RoboPod and the Perpetual Money Machine - Cautionary Questions 2

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Hello, listeners.

Tim Harford here.

As loyal listeners will know, Cautionary Tales is a podcast about learning from the mistakes of the past, but it also seems to me that we can learn from things that have gone well in the past.

For example, getting Jacob Goldstein on the show.

Jacob is back for an episode of Cautionary Questions.

Hello.

Jacob.

What's the opposite of a cautionary tale?

A salutary tale.

A salutary story.

I guess.

We salute you, Jacob.

We can do better.

Let's try and punch that up.

We'll work on it.

For those of you who don't know, Jacob is the host of Pushkin Podcast, What's Your Problem, which is a brilliant show about people who are trying to make technological progress.

He is also the author of the book Money, The True Story of a Made-Up Thing, and he's the perfect person to help me answer all of the questions that you lovely people have been kind enough to send in.

So Jacob, wonderful to have you back.

Of course, our virtual mailbag is bursting with queries on topics as varied as climate investing and careers advice.

So Jacob Goldstein, are you ready?

Yes.

Let's do it.

So, Tim, we're going to start with a couple of emails that came in after the last time you and I talked on the show.

And one of the things we talked about was: what happens if AI and robots take all of our jobs?

So, the first question about that, which is frankly really more of a comment, but a lovely comment, comes from Karen, who writes, Dear Tim Harford, I was, as usual, enjoying your recent Q ⁇ A episode with Jacob Goldstein.

She's a woman of taste.

I like how this starts.

I like her already.

And your lively discussion about what happens when everyone loses their jobs to AI.

At one point you said,

quote,

How would we react if our desire for mastery, our desire for meaning, our desire to feel useful, if all that had to be satisfied without having a job?

And what would we do?

And could we cope?

And I don't know.

Well said, Tim Harford.

Karen writes, you could just have easily asked, what do people do after they've retired?

Fair.

She goes on, my work was very meaningful to me too.

I led policy teams that advised government ministers.

It was fast-paced, exciting, fun, challenging.

I loved my job.

So when I retired, I wondered about all the things you expressed concerns about on your show.

Here is the truth as I see it.

Whatever you're doing for a living, it's not all of you.

It just takes most of your time.

All the other parts of you, all those pushed down by the demands of capitalist discipline, emerge once your time has been freed.

Then you find out what else you are, what else makes you happy, and what else gives you meaning and purpose.

So there is really nothing to fear from our robot overlords.

My very best regards, Karen.

Wow.

Way to start the show with our best question.

The other questions can't possibly be as good as that.

It's really lovely, right?

Thoughts of that.

It's really lovely.

And I agree with all of the stuff about what we do for a living is not all of us.

It's a very interesting thought, though.

Is retirement the same

as living your entire life not working because a robot took your job?

And we have some evidence on this point.

Tell me, what is the finding?

So these three German economists published this research just over a decade ago.

Looking at people's life satisfaction, turns out people are quite happy being retired.

And if you have a job and then you retire, nothing happens to your life satisfaction.

You were fine before, you're fine after.

But if you're unemployed,

you're miserable.

And if you then retire from a situation of unemployment, your life satisfaction goes up.

I mean, it's the same thing, right?

Like you go from not having a job to not having a job, but there's something about your identity as a retired person versus a person who is looking for a job and can't find a job.

It makes a huge difference to how people feel about themselves.

Unemployed in the data does not mean a person who doesn't have a job, right?

It means a person who wants a job and doesn't have a job.

And that's an important difference.

And so I wonder in that study if that difference is actually quite significant, right?

Like if you want a job and don't have a job, you're going to be unsatisfied in that dimension.

Whereas if you don't have a job and don't want a job.

It's fine.

That sounds fine.

Yeah.

Yeah.

So I think that's right, Jacob.

And I think a lot of this depends on what people's expectations are, their expectations of themselves, what they think other people expect of them.

But I would guess there's a huge difference in the scenario where the robots take everyone's job and we're all basically just

doing

hobbies, whatever whatever we want.

Our living standards are taken care of by the robots, and everyone's in the same boat, versus a situation where a lot of people lose their jobs to the robots, and a lot of other people don't, which I think is more likely.

So, traditionally, we thought of technological unemployment as happening to people

with lower job skills, right?

People with less education, strong people who were getting replaced by machines.

Plainly, the new wave wave of generative AI threatens

you and me.

