speaker 1: but through the I R s, so that essentially every
Speaker 1: entity that had any employers could have massive wage subsidies
Speaker 1: throughout the duration of the crest exactly exactly. And as
Speaker 1: I said, we had the model, and we had the
Speaker 1: existence proof of the model working in Germany back in
Speaker 1: ten years ago. Okay, we've had this wave of layoffs
Speaker 1: as of right now when we're recording this, and these days,
Speaker 1: I'm always making a point to remind listeners when the
Speaker 1: episod it is being recorded, because the world changes so
Speaker 1: fast between recording and the time they listen to it.
Speaker 1: So it's April sixteen, that's ten am East Coast time
Speaker 1: that we're recording this. As of yet, we haven't embraced
Speaker 1: the sort of European, UK German model of keeping all
Speaker 1: of really trying to subsidize employment. Regardless, every country is
Speaker 1: going to have a seriously difficult road getting back to
Speaker 1: something resembling normal, especially because of the behavioral changes, both
Speaker 1: in terms of people having realized that employment is so
Speaker 1: precarious and also the health concerns that will linger for
Speaker 1: quite some time even after reopening. Whatever that means or
Speaker 1: whatever that entails. Almost everyone expects thori be changes and
Speaker 1: people are going out to eat and other traveling. We
Speaker 1: don't know exactly what the future is going to look like.
Speaker 1: What is the role that the government can play beyond
Speaker 1: obviously sort of spending money or maybe it is just
Speaker 1: ending money in rebuilding private sector confidence to go out
Speaker 1: and invest and spend and to not save every dollar possible. Well,
Speaker 1: that's a great question, and you know it it um.
Speaker 1: I think there are two quite different aspects to it.
Speaker 1: And it does reflect the fact that we have this
Speaker 1: remarkable federal system. Because we've been seeing we've been we've
Speaker 1: been seeing across the country over the last months six weeks, UH,
Speaker 1: this pattern playing out of certain governors. I'm in New
Speaker 1: York City, You're in New York City. So we happen
Speaker 1: to have more exposure to Governor Cuomo than to other governors.
Speaker 1: But it's clear that there's a pattern of governors who
Speaker 1: have been able to contribute um a kind of sense
Speaker 1: of responsibility at the top. That evening of itself is
Speaker 1: a contributor to maintaining and then potentially reviving confidence and
Speaker 1: a sense of reasonable security. This of course was uh,
Speaker 1: you know, the classic example in American history Franklin Roosevelt
Speaker 1: and the fireside catched to the bottom of the depression
Speaker 1: and then during the really dark days of THEO and
Speaker 1: into forty three in World War Two, when as the
Speaker 1: British say, the US was completely on the back foot.
Speaker 1: Whether and how the messages out of Washington evolved, and
Speaker 1: maybe it's not something that can happen in this year,
Speaker 1: in this presidential election here that provides a green of consistency, reliability, uh,
Speaker 1: that are indeed, in the traditional phrase, confidence inspiring. I
Speaker 1: think we can perhaps hope for that in one but
Speaker 1: I don't think it's on the table for the I
Speaker 1: think it's going to be more at the state level
Speaker 1: that we will see confidence re established state by state.
Speaker 1: And you know, there's a there's a deep history, you know.
Speaker 1: I I'm I'm devoted Joe is as I think you're
Speaker 1: aware to reading lists and there's a remarkable book by
Speaker 1: a great American history and Gary Gurthel The books called
Speaker 1: Liberty and Coercion, and what it's about are the two
Speaker 1: very different structures of government that the Constitution gave us.
Speaker 1: At the at the federal government, we have a government
Speaker 1: where the president is not endowed with total authority. It's
Speaker 1: a government with enumerated powers. In times of crisis, those
Speaker 1: powers have been extended, as in World War Two, as
Speaker 1: in the Civil War, when the challenges overwhelmed the capacity
Speaker 1: of the state. But the extension federal power under those
Speaker 1: crisis conditions there's always been subject to challenge because the
Speaker 1: police power, the authority that tells us when we can vote,
Speaker 1: when we can get married, when we can drive, all
Speaker 1: of that resides in the state government, and that clearly
Speaker 1: includes whether or not we can keep a restaurant open
Speaker 1: or not. This is a very interesting experiment, real time experiment,
Speaker 1: in the functioning of American federalism. And I think the
Speaker 1: question you rais is a very very important one, and
Speaker 1: I expect that we will see very different patterns of
Speaker 1: develop of demand returning for the services and products that
Speaker 1: we need. Really under state by state basis. This is
Speaker 1: a bigger issue, bigger issue for economists and the issue
Speaker 1: for political leaders. We've spent the last forty years. Again,
Speaker 1: this gets back to the question of international collaboration. Should
Speaker 1: we spent the last fourty years mobilizing information technology in
Speaker 1: order to optimize supply chain around the world, not just
Speaker 1: for products, also for services. Think of call centers located
Speaker 1: remotely as well as software development in India. We've optimized
Speaker 1: for the most efficient supplied things for goods and services,
Speaker 1: and the increase in efficiency comes at the cost. The
Speaker 1: cost is robustness resilience that we've been learning the hard
Speaker 1: way can be a truly devastating cost. So I do
Speaker 1: expect without government intervention, but in some cases with government
Speaker 1: leadership to see a if you like, retreat from global
Speaker 1: emphasis on efficiency towards greater respect for resilience. In robustness,
Speaker 1: you know, to go back to the defense departments years
Speaker 1: of supporting and sponsoring all the technologies that combined to
Speaker 1: make the digital revolution. The Defense Department for critical materials
Speaker 1: always required at least two sources of supply. It required
Speaker 1: the the inventor. UH. You might think this could be
Speaker 1: the case with the vaccine to share the intellectual property
Speaker 1: with a competitor, so that if the first supplier failed,
Speaker 1: the second source, as it was called, would be available
Speaker 1: to maintain critical supplies. I think we're gonna see a
Speaker 1: lot of that happening more broadly and more generally, as
Speaker 1: well as discussion how much will actually come of it
Speaker 1: of bringing critical production capacities back to the United States.
