Pessimist Economist Why He Think Future Looks BLEAK
Episode Stats
Harmful content
Misogyny
4
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Toxicity
9
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Hate speech
3
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Summary
In this episode, we discuss the current wealth disparity between rich and poor, the role of AI, and the role it will play in the future of the economy, and whether or not we should be worried about the possibility of robots replacing humans.
Transcript
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Where are you at, Steve, on the topic of what's happening right now with the wealth disparity?
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You know, we've always heard the saying, rich get rich, or poor get poor, right?
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I pulled up something yesterday when I was looking at it, when, you know, the last 50 years,
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who were the top five richest men in America, last 50 years?
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And one of the things I noticed is 50 years ago, the difference between first place and second place was, I don't know, 10%, okay?
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Today, the difference between first place and second place is 300%.
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And, you know, Elon is at the top with 1.3, 1.4, which I have no problem with.
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But what role you think AI is going to play on accelerating, creating extremely wealthy people and a lot of people being left behind?
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And then if that does end up happening, your position, maybe you're pro-AI.
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Maybe you're optimistic that AI is going to do good for the economy.
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But what role do you think AI is going to play the next five to ten years?
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First of all, I think there's going to be a bust.
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This is a classic boom and bust cycle in capitalism, just like with railways back in the 19th century.
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So railways were a private technology when they first came in, and everybody thought they're going to make an absolute fortune out of railways.
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Railways, particularly in the U.K., just crisscrossed everywhere.
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They all went bust, and you only had a handful of operators surviving,
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From what I've seen in terms of the amount of revenue these companies are getting
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In other words, they're losing large amounts of money.
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And so you're going to come up with only a few survivors coming out of this.
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And I think the cost of AI is going to increase quite dramatically as well.
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At the moment, people are using AI to make funny cartoons of their father-in-law or mother-in-law.
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More mother-in-laws, I'll agree with that.
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the bus will come, I think, in the next one or two years, and then you're going to get a large
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collapse. All the money that was put into it would be lost. Money will still be distributed in the
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system, of course, but it won't be in the hands of those who paid out for the data centers and so on.
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So I see that happening. With AI in general, I know that it's a long way from this being
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technologically feasible, but the thing which Musk is talking about, and I agree with him on this
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front, is that if we got to the stage where robots could replace humans, then there would be no
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capacity for workers, for anybody without capital, to get an income. So the only way to survive that
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is to have the income generated by the economy as a whole. And that means you get basically a
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universal, Musk calls it universal high income, but you have to create the money that enables
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people to buy because the vast majority of people won't have ownership of capital and they won't
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have the capacity to get unskilled jobs anymore anyway. The robots will have them. So if you're
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to avoid the Hunger Games outcome, you have to give everybody enough money to be able to buy the
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goods being produced by these firms and live a comfortable life. But I can't see that happening.
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I think we're going to see climatic issues long before we get to that point.
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Let me, by the way, when is your birthday? What month is your birthday? I'm curious.
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Okay. So you're in Aries. Are you like after the 22nd?
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So my dad's also the same as you, and it's funny just talking to you.
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I'm wondering why, Rink, how much of your own philosophies on economy and finance,
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how has it worked for you when it comes down to making investments with your own money?
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I've done a couple of attempts at getting businesses started.
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If I'd done them in America, they would have been successful because the scale of the American economy is much larger than the Australian economy.
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You floored it a little bit with the, you know—
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We have been quite successful in Europe and England as well.
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The way you said it, you couldn't help yourself.
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I mean, there is one thing I will say in favor of American culture.
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Failure is – one of my favorite lines as a send-up is saying success is the first step on the ladder of failure and vice versa.
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So being able to fail and commit yourself up and keep on going, that's part of what the attitude of America is.
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And that's a positive contribution to enabling innovation to occur.
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But, yeah, in terms of – what people call investing, I call speculation.
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You're buying shares and buying houses and expecting to increase in price.
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When I know the logic behind that, it's all driven by financial bubbles.
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But I am trying to form a company right now called Revelation,
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and that will be marketing a software package both for data analysis
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Steve, did you fall in love with an American girl that broke your heart many years ago
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It seems like you're, you know, Mary was wrong.
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In fact, I married, I made two, I said two things I'd never do
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was marry a nurse or an American, and I did both in sequence.