Which is what makes it existentially threatening.

It does.

People losing their jobs to technology are more broadly drawn from across the income spectrum and the education spectrum.

How does it change the sort of social implications?

Because on a fundamental level, what we're really talking about is whether you have a job or not and how you feel about that is largely determined by social norms, right?

That's actually actually what's going on here.

It's a status game to some significant degree, and it's uncomfortable to call it that.

I don't think I like my job because it gives me status.

I think I like my job because it's fun and I'm contributing something to the world.

But obviously we all care about status.

And it does give you status.

You have one of the best jobs in the world.

You're a podcaster.

Listen, we're walking right up to the next question in a very elegant way from Neil.

Hello, Tim.

During your recent cautionary questions episode, Jacob Goldstein jokes that if AI takes everyone's jobs, the two of you will still do a free podcast together.

I understand the jest,

but it begs the question.

By the time AI is good enough to take over most jobs, won't it also be better than us at creating entertainment and art?

I think we as humans don't want to admit that is possible, but it's definitely the goal of AI developers all over the world at this very moment.

I'm curious what that possibility could mean for humanity and what we might do to avoid or prepare for it.

Thank you for for all your excellent content.

The robots have nothing on you

yet.

Yes.

Jacob, have you heard the podcasting software that Notebook LM have just released?

This is a Google product.

Tim, not only have I heard it, I uploaded a chapter of my book about paper money in China and queued up a moment of it to play for you right now.

You know how we always hear about Marco Polo bringing back these crazy stories from China?

Right.

Well, get ready for this trying out.

China was light years ahead of Europe when it came to money.

Centuries ahead, to be exact.

We're talking paper money, folks.

Yeah.

Centuries before it ever showed up in Europe.

It's wild.

It really flips the script on how we usually think about financial history.

Absolutely.

So just to be clear, I just uploaded a chapter of the book, clicked whatever, make a podcast, didn't make any choices, didn't tell it to do anything but that, and that's what came out.

And these are two synthetic voices reading a script that was created by a generative AI in response to your wonderful book, Money, the True Story of a Made-Up Thing, and it was pretty good.

It's pretty good.

It's definitely good enough to be very scary.

I've heard worse human podcasters for sure.

So, I mean, maybe this is all happening sooner than we think.

But what Neil is basically driving at is by the time the robots take our jobs, won't they also be better than us?

So they will make a better podcast than we will.

They will draw better pictures than we will.

They will write better prose than we will.

They will compose better music than we will.

And so on.

And is that a problem?

I'm not sure that's the problem I'm worried about.

The computer already draws better than I do.

And low bar.

Respectful.

Very low bar.

And it's great.

I'm like, wow, I can create art for my hobby projects.

That's great.

I'm not doing anybody out of a job.

But now my own creativity is unlocked by the computer.

Of course, maybe there comes a time where I don't need to do any of that.

I just press the button and the computer just produces everything.

And it's better than what I could produce.

Does that matter?

I want to add a wrinkle.

Wrinkle away.

When I was talking about making a podcast with you after the robots take our jobs, part of what I was imagining was that somebody would listen, right?

Like, not that we could make a living out of it, but that we would be doing it for some audience, right?

My hope, although I really don't know, is that even if AI makes a better podcast than us, people will listen just because people like people.

And one interesting case to consider is chess, right?

Chess has this history where first people were better than machines.

And then for a long time, computers could beat people, but a person working with a computer was better than just a computer.

And then a few years ago, that ceased to be the case.

And obviously, many, many computers can beat every single human being on Earth.

But

chess players still

are famous among nerds, right?

Magnus Carlson is

a rich guy.

He's a superstar, and people pay lots of money to watch him play worse chess than a computer.

So my hope is we can be, if not the Magnus Carlsons of podcasting, the whoever is like, you know, way worse than Magnus Carlson, but still a pretty good chess player.

Sure.

And you may be right, but I think my point is

it's worth playing chess even if nobody watches you, even if it's just you and a friend.

Yeah.

But is it worth making a podcast if nobody listens?

Then what are we bothering with the microphones for?

Then you could just call me.

Yeah.

Yeah.

Okay.

We could have this thing.

It's a podcast that nobody listens.

It's a phone conversation.

Welcome to the podcast for no one.

I'm Jacob Goldstein.

If people weren't listening, it would be different, but I think people would still be creating stuff.

People would still be making art.

And that will be fine.