Speaker 1: That's going to be a very very challenging issue, the
Speaker 1: process of learning, for example, how to make the kind
Speaker 1: of micro process or semiconductor devices that are made in
Speaker 1: Taiwan t SMC Taiwan Semiconductor Manufacturing Company as the world leader,
Speaker 1: bringing that back to the US. Intel can do it
Speaker 1: for itself, but Intel legs t SMC. So there are
Speaker 1: all sorts of questions which in a broad sense, our
Speaker 1: national security questions as well as questions of political economy
Speaker 1: that this experience is forcing us to consider after almost
Speaker 1: two generations of thinking that they were off the table
Speaker 1: and the only thing that mattered was efficiency in the
Speaker 1: allocation of resources real quickly. And then I'll let you
Speaker 1: go on a sort of remind listeners. Uh, you know,
Speaker 1: obviously you have a venture capital passed or US an economist,
Speaker 1: you're a student of John Maynard Keynes's work, You've written
Speaker 1: a lot about his work in sort of this idea
Speaker 1: of and again it almost speaks to exactly what you're
Speaker 1: talking about, the ability of the government to provide stability
Speaker 1: at a time of like truly radical uncertainty, and radical
Speaker 1: uncertainty is a cliche that people talk about during normal times,
Speaker 1: but it's sort of never felt more real than now,
Speaker 1: when there are just so many balls in the air
Speaker 1: and questions about would the future looks like, what what
Speaker 1: should people look at looking to Keynes's work and sort
Speaker 1: of helping illuminate, illuminate sort of from a philosophical perspective,
Speaker 1: perhaps what the role of government is in humeliorating some
Speaker 1: of that uncertainty. Cains Indeed, at the core of Cains
Speaker 1: of the Economics was his recognition that much as it
Speaker 1: would be lovely to believe that we can know what
Speaker 1: the return on investment will be when we decide to
Speaker 1: build a plant or invest in research and development, we can't.
Speaker 1: And consequently, efficiency in the allocation of resources is on
Speaker 1: the one hand, the enemy of innovation, but it also
Speaker 1: can be, on the other hand, the enemy of a
Speaker 1: thriving private sector. But as I've said several times in
Speaker 1: this conversation here, we we have great uncertainty about when,
Speaker 1: but we don't have much uncertainty at all about what
Speaker 1: about what we need to invest in. And and that
Speaker 1: is you know, this array of personal protection equipment and
Speaker 1: above all the vaccine, and they're not much intervention and
Speaker 1: except for writing check is required. I think there'll be
Speaker 1: a more complicated and difficult role in as as as
Speaker 1: things reopen. The central banks of the world and the
Speaker 1: treasuries of the world have poured money into the private
Speaker 1: sector in more or less efficient ways. They've created enormous
Speaker 1: to boars of liquidity. And we know that when the
Speaker 1: economy begin to reopen, there are going to be these
Speaker 1: imbalances and these opportunities for inflationary hotspot. How has the
Speaker 1: process of withdrawing excelex liquidity as cash flow starts to
Speaker 1: percolate again through the private sector. And right now the
Speaker 1: private sectors of the world's economies are on the ventilators.
Speaker 1: Converting them over to be able to believe under their
Speaker 1: own scheme without artificial support, that's going to be a
Speaker 1: big challenge. Bill Janeway is always great to get your perspective.
Speaker 1: Really appreciate you joining us. So we need um, we
Speaker 1: need blank checks from the government and fireside chats from
Speaker 1: the governors is my big takeaway, and we'll see what
Speaker 1: we get. But I really appreciate you taking the time.
Speaker 1: Thanks so much, Joe, always enjoy Thanks Bill Well, that
Speaker 1: was summary needed for me. That was my conversation with
Speaker 1: Bill Janeway. I strongly recommend, though, if you haven't read it, listeners,
Speaker 1: check out his book Doing Capitalism in the Innovation Economy
Speaker 1: because there are not many people that I've ever read
Speaker 1: who for balanced both the private sector experience, what actually
Speaker 1: motivates business and how they make calculations in terms of
Speaker 1: what's a good money making investment with academic theory, and
Speaker 1: there's often a disconnect between the two, and I feel
Speaker 1: like understanding that nexus is going to be extremely important
Speaker 1: in the months and weeks ahead as governments around the
Speaker 1: world tried to get their recovery policies correct. So that
Speaker 1: was Bill Janeway and this has been another episode of
Speaker 1: the Odd Lots podcast. I'm Joe Wisenthal and you could
Speaker 1: follow me at The Stalwart. You should follow my co
Speaker 1: host on Twitter. She's on Twitter at Tracy Alloway. Bill
Speaker 1: is on Twitter. His his handle is at Bill Janeway.
Speaker 1: You should follow our producer Laura Carlson. She's at Laura M. Carlson.
Speaker 1: Followed the Bloomberg head of podcast frances Believe Me at
Speaker 1: Francesca Today, and check out all of the Bloomberg podcasts
Speaker 1: under the handle at podcast. Thanks for listening.