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No, lasted about two years, and I wish I'd never gotten involved.
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We just figured out your economical philosophies in the last 20 seconds with what happened on the second one.
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But let me ask you, do you ever sit there, Steve, and wonder and say, maybe I should have gone into the market.
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I should have bought Bitcoin because I was first introduced him when it cost a pound of Bitcoin.
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When I had the energy use explained to me, I thought this isn't going to work.
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Now, I should have done what Newton did, not the first time, but say this is a crazy bubble.
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If other people are idiotic enough to do it, I'm going to buy and put $1,000 I can afford to lose.
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Like, do you look back and say, you know, because an element of investing,
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and I'm so glad you're in free market capitalism right now to build a company.
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God willing, you'll build it and you'll sell it.
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And I actually hope you do because I love when these types of –
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I don't know if you're familiar with Mehdi Hassan.
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I think he was on two weeks ago or three weeks ago.
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We had a very good conversation, great back-and-forth debate.
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But I said to him, I said, you know, how's it feel going from working at MSNBC
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and they're paying you a salary to now you're a capitalist?
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We laughed about it, you know, kind of went through it.
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I hope he, because, you know, I grew up in a family where my mother was a communist.
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We grew up, our Bible was the Karl Marx Communist Manifesto.
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You know, my mother's side, they come from Baku, Azerbaijan, so her family was all about—my dad was pro-Shah, so he was an imperialist, and so they married each other.
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They married and divorced each other twice, and so—no, literally, that's what happened.
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I'm born, divorced, and they never got married again to anybody, but a big part of my financial philosophy comes—
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comes from me hating rich people and saying these guys are greedy it's all self-interest that's all
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they care about and then I went into business and then I started off with Morgan Stanley Dean
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Witter and then next thing you know I made some money then I built a business and I realized
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you're not gonna win if it's only you making money and so I give everybody equity and then
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I realized when everybody owned a piece of the company they ran in a different way they picked
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up the trash you know they said hello to people in a different way there was a certain incentive
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to it. So I'm glad you're getting into the business. But do you think about and say,
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maybe I should have gotten involved in equities 30, 40 years ago?
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Not equities, but the software package I'm designing now called Ravel. I came up with
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the idea for that 30 years ago. In fact, it's Ravel. The main thing Ravel does that in terms
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of data analysis, that's better than anything else on the market is that it handles multidimensional
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data, data that's more than rows and columns in a spreadsheet. And in fact, the system that most
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people use is called a pivot table. And it turns out that pivot tables first invented seven years
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after I came up with the idea that I'm now putting into Rabble, which is a graphical
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multi-dimensional object for handling complex data and being able to analyze it and see it
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easily. So yes, I could have made the decision to go and push that forward. I would have come up
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with a software package that predates Excel that would have trashed what Excel tried to do with
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pivot tables. So I wish I had done that, but I didn't. So I'm now doing it a bit later in age.
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Would you mind spelling it so guys know how to find it?
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Now, R-A-V-E-L, R-A-V-E-L, and the company name is Ravulation, not Revelation, but Ravulation.
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There is a Patreon page, which we're doing at the moment, very basic, but that's where
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you can get a copy of Ravulation from at the moment for a sort of Patreon support level.
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Can you send that link to us so we can put it below for the audience to see it?
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It's a similar sort of idea as the capitalist manifesto.
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You were talking a bit about worker-managed firms fundamentally a moment ago,
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You want people to have a commitment to the firm they're in,
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and just having a wage doesn't necessarily do that.
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Apparently that's a large part of the success for BYD.
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Yeah, do you remember that one socialist who said,
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I pay everybody only $70,000 a year, and Bernie Sanders liked the story.
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I don't know if you remember that story or not.
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Who was the socialist that paid his employees 70K a year, something like that, and he went viral?
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So when we had him on, yeah, Gravity Payments, we ended up having him on.
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And again, politically, we probably, economically, we probably disagreed where we were at because
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But then when I asked him the question, I said, so you pay everybody 70 grand?
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I said, if you're so much about spreading the wealth, why don't you give them equity?
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I said, so you got $100 million of your company and you own 100% of the company?
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I said, that's not, that doesn't sound like, you know, your values match each other.
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I think he got in trouble, but I'm excited to see what this next phase you're going.