So that's my answer to Neil.

Okay, Tim.

We're going to go from the robot apocalypse to the climate apocalypse with our next question from Julian, who writes:

Dear Tim, lately, more and more news breaks of climate change harming the economy.

For example, I remember a recent story about home insurance premiums rising steeply in hazard zones for flooding, storms, or landslides.

That made me wonder, isn't there a way to profit from climate change too that would allow us to hedge against these economic risks?

Could you set up a fund that would act, in effect, like a climate change insurance policy?

Excellent show, by the way.

Deep insights told via gripping stories.

All the best from Vienna, Julian.

It's a very interesting question.

The thing that immediately springs to my mind is: I once saw one of the most amazingly persuasive pieces of rhetoric ever

that was not intended to be persuasive.

And it was at a commodities conference.

It was a bunch of guys who trade agricultural commodities and therefore have a big interest in climate variability, but at the same time were culturally Midwestern and therefore climate skeptic.

And the guy giving a talk at this conference was a rather professorial Germanic character.

I can't remember if he was German or Austrian or Swiss.

And he was from one of those big reinsurance companies.

He just gave a talk explaining how they were raising all of their insurance premiums because of climate change and showed loads and loads of data about climate change and how they were changing their pricing model.

And there's a bunch of people who I think were politically predisposed to be climate sceptics were like, huh, this guy is not Hillary Clinton and the Dems coming to take away our freedoms.

This guy doesn't want to persuade us of anything.

He's just telling us that the price of insurance is going up and here's why.

And I really felt the mood in the room change because of that talk.

It was fascinating.

And what that gets at is that insurance gives us a kind of truth about the risks that we face because insurance companies operate in a competitive market.

They want to offer the most expensive premiums they can get away with, but they're forced by competition to keep the premiums low.

And so, as the premiums rise and rise and rise, that generally indicates that the risk is rising and rising and rising too.

So, to return to Julian's question, is there a way to profit from climate change?

I mean, your podcast, What's Your Problem, Jacob?

You've talked to many entrepreneurs who are hoping to make money while also saving the planet.

I was thinking about that.

It is encouraging to talk to these people who are very smart and I think truly believe that the work they're doing will mitigate the damage from climate change.

And the progress has been extraordinary, right?

Like the fall in the price of solar power in particular.

It's staggering.

You know, people are making batteries better and there are really hard parts of the problem like cement and planes and people are working on that.

And, you know, Bill Gates started a venture capital fund called Breakthrough Energy Ventures.

That is exactly what Julian is asking about, right?

Like the point of this fund is to profit from climate change by helping to solve or mitigate climate change.

So I think that there are all these hopeful stories and it is very encouraging.

But fundamentally, to come back to this idea of a kind of inverse insurance policy, I think that the answer is no.

Fundamentally, insurance...

moves the cost around.

So the person whose house got burned down or the person whose home was destroyed in a hurricane, they don't have to pay for rebuilding it.

Instead, the insurance company pays.

But somebody still has to pay.

And insurance moves that risk around.

And that's very valuable, but it doesn't make the cost go away.

And climate change increases these costs.

And all the insurance in the world is not going to reduce them in aggregate.

It'll shift them to different people, but it's not going to reduce them.

For that,

we need your solar panels, Jacob.

You know, when you put it that way, like what we really want in terms of moving the economics is you want the people who are consuming the fossil fuel, who are flying on the plane, who are eating the hamburger, to pay the full cost of that, right?

You want to internalize that cost, which is now not in that transaction.

And you can do that with a carbon tax.

Like, it's a great idea.

You can even have a carbon tax and then just give everybody the money back, right?

The government collects money from people for consuming carbon, essentially, and then sends a check to everybody in the country at the end of the year.

So the government doesn't even have to take more money in the aggregate.

And like, it's super elegant, and it's just politically doesn't really seem to be happening.

But it is, in a way, solving the problem fundamentally.

Absolutely.

All right, that's enough about that.

We'll be back in just a minute.

In today's super competitive business environment, the edge goes to those who push harder, move faster, and level up every tool in their arsenal.

T-Mobile knows all about that.

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With a network that adapts in real time, your business stays operating at peak capacity even in times of high demand.

With built-in security on the first nationwide 5G advanced network, you keep private data private for you, your team, your clients.

And with seamless coverage from the world's largest satellite-to-mobile constellation, your whole team can text and stay updated even when they're off the grid.

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We are back.

I'm Tim Harford.

I am talking to the amazing Jacob Goldstein, and this is another of our cautionary questions episodes where you have been sending in your questions, and Jacob and I are going to try and answer them.

Jacob, what have you got for me?

Tim, this is a throwback.

It's from Robert, who writes, Hi, Tim.

Why did no one go to jail after the 2008 financial crisis?

I remember the savings and loans financial crisis during the Reagan presidency when Charles Keating was jailed.

Love your show.

Robert from Illinois.

Yeah.

And a throwback because we first met each other shortly after the financial crisis.

In 2010, when the question on everybody's lips was, who's going to jail?

Yeah.

I mean, it's not literally true that nobody went to jail.

Bernie Madoff went to jail, for example.

I mean, I think the short answer is...

If you want people to go to jail, then first they have to commit a crime.

And the weird thing about the financial crisis is I don't think many people did commit crimes.

All of this crazy stuff that happened and all the outrageous things that people did were, I think, mostly legal, which is, of course, the real scandal.

Aaron Powell, yeah.

You know, everybody talked about housing and crazy sliced up bonds built on mortgages, right?

That was the sort of part of the story that everybody heard and told.

And that part of the story is true.

But there is another piece of the story that I actually think is a really fundamental driver of the crisis that you didn't hear as much because it's a little more abstract and a little nerdier.

And that is basically that starting a long time before the crisis, starting in like the 1970s, there arose in the United States what came to be called a shadow banking system,

where because of regulations on banks in the U.S.

that were set up after the Depression, when there was a giant banking crisis, clever finance people came up with financial structures that looked like banks, but weren't regulated like banks.

And in particular, they look like bank deposits, right?

So a bank deposit is a weird thing where you put your dollar in the bank and you have your deposit and it's worth a dollar.

And then the bank takes your dollar and lends it out to somebody else or your $1,000 and lends it out to somebody else for a mortgage that doesn't have to be paid back for 30 years.

And so then there is this inherent fragility in that system, right?

Because if we all come back and ask for our money, the bank won't have it.

And it's not because the bank is greedy or evil or incompetent.

It's because of the fundamental structure of banking.

That fragility is inherent in the fundamental structure of banking.

And what happened in the financial crisis is that there were billions of dollars that were deposit-like.

They weren't exactly deposits.

They weren't insured by the federal government, but they were in money-market mutual funds, which people may be familiar with and were explicitly set set up to be like a bank deposit, but could pay higher interest and weren't regulated.

And in the repo market, which is like a weirder version of the same thing, let's say.

And everybody came and asked for their money back in 2008.

And of course, the shadow banks, which were not called banks or shadow banks, didn't have it.

And that was a core driver of the crisis.

And it wasn't illegal, as you said, but it's like, that is what all financial crises are.

They just have like different flavors, different skins.

Yes.

I mean, you you said it wasn't because the shadow banks were lazy or incompetent or greedy i mean i think they probably were incompetent and greedy as well fair well greed i shouldn't have brought greed into it greed should be fine but greed right like incompetence is not illegal and neither is greed yeah they certainly didn't break the rules yeah right and in fact

One of the key under-the-radar failures that week in September in 2008 when Lehman Brothers, the investment bank failed and then everybody else failed and the the government bailed everybody out, was the very first money market mutual fund that had been created 40 years earlier and was very much like a bank and suddenly couldn't give everybody their money back.

And so it's totally understandable that everybody is angry when one industry blows up the economy.

And by the way, all the people in that industry are getting rich and it's not obvious what they're providing to us.

But it is, in fact, a really hard problem to solve.

Like banks are inherently unstable and people love making things that look like banks and are inherently unstable.

Thank you, Jacob, for reminding me of the concept of shadow banking.

It's like real banking, but their headquarters are in Mordor.

It's just such a great

thing.

Yes.

Oh, good times.

Good times.

Jacob,

there are more questions in the mailbag.

Would you mind if I were to read the next question to you?

Because I want to hear your answer, because you are the author of Money, the True Story of a Made-Up Thing, and I feel like this question is made for you.

One of my friends posted this on Facebook but is it true?

This is the Facebook post.

This is why I keep telling the younger generation to stop avoiding cash.

I have a £50 banknote in my pocket.

I go to a restaurant and pay for dinner with it.

The restaurant owner then uses the note to pay for the laundry.

The laundry owner then uses the note to pay the barber.