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By the way, how much you think, if I were to ask your best friends from high school,
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guys that you've known the longest, okay, people that like, you know, if you ask my
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friends, they'll be able to tell you who I was and all this stuff, would they consider
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I've got a very optimistic orientation, a very outgoing personality.
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But the more I learn about society and the state wherein pessimism has been forced upon me.
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Well, only the optimist if I didn't know what I know right now.
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So like, for example, one career I could have had was being a professional tennis player.
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And that would have been a very different lifestyle to what I've led.
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It was like a fork in the road moment where I had a choice between a professional sports career or academia.
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What happened? What was the event that you didn't go tennis?
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Because, I mean, why wouldn't you go tennis over academia?
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Well, because I was a student at the time at Sydney University, studying, doing an arts law degree, studying economics.
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and horrified by how stupid the economic theory is,
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still even more horrified today than I was then.
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And then there was a student strike at university
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which led us to overthrow the economics department,
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well, not to overthrow it, but to create a rival department.
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and that meant my tennis went from five days a week to one day a week
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and I dropped from that incredibly high standard.
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plus a ludicrous amount of running and weightlifting
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and cycling while doing a university degree. And then with the excitement of the student strike
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and taking on economics and challenging it, that's become my life. So in one sense,
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I've enjoyed the life I've led. I'm glad I've led this life, but I'd like to have two of me.
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Is that not crazy when we look back and we're like, what if I would have done this and what
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three, everybody in the strike was a lefty, okay? You'd call them communists.
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And they said, all the various strikes succeeded, all sorts of reform of education at Sydney
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University that year. And we had a, let's have a Marxist reading group. So in the middle of a
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Sydney summer, and I'm talking a glorious summer when you should be spending your time on the
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beach, a bunch of 20 or 30 lefties sitting in a cold room inside the Sydney University reading
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Das Kapital. Now, part of what I knew was in Das Kapital was the argument that machines
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don't add value. Machines transfer the value they hold, but they don't actually add any extra value
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to the system. And I remember walking across to that, the beginning of this reading group
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with a colleague looking at the, over Sydney's skyline and where Sydney, you can see the whole
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of Sydney from Sydney University. And there were hundreds of cranes. And I said, I want a very
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good explanation by Marx as to why those machines don't add value. So I read the book very carefully
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and I found that Marx had a brilliant argument about what he called the gap between use value
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and exchange value in production. And I applied that to machinery, and it led to the deduction
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that machines do add value. So I then said that to my bunch of fellow Marxists, and they'd already
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brainwashed themselves into believing the labor theory of value. They laughed at me.
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So I then decided that's going to be my master's thesis topic to find where Marx came up with those
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ideas. And I didn't do a master's until I was about 20 years older. I finished my undergrad
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in 73. I began my master's in 1993, I think so, 20 years later. But I went through Marx looking
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for where he came up with those ideas and I found it. So I've read everything Marx ever wrote on
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economics, including the Communist Manifesto. But would you have considered yourself a leftist at
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17? No, I was quite right wing. So academia got a hold of you and kept that mindset with you
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since then? No. Marxists dislike me about as much as
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neo-classical economists do. It's very hard to put me into any particular category. I'm
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very much a capitalist entrepreneur at the same time as being an intellectual. So I don't
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think I've been a whole of anything. What I look for is good logic. And what I found
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in Marx in those first seven chapters was brilliant logic that contradicted a fundamental
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argument he believed in, which is the labor theory of value. And the labor theory of value
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was needed to believe that there'd be what I call a falling rate of profit, and a falling
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rate of profit was needed to believe in socialism. So when I read that book in 1973, I saw Marx's
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arguments that socialism is inevitable were wrong. Okay? So pretty hard. I mean, the first
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people I got, the first people I attacked in terms of attacking their economic thinking
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was neoclassical economists. The next group was Marxists. But by the way, the school you
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went to, did they also ask you to read Wealth of Nations or Hayek or any of the avant-mises,
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any of this stuff, or not really? Well, it's all my own reading. I mean,
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at university, at school, I went to a Catholic school. So I read the Bible more than I read
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any economics text, but I read books by books by Samuelson and Hicks when I was at school.
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So my basic argument is you've got to read to understand what people are talking about. You
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don't just take newspaper cutouts to understand the theories. When we set out to create a shoe
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