The barber will then use the note to pay for shopping.

After an unlimited number of payments, it will still remain a £50 value, which has fulfilled its purpose to everyone who used it for payment.

But

if I go to a restaurant and pay digitally via card, the bank fees for my payment transaction charged to the seller are 3%,

so around £1.50 for the £50 payment.

This will also be the case for laundry payment, payment to the barber, and so on.

Therefore, after 30 transactions, the initial £50 will exist at only £5,

and the remaining £45 has become the property of the bank.

That's not actually how percentages work, but that's fine.

Thanks to all the digital transactions and fees.

Use it or lose it, folks.

Once it's gone, we won't get it back.

Cash is king.

Okay, so the arithmetic on this is wrong.

We don't need to bother with that.

But Jacob, what about the economics?

What's your reaction to this?

So that was from Wendy, right?

And she says, if you pay with a £50 banknote at the restaurant, the restaurant owner then uses the note to pay for the laundry and so on.

Yeah.

And the note never gets used up.

It just goes around and around.

Right.

So at the risk of being pedantic, I think it is relevant to say that is not in fact what happens.

There is a cost borne by the restaurant of dealing with cash, right?

They pay somebody to account it, they pay somebody to take it to the bank.

And so there is a cost to cash.

So the relevant question is: how does the cost of cash compare to the cost of a credit card and also to the cost of a debit card?

Those two things feel the same to us as customers, but as it happens, they're not the same to merchants.

And for the most part, and it varies from country to country, debit cards are the cheapest for merchants.

Then cash is in the middle, and credit cards are the most expensive.

So like the most efficient mode of transaction for the merchant in most countries is the debit card.

Basically, because you compare the cost of dealing with the cash, of paying people to count the money, to take it to the bank, et cetera, to the fees they have to pay to use credit cards and debit cards.

And,

from a sort of first principles perspective, if you just step back and think what is most efficient, it should be that a card is cheaper, right?

Like it's obviously costly to deal with cash.

It's a security risk.

You have to actually physically move it around.

And so on one level, we should ask, well, why is a card ever more expensive, right?

And they're paying some amount for credit, right?

Because a credit card, there's a risk that the bank won't get paid back because it is in fact credit.

There's a risk of fraud.

And so that cost is born.

Debit should be really cheap because you can just have the computer at the restaurant, ask the computer at the bank, hey, does this person have the money in their account?

And the bank says yes.

And the payment goes through and it should be very cheap.

So there is a question, why does it cost anything for debit?

One answer to why is because Visa controls a huge percentage of the debit card payment system in the U.S.

And in fact, the U.S.

Department of Justice, the federal government, is suing Visa for basically monopolistic practices in the debit card business.

I mean, there's a lot wrong with this Facebook post, but there is a grain of truth in that there is a monopolistic provider or allegedly monopolistic provider of these payment services and they're raking off a disproportionate fee.

Yes.

On the other hand, I mean, Visa, just like the barber and just like the laundromat owner and just like the restaurant owner, Visa is also a business.

So if they take the money, well, they can also spend the money back into the economy.

I mean, it may feel a bit unfair, but I mean, the money still goes around.

I mean, this Facebook post is acting like the thing that's scarce is the money.

Like the £50 note is the thing that's potentially scarce.

But actually, you can always make more £50 notes if you are the central bank.

So money is, in fact, not the thing that is scarce.

What is scarce is...

laundromats and restaurants and chefs and all of these real resources in the economy.

And the money, whether it's digital money or whether it's paper money, is just a way of kind of keeping track of things.

And then which gets back to your question, which is which is the most efficient way of keeping track of things?

And that's an open question, I think.

I mean, efficiency gains are good, right?

Like the question does matter in the sense that we want to spend as little as possible on payment rails.

That's fundamentally what this is about.

We can all get more stuff we like, more restaurant meals and nice haircuts if we're spending as little as possible moving the money around, right?

And so we want technology to make it cheaper to move money around.

Ideally, there should be a cheaper way to do it than cash.

And we're getting there.

So don't get your economics from Facebook posts.

Get your economics from Jacob Goldstein.

Thank you, Jacob.

Cautionary Tales.

We'll be back after this break.

In today's super competitive business environment, the edge goes to those who push harder, move faster, and level level up every tool in their arsenal.

T-Mobile knows all about that.

They're now the best network, according to the experts at an OOCLA speed test, and they're using that network to launch Supermobile, the first and only business plan to combine intelligent performance, built-in security, and seamless satellite coverage.

With Supermobile, your performance, security, and coverage are supercharged.

With a network that adapts in real time, your business stays operating at peak capacity even in times of high demand.

With built-in security on the first nationwide 5G advanced network, you keep private data private for you, your team, your clients.

And with seamless coverage from the world's largest satellite-to-mobile constellation, your whole team can text and stay updated even when they're off the grid.

That's your business, supercharged.

Learn more at supermobile.com.

Seamless coverage with compatible devices in most outdoor areas in the US where you can see the sky.

Best network based on analysis by OOCLA of SpeedTest Intelligence Data 1H 2025.

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Tim, let's talk about housing.

Sure.

Fred writes, Hi, Tim.

I absolutely love your podcast.

It scratches the itch of economics in society, and every episode is a great lesson.

My question is about housing, NIMBYs, and the impact on the economy.

I've long been a believer in the housing theory of everything, and find it appalling that, as nearly everything has gotten more affordable in real terms, housing has become completely out of reach for younger people, particularly in the UK.

Quite beyond the ethical implications, I'm interested in your view of its impact from a macroeconomic angle.

How impactful do you think housing reform would be on the UK economy?

How would you deal with NIMBY's from a behavioural economics/slash policy perspective?

Thanks, Fred.

I think Fred is completely right.

I think the UK economy desperately needs housing reform.

Fundamentally, we've just made it very, very difficult to build houses.

And if you make it very, very difficult to build houses, that makes houses very expensive.

And that's a problem in its own right because people need somewhere to live, but it also damages the economy because people don't get to move around to where the jobs are.

And it's also inequitable.

So it means that people who are older have a lot more money than people who are younger, disproportionately, because they've just sat in houses that they bought when they were cheap and those houses have got more and more expensive.

And it's also inequitable within generations because not to put too fine a point on it, if you are the only child of parents with a house, you're going to inherit the house, which is hugely valuable.

If you're one of three or four children, or if your parents never had a house in the first place, you're not going to inherit.

And it becomes incredibly difficult to afford a house.

And so there are a huge number of different economic problems being caused by the fact that we're just not willing to let people build more houses.

And in a nutshell, I mean, houses are incredibly expensive in the UK.

Fundamentally, if you let people build houses, the cost of a house is going to fall to the cost of building a house.

That's how much it's going to cost you to buy a house.

It's like whatever it costs to build a house, which is a lot less than the market price of a house in the UK at the moment.

As you may know, houses are also really expensive in many parts of the United States and for similar reasons.

But one really interesting and encouraging and surprising thing to me is that there has actually been some progress on this in the United States.

Not enough to solve the problem, but enough to suggest that the problem is at least somewhat solvable.

Fred referenced NIMBYs, which means not in my backyard, which is people who say don't build apartment buildings on my block or whatever.

They're better than bananas, right?

You know what bananas stands for?

Build absolutely nothing anywhere near anybody.

I like that.

In the U.S., and starting in the Bay Area, as far as I know, you know, in the San Francisco Bay Area, where houses are extraordinarily expensive, we have had the YIMBY movement, the Yes in My Backyard movement, which has in the past decade or so scored some real victories in California.

And one of the really interesting things to me, you know, Fred says, how would you deal with NIMBY's from a behavioral economic slash policy perspective?

We haven't heard that much about the YIMBI's, and I have a theory for why, and that is,

as you may have heard, America is a rather politically polarized place these days, but the YIMBY-NIMBY fight is not particularly polarized.

It is not left-coated, right-coated the way immigration or capital gains, tax rates, or many other things are, which I think is actually great.

It means you can have a rational as opposed to tribal discussion about it.

So that's one piece of it.

And the other piece of it is somewhat wonkier, but it is this.

At least in the U.S., the rules about housing, we call it zoning, are typically locally imposed.

They're imposed basically at the city level.

And there's a sort of political economy reason for that, which is homeowners care a lot and they show up at the city council meeting and they say, don't let anybody build apartments in my neighborhood because that'll lower the value of my house, right?

Homeowners don't want the value of that.

That's the whole point, right?

It's the whole point, right?

There's this weird thing where like, yes, houses are too expensive.

We need to lower the value of your house.

So instead of dealing with it at the city level, the Yimbies went to the state and got California to pass laws overriding cities that said to cities, you basically can't do exclusionary zoning anymore.

You can't say there can only be single-family homes.

But in most of California now, you can build what are called ADUs, additional dwelling units.

You can can build a little apartment over the garage or in your backyard, for example.

And other rules like that have passed the state.

So there is encouraging progress, though houses are still too expensive.

It's a problem that can be solved.

Okay, Tim, this one is for you.

It's from Benji from Brisbane.

He writes, Hi, Tim and all.

Appreciate you taking the time to read my question.

What happened to Mohamed Yunus and Grameen Bank?

There was so much promise with microfinance as a tool for good in helping the underbanked in developing economies.

Kind regards, Benji.

So the short answer is Mohammed Yunus is now a senior advisor to the government of Bangladesh and won a Nobel Prize, not for economics, but for peace.

So he's doing fine.

So microfinance is basically the idea that you give very

small loans to entrepreneurs in very poor communities at low interest rates and they can use that to build their business.

So, Eunice was famous for saying, All people are entrepreneurs.

And the founding story of Grameen Bank, which is the microfinance outfit that he started, he was an economist, he went to a village near the University in Bangladesh where he worked, and he found that these local women were weaving baskets and selling these baskets, and that's how they made their money.

But they had to borrow money from the village moneylender to pay for the materials to make the baskets.

And the village moneylender was charging them 10%

a day.

Just an astonishingly high interest rate.

I did the maths once.

That interest rate would turn one cent into larger than the entire US government debt over the course of a year.

So it's a very high interest rate.

And Eunice came in and said, I'll lend you money.

I won't charge you much interest.

These women borrowed money off him and they paid it back and it was fine.

And suddenly, not having to pay 10% on top of your costs every single day was the difference between grinding inescapable poverty and the chance to build your own small business.

So it's a lovely idea.

The development economists came in and said, well, this sounds great, but does it actually work?

And they found mixed pictures.

So there was a really interesting study in South Africa, which was conducted by Dean Carlin and Jonathan Zinman, two development economists.

And they found that people borrowing money from what seemed pretty much like a payday loan company at very high interest rates, I I think it was 200% annual percentage interest rate.

They randomized it so that some people who this company were going to turn down for loans, at random, some of them were offered loans anyway.

And the people who at random were offered the loans versus at random were not offered the loans, the ones who got the loans were doing much better six months later.

So really interesting randomized trail.

So even this very expensive credit was great because what they were doing was they were using the loan to, I don't know, buy a suit to go to a job interview or to fix their bike in order to stay in employment.

But other research was more mixed.

And I think the fundamental idea that the reason why people are poor in poor countries is because they don't have access to cheap loans.

I mean, there's so much else going on.

So it's only ever going to be a part of the story.

The other really interesting thing is the commercial companies came in.

So there was a one called Compatamos in Mexico, which was just a huge business that was lending money at pretty high rates and making a lot of money.

And it was just about to do an IPO, I think, and they made all the founders of this organization very rich.

And Eunice was like, this is outrageous.

He was trying to excommunicate them from the microfinance movement because they were too commercial.

But the problem is, there was always shades of gray between kind of non-profit microfinance and the moneylender who Eunice was originally worried about.

Even non-profit microfinance, they're not lending people loans at zero interest.

Even the non-profits are often lending at 50, 60, 70% a year.

And the reason is you're making such small loans for such a short period of time, like maybe you're lending somebody like $50 for three months.

Unless you charge a big interest rate, your fee on that is like 50 cents.

Yeah.

And it's just not enough to cover your costs.

Yeah.

And so it's this fine line between what is abusive money lending and what is non-profit microfinance, it's harder to draw that line than you think.

So it's a fascinating area, but that is what happened to Mohamed Yunus and the Grameen Bank.

Clearly, people are deeply, deeply uncomfortable fundamentally with the idea of lending money at interest, right?

Like we've gotten used to it in the developed world with a mortgage or a car loan.

But if you look historically, lots of places, there were rules for thousands of years that said nobody's allowed to lend money at interest because it's fundamentally bad.

It's unnatural, right?

And you don't have that with most other businesses.

And I think that's part of what is going on here.

Like lending money at interest makes people morally uncomfortable.

And so when you have someone riding in and being morally righteous by lending money at interest, it's going to get complicated.

Have we got time for one more question, Jacob?

We do.

Our last question, Tim, comes from Ella, who writes, Hi, Tim.

I've been listening to your podcast for a while now.

I'm a big fan.

And you seem very insightful across a range of topics.

So I was wondering if you could help me out with the problem I've run into recently.

I'm in my second year of uni studies, physics if you're curious, and I keep getting asked what I want to do for a career path.

Aside from further academics, I'm not really sure what there is that I like the sound of, and I know eventually I will have to finish my education.

I do know that I'm in the right field.

I just don't know what jobs are waiting for me on the other side of my studies.

Do you think I should be worrying about where I'm going to end up?

Or is a more go-with-the-flow go-with-flow attitude fine for something this serious?

Thanks for the help, Ella.

So this is where I hope that Ella's parents aren't listening to this podcast, because I'm going to tell Ella not to worry.

I think go with the flow is fine.

I mean, physics is such a desirable degree.

I'm sure you'll have no trouble finding somebody to give you a job in the end, Ella.

So Jacob and I are collectively over 100, so we're basically two old geezers.

We're probably not really very well qualified to give you advice.

But when I look back at my career, I didn't know what I wanted to do when I went to university.

I didn't know what I wanted to do when I left university.

I didn't have any particular plans to become a journalist or a writer.

And in fact, I didn't become a journalist or a writer until I was nearly 30.

And I think all of the things that I did in my 20s, Some of them were mistakes, some of them were not, but they all kind of contributed to who I am now.

If there's something that you're really passionate about and you've got this vision, you want to chase it, that's fine.

But I think it is also fine to experiment and to try different things and to see if you like them.

What do you think, Jacob?

Certainly, I agree.

I mean, I majored in English, which unlike physics, gave me no fundamentally useful skills, except for living, right?

Like, I still think all the time of stuff that I read in college, and I'm certainly glad that I studied English.

But I think this, when you're in college, people say, oh, what are you studying?

And then you say what you're studying.

And then the next question in a sort of robotic way is, what do you want to do with that?

The thing I wish I had known when I was in college is the people asking don't actually care.

Yeah.

Right?

Like, I felt all this pressure of like, oh my God, everybody wants to know what I am going to do.

They don't actually want to know.

They're not really thinking that much about you.

They're just making conversation.

They're just talking about the weather, right?

I mean it in a good way when I say other people don't care.

Everybody is mostly thinking about themselves.

I would phrase it slightly differently.

I would say there's no pressure, there's just curiosity.

They're just interested.

They're not even that interested, is my take.

They're just making small talk.

And like, recognizing small talk as small talk is a hugely empowering thing.

And it's fine.

Like, we're just social animals following norms.

And asking a college student what they want to do is just what people do.

So I would say to Ella, just make up an answer and know in your heart that you're going to figure it out.

And people love hiring physicists.

Wall Street is full of physicists.

And consulting firms are full of physicists.

Anybody who can think hard about the most difficult problems in the world in a quantitative way is going to be eminently employable.

And you know, another thing you can do with an undergraduate degree in physics is a postgraduate degree in economics.

Twist!

Jacob, thank you so much for joining me.

Tim, it's so fun.

I truly would do it for free, even if nobody listened.

Thank you so much, Jacob, and thanks to all of you for sending in your questions.

We will be back again on our regular schedule with another classic episode of Cautionary Tales.

But in the meantime, happy Thanksgiving to our U.S.

listeners.

And if you have a question for us, please send it in to tales at pushkin.fm.

That's T-A-L-E-S Tales at pushkin.fm.

Thank you.

We love hearing from you.

Cautionary Tales is written by me, Tim Harford, with Andrew Wright.

For a full list of our sources, see the show notes at TimHarford.com.

The show is produced by Alice Fiennes with Marilyn Rust.

The sound design and original music are the work of Pascal Wise.

Sarah Nix edited the scripts.

Cautionary Tales features the voice talents of Ben Crowe, Melanie Guttridge, Stella Harford, Gemma Saunders and Rufus Wright.

The show wouldn't have been possible without the work of Jacob Weisberg, Ryan Dilley, Greta Cohn, Eric Sandler, Carrie Brody, Christina Sullivan, Kira Posey, and Owen Miller.

Cautionary Tales is a production of Pushkin Industries.

It's recorded at Wardore Studios in London by Tom Berry.

If you like the show, please remember to share, rate, and review.

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And if you want to hear the show ad-free, sign up to Pushkin Plus on the show page on Apple Podcasts or at pushkin.fm slash plus.